THE INCORPORATED OWNERS OF WAH TAT INDUSTRIAL CENTRE v. YICK FUNG HOLDINGS LTD

cacv 128/2006

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 128 of 2006

(on appeal from HCA NO. 4580 of 2003)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This was an appeal by the defendant from part of a judgment of Deputy High Court Judge Poon given on 27 February 2006.  The appeal was dismissed with reasons to be given in writing.  On the defendant’s application, which was not opposed by the plaintiff, the injunction imposed upon the defendant and stayed pending appeal was ordered to come into effect on 20 July 2006.

Background

2.  This case involved the Wah Tat Industrial Centre (“the Centre”), which is an industrial building in Kwai Chung.  It was completed in two phases.  The first phase was Block C, which was completed in 1985, and the second phase, Blocks A hand B, which were completed in 1988.  The dispute in this case is between the Incorporated Owners, namely the plaintiff, and the developer, namely the defendant.  One can only surmise from the nature of the disputes which the judge had to consider that the real dispute between the parties has not been before the court.  Rather, the parties have litigated in respect of matters where success would appear to be more of an aggravation to the losing party than a benefit to the successful party.  This might lead to the conclusion, perhaps, that it is contemplated that success will enable the respective party to establish its control in respect of other matters.

3.  The disputes between the parties at trial included the questions as to whether certain areas of the Centre were common areas or whether the defendant was entitled to exclusive possession thereof.  The relevant areas were:

(1) The Passageway, which is a portion of the passageway beneath the main staircase at the main entrance of the Centre.

(2) The BTM Room on the ground floor of the Centre.

(3) The Transformer Room on the ground floor of the Centre.

(4) The Transformer Room Extension on the ground floor of the Centre.

(5) The exterior walls of Blocks A to C (“the Exterior Walls”).

4.  This appeal was confined to the issues relating to be Passageway and the BTM (bromotrifluoromethane) room.  For the purposes of determining the issues between the parties, it was necessary for the judge to consider the first assignment which had been made between the defendant and the first purchaser on 23 September 1985 and the Deed of Mutual Covenant (“the DMC”).  Apart from a suggestion that the judge might have given undue weight to one of the documents rather than the other, there was no dispute between the parties that that was the correct course.

5.  When the first assignment was executed only Block C had been built.  Nevertheless the assignment was drafted on the basis that all 6385 undivided shares which applied to all 3 blocks were relevant.  Mr Mak, who was the first assignee, was assigned six equal undivided shares.  He was granted the exclusive right to occupy Unit 5 on the 9th floor of Block C.  There was a reservation in the first assignment.  In so far as is relevant to this appeal, the reservation was that the defendant reserved to itself the right to the exclusive use, occupation and enjoyment of:

“…..(b) all areas within the said Land not covered by any building or buildings and all open areas under any building or buildings which are not car parking spaces included in the specific reservations contained in the following sub-clauses of this Clause save and except such areas (if any) as may be designated as common areas in the Deed of Mutual covenant as hereinafter more particularly described or are intended for common use;”

6.  The assignment was made subject to and with the benefit of the DMC.

7.  The DMC provided for the allocation of the undivided shares in the Sixth Schedule.  It is to be noted that one undivided share in each of the Blocks was to be allocated in respect of what may be termed the Remaining Parts.  Those were listed as:

“The exterior wall, transformer room, switch room, staircases, spaces underneath the open yard, common path, the lift hall, the machine room, water tanks, pump room, corridor, private lane, refuse chute, meter room and public lane.”

8.  Many of those areas were also reflected in the Fifth Schedule which identifies areas which were specifically designated as “common parts”.  The Fifth Schedule read:

“1. The Entrance-Hall, lift-Hall, common passages and corridors, driveways (if any), staircases and landings.

2. The loading and unloading platforms.

3. The lifts.

4. The water tanks on the roof.”

9.  Clause 14(g) of the DMC provided that the defendant reserved:

“…the right to assign any or all of the Common Areas together with the Undivided Shares relating thereto to the Manager for the general amenity of the Owners subject to this Deed.  PROVIDED THAT such Undivided Shares shall be held by the Manager as trustee for all the Owners and in the event the Manager shall be wound up or a Receiving Order made against it and/or another manager appointed in its stead…… then the Liquidator or the Receiver or any person authorised to do so… shall assign the Undivided Shares together with the Common Areas to the new manager…”

10.  It appears to me that when all these matters are taken into consideration, together with the fact that the Seventh Schedule allocated maintenance contributions in respect of Block C on the basis that there was no contribution in respect of the undivided shares relating to the Remaining Parts, it can be seen that the areas comprised within the Remaining Parts, whether or not specifically designated common parts by the Fifth Schedule, were clearly to be used for the benefit of all owners, even if some of the areas, for example the machine room, might not have been accessible on a casual basis to those who had no business being there.  I would add, it is hoped without being too pedantic, that whereas the Fifth Schedule is said to specify the common parts, there is no definition of the “Common Areas” referred to in clause 14(g).

11.  Apart from the side issues, the crucial finding in respect of the Passageway was that, although it might be said to part of the land not covered by any building or, alternatively, part of the open areas under a building not included as car parking spaces, it fell within the first paragraph of the Fifth Schedule because it formed part of the footpath leading to the main entrance to the ground floor.  The judge went on to say that even if it did not form part of the footpath, given its proximity to the main entrance and its location next to the footpath, it was a portion intended to be used as if it were an extension of the footpath and thus it was intended for common use.  In this respect, it is pertinent to note that the judge had the advantage of having viewed the Centre on a site inspection.  Although this court did not have that advantage, it did have the benefit of photographs of the areas of the Centre which were in dispute, and in my view there was no ground for rejecting any of the judge’s observations and findings as a result of his inspection.  At the time of inspection, the relevant part of the Passageway had a room built on it with 2 booths visible from one side.

12.  The BTM room was initially designated “Generator Room” according to the original building plans that were approved in January 1986.  It was re-designated as a BTM room in an amended approved layout plan dated 7 March 1987.  The judge had no difficulty in holding that the BTM room was clearly intended for common use.  He said at paragraph 59:

“When it was called a “Generator Room”, it meant to house a generator, which plainly was intended to serve the Centre for the benefit of all owners.  When it was re-designated as a BTM Room, its purpose was to how as BTM gas and facilities for fire fighting purpose, which is also for the benefit of all owners.”

13.  In consequence the judge made granted the following relief:

(1) A declaration that the BTM Room and the Passageway form part of the common parts of the Land.

(2) An injunction restraining the defendant from occupying the Orange Portion of the BTM Room and the Passageway to the exclusion of the other owners of the Land.

(3) An order that the defendant do deliver up vacant possession of the Orange Portion of the BTM Room within 42 days after the handing down of the Judgment.

(4) An order that the defendant do within 42 days from the handing down of the Judgment :

(a) remove the booth placed on the Passageway;

(b) remove the boarding erected at or on the Passageway; and

(c) deliver up vacant possession of the Passageway.

14.  On the defendant’s counterclaim, the judge made a declaration that the defendant was entitled to exclusive possession of the Exterior Walls and dismissed the balance of the counterclaim.

15.  On this appeal, Mr Chain, who appeared on behalf of the defendant in this court but not below, relied upon the fact that the Remaining Parts had been allocated to the defendant in the DMC.  Relying on clause 14(g) of the DMC, Mr Chain argued that the defendant was indisputably the owner of the common parts.  Originally, in the skeleton argument, it had been suggested that the defendant was thus entitled to the exclusive occupation of the common parts.  However, in argument Mr Chain resiled from that extreme stance as clearly that clause, in itself, made clear that the intention was that the common parts should be for the general amenity of all the owners.

16.  It was said, however, that the judge had been wrong in holding that of the Passageway and the BTM room fell within the ambit of “areas intended for common use”.  The thrust of the submission then became centred on the argument that at the time of the first assignment the defendant had already co-opted for its own use the Passageway and the BTM room.  It was said that the judge had overlooked the practical situation that existed at the time.

17.  This argument was not supported by any finding of fact by the judge.  In my view the evidence upon which it was sought to raise this argument was far too tenuous.  Mr Chain emphasised that the witness statement of Yeung Kai Man had been accepted by both sides.  If anything, that showed that the second booth in the Passageway had only been placed there some months after the first assignment.  Furthermore, the room in the Passageway had only been built up in 1996 because prior thereto there had only been a temporary wooden board erected.

18.  As regards the BTM room the suggestion was that this had been used as a sales office and a sign to that effect had been erected.  Even on the basis that this had taken place prior to the first assignment, sales of flats in a building could only be expected to be a temporary measure since the sale of the development could hardly be expected to extend over a long period.

19.  Be all that as it may, the fact that one party may have used a particular area, probably visibly on a temporary basis, does not mean that it had been the intention of the parties that that party was to be allocated that area.  As was accepted by Mr Chain, the intention had to be assessed on an objective basis as a matter of construction of the documents.  In my view the judge did so construe the documents, and in the circumstances I saw no basis for interfering with his decision.  There was no evidence that it was the intention of the parties, as opposed to simply usurpation by one of them, that the arrangement specified in the first assignment and the DMC should be altered.

20.  It is for these reasons that I perceived no merit in this appeal.

Hon Cheung JA:

21.  I agree.

Hon Stone J:

22.  I agree with the judgment of Hon Rogers VP.