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Actionable Misrepresentation, Contractual Estoppel and the Unobstructed Sea View
1 November 2016

Introduction

Hong Kong has one of the most expensive housing markets in the world. If you are an owner of a property enjoying an unobstructed sea view, you will naturally be quite unhappy about the loss of sea view caused by an adjacent development. This occurs quite often in the rapid building city of Hong Kong and was what happened to the plaintiff in the case of Yang Dandan v Hong Kong Resort Company Limited ([2015] HKEC 2050).

Facts of the case

In 2008, the plaintiff bought a luxury duplex apartment in Discovery Bay on the island of Lantau (“Property”) from the defendant who was the property developer. In 2011, the Property’s sea view was obstructed by an adjacent residential development. Dissatisfied with the loss of the sea view, the plaintiff brought a claim based on misrepresentation against the defendant. She claimed that she was induced to enter into the contract to buy the Property by 2 representations :-

(i) The written representation in the sales brochure that the open land (i.e. the location of the new residential development) between the Property and the sea would be used for a “mid-rise residential development”, thus the sea view will not be obstructed; and

(ii) An oral representation made by the sales agent of the defendant prior to the contract of sale that the Property would enjoy the view of the Victoria Harbour and that only a hotel then under construction would interfere with the sea view.

The plaintiff claimed that the above representations led her to believe that she would continue to have an unobstructed sea view from the Property and that the defendant intended to ensure no change of that sea view.

Judgment

The Court held that there was no actionable misrepresentation. The core issue is how the representation would have been understood by a reasonable person in the plaintiff’s position as a highly educated and intelligent entrepreneur and was once mentioned in the Forbes magazine in 2011. Also, the written representation in the sales brochure has to be interpreted in the context of the whole sales brochure which contain clearly printed albeit small print disclaimers that “the developer reserves the right to make modifications and changes to the future development without notice”. With the disclaimers, it was held that a reasonable person cannot rely on the brochure as a statement of any existing fact and present the same as an actionable misrepresentation.

On the claim of oral misrepresentation, the Court concluded on evidence that the sales agent did not make the alleged misrepresentation.

On the issue of contractual estoppel, obiter, the Court considered prior case law and found that had the plaintiff succeeded in proving misrepresentations, she would still have been precluded or estopped from making her misrepresentation claim by reason of contractual estoppel arising from the two clauses below :-

(i) Clause 16 of the Memorandum for Sale

“The terms and conditions of this Memorandum shall supersede any and all oral or written agreements or representations made by or on behalf of the Vendor (the Company)”;

(ii) Clause 34 of the Sales and Purchase Agreement

“This Agreement sets out the full agreement between the parties. No warranties or representations express or implied of any kind other than those set out above are or have been made or given by the Vendor or by anybody on its behalf and if any such warranties or representations express or implied has been made, the same is withdrawn or deemed to have been withdrawn immediately before the execution of this Agreement.”

The above provisions were held reasonable and simply preclude the plaintiff from relying on any oral or written representations allegedly made by or on behalf of the defendant. The court also rejected the plaintiff’s submission that the application of contractual estoppel should be confined to sophisticated parties and was satisfied that it is a common law principle firmly established irrespective of whether the parties are of equal or unequal bargaining power.

Conclusion

Prospective property buyers should be aware of the terms in the sale and purchase agreement of property excluding any warranties and representations made and if there are any representations that are material for the purchase, they should be expressly incorporated in the sale and purchase agreement or not excluded or restricted. If you have any questions on the above case or relating to property or commercial matters, experienced lawyers in our firm would be happy to assist you.

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