Lucky Dragon Corporation Ltd v. Speedy Vantage Ltd

HCMP778/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 778 OF 2008

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Before : Hon Chu J in Chambers

Date of Hearing : 29 October 2008

Date of Judgment : 23 March 2009

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J U D G M E N T

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1.This is a vendor and purchaser summons relating to the sale and purchase of a shop space situated at Ground Floor, No.4 Elgin Street, Hong Kong (“the Property”).  The Shop is located within a building that was completed in 1966.

2.The plaintiff is the purchaser and the defendant is the vendor.

3.In the originating summons, the plaintiff seeks the following relief:

(1)   A declaration that the defendant had wrongfully repudiated the sale and purchase agreement, which was accepted by the plaintiff.

(2)   A declaration that the defendant had failed to show a good title to the Property.

(3)   A return of the deposits paid to the defendant.

(4)   A declaration that the plaintiff has a lien over the property until the return of the deposits.

(5)   Costs of investigating the title.

(6)   Damages to be assessed.

4.The main disputes between the parties are whether the defendant was able to show a good title to the Property in light of the unauthorised alteration works found on it and whether the plaintiff had waived the right to raise requisition on the unauthorised alterations.

5.The facts surrounding the dispute are not in dispute.  They are summarised below.

The sale and purchase agreement

6.By a provisional sale and purchase agreement dated 18 January 2008, the defendant agreed to sell and the plaintiff agreed to purchase the Property at the consideration of HK$13 million.  An initial deposit of HK$500,000 was paid by the plaintiff to the defendant. Two weeks before entering into the provisional agreement, the plaintiff’s director, Mr Colin Ng, had made an inspection of the Property, which was in a vacant state.

7.On 4 February 2008, the parties signed the formal sale and purchase agreement (“the Agreement”).   A further deposit of HK$800,000 was paid by the plaintiff to the defendant.  The completion date under the Agreement was 3 April 2008.

8.There are two provisions in the Agreement that are of particular relevance to the present dispute. They are:

(1)   Under clause 8(a), the defendant shall give a good title to the Property and shall at his own expense show and prove good title to the Property.

(2)   Under clause 12, any requisition or objection to title shall be delivered to the defendant’s solicitors within seven working days after the date of the receipt of the title deeds by the plaintiff’s solicitors. If the requisition or objection is not delivered within the time stipulated, the plaintiff shall be deemed to have waived the right to raise any requisition or objection on title.

9.On 31 January 2008, the plaintiff’s solicitors (“WG”) received from the defendant’s solicitors (“KM”) the title deeds of the Property, including the occupation permit (“OP”), the deed of mutual covenants (“DMC”) and the 1^st assignment of the Property with an assignment plan attached to it and a control card. 

10.By letter dated 5 February 2008, WG raised a set of three requisitions. KM replied by letter dated 13 February 2008.  There were several follow-up requisitions, the last of which were made by letter dated 27 February 2008.  KM replied by letter dated 29 February 2008, enclosing the approved building plans. There was no further follow-up requisition after this.  On 27 March 2008, WG sent a draft assignment to KM.

Discovery of unauthorised alteration works

11.On 29 March 2008, Mr Ng discovered, during his visit to the Property, two notices were attached to the gate of the Property.  They were dated 18 and 25 March 2008 and issued by ISS EastPoint Property Management Limited (“ISS EastPoint”), an agent of the Building Authority. The contents of the notices are identical. In essence, they stated that: (1) ISS EastPoint was appointed by the Buildings Department as a consultant to inspect the Property in relation to a complaint received; and (2) ISS EastPoint wished to have access to the Property for the purpose of conducting an inspection.  Mr Ng immediately passed the notices to the estate agent and WG.

12.I pause here to note that the plaintiff took exception with the suggestion that it had instigated the complaint to the Buildings Department with a view to getting out of the Agreement.  Its case is that the investigation by the Buildings Department was brought about by an application for a restaurant licence for an adjoining property.  The plaintiff further stressed that it was ready and able to proceed to completion and would have completed the transaction, but for the notices from ISS EastPoint and the subsequent discovery of the unauthorised building works.   

13.On 31 March 2008, Mr Ng and the estate agent accompanied the representative of ISS EastPoint, Mr Marco Cheung, to conduct an inspection of the Property.  Mr Cheung found there were unauthorised alteration works on the Property in that: (1) a void area between the Property and the cockloft had been slabbed over forming part of the floor of the cockloft and the ceiling of the Property; and (2) instead of sharing a common access as shown on the approved building plan, the Property and the cockloft now have separate access and separate ownership.  

Correspondence between the solicitors

14.WG faxed a copy of ISS EastPoint’s notice to KM on 31 March 2008.  By another letter also dated 31 March 2008, WG conveyed to KM the above findings of Mr Cheung and stated that: “In view of the separate and distinct ownership of the above property and the cockloft, reinstatement has become virtually impossible. As such, that would constitute a defect that goes to the root of the title of the above property. It should also be noted such defect is not apparent from the title documents of the above property.”  The letter went on to propose, on a without prejudice basis, a postponement of the completion date to 6 May 2008 and request the defendant to deal with the problem by writing to the Buildings Department to confirm whether any enforcement action would be taken.

15.KM replied by letter dated 1 April 2008. It pointed out that the plaintiff had been supplied with the approved building plans on 29 February 2008 and no objection had since been raised such that the plaintiff would be deemed to have waived its right and further deemed to have accepted the defendant’s title. The letter also stated that Mr Cheung had indicated it was too early to conclude whether there were unauthorised alteration works on the Property and whether the Buildings Department would issue any demolition notice or order.  It further disputed the existence of any unauthorised alteration works or that they went to the root of the title.  Nevertheless, the defendant agreed to postpone completion to 8 April 2008.

16.WG replied on the same day, disputing there was waiver and asserted that as the problem went to the root of the title, the plaintiff was entitled to raise it even though the time provided for under clause 12 of the Agreement had expired. The letter identified further that an internal staircase leading from the Property to the cockloft, as shown on the approved building plan, had been demolished.  WG proposed to engage, at the plaintiff’s costs, an authorised person to confirm whether there was any unauthorised alteration and, if so, the extent of it.  It also reiterated its previous suggestion that the defendant should write to the Buildings Department.  

17.On 2 April 2008, KM wrote and stated that the defendant would not entertain the matters raised in WG’s letter unless and until there was substantial written evidence in support.  In its reply of the same day, WG reiterated its stance. At the same time, WG wrote to the Buildings Department to enquire whether there was any unauthorized alteration to the Property and whether any building order would be issued.

18.On 3 April 2008, upon the defendant's refusal to allow inspection of the Property, the plaintiff engaged Savills Project Consultancy Limited (“Savills”), a building surveyor, to conduct a study of the approved building plans.  By letter of the same day, WG informed KM that Savills confirmed there should have been an internal staircase linking the Property to the cockloft as well as a void area at the front part of the Property.  

19.In fact, in the same afternoon, a representative of KM accompanied Mr Cheung of ISS EastPoint to inspect the Property again.  By letter dated 5 April 2008, KM informed WG that during the inspection Mr Cheung “primarily suspected and indicated” that the internal staircase shown on the approved building plan had been removed and there was an extension at the cockloft level that had taken up the void area.  KM argued, nevertheless, that there was no structural alteration and that it was unimaginable that the Buildings Department would demand a reinstatement of the staircase having regard to the fact that:

(1)   Under the DMC, the cockloft and the Property were individually allocated and separately owned, each being allocated with undivided shares with exclusive enjoyment without interruption by the other;

(2)   The OP showed the cockloft and the ground floor to be separate levels;

(3)   By the 1^st assignment, the area where the internal staircase should have been located was assigned to the Property with exclusive occupation and enjoyment and it was not reserved as a right of way upward to the cockloft;

(4)   Neither the 1^st assignment nor the DMC had provided for any right of way in the form of an internal staircase for going up and down the cockloft and the Property; and

(5)   The cockloft was first sold by the developer and the relevant assignment plan was prepared and certified by the same authorized person who prepared the approved building plans. The assignment did not show any right of way from the ground floor by means of an internal staircase.  

20.KM concluded that there was no real risk of enforcement action by the Buildings Department since the building had been built and existed in the present state for more than 40 years and that the Building Department must (by reason of building orders imposed against the Property in the past) have been aware of the alterations but has taken no interest in them.   

21.KM’s letter was only received by WG on 7 April 2008, which was a Monday. On the following day, which was the day for completion, WG wrote to KM, enclosing the written report of Savills. The letter stated, among other matters, that the defendant had failed to show that the alteration works were made with the approval of the Buildings Authority or that there was no real risk of enforcement action. It went on to state that on the basis of the defendant’s failure to give good title to the Property, the plaintiff rescinded the Agreement and demanded the return of the deposits.

22.There were further correspondence between KM and WG on 8 April 2008.  On 9 April 2008, KM wrote to WG stating that as the plaintiff had failed to tender the balance of the purchase price, the defendant exercised its right to rescind the sale and forfeited the deposits paid.  

23.On 24 April 2008, the plaintiff issued the originating summons herein.

Expert reports

24.As mentioned above, the plaintiff had commissioned Savills to prepare a survey report of the Property.  Subsequently, the defendant also engaged an architect, Mr Michael W K Yuen, who conducted a site inspection of the Property on 13 June 2008 and made a study of the approved building plans and assignment plans.

25.Essentially, both experts agreed that the physical condition of the Property is at variance with the approved building plans in the following aspects:

(1)  On the approved building plan, there should be an internal staircase inside the Property, leading from the Property to the cockloft, with a corresponding stairwell between the Property and the cockloft.  Physically, however, there is no internal staircase in the Property and there is no stairwell left between the Property and the cockloft.

(2)  On the approved plan, the floor of the cockloft should only run up to the location of a pair of pillars that Mr Yuen had marked as “Pillar X” on the copy building plan annexed to his report.  There should also be a parapet wall running across the whole width of the cockloft between the pair of pillars. In other words, there should be a void at the cockloft level between the parapet wall and the external wall of the building in question.  Physically, however, the floor of the cockloft and the ceiling of the Property (which was made of concrete/ cement finish) has extended over the void area. 

26.Savills had in its report also indicated there was breach of a 1996 Code of Practice on means of fire escape issued by the Buildings Department as a result of the conversion of the cockloft into a single storey separate from the ground floor and also contravention of the Buildings Ordinance as a result of increase in gross floor area caused by the slabbing over of the cockloft.  Mr Yuen did not agree with these views and criticised them for lack of particularity. For the purpose of this Judgment, it is not necessary to go into the details of the disagreement, as they do not bear materially on the disputes between the parties.

27.Three further points, however, need to be made about Mr Yuen’s report, which was prepared after the commencement of these proceedings.  First, Mr Yuen remarked that the removal of the internal staircase and the slabbing over of the stairwell “should have been obvious to one who have visited the Property and have read the approved building plan” and similarly, the slabbing over of the void area between the cockloft level (and the ceiling of the Property) and the external wall of the building should also have been obvious. Second, Mr Yuen was of the opinion that the risk of enforcement action of reinstatement by the Buildings Department is low, having regard to the fact that the Property has been in the present physical condition since shortly after the building was completed more than 40 year ago, and that the Buildings Department should have been aware of the condition of the Property as it should have conducted inspections of the building in connection with building orders imposed against it in the past.  Third, Mr Yuen commented that should the void area be required to be reinstated, a false ceiling could be put up to cover up the void and to maintain uninterrupted enjoyment and privacy, and that the work involved would be exempted works that do not require prior approval or consent from the Buildings Department.  

Letter from the Buildings Department

28.Apart from the expert evidence, it is also of relevance to note the Buildings Department’s letter dated 10 April 2998, which was a reply to WG’s letter of 2 April 2008.  The material part of the Buildings Department’s letter states as follows:

ISS EastPoint Property Management Limited has inspected ground floor and cockloft of  No.4 Elgin Street and found the following unauthorised building works relating to G/F No.4 Elgin Street :-

a.   Removal of the approved staircase connecting G/F and Cockloft and the stairwell slabbed over; and

b.  Ceiling void facing Elgin Street slabbed over.

It is our assessment that the unauthorised building works listed above do not warrant Prioritized Enforcement Action in the light of the current enforcement policy. Nevertheless, advisory letters will be issued to the owners of the premises concerned.”

The issues

29.At the hearing of the originating summons, the defendant does not seek to dispute that the removal of the internal staircase connecting the Property and the cockloft (and the slabbing over of the stairwell) and the slabbing over of the void area constitute unauthorised alterations.  On the other hand, the plaintiff does not dispute the objection based on the unauthorised alterations was not made within the time prescribed under clause 12 of the Agreement.

30.Counsel are also in agreement that the time limit imposed in sale and purchase agreement for raising requisitions will not apply where the requisition goes to the root of the title and that if, having used due diligence, the purchaser was unaware of the defect in the vendor’s title: Giant River Ltd v. Asie Marketing Ltd [1990] 1 HKLR 297, Hillier Development Ltd v. Tread East Ltd [1993] 1 HKC 285, Mexon Holdings Ltd v. Silver Bay International Ltd [1999] 3 HKC 756.

31.Hence, the critical issue in these proceedings is whether the requisition on the unauthorised alterations goes to the root of the title of the Property and whether the plaintiff should, by using due diligence, have been aware of the existence of the unauthorised alterations.  Additionally, the defendant also contends that the requisition was not properly formulated.  A further issue is whether, on the facts, it can be concluded that the plaintiff had already accepted the defendant’s title before it raised the requisition on the unauthorised alterations. 

Was the requisition properly raised?

32.The cases have established that requisitions should be formulated with reasonable precision and must not be imprecise, confusing or obscure: Chan Chik Sum v. Great Pearl Industries Ltd [1997] 1 HKC 27, Excel Wood Ltd v. Charmed Investments Ltd (unreported) HCMP 4130 of 1997, Century Crown Ltd v. Ho Wing Chun (unreported) HCMP 2147 of 1998.  In Essence Star Ltd v. Mai Jianbo (unreported) HCMP 299 of 1998, Mr Recorder Kwok SC made the point that requisition on unauthorised alterations ought properly to be made with reference to plans and supported by expert report.

33.As I understand Mr Lee, the defendant’s complaint is that the plaintiff’s requisition was raised without proper basis because it was not supported by any report and there was no proper reference to plan. It is said that while the first letter dated 31 March 208 from WG to KM only enclosed the notice from ISS EastPoint, the second letter of 31 March 2008, the 1 April 2008 letter and the 3 April 2008 letter from WG merely reported the views of ISS EastPoint or Savills, without any reference to plan and were not supported by any written report.  It is also said that the language deployed shows a lack of conviction and reflects that both ISS EastPoint and WG had no clear view on whether there were unauthorised alteration works on the Property.  As for Savills’ report enclosed in WG’s 8 April 2008 letter, Mr Lee says that it was deficient because it is a pure desk study with no site inspection and the allegations of breach of Code of Practice and Building Ordinance lack specificity.

34.The underlying reason for requiring a requisition to be formulated with reasonable clarity is to ensure that the vendor and his solicitor know precisely what it is that the purchaser wants in clarification of his title so that they can properly answer it. In reply to Mr Lee’s submission that the plaintiff’s requisition was not supported by written report or reference to plans, Mr Man pointed out that the whole matter was brought about by the notice from ISS EastPoint.  Given that ISS EastPoint was the agent of the Buildings Department, the lack of a written report was not critical. He further submitted that there should be no confusion between the parties as to what they were talking about for, among other matters, the defendant and KM had with them the approved building plans. There is force in these submissions.

35.It is evident from the correspondence between WG and KM between 31 March and 8 April 2008 that the parties were clear about the subject matter of the requisition and were fully aware that the requisition was raised on the basis of variance between the physical condition of the Property and the approved building plan. In any case, by 3 April 2008, after the joint site inspection by KM’s representative and Mr Cheung of ISS EastPoint, the defendant must be left with no doubt as to what were the alteration works involved. I do not consider that in every case of unauthorised building works, the requisition cannot be effective unless and until there is a written report and/or that the plans involved be supplied to the vendor.  I do not read Essence Star Ltd v. Mai Jianbo, supra, as establishing such a wide or general proposition. In the present case, the plaintiff’s requisition is not rendered ineffective by the fact that no written report nor plan was provided when the requisition was raised.

Does the requisition go to the root of the title?

36.I turn next to the core issue of whether the requisition on the unauthorised alteration works go to the root of the title. This essentially boils down to whether the defect is peripheral and has minimal effect on the title and whether there is any real risk of enforcement action by the Buildings Department.

37.The defendant’s case is that the defect is only of a peripheral nature since the internal staircase only takes up 33 sq. ft. of the total area of 565 sq. ft (i.e. about 6% of the total area) and the void can be easily reinstated by means of non-structural decoration work.  It is also the defendant’s case that there is no real risk of government re-entry to the Property or enforcement action of reinstatement by the Buildings Department, having regard to the following considerations:

(1)   The Property and the cockloft have for over 40 years existed, treated, conveyed, owned and used as separate and distinct units.

(2)   The cockloft had been divided into two separate units. Each of them has its own entrance and access via the common staircase independent from the Property.

(3)   The Buildings Department had in 1993 and 2002 issued building orders against the building, including the Property.  The Buildings Department would have inspected the building and must be aware of the separate ownership and occupation of the Property and the cockloft above it.

(4)   The unauthorised alteration works have been in existence for over 40 years. Yet, no reinstatement order has been issued. The Buildings Department also indicated in the 10 April 2008 letter that the unauthorised works do not warrant prioritised enforcement action.

38.In Mexon Holdings Ltd v. Silver Bay International Ltd (2003) 3 HKCFAR 110, 117, Litton PJ said:

“A good title does not mean a perfect title, free from every possible blemish. Whenever a question like this arises, it must be approached from the stand-point of a willing purchaser and a willing vendor, both possessed of reasonably robust commonsense, both intending to see the transaction through to completion in terms of the own bargain.”  

39.Applying this approach, can the defect in the defendant’s title be said to be peripheral or minimal?  In respect of the internal staircase, if it had to be reinstated, this will result in reduction in the area of the Property by some 6%.  For a shop of the size of the Property, the reduction cannot be said to be insignificant or minimal. Further, as Mr Man points out, the staircase will probably be a useless structure, unless the Buildings Department were also to disallow the cockloft to have access via the common staircase, which will be even more problematic. Most significantly, the work for reinstating the internal staircase and stairwell is not confined to the Property, but will have to involve the cockloft as well.   There is no certainty that the owner of the cockloft will cooperate or agree to the reinstatement work or the manner in which the work is to be carried out . Similarly, for the void, although Mr Yuen suggested that it could be reinstated by installing a false ceiling so as to maintain the privacy and quiet enjoyment of the Property as well as the cockloft, much depends on the cooperation and agreement of the cockloft owner.

40.These considerations put the present case in a different category as cases such as Profit Rich Enterprises Limited v. Sky Talent Properties Limited (unreported) HCA9119 of 1998 (where the unauthorised structure could be removed within 60 days) and the case of Mexon Holdings Ltd, supra, (where the internal partitioning that did not involve structural alteration), cited by Mr Lee to support his submission that the defect does not go to the root of the defendant’s title.  I do not agree that the problem with the internal staircase and the void can be dismissed as being minimal or peripheral.  

41.This brings me to the other question of whether there is any real risk of enforcement action by the Buildings Department.  In Spark Rich (China) Ltd v. Valrose Ltd [2006] 2 HKC 589, 598 at paras.20-22, Godfrey JA said:

“20. It is impossible to formulate any test as what is a real risk and what is a risk which is not real.  So this is of little help.  It is more helpful to state that if, in an “unauthorised structure” case, the court concludes that, beyond reasonable doubt, the purchaser will not be at risk of any successful action against him by the Building Authority, it should declare in favour of a good title shown: cp MEPC Ltd v. Christian-Edwards [1981] AC 205, per Lord Russell of Killowen at p.220 (followed here in Kan Wing-yau v. Hong Kong Housing Society [1988] 2 HKLR 187: see per Clough J.A., at p.194).

21.   Now, the burden of showing a good title falls on the shoulders of the vendor.  He must, therefore, in an “unauthorised structure” case, satisfy the purchaser (or, failing him, the court) that the risk of such action is one which a purchaser can safely be advised to disregard.

22.   So the test may be usefully framed as follows: If the purchaser asks his solicitor: “Can I be sure that I can safely disregard the risk?”  then, unless his solicitor (being a prudent and experienced solicitor) can properly advise him that he can, the purchaser cannot be obliged to accept the vendor’s title, even if supplied by the vendor with opinion evidence to the effect that action by the Building Authority was unlikely.”

42.Applying the test formulated by Godfrey JA, a prudent and experienced solicitor cannot have properly advised the plaintiff that it can safely disregard the risk of enforcement action by the Buildings Department in respect of the internal staircase and the void.  First, although two building orders had been issued against the building in the past, they related to different matters, namely, concrete and plastering at the external and common areas of the building, the piping and the canopies attached to it. It cannot be inferred that the Buildings Department would have inspected the units within the building, including the Property and/or the cockloft and should therefore be fully aware of the physical conditions of the Property and/or the cockloft.

43.Second, it cannot be said that the Buildings Department has no interest in the unauthorised alterations.  It had appointed an agent to inspect the Property upon receipt of complaints.  In its letter of 10 April 2008, it indicated that advisory letter would be issued to the owners.  The fact that the Buildings Department considers that the unauthorised alterations do not warrant prioritized enforcement action does not assist the defendant.  The necessary implication is that the Buildings Department has not decided that reinstatement will not be required.  It is not a case of no risk of enforcement action at all or the risk is so minimal that it can be safely disregarded.  The position is thus similar to what Godfrey JA said in Spark Rich (China) Ltd v. Valrose Ltd, a prudent and experienced solicitor would be bound to advise the plaintiff that it cannot safely disregard the risk of some action at some future time by the Buildings Department, although he might add that such action would in his own view be unlikely or the risk was small. However, he could not properly exclude the possibility completely or to advise the plaintiff that it could be sure the risk could safely be disregarded.

44.For these reasons, I am of the view that the defect does go to the root of the defendant’s title.

Due diligence

45.Turning to the issue of whether the plaintiff should, by using due diligence, have been aware of the existence of the unauthorised alterations.  The defendant’s argument is that it is apparent from an inspection of the Property and a study of the approved building plans that the internal staircase had been demolished and the ceiling of the Property had extended into the void area.  

46.In this regard, it is necessary to look at Requisition no. 2 first raised by WG in its letter dated 5 February 2008 and the follow-up requisition. By Requisition no. 2, WG pointed out that there was discrepancy between the DMC and the OP in relation to the description of the units in the building, and further questioned why there was no mention of Ground Floor, No.4 Elgin Street in either the OP or the First Schedule to the DMC.  In the reply letter dated 13 February 2008, KM pointed out that the control card of the building identified Ground Floor, No. 4 Elgin Street as equivalent to Upper Ground Floor of Nos. 2, 4 and 4A Elgin Street and No.47 Peel Street.

47.In the follow-up requisition, WG pointed out that whereas the OP suggested there was only one unit on the Upper Ground Floor and one cockloft, the control card showed there were three units at the Upper Ground Floor and three cocklofts.  In the letter dated 26 February 2008, KM replied, inter alia, that the OP was to restrict the user and not the number of units. The letter went on to state: “(b) The number of units situated on the relevant level was divided and first sold by the developer upon completion with division plan duly prepared and certified by an authorised person prescribed by the Buildings Ordinance. (c) a fortiori, an internal partitioning not involving any structural alteration may be undertaken within application to the Buildings Authority under s.41(3) of the Buildings Ordinance which was consequentially supported by judgements laid in Octorich Limited’s case (HCMP No. 97 of 1992. Active Keen Industries Limited’s case (1993) Civ App No. 42/93 and Dei Chuen Ho Industrial Limited v. Leung Yin Por’s case.”

48.KM concluded that the difference in number of units between the OP and the existing condition would not be a blot to title of the Property.  WG then wrote on 27 February 2008 requesting for confirmation from Buildings Department and documentary support for KM’s views.  KM replied on 29 February 2008, enclosing the certified copy of the approved building plan of the building for WG’s perusal.

49.The approved building plan is relevant in that it shows: (1) there is to the right rear part of the Property a staircase, which was marked with the word “UP” and an arrow leading to a dotted opening; (2) there is on the cockloft, a staircase marked with the word “DOWN” and an arrow leading from where the dotted opening appeared on the Property; and (3) there is on both the Property and the front portion of the cockloft, a pair of parallel lines extending between two pillars at the front part.  The pair of parallel lines is to denote a parapet wall.  In fact, there is also indication of an internal staircase on the Property on the plan attached to the 1^st assignment, albeit less obvious and the area occupied by the staircase was included in the area to be assigned.

50.It is common ground that Mr Ng of the plaintiff had inspected the Property before entering into the provisional sale and purchase agreement and that the Property was then vacant.  It would be plain to him from the inspection that there was no internal staircase or stairwell on the Property.  At the same time, it is readily apparent from a reading of the approved building plan that there ought to be an internal staircase connecting the Property to the cockloft.  This is so even if one were to have regard to the fact that the approved plan was supplied to the plaintiff in the context of Requisition no. 2, which concerned the identification of the Property and that no expert is engaged.  As such, I agree with Mr Lee’s submission that with due diligence, the plaintiff should have been able to discover there was no internal staircase on the Property, which is contrary to what is shown on the approved building plan. 

51.As to the covering up of the void as a result of the extension of the ceiling of the Property, I agree that when Mr Ng inspected the Property, he should have realised that the Property only has one level and there is no cockloft or a second level on it.  However, I cannot agree that the existence of the void is something apparent and obvious from a study of the assignment plan and/or the approved building plan, without engaging a surveyor or architect.  Apart from the fact that the assignment plan gives no indication of a parapet wall or a void, their existence is also not clearly or readily discernable from the approved plan. This is particularly so when the plaintiff or its solicitors cannot be expected to pay any or much attention on the cockloft, which was not the subject matter of the transaction.  Additionally, the difference between the areas of the Property and the cockloft is not significant, probably because the cockloft had included the common staircase and the Property had not. 

52.Mr Lee argues that upon the discovery of the internal staircase, and the consequential instruction of a surveyor, the existence of the parapet wall and the void on the approved building plan would be readily detected. This argument is in effect saying that the plaintiff ought to have called for a surveyor’s report upon receipt of the approved plan. In my view, this is imposing too onerous a duty on a purchaser and goes beyond the due diligence required of a purchaser in the context of a requisition raised out of time, which is to cover obvious matters that would put a purchaser on enquiry: see Billion Best (Hong Kong) Ltd v. Amity Investment Co Ltd [2002] 1 HKLRD 392, 401A-C and Ip Cho Sau & Anor v. Leung Kai Cheong & Anor (unreported) HCMP 1299 of 1998. I also note that there is no evidence to contradict the plaintiff’s evidence that the complaint to the Buildings Department was not instigated by it and that there is no evidential basis for saying that the plaintiff was making an opportunistic use of the unauthorised alteration works on the Property as observed by Stone J in Wong Man Kit Raymond v. Chan Nam Fan (unreported) HCMP 439 of 1997, pp.8-11. 

53.In respect of the unauthorised alteration work relating to the void, I am of the view that it cannot be said that the plaintiff would have been aware of its existence, had it exercised due diligence.

Waiver

54.I turn to deal with the issue of whether the plaintiff is barred from raising any requisition as a result of having accepted the defendant’s title. The defendant’s case is that by forwarding a draft assignment to the defendant for approval on 27 March 2008, it must be conclusively implied that the plaintiff had accepted the defendant’s title such that it is not entitled to raise any requisition thereafter.

55.When WG sent the draft assignment to KM for approval, it was before Mr Ng discovered the notices left by ISS EastPoint and before the issue of unauthorised alteration works came to light.  There is no evidence to suggest that the plaintiff was aware of the relevant facts surrounding the defect in the defendant’s title or the existence of its legal right arising from the unauthorised alterations on the Property.  That being the case, it cannot be conclusively implied that the plaintiff had accepted the defendant’s title and had waived its right to raise requisition on defect that was unknown to it and that goes to the root of the title.   

Conclusion

56.It follows from the above discussions that the plaintiff was entitled to rescind the Agreement on the basis that the defendant had failed to give a good title to the Property. I therefore enter judgment for the plaintiff for the relief claimed in the originating summons.  Counsel have agreed that the normal rule of costs follow event should apply.  Accordingly, I order that the defendant pay the costs of these proceedings to the plaintiff, to be taxed if not agreed.

Mr Bernard Man instructed by Messrs Wilkinson & Grist for the plaintiff

Mr Lee Tung Ming instructed by Messrs Kenneth CC Man & Co for the defendant