Archive for the ‘breach’ Category

Failure to pay deposit by stipulated date: the seller did not waive the breach by cashing a cheque for the deposit after communicating an intention to treat the agreements as terminated

February 11, 2017

In Fast Happy Ltd v Lee Chun Pong Bruce ([2017] HKEC 121) the plaintiffs entered into provisional sale and purchase agreements (‘the agreements’) for the sale of land by the plaintiffs to the defendants. The initial deposit was to be paid in two instalments on dates specified in the agreements.

The cheque for the first instalment was not honoured when presented. The cheque for the second instalment was proffered after the date specified in the agreements. Time was of the essence for making the payments.

The sellers’ solicitors sent an email and a letter to the estate agents handling the transactions terminating the agreements on the grounds of the buyers’ breach. The plaintiffs’ bank then re-presented the cheque for the first instalment of the deposit and it was honoured.

The defendants registered the agreements at the Land Registry and the plaintiffs sought the vacation of these registrations. The defendants argued that the plaintiffs had waived the breach by presenting the cheque for the first instalment of the deposits after the defendant’s breach.

The defendant’s argument failed. The sellers were entitled to cash the deposit cheque and to forfeit the deposit without waiving the breach. This was especially the case since the sellers had by then given clear notice of their intention to treat the agreement as having come to an end.

This was a case where the estate agents were acting for both parties and not only for the sellers. Thus notice of termination given to the agents was an effective way of giving notice to the defendants.

Michael Lower

Acquiescence: Is a history of non-enforcement of DMC terms relevant?

March 2, 2016

In Freder Centre (IO) v Gringo Ltd ([2016] HKEC 418, CA) the owners of units in a commercial building placed a sign with a trade name on part of the external wall of the building. This was a breach of a term of the DMC prohibiting the placing of signs anywhere on the building except in spaces assigned for that purpose (the sign was not in an assigned space). It was also a breach of the covenant implied by section 34I of the Building Management Ordinance not to convert any common part to private use without the consent of the owners’ corporation.

In its defence, the owner of the units relied on acquiescence. The terms were of such a nature that acquiescence was possible; the space could have been made an assigned space, the owners’ corporation could have consented to the private use of the common part. The question was whether there had been acquiescence. The owners’ corporation had informed the owner of the units of its objection as soon as it learned of the breach. Looking at the incident in isolation, they could not be accused of standing idly by when the breach was committed. Gringo Ltd, however, pointed to the fact that the corporation had a long history of tolerating such breaches. It was this history that it relied on as amounting to an acquiescence. The owners’ corporation said that its limited resources meant that it could not bring proceedings in respect of all of the past breaches at once; it had a policy of concentrating on recent breaches.

The owners’ corporation’s argument had succeeded at first instance but was rejected on appeal. Chu JA giving the Court’s judgment said:

‘In our view, the fact that nearly all the other owners or occupiers of basement and ground floor units have for many years committed similar breaches, and the applicant has never taken any enforcement action or proceedings against them suggests that the breaches are prevalent and have over the years been tolerated by the applicant. This is directly relevant and germane to whether there is assent or lying by on the part of the applicant and whether it is unjust to grant the injunctive relief against the respondents.’ ([28]).

There had been acquiescence and  it would be inequitable to grant the injunction sought.

Michael Lower

Manager’s DMC duty to bring legal proceedings where necessary: enough to act reasonably?

September 23, 2015

In Long Source Industrial Ltd v Guardian Property Management Ltd ([2015] HKEC 1964, LT) Guardian Property Management (‘GPM’) had been appointed manager of a development at Tai Po Kau. There is no owners’ corporation. The applicant, Long Source Industrial (‘LSI’), was an owner of the development. The owners of several houses had extended their rear gardens to incorporate common parts and a surface channel had been altered. LSI began proceedings in March 2013. At that time, GPM’s view was that the matter was in hand: it was monitoring the progress of rectification works and was liaising with the Buildings Department on the progress of its enforcement action. Subsequently, some owners were prosecuted and the owners of most of the houses had complied with the Building Orders issued by the Buildings Department by the time of the hearing.

The DMC contained the following provisions concerning the responsibility and powers of GPM as manager of the development:

‘the Manager shall be responsible for and shall have full and unrestricted authority to do all such acts and things as may be necessary or requisite for the proper management of the Development’.

For this purpose, it had the power to bring legal proceedings to enforce due observance and performance of the DMC terms by the owners.

LSI sought an order compelling GPM to bring proceedings against the owners in breach. The LT declined to grant this injunction. While the words ‘necessary or requisite’ were not expressly qualified by the word ‘reasonably’, it was enough for GPM to act reasonably here. It had acted reasonably. Even from the perspective of March 2013, GPM was acting reasonably. At that time, many of the owners were taking steps to rectify the breach. It would not have been managing the funds of the development properly, as it owed a fiduciary duty to do ([36]), had it commenced proceedings at that time.

Michael Lower