Your World of Legal Intelligence
 Hong Kong | 1-800-335-6202

Giant River Limited v Asie Marketing Limited

Judgment Cited authorities 16 Cited in Precedent Map Related
Vincent
Judgment Date02 August 1988
Subject MatterMiscellaneous Proceedings
Judgement NumberHCMP2510/1987
CourtHigh Court (Hong Kong)
HCMP002510/1987 GIANT RIVER LIMITED v. ASIE MARKETING LIMITED

HCMP002510/1987

Property law - residential property sold for $12 million when defendant vendor contracted to show good title - property comprised 6 storeys of which 3 upper storeys authorised under occupation permit but 3 basement floors unauthorised - 950 square feet ground floor inner court also unauthorised - when defendant purchased property for $4 million certain unauthorised structures disclosed - whether defendant made full and frank disclosure - whether exemption clauses excluded defendant's liability - whether plaintiff waived defendant's obligation to show good title - Held: 1. Unauthorised structures entitled Crown to re-enter and exercise other enforcement powers and adjoining owners entitled to sue under Deed of Mutual Covenant; 2. Unauthorised structures constituted defects which precluded defendant showing good title; 3. Defects went to root of title and plaintiff therefore not prohibited by exemption clause from raising late objection; 4. On facts plaintiff had not waived defendant's obligation to show good title; 5. Plaintiff entitled to refund of $1.2 million deposit; 6. Defendant's counterclaim dismissed.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

M.P. No. 2510 of 1987

____________

IN THE MATTER of House No. 66 Black's Link, Hong Kong

and
IN THE MATTER of Section 12 of the Conveyancing and Property Ordinance, Chapter 219

BETWEEN

GIANT RIVER LIMITED Plaintiff
and
ASIE MARKETING LIMITED Defendant

______________

Coram: Deputy High Court Judge Cruden

Dates of Hearing: 7th, 8th, 11th to 14th and 18th July 1988

Date of Judgment: 2nd August 1988

___________

JUDGMENT

___________

1. On 27th August 1987 the parties entered into an agreement for the sale by the defendant to the plaintiff of the residential property at No. 66 Black's Link ('the property') for the sum of $12,000,000. The plaintiff paid a deposit of $1,200,000 but has not paid the balance or entered into possession. The plaintiff refused to complete the purchase on the ground that because the property included certain unauthorised structures, the defendant had failed to discharge the contractual obligation imposed by Clause 10 of the agreement to show good title.

2. The plaintiff on 24th November 1987 took out the present summons under Section 12 of the Conveyancing and Property Ordinance, Cap. 219 seeking various declarations and an order for the return of the deposit.

The first 3 declarations were sought in the following terms:

(a) A declaration that the requisition and objection dated 16th November 1987 of the plaintiff in respect of the property comprised in the ... agreement have not been sufficiently answered by the defendant.

(b) A declaration that the plaintiff is not precluded by Clause 6 of the ... agreement from making or raising its said objection or requisition.

(c) A declaration that a good title to the said property has not been shown in accordance with the ... agreement.

3. Section 12 is a useful provision which enables vendors and purchasers summarily to apply to the Court to have questions arising out of contracts for the sale of land speedily determined. Often but not always the plaintiff takes out a summons in the hope that completion of the contract will be achieved in accordance with its terms after any prior ambiguities have been resolved by the Court. The plaintiff's present summons raises more substantial issues than those commonly raised on a vendor and purchaser summons and it is not surprising that the Master by consent on 30th May 1988 Made a number of order considerably widening the scope of the proceedings. These orders granted the defendant liberty to file points of counterclaim; liberty to the plaintiff to file a defence to counterclaim; required each party to file a list of documents; provided for inspection; ordered deponents of affidavits filed to be available at the hearing for cross-examination; and granted leave to both parties to adduce further evidence at the hearing viva voce but limited to matters contained in the affidavits.

4. The defendant thereafter filed points of counterclaim seeking declarations that the defendant had deduced good title; that the plaintiff had failed to complete; that the deposit was in terms of the agreement thereby forfeited; and for various related declarations. The plaintiff in turn filed a defence to the counterclaim. Although the Master did not make a formal order under R.S.C. Order 28 Rule 8 that the originating summons proceedings continue as if begun by writ, the result of his directions had a similar practical effect. The hearing proceeded in open, Court in accordance with those directions.

The facts

5. To understand the nature of the unauthorised structures it is necessary to go back to 20th March 1979 when the permit to occupy the property was issued pursuant to Section 21 of the Buildings Ordinance, Cap. 123. The permit in fact extended to the whole of Lot RBL 933 on which 2 houses had been built at a lower level and 3 houses had been built at a higher level. The subsequent owners of the 5 houses held the whole of Lot RBL 933 as tenants in common in equal shares. The lot was notionally subdivided into Blocks A, B, C, D and E. Under this notional subdivision one of the 5 equal shares was allocated to each of the houses and adjoining private gardens designated as Blocks A, B, C, D and E. No. 66 Black's Link is one of those 5 houses, built on the upper level and also designated as Block A. Under the Section 21 permit, the Building Authority permitted the occupation on Lot RBL 933 of 5 detached 3 storey residences for domestic use.

6. The defendant's predecessor in title was Ricoa Lee & Son Ltd. which had mortgaged its interest in the property to the Algemene Bank Nederland NV ('the Bank'). On 21st January 1985 the Bank, in exercise of its power of sale, sold the property to the defendant for $4,000,000. I accept the evidence of Mr. Philippe Charriol, the defendant's Managing Director, that since the property was purchased by the defendant in 1985, no structural additions or alterations have been made to the property. I find that the alleged unauthorised structures were all built at some time before the defendant purchased the property. The plaintiff has alleged that the 3 lower basements, the inner court and certain bedroom balconies forming part of the property are unauthorised structures. On the evidence I find that each of these 3 structures are unauthorised.

7. The Bank was clearly aware of the existence of at least some of these structures for Clause 18 of the agreement its solicitors prepared, for the sale of the property on 21st January 1985 to the defendant, provided:

"18. The said premises are and will be sold on an "as is" basis. No warranty is given by the vendor as to the state and condition of the said premises or of any building or buildings of which the said premises form part. Nor is any warranty given as to whether the said premises or the said building or buildings conform with the approved plans. The purchaser hereby acknowledges that he has inspected the said Block A and the adjacent garden and is aware that certain structures there within (which are not comprised in the said premises hereby agreed to be sold and purchased) are not in conformity with or included in the approved plans."

8. Although Clause 18 refers to the fact that the property included structures not included in the approved plans, it does not specify the nature of those unauthorised structures but merely records that the defendant was aware of them. Mr. Charriol stated that when the defendant purchased the property it comprised 6 and not 3 storeys. Three of those 6 storeys were above ground level; the remaining 3 floors formed the basement. He also stated that as at that date the inner court on the ground floor, was roofed-over and that 2 bedrooms on the 1st and 2nd floors were provided with balconies. Mr. Charriol stated that when the defendant purchased the property he had been told by the previous owner that the basements were unauthorised and their illegal nature was one factor which caused him to take 2 months before a final decision was made to purchase the property. I before the present hearing that he became aware that the balconies might also not be approved structures.

9. Mr. Charriol also stated that the previous owner told him that the roofed-over inner court was not approved. He went on to assert that the previous owner had also told him that some time after the unapproved inner court roof had been constructed, an officer of the Building Authority had called and given oral "clearance" of the roofed-over inner court. Counsel for the defendant conceded that because of the hearsay nature of that evidence, it was not admissible as truth of its contents but submitted that it was evidence that the statement was made by the previous owner to Mr. Charriol and relevant to Mr. Charriol's subsequent conduct. I accept that the statement is admissible on that very limited basis. Any doubts as to Mr. Charriol's knowledge were removed in cross-examination, when he agreed that before purchase he was told that both the basements and the roofed-over inner court were unauthorised. I find that when the defendant, purchased the property in 1985 it knew that the basements and the roofed-over inner court were unauthorised structures.

10. The Section 21 occupation permit, already referred to, was issued in Eerms of the restrictive covenants contained in the Crown's particulars and conditions of sale of Lot RBL 933 for its sale by auction on 18th January 1974. The particulars and conditions are important. General Condition 14...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT