Misrepresentation: failure to disclose landlord’s objections to alterations to the property

In Santani Ltd v Shum Shuk Fong ([2013] HKEC 104, CFI) S sold a flat to C. C agreed to pay an extra HK$2m on top of the value of the flat because of the prospect of being able to enjoy the adjacent large garden. The garden had been leased to S by the Hong Kong Government at a very low rent. S told C that there would be no problem that would prevent C from enjoying the garden as it was at the time of the sale provided she made no additions or alterations. In fact, the District Lands Office had already served an Order on S requiring her to remove certain unauthorised structures. S did not disclose this. The Order had not been complied with fully even by the date of the hearing. The Government would not grant a new lease until the works specified in its Order had been carried out.

The court held that there had been a misrepresentation that had induced the contract. The representation that there was no problem concerning the tenancy was false and S either knew this or was reckless as to whether it was true or not. C was awarded damages to reimburse her for the extra sum that she had agreed to pay (on top of the market value of the flat) because of her expectation of being able to enjoy the garden.