Asia Way International Investments Ltd v. Hung Kin Ping and Another

DCCJ3911/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3911 OF 2011

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DECISION

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Introduction

1.The present action follows the aborted sale of a unit in Maison Deluxe, No.341 Prince Edward Road West, Kowloon, in which the purchaser’s solicitors raised certain requisitions in respect of the title to the property which they claimed had not been satisfactorily answered.  The purchaser did not complete the transaction, and the vendors forfeited the deposits or part payments previously paid by the purchaser.  The purchaser issued the present writ claiming for a declaration that the vendors had been in repudiatory breach of the sale and purchase agreement in failing to give and/or show a good title to the property by the date of completion, and for damages for breach of contract.  The vendors counterclaimed similarly.  The plaintiff purchaser took out an Order 14A summons to have the questions determined: (1) whether the vendors failed to give a good title to the property by failing to provide certain documents requested by the purchaser’s solicitors, and (2) whether the vendors failed to show and prove a good title to the property by failing to answer satisfactorily certain requisitions raised by the purchaser.

The Property and the Partitioning

2.The property in question (“the property”) is one equal undivided 2^nd part or share in one equal undivided 27^th part or share in Kowloon Inland Lot No.4031, a building known as “Maison Deluxe”, together with the exclusive right to enjoy Portion 1 of Flat C on the 5^th Floor of the building.  The “half-share” of the 1/27 share came about as a result of a Deed of Mutual Grant dated 4 September 1987, whereby the 2 co-owners of the then Flat 5C divided Flat 5C into 2 portions (Portion 1 and Portion 2), each holding one half-share of the 1/27 part, while at the same time granting each other exclusive possession of Portion 1 and Portion 2 respectively.

3.It was this partitioning of the relevant share in the land along with the physical partitioning of Flat 5C which gave rise to most of the contentions between the parties in this transaction, or what has been called “the Partition Requisition” in this case. The other requisition which has remained contentious is what the parties have called “the Cancellation Agreement Requisition”.

4.The Deed of Mutual Grant contained provisions and covenants governing the relationship between the owners of Portions 1 and 2, while their relationship with the other co-owners of the building would continue to be governed by the previous Deed of Mutual Covenant dated 29 August 1966.

5.The formal sale and purchase agreement (“the Agreement”) dated 8 July 2011 follows an earlier provisional agreement between the parties dated 26 June 2011.  Clause 6(a) of the Agreement provides that “[t]he Vendor shall give a good title to the Property in accordance with section 13A of the Conveyancing and Property Ordinance (Cap 219),” and “shall prove and show a good title in accordance with section 13 of the Ordinance …..” Clause 8 provides that “any requisition or objection on title shall be delivered to the Vendor’s solicitors in writing 7 working days after the receipt of all title deeds by the Purchaser’s Solicitors, ….. , otherwise the same shall be considered as waived.”  Completion was to take place no later than 5 p.m. on 9 September 2011.

6.Title deeds were delivered to the purchaser’s solicitors on 13 July 2011.  By letter dated 18 July 2011, they raised a number of requisitions in respect of the property, two of which remain controversial in this action.

The Requisitions

7.The Partition Requisition raised is as follows:

“Occupation Permit No.K28/65 and Deed of Mutual Grant memorial No.3510466

“In the Occupation Permit, it stipulates that only 3 flats per floor are permitted from 1^st to 8^th floors of the building. All the same, we note that by the above Deed of Mutual Grant, the owners of “Flat C on 5/F” had partitioned & granted to each other, Portion 1 and Portion 2 thereof, without obtaining approval by the Building Authority, so that the 5^th floor comprises 4 flats, otherwise than as 3 flats so permitted in the Occupation Permit.

“In regard to such partition, what we were provided is merely an un-dated Architect’s Certificate of Shum Dai Chung, in which it only states that no such partition involved structural alteration and no requirement of such approval was for non-structural alteration.

“In any event, it does not address the cardinal issues as to whether the consequential internal partition of rooms or change of the drainage system of portions 1 and 2 after such partition would affect structure or were exempted from approval by the Building Authority, taking note that the original plan for Flat C in the Deed of Mutual Covenant was constructed with fixed and various rooms therein. Nor did the Certificate confirm that such partition had complied with the Buildings Ordinance, Cap 123, and Fire Services Ordinance, Cap 95, and all their respective regulations. There is also short of the evidence of approval by the manager of the building sent to us.

“In this connection, please let us have the following documents for our perusal:-

1. Approval by the Building Authority of such partition of Flat C on 5^th Floor into portion 1 and portion 2, including the internal partition of rooms and change of drainage system therein; or

2. In the absence of the approval by the Building Authority, a fresh Architect’s Certificate of the authorized person duly certifying that such partition (including the internal partition of rooms and change of drainage system therein) had not involved structural alteration AND had complied with in all respects the Buildings Ordinance, Fire Services Ordinance and their Regulations.

“On top of the above documents, please also let us have the approval by the building manager regarding such partition.”

8.The Cancellation Agreement Requisition is as follows:

“Cancellation Agreement Memorial No.06080202440011

The above document purports to have cancelled the Agreement for Sale and Purchase Memorial No.0606270330014, but there is no receipt clause therein by which the purchaser acknowledged receipt of the deposit. As a result, the Cancellation Agreement is defective OR at least it casts a doubt as to whether the purchaser therein still had a lien of the deposit against the vendor on the Property. Please therefore clarify the situation by documentary evidence.

“Besides, please adduce evidence to prove the Cancellation Agreement was duly stamped or exempted from payment of stamp duty thereon.

9.By letter dated 4 August 2011, the solicitors for the vendor replied, in relation to the Partition Requisition, that the certificate issued by Shum Dai Chung as an Architect and Authorised Person, which confirmed that the partitioning did not involve structural alteration and that no approval from the Building Authority was required, was sufficient, and therefore no fresh architect’s certificate would be necessary.

10.In the same letter, the solicitors for the vendor referred to the Cancellation Agreement which stipulated that the sum of $200,000 would be refunded by the then vendor to the purchaser upon the signing of the said Cancellation Agreement.  They went on to say that the signing of the Cancellation Agreement itself implied that the refund had been made, and no unpaid lien could have remained.

11.The solicitors for the parties continued the correspondence, essentially repeating their initial positions.  I shall further refer to some of the correspondence later.  By letter dated 8 September 2011, the purchaser’s solicitors informed the vendor’s solicitors that the vendors would be deemed to be in breach unless the requisitions were satisfactorily dealt with.  No completion having taken place, the vendors’ solicitors gave notice by letter dated 9 September 2011 that the purchaser was in breach of the Agreement, and forfeited the deposit.

Cancellation Agreement Requisition

12.The purchaser complains that the Cancellation Agreement dated 5 July 2006 which cancelled an earlier agreement for sale and purchase of the property dated 19 June 2006 provided for the refund of a sum of $200,000 by a predecessor-in-title as vendor to the then purchaser.  Yet the Cancellation Agreement contained no receipt clause, and there was otherwise no evidence of such payment.  Therefore, so Mr Cheng for the present purchaser argues, there is a real risk that the then purchaser still retains a purchaser’s lien over the property for the amount of $200,000, which cause of action would not have been time-barred by the time of the contractual completion date.

13.The question of whether there is any title problem is to be approached from the standpoint of a willing vendor and a willing purchaser both possessed of robust common sense: Mexon Holdings Ltd v Silver Bay International Ltd [2000] 3 HKCFAR 109 at 117D-E. Clause 2 of the Cancellation Agreement provided: “The said sum of HK$200,000 shall be refunded by the Vendor to the Purchaser upon the signing of this Agreement.”  The Cancellation Agreement was executed by both parties in the presence of their respective legal representatives.  The then purchaser was therefore represented by his own solicitors.  I agree with the submission of Mr C Y Li, as he then was, for the vendors, that it must be a matter of common sense that any reasonably competent solicitors acting for the then purchaser would have protected their client’s interest and ensured that the said sum was refunded in accordance with clause 2 thereof.  Any suggestion that the said sum might not have been refunded would be fanciful, especially given the passage of time and the absence of any evidence of any claim, lis pendens or registration of lien over the property in respect of the said sum.  The Cancellation Agreement Requisition has clearly been sufficiently answered.

Partition Requisition

14.Mr Cheng, counsel for the purchaser, relies on a number of grounds:

(1)  The Occupation Permit allows only 3 flats per floor and the partition of the original Flat C on the 5^th floor into 2 units means there are 4 flats on that floor, in contravention of the Occupation Permit.  The purchaser was entitled to an approval plan of the property after the partitioning, and approval by the Building Authority permitting 4 units on the 5^th floor.

(2)  The Architect’s Certificate was undated and in any event incomplete in that the “5^th Floor Plan” which was supposed to be annexed with the Architect’s Certificate was never provided to the purchaser.

(3)  Even if the Architect’s Certificate can be relied on, it did not purport to deal with the consequential changes to doors for entry, internal partitions and drainage works for the kitchens and bathrooms which must have taken place as a result of the partitioning.  The purchaser was entitled to evidence of approval by the Building Authority of such changes or that such approval was not required.

(4)  The partition prima facie contravenes clause 9(a) of the DMC dated 29 August 1966 under which owners covenanted not to make any alteration to any installation or fixtures as to affect or likely to affect the flow or supply of water, electricity, gas, light and air and not to cut or damage any of the main walls or beams or floors.  The purchaser was entitled to evidence of approval either by the manager of the building or the incorporated owners, or evidence that there has been no breach of the DMC.

15.The purchaser’s case is that the vendors failed to give a good title to the property for failing to provide the above-mentioned documents or proof; and that the vendors failed to show and prove a good title by failing to satisfactorily answer the requisitions for the said documents or save for the 5^th floor plan annexed to the Architect’s Certificate which was never requested.

Occupation Permit

16.Mr Cheng makes the simple point that the partitioning created an additional residential unit so that there are 4 units on the 5^th floor instead of 3 units as provided for under the Occupation Permit.  Mr Li argues that despite the partitioning, Portion 1 and Portion 2 both remain residential in nature and both units have been created within the space of the original single Flat 5C, without encroaching upon the common areas.  I agree with Mr Li’s submission.  Although an additional unit was created by the partition, the 2 new units were created within the confines of the original Flat 5C.  I hold that the partitioning of Flat 5C into 2 Portions did not create a title defect.  See also Summit Investment Ltd v Shia Ning Enterprise Ltd [1999] 2 HKLRD 798.

The Architect’s Certificate

17.The remaining arguments are to an extent inter-related, as many of both parties’ arguments ultimately depend on whether the partitioning had involved the structure of the building thereby requiring approval by the Building Authority, which in turn depends on the efficacy of the Architect’s Certificate in clarifying or confirming the issue of structural changes.

Lack of 5^th Floor Plan Annexed to the Architect’s Certificate

18.Mr Cheng argues that as the Certificate was undated, there was nothing to show that the Certificate was made contemporaneously with the partitioning and the Deed of Mutual Grant in 1987.  He further submits that as the Certificate purports to certify that “the partitioning as per the 5^th Floor Plan annexed herewith” was non-structural, the Certificate was of no use without the floor plan, which was not provided to the purchaser.  He relies on the case of Chiu Hong Development Ltd v Wong Tsui Ha HCMP 1044/2009 (unrep), Recorder Jat SC, 7 January 2010, in which the learned Recorder held in a similar situation that a purchaser was entitled to know that the partitioning existing at the time of completion was not unauthorised building work as certified by the architect, and without the floor plan, there was nothing to show that the partitioning referred to in the Certificate was the same partitioning existing at the time of completion.  It was therefore held that the vendor had failed to show a good title.

19.It is not disputed that the Architect’s Certificate provided to the purchaser did not come with a floor plan.  Nor is it in dispute that the purchaser’s solicitors never raised any requisition over the missing floor plan.  Mr Li points out that as the purchaser’s solicitors never asked for the missing floor plan, the purchaser cannot now complain that it was not given a copy of the floor plan.  He distinguishes the present case from Chiu Hong Development Ltd, in that there the purchaser specifically requisitioned for the missing floor plan, despite which request the vendors failed or refused to provide the plan.

20.Mr Cheng in turn argues that the vendors were under a duty not only to show a good title (eg by answering a specific requisition), but also to give a good title.  Therefore it does not matter whether the purchaser in this case had raised a requisition on the missing floor plan, as it was the duty of the vendors to provide it anyway.  He relies on the case of Profit World Trading Ltd v Ho So Yung [2011] 2 HKLRD 773, at para 23, per Le Pichon JA:

“Logically, a vendor’s obligation to give a good title on completion cannot depend on whether a requisition as to defects was raised within time or was raised late or not at all. Either [the vendor] is in a position to give a good title on completion or he is not. Requisitions cannot alter the nature of that obligation.”

21.In answer, Mr Li submits that the document in question is not a title document required under section 13 of the Conveyancing and Property Ordinance or under the Agreement, the last assignment dealing with the entire interest in the property extending not less than 15 years before the Agreement being an assignment executed in 1988.  The Architect’s Certificate would have come into existence in 1987 when the partitioning took place.  Therefore it was not a document which the vendors would otherwise be obliged to produce as part of the proof of title. In Profit World Trading Ltd, above, the subject matter of the sale was a town house, and the defect in title related to an extension of the town house into the common areas of the residential development.  It was in that context that the Court of Appeal held that the vendor clearly had no title to give in respect of the area encroaching upon the common areas, and the lateness of the requisition could not have affected the vendor’s obligation or ability to give a good title.

22.I ought to mention at this juncture that there was a 5^th floor plan annexed to the Deed of Mutual Grant, which floor plan was provided to the purchaser under cover of a letter dated 22 August 2011 from the vendors’ solicitors, if not before, which shows the partitioning of the original Flat 5C into Portions 1 and 2.  Mr Cheng argues that there was no evidence to suggest that this was the same 5^th floor plan referred to in the Architect’s Certificate.  But the combination of the circumstances, namely, that there was a partition and a Deed of Mutual Grant in September 1987 to deal with some of the legal consequences of the partition, that a 5^th floor plan showing the partition was attached to the Deed of Mutual Grant, and that an Architect’s Certificate was issued to address the question of possible structural alterations as a result of the partitioning which referred to a 5^th floor plan, makes it plain that the 5^th floor plan attached to the Deed of Mutual Grant must be the same plan referred to in the Architect’s Certificate.  This would have enabled the purchaser to check what partitioning was being referred to in the Certificate.  The parties’ solicitors were in protracted discussions over the sufficiency of the Architect’s Certificate, and if the purchaser’s solicitors were in any doubt about what partitioning the Architect’s Certificate was alluding to, they could still have raised a requisition over the 5^th floor plan that should have come with the Certificate, but they did not.  In these circumstances, of the existence of other evidence from the Deed Mutual Grant 5^th floor plan showing the partitioning and the absence of a requisition, I am of the view that the purchaser must be taken to have waived the requirement for producing the relevant plan.

Works Consequential upon the Partitioning

23.Mr Cheng submits that the division of the original flat into 2 units would have entailed consequential works, such as doors for entry and new drainage works.  He relies on the case of Lucky Success (HK) Ltd v Ko Ni Kwong [2010] 1 HKC 351, which, to be fair, was a case very properly cited by Mr Li himself for the benefit of the court.  In that case, the property in question was a flat which was one of two units subdivided from an original larger unit, similar to the present case.  The purchaser’s solicitors in that case raised requisitions over the non-compliance with the occupation permit and over the question of drainage works for the creation of a new bathroom and kitchen within the property itself which was necessitated by the partitioning, the pre-existing bathroom and kitchen being in the other unit after the partitioning.  The vendor’s solicitors in that case in their answers to the requisitions mainly denied that there was a potential problem, and only very shortly before the time for completion did they produce an architect’s certificate to the effect that the original flat had been subdivided into 2 units by a non-load bearing partition wall which did not require approval from the Building Authority.  Incidentally, that certificate was issued also by Mr Shum Dai Chung, the architect who issued the Certificate in the present case.  Carlson DHCJ held that the certificate came too late in the day and in any event related only to the partition wall and failed to address the important aspect of the additional kitchen, bathroom and toilet facilities which would have required changes to the drainage and which would have almost certainly involved the structure of the building.

24.Mr Li submits that the present case is distinguishable from Lucky Success in that the purchaser’s solicitors in that case had specifically brought up in their requisitions the fact that the original kitchen, bathroom and toilet facilities were in the other subdivided unit, so that similar facilities had to be added to the very property that was being sold, which facilities had entailed new drainage works (Lucky Success, above, at 353B-D, para 5).  Any enforcement action would affect the property itself, a consideration which was stressed by the learned judge (at 357D-E, para 13).  In the present case, however, the requisitions raised by the purchaser’s solicitors remained very general and non-specific, without any particulars of what kind of changes or works had been carried out which would have necessitated clarification by the vendors’ solicitors that such changes or works did not require approval by the Building Authority.  The requisition requiring evidence of compliance with the Buildings Ordinance and Fire Services Ordinance and their regulations, without specifying which sections or regulations, was also too broad.  It was, Mr Li submits, for the purchaser’s solicitors to formulate and particularise the nature of the problem, and there simply was no evidence as a matter of conveyancing to suggest the existence of “consequential changes” in the property, ie Portion 1, itself.

25.Mr Li further relies on clause 5(a) of the Deed of Mutual Grant which is a covenant not to make structural alteration, remove doors or plumbing, or cut or injure the floors and walls. Dealing with this submission first, clause 5(a) represents an obligation on the part of the owners of the 2 Portions not to make structural alterations etc, but is no evidence that such alterations had not been carried out during the partitioning.

Was there a Valid and Proper Requisition?

26.No evidence has been filed by either party in this case of where the original amenities were situated, or where the entrance to the original Flat 5C was.  Nor is it apparent from the 5/F floor plan attached to the Deed of Mutual Grant, or from the original floor plan attached to the Deed of Mutual Covenant.  Certainly in the correspondence between the solicitors for both parties, no one has ever suggested that Portion 1 had inherited the original entrance and all the pre-existing drainage facilities, or that such a case could be easily gleaned from the conveyancing documents.  There is also no evidence in these proceedings or in the correspondence as to what building or drainage works were carried out during the partitioning.  The 5^th floor plan annexed to the Deed of Mutual Grant simply shows a partitioning wall, and the Architect’s Certificate does not state what works were involved in the partitioning, apart from the reference to the partitioning wall.

27.What we do know is that 2 separate units were created out of a single unit.  To make the 2 units self-sufficient as residential units, both units must have a separate entrance, a kitchen, a bathroom and a toilet.  It must have been necessary to put in a new kitchen in one of the 2 units entailing proper drainage for the new kitchen.  Changes or additions to the drainage system of the 2 units, whether to do with the kitchens, bathrooms or toilets, would have been likely or at least reasonably possible.  Most likely a new entrance had to be created for one of the 2 units, which would have involved making an opening in a wall, unless there already existed a second entrance in the original flat.  I may not share the same degree of certainty which the learned judge in Lucky Success had that such drainage works would have involved the structure of the building, as there is no evidence in this case of the location of the pre-existing drainage system, but at least there remains a real risk that such drainage works occurred within Portion 1 which may have involved the structure.  A new entrance may also have involved works affecting the structure.  These works, if involving structure, would require approval by the Building Authority under section 14 of the Buildings Ordinance, and there was none.  This could lead to enforcement action by the Building Authority under section 24 against the owner of Portion 1 itself if building or drainage works affecting structure had taken place in Portion 1: Active Keen Industries Ltd v Fok Chi Keong [1994] 2 HKC 67.

28.In these circumstances, and given the paucity of information as to what works were carried out in the partitioning, I find that it was a legitimate and reasonable concern on the part of the purchaser’s solicitors that the partitioning would have involved building and drainage works in one or both of the 2 units, and that such works might have involved the structure of the building.  In their first requisition dated 18 July 2011, they pointed out that the Architect’s Certificate did not address the cardinal issues as to whether the consequential internal partition of rooms or change of the drainage systems in portions 1 and 2 would affect structure or were exempted from approval by the Building Authority.  They therefore requested either proof of approval by the Building Authority or a fresh Architect’s Certificate certifying that such partition including the change of drainage system had not involved structural alteration and had complied with the Buildings Ordinance and the Fire Services Ordinance and their Regulations.

29.At the start of the hearing, Mr Cheng for the purchaser conceded that the Fire Services Ordinance had nothing to do with any fire escape route for buildings.  See also in this regard Mexon Holdings Ltd v Silver Bay International Ltd (2000) 3 HKCFAR 109 at 115G to 116C.  I accept that the reference in the requisition to compliance with the entirety of the Buildings Ordinance, the Fire Services Ordinance and their Regulations, without specifying which particular sections or regulations, made the request wider than was necessary, and to that extent I have sympathy for the vendors’ solicitors for having to deal with such a wide-ranging requisition.  However, the fact remains that there was a specific requisition that there be proof that the change in the drainage system either had received approval by the Building Authority or had not involved structural alteration so as to require such approval.  There was no specific mention about doors for entry as part of the consequential changes in this letter yet, which came in their next letter dated 5 August 2011.  Although the purchaser’s solicitors did not refer to any specific sections in the Buildings Ordinance, the gravamen of the requisition, about possible structural alterations caused by building or drainage works was clear. This was a reasonable requisition, properly raised in the circumstances, which required a satisfactory answer.

Answers to the Partition Requisition

30.The answer that came on 4 August 2011 was to the effect that the Architect’s Certificate had already certified that the partition did not involve structural alteration and did not require approval by the Building Authority.  In effect the vendors’ solicitors was saying that the Architect’s Certificate was sufficient to cover whatever works that were undertaken as part of the partitioning.

31.I do not intend to detail the ensuing correspondence, as the parties essentially maintained and repeated their positions, save that I will highlight certain points made by the parties.

32.In a letter dated 22 August 2011, the vendors’ solicitors pointed out that since the partitioning on 14 September 1987 there had been no building order issued against the owner.  They also referred to clause 9 of the DMC which stipulated that the owners were not to make any structural alterations to the building.  I would add here that clause 9 of the DMC imposes an obligation on the owners not to make structural alterations, but is not evidence that no structural alterations had been made. That reference prompted a letter dated 27 August 2011 from the purchaser’s solicitors, who wrote that the partitioning might have constituted breach of clause 9 of the DMC.  They further pointed out that as a matter of course, the partition would cause change of the doors for entry, the internal partitions for bedrooms, kitchens and bathrooms, and the drainage systems in the two individual and separate portions after such partition, so as to affect the “prototype” of water, electricity, gas and light previously approved and provided for one unit.  This in my view highlighted the evidential basis for the requisition.

33.In their reply on the same day, the vendors’ solicitors again referred to section 41(3) of the Buildings Ordinance and the exemption therein for non-structural works, and “there is nothing further approval as alleged in your alleged drainage systems.”  They added that there was no authority in support of their counterpart’s allegation that the Architect’s Certificate had to certify that the openings and the drainage system had complied with the Buildings Ordinance, Fire Services Ordinance and their Regulations.  They also pointed out that there had been no complaint by the manager of the building ever since the partition about any breach of the DMC.

34.Therefore, the position of the vendors’ solicitors was that the Architect’s Certificate was sufficient to cover all the concerns of the purchaser, that there was no authority requiring an architect’s certificate to certify that the drainage systems had complied with the Buildings Ordinance, and that for over 3 decades since the partitioning, there had been no building order from the Building Authority and no complaint from the manager of the building.

Scope of the Certificate

35.I now turn to the contents of the Certificate itself.  The Architect’s Certificate reads as follows:

“Re: Partitioning of Flat C on 5/F of Maison Delux, No.341 Prince Edward Road West, Kowloon into Portion Nos.1 and 2.

I, Shum Dai Chung, Authorized Person and Registered Architect certify herewith that the partitioning of Flat C of 5/F of Maison Delux, No.341 Prince Edward Road West, Kowloon into Portion Nos.1 and 2 as per 5^th Floor Plan annexed herewith does not involve structural alteration and no approval from the Building Authority is required for such a non-load bearing and non-structural partitioning wall which falls within the exemption in Section 41(3) of the Buildings Ordinance Cap.123.”

36.Mr Cheng argues that the Certificate deals only with the partitioning wall between the 2 portions, and does not purport to cover the issue of other works involved in the partitioning, such as the doors for entry for the 2 units and the drainage works entailed by the division into 2 individual flats.  Mr Li argues that although the Certificate refers to the partitioning wall in the latter part of the Certificate, there was a more general reference in the beginning thereof to “the partitioning”, and therefore the Certificate must be understood to cover not just the partitioning wall, but also to the partitioning project as a whole, including any drainage or building works, if any, which might have been carried out.

37.An architect’s certificate is created by a professional architect and authorised person registered under the Buildings Ordinance, who is trained and well-skilled in his sphere of work, for the purpose of stating his professional opinion, often as to whether certain requirements of the Buildings Ordinance have been complied with.  It should be read and understood in the light of the purpose for which it is created.  At the same time, it is after all a creation by a professional who must be presumed to be conversant with matters within the area of his expertise. Furthermore, in the context of conveyancing, whether a certificate is sufficient must be determined in accordance with the standards required under the law of conveyancing.

38.Turning to the Certificate, the purpose for which it was created should be clear.  The partitioning would have involved certain works to be carried out, and the reference in the Certificate to the Buildings Ordinance indicates that the Certificate was issued to address certain requirements under the Ordinance arising from the partition.  But for the specific wording of the Certificate itself, I would have been very much inclined to the understanding urged upon me by Mr Li, that the Certificate was there to deal with the partitioning project and must cover all the works forming part of the partitioning: not just the single aspect of the partitioning wall itself, but also any incidental building or drainage works. However, the latter part of the Certificate reads, “… and no approval from the Building Authority is required for such a non-load bearing and non-structural partitioning wall which falls within the exemption in section 41(3) of the Buildings Ordinance.”  As a matter of plain English, this would appear to qualify and limit the earlier reference to “partitioning”.  No information has been included in the Certificate as to what works or even types of works were under consideration in the Certificate.  There is a reference to the 5^th floor plan which is a fairly bare drawing of the original Flat 5C being divided into the 2 Portions by a partitioning wall.  There is no indication on that plan about what works other than the partitioning wall were involved in the “partitioning”.

39.The Certificate does refer to the exemption under section 41(3) of the Buildings Ordinance.  This is an exemption from approval by the Building Authority of non-structural building works, so that it could be said that the architect was stating his opinion that all building works involved in the partitioning were exempted from approval, which would have applied to, say, a new entrance.  Nevertheless, the Certificate and the exemption referred to therein cannot cover drainage works.  This is because the exemption under section 41(3) even as it then existed in September 1987 covered only buildings works other than drainage works (as is still the case currently).  The exemption for drainage works was dealt with under a newly enacted section 41(3A): see Buildings (Amendment) Ordinance 1987 (Ordinance No.57 of 1987) section 8, which ordinance came into effect on 17 July 1987. Before the new section 41(3A), all drainage works required approval, perhaps hard to comprehend these days.  The architect must have been aware of the separate exemption for drainage works, and therefore his specific reference to the exemption under section 41(3) must mean that the Certificate does not purport to deal with any issue concerning drainage works.  As a matter of conveyancing, the Certificate is certainly not sufficient to remove the reasonable doubt over the existence of drainage works in Portion 1 possibly affecting the structure, raised by the Partition Requisition.

Risk of Enforcement

40.As to the risk of enforcement, I bear in mind that the issue of a possible defect in title should be approached from the viewpoint of a willing vendor and a willing purchaser with robust common sense (Mexon Holdings Ltd, above), and that it is not for the legal representatives to magnify difficulties which are non-existent (Active Keen Industries Ltd v Fok Chi Keong [1994] 2 HKC 67 at 87H).  Alterations to existing flats are common in Hong Kong and the courts have held that potential problems arising out of alterations to other flats in the context of a multi-storey building carry with them little risk of enforcement action against the owners other than the owners of the offending flats.  I am also conscious of the fact that the partitioning in this case occurred way back in 1987 and since then there has been no enforcement action by the Building Authority.  However, there remains a reasonable doubt whether drainage works, which must have occurred as part of the partitioning, occurred within Portion 1 itself.  Unless it is shown that such drainage works did not occur in Portion 1 itself, or that they did not involve the structure of the building and therefore were exempted from approval, there remains a risk of enforcement action against the owner of Portion 1 itself, given the Building Authority’s statutory powers (and possibly duties) under section 24: see Lucky Success (above, at 357D-E, para 13).  For these reasons, there remains a reasonable doubt over the title to the property which could not be forced upon the purchaser: see Kan Wing Yau v Hong Kong Housing Society [1988] 2 HKLR 187.  The vendors have failed to show and prove a good title.

41.As to the potential breach of clause 9 of the DMC, the manager or the incorporated owners of the buildings must have known about the partitioning and have so far not made any complaint or taken any action, and the risk of action by other owners is arguably low. Nevertheless, if there had been a breach of the DMC caused by drainage works involving structure during the partitioning, such a breach would be a continuing breach and present or future co-owners of the building could still take action.  In failing to answer the requisition satisfactorily in respect of clause 9 of the DMC, the vendors have failed to show and prove a good title.

Questions in the Order 14A Summons

42.I would therefore answer the question posed in the Order 14A summons as follows.  The vendors failed to show and prove a good title to the property by failing to answer satisfactorily the requisitions raised by the purchaser pertaining to the documents or evidence referred to paragraph 1(a)(i)(c) and (d) in respect of the drainage works affecting the property in the partitioning, and to that extent they have failed to give a good title to the property.

Orders

43.The orders I make are as follows:

(1)  that there be interlocutory judgment on liability for the plaintiff with damages to be assessed;

(2)  that the defendants’ Defence and Counterclaim be dismissed;

(3)  that there be an order nisi that the defendants pay the plaintiff’s costs of this application with certificate for counsel, and costs of this action.

Mr Alfred C P Cheng, instructed by Fred Kan & Co, for the plaintiff

Mr C Y Li, instructed by Edmund W H Chow & Co, for the defendants