Posts Tagged ‘unauthorised structures’

Interpretation of a clause barring requisitions about unauthorised structures. Justification of a large deposit.

March 3, 2015

In Channel Green Ltd v Huge Grand Ltd ([2015] 1 HKLRD 655, CA) C agreed to buy commercial property from H. The agreement contained a clause (clause 30) to the effect that the purchaser ‘shall not raise any questions / inquiries or refuse to complete or delay completion of transaction on the ground that there are any unauthorised additions, alterations or illegal structures on the Property’. There were defects arising out of the physical condition of the property. Stalls occupied areas designated for car parking under the terms of the Government Lease. Parts of shop premises were built on areas that the Government Lease stipulated should not be built upon. Despite the terms of the agreement, C raised requisitions about these matters and later failed to complete. The question was whether clause 30 prevented  C from raising these requisitions and from asserting that H could not give good title.

C argued that the effect of the clause was only to prevent it from objecting to unauthorised or illegal structures to the extent that they amounted to a breach of the Buildings Ordinance but not to the same problems considered as breaches of the terms of the Government Lease or the Deed of Mutual Covenant. The argument failed:

‘In our view, illegal structure simply means any structure erected against the law. The relevant illegality can stem from a breach of the Buildings Ordinance, it can equally stem from a breach of the terms of  the Government lease or the terms of the DMC.’ ([27], Lam V-P)

Applying Jumbo King the plain words of the clause prevented C from raising requisitions or objecting to the title on the grounds of the defects relied on ([39]). The fact that C knew of the problems at the time of the contract was part of the factual matrix and this made it even clearer that the clause prevented C from objecting to the defects ([40]). While Lord Hoffmann had spoken of an ovepowering principle that a vendor could not knowingly impose on a purchaser a seriously defective title, this was to be balanced against freedom of contract ([42] – [43]).

C had paid a 15% deposit and this was forfeited. C argued that the fact that the deposit was larger than the customary 10% meant that the onus was on H to justify it being treated as a deposit. This proposition was accepted ([50]) but H had provided the necessary justification. H had agreed to a four and a half month gap between contract and completion:

‘whether a higher deposit is reasonable in the circumstances of a particular case is a matter of fact and degree. In the present case, the Judge was clearly entitled to take account of the fact that the longer the completion period, the longer the vendor is at risk from the vicissitudes of the market and there is objective justification for a 15% deposit.’ ([56]).

Michael Lower

IO asked to reimburse owner the cost of replacing an unauthorised structure that it had removed

June 20, 2013

In Lee Din Chun v Beverly Heights (IO) ([2013] HKEC 924, LT) L owned a parking space at the property. There was a canopy above the parking space. This was an unauthorised structure. The incorporated owners had it removed because it was impeding the progress of works on the sewers and drains beneath the parking space. L replaced the old canopy with a new canopy. The erection of the new canopy amounted to a breach of the DMC. Further, the Building Authority issued a notice requiring the demolition of the new canopy as it was in breach of the Buildings Ordinance. Nevertheless, L now sought compensation from the IO for the cost of erecting the new canopy. L failed. There was no basis on which the IO could be liable for the cost of the new canopy. Further, it was unreasonable to require it to pay for the cost of erecting an unlawful structure; this might expose it to the risk of having committed a criminal offence.

Michael Lower