Illegal structure: blot on title?

In More Alliance Ltd v Shing Samuel ([2013] HKEC 629, CFI) V agreed to sell property to P. P refused to complete contending that a number of requisitions had not been satisfactorily answered and that V had not shown good title. P successfully sought an order confirming his right to rescind and to recover the deposits paid under the preliminary and formal agreements.

In 2008, an order had been made against the property under section 24(1) of the Buildings Ordinance requiring the demolition of a structure on the roof of the property. V made no attempt to respond to P’s requisition calling for evidence that the order had been discharged / released. This was a blot on title since V had done nothing to show beyond reasonable doubt that the order did not create a risk of a successful claim against P. Thus, V had failed to give good title ([35]). The argument that the order had been registered before the contracts and that the property was sold ‘as is’ did not help V ([31]).

The agreements had been signed by V’s mother pursuant to an undated power of attorney. P promptly raised a requisition seeking evidence as to the date of execution and this was never properly dealt with. Later, outside the contractual timetable for raising requisitions, V’s mother claimed that she was in possession and was the beneficial owner. P raised a requisition in this regard and, again, this was not fully answered. It was held that as the requisition concerning ownership went to the root of title and P had shown due diligence in raising requisitions, the contractual timetable could not be held against him. A simple denial that V’s mother had any claim was not sufficient in the circumstances ([55]). This too amounted to a failure to show good title ([56]).

Finally, the title deeds were not in V’s possession and there were genuine doubts as to whether he would be able to deliver them on completion and so give good title.

Michael Lower

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