CHAN SAU HEUNG (a female) v. CHUE JEN INVESTMENT CO. LTD.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

__________

------------------

JUDGMENT

------------------

1. In 1964, the defendant in these proceedings became the registered owner and the sole-occupier of a block of 12 flats known as Grace Mansion at 59A Nga Tsin Wai Road. The block of flats faced north onto that road. The block was of a common construction in Hong Kong. The building itself was supported on a number of pillars leaving the ground floor free for 12 designated carparking spaces. There were two entrances to the premises, at the east and west ends of the building, with driveways leading from the entrances down each side of the building and along the back or south side to service carparking spaces Nos. 1 to 8 which were at the rear of the building.

2. The defendant itself was, and as I understand still is, a family company. Between 1964 and 1977, the alter ego, i.e. the guiding light behind the company, was Dr. Chan Pak Chue. From 1977, after Dr. Chan had retired and gone to the United States of America, Dr. L.K. Ding, who was the principal witness for the defendant, became. its alter ego.

3. Dr. Ding told me, and this was not challenged, that he lived at Grace Mansion since 1964. He had always parked his own and his wife's cars in, the south-east corner of the land on which the building was constructed. In 1965, soon after the building, had been completed and occupied, a carport was erected at the area at which he and his wife parked their cars. That carport effectively prevented any other vehicles from gaining access to the rear carparks from the east side of the building.

4. At the same time Dr. Chan, who was a religious man converted carparks Nos. 4 to 8 into a chapel and carpark No. 3 into a storeroom. In 1969, Dr. Chan had constructed for himself, on the round floor, an office which enclosed carparking spaces Nos. 11 and 12 and a measure of what I will call the common areas adjacent to those carparking spaces. Dr. Chan used that office as a clinic.

5. In 1970, the defendant decided to sell one of the flats of the 12 in the building. On the 3rd January 1970, the defendant signed a Deed of Mutual Covenant with the purchaser of, that flat. By Clause 13 of that deed, (which I shall simply call the DMC), the defendant was appointed as Manager of the building. Another flat was sold a few years after that and in 1977 a third flat was sold to the plaintiff. It is not seriously disputed that the plaintiff is the legal owner of that flat and that her husband, Mr Chong Seng kion, is the beneficial owner and had and has charge of all dealings with the defendant. Mr Chong gave evidence for the plaintiff. He was the principal witness An assignment in favour of the plaintiff was executed on the 17th October 1977 and it was subject to and with the benefit of the covenants in the DMC. Included in that assignment was carpark No. 3. However, by agreement, carpark No. 4 was substituted for No. 3 in 1978.

6. By 1982 as more flats were being sold or leased, the chapel was removed from carparking spaces 5 to 8 and relocated at what had been Dr. Chan's clinic but with a somewhat expanded area.

7. On the 16th September 1980, and this is going back 2 years, there began an intermittent correspondence between three successive firms of solicitors instructed by Mr Chong and the defendant's solicitors who have remained the same throughout. Initially, Mr Chong, through his then solicitors, complained about the carport, to which I have referred, as being in breach of the DMC, and of a car which was parked immediately to the west of that carport which caused some obstruction to Mr Chong in relation to his carparking space. Proceedings against the defendant, who was written to as manager, were threatened.

8. The problem in relation to the car which was parked, causing obstruction, was resolved within two or three weeks. In relation to the complaint about the carport, however, the defendant's solicitors in their reply pointed out that no earlier complaint had been made and that, indeed, it was already in existence when the original DMC had been executed. Mr Chong's solicitors from time to time returned to this complaint about the carport in correspondence. Complaint was also made by them, upon the instructions of Mr Chong, about the chapel, again as being In breach of the DMC, and about various other matters.

9. Goversely, the defendant, through its solicitors, had to chase the plaintiff, or effectively Mr Chong, for non-payment of management fees on several occasions. Twice the defendant was forced to resort to the Small Claims Tribunal for this purpose.

10. Quite clearly, therefore, matters between Mr Chong and the defendant were far from happy. Matters came to a head in 1985 over repairs to pipes and the supply, or perhaps to be more accurate, the non-supply of flushing water for the plaintiff's flat. As a result, the plaintiff issued a writ on the 5th August 1985 and by a Statement of Claim dated the 31st October 1985, sought first, orders in relation to the non-supply of flushing water, and secondly, an injunction for the removal of illegal structures which, by reference to a plan attached to the Statement of Claim, clearly meant the carport and the chapel. The defendant denied both claims. Happily, the dispute in relation to the supply of flushing water was resolved between the parties without recourse to the court.

11. In 1987, in February, the action which had been commenced by the plaintiff a year and a half earlier was taken a step further when the plaintiff amended her Statement of Claim and specifically pleaded the DMC, in particular Clauses 6, 8, 10 and 16(c). Paragraph 5 of the amended Statement of Claim then read:

"On divers date's unknown to the Plaintiff but prior to August 1980, the Defendant wrongfully and in breach of the said Deed "(i.e. the Deed of Mutual Covenant)" and its duty under the said Deed caused, allowed, suffered, permitted or acquiesced various illegal structures to be erected on the common parts of the Ground Floor of Grace Mansion as particularised in the, plan attached to the Writ of Summons herein; further and in the alternative, the Defendant has since August 1980 or prior thereto wrongfully purported to lease and/or license out some or all of the aforesaid illegal structures to various persons/bodies whose identities are unknown to the Plaintiff until discovery herein."

By its amended defence and counterclaim the defendant admitted the existence of the structures but denied that their existence or construction was in breach of the DMC. Alternatively, the defendant pleaded laches or other forms of equitable defence, such as acquiescence. At the same time the defendant introduced a counterclaim. The counterclaim was withdrawn at the close of the plaintiff's case before me. Counsel for the defendant conceded that, effectively, the counterclaim had been put in as a bargaining factor in an attempt, sensibly in my view, to settle the matter as the defendant had sought to settle it all along.

12. The question, therefore, is whether the carport and the chapel, which were admittedly erected by the defendant who is the principal occupier and manager of the building, constitute breaches of the DMC. If the carport and chapel had been erected after 1977 and even possibly after 1970 when the DMC was executed, there can be no question but that they are in breach of the DMC. Clause 6 of the DMC, which is one of the clauses relied upon by the plaintiff, reads:

"Neither of the parties hereto shall make any structural alteration to the said building or to the flat of which he is entitled to the sole and exclusive use, occupation and enjoyment or make any alteration to any installation or fixture so as to affect or be likely to affect the supply of crater, electricity or gas or cut or damage any of the main walls or beams or floors of the said building."

13. Clause 8 of the DMC, again on which the plaintiff relies, reads:

"Neither of the parties hereto shall use the common entrances, passages, driveways, staircases or landings of the said building for the purpose of drying laundry or hanging or placing or storing any thing thereon or therein."

Although it was argued and indeed it was tentatively suggested by me that the carport at least might be a structural addition rather than a structural alteration, I am now firmly of the view after considering all the evidence that the carport and chapel are unarguably structural alterations to the building, that is the flats and the carparking spaces, as opposed to alterations to the plot of land which is the premises. For the definitions of building and premises, one can look at the recitals to the DMC.

14. Even if the carport is not a structural alteration but rather an addition, it is, in any event, my judgment situated upon a driveway and used for storing within Clause 8 of the DMC.

15. It is, however, Miss Vibert's contention on behalf of the defendant that the DMC does not apply to these two structures, i.e. the carport and the chapel, because they were erected before the DMC. If she is wrong about that, she says, on the true construction of the DMC, the carport and chapel do not fall within what I will term for convenience, common areas, which are the subject of and regulated by the DMC. These two arguments mere put forward as alternatives. Upon careful reflection, I think they are really part of the same point.

16. The DMC was executed, it is said, in 1970, upon the basis of the existing building and structures. In 1970, of course, the structures additional to the original building were the carport, the chapel in carparks 4 to 8, and the clinic which Dr. Chan had constructed underneath the building around carparking spaces Nos. 11 and 12.

17. If the DMC had retroactive effect, it is argued, the defendant was putting itself in breach of the DMC the moment it executed that document. That was the first argument Miss Vibert put forward. The second argument, as I said, was that on the true construction of the DMC, there could be no question of saying a carport could be or constitute part of a driveway or some other common areas as defined in the DMC.

18. Clearly, the carport which is occupied and used exclusively by somebody, cannot be a driveway or a common area. But in my view that really begs the question as to whether or not these structures were embraced by the DMC as part of the building. If they were, then they were and remain structures of which no complaint can be made, at least on the basis of the DMC. But if those structures, i.e. the carport, the chapel and the clinic, were not so embraced, they were and remain structures in breach of Clauses 6 or 8 of the DMC for the reasons which I have already outlined.

19. In my view, it is simply not possible to argue that, as at 1970, the carport could not be a driveway. In 1970, the carport was either an established feature embraced by the DMC or it was a structure on what was unarguably a common area, i.e. a driveway. In my view no real question of construction of the DMC can arise.

20. There is some further support for Miss Vibert's argument that the DMC embraced existing structures from the use of word "shall" in Clause 6. That, Miss Vibert said, suggest future rather than retroactive effect by the DMC.

21. For the plaintiff Mr Chung contended correctly that the DMC does not confer any title upon any party to it or on any party becoming a party to the DMC subsequently upon the purchase of one of the other flats in the building. The DMC, said Mr Chung, is only concerned with rights and obligations of the parties in relation to common areas. He said that the existing position at the time of the execution of the DMC does not and could not place the defendant in a better position in relation to any other party or parties without a proper reservation to itself.

22. In respect of the structures, said Mr Chung, the defendant was in breach of the DMC immediately upon its execution. Once a flat or flats were sold off, he argued, the building is not just for the benefit of the owner, that, is the defendant. Mr Chung said that the carport and chapel are not capable of ownership and therefore constitute breaches of a covenant or covenants as contemplated by the DMC. Mr Chung conceded rightly that, as the plaintiff's claim is based upon breach of the DMC, if his argument failed in this respect then the plaintiff's claim failed in its entirety.

23. I have no hesitation in finding that the DMC recognised the position as it prevailed in 1970. To find otherwise would, in my view, be to fly in the face of common sense. The carport, the clinic and the chapel were, in 1970, substantial and obvious structures. In my view, only an express stipulation could have had the effect of excluding them from being, part of the building that was embraced by the DMC.

24. The question of illegality apart, an owner may erect what he likes upon his land. If he then sells part, the purchaser must take what he Purchases subject to what is already there upon the land. I confess I can see no distinction between a developer in the usual sense of the word, for example, Mr Li Ka-shing, who builds upon land which he has acquired and immediately sells off the individual flats for gain, each purchaser taking the flat and the surrounding development as he finds it, and the present case where the defendant was effectively a developer selling flats upon its land as the development was constituted in 1970 and not in 1965.

25. Until 1970, there were no common entrances, driveways, or passages defined or needing definition because the whole of the property was in single ownership. In 1970, the defendant clearly conceded rights only over common areas as then existing and retained exclusive possession of the carport, the clinic and the chapel. Put another way the defendant did not relinquish areas to or over which it had until that time title and exclusive possession. In those circumstances, therefore, the Plaintiff's claim must be dismissed.

26. In deference, however, to the evidence which has been put before me and in deference to counsels' submissions, I should deal with the other issues which have been raised in case the matter should go further.

27. The first issue was illegality. I have already read paragraph 5 of the amended Statement of Claim in which illegality was touched upon. I think it fair to say that illegality was only raised and argued faintly before me because, as I already said, Mr Chung was principally relying upon a breach of the DMC. The plaintiff's evidence on this point was contained in the report of Mr David Russell, an Architect. That evidence, in my view, falls far short of establishing illegality. There were vague references to structures having been erected after the occupation permit was issued and being in breach of various regulations. No firm or clear evidence was led on these matters. To my mind, what Mr Russell said was really a matter of conjecture. I note also that the plaintiff's, that is Mr Chong's solicitors wrote to the Building Development Department as long ago as September 1985 about the structures. Today, the Building Development Department, as I understand it, have not even carried out inspection of the premises. Any illegality, if there is any, seems likely therefore to be of very minor and insignificant nature. In dealing with the question of illegality, there is also the authority of Cheung Yuet v The Incorporated Owners of Oriental Gardens^(l) to which 1 was referred by Miss Vibert which at least makes it arguable that the question of illegality is not relevant in an issue between parties to a DMC. If illegality was a live issue, I would have no hesitation in rejecting it.

28. The next issue concerned fire risk. Fire risk arises out of Clause 10 of the DMC, the relevant part of which reads as follows :-

"Neither of the parties hereto shall do or cause or permit or suffer to be done anything whereby any insurance of the said building or of any part thereof against fire may be rendered void or voidable or whereby the premium for any such insurance may be liable to be increased,"

The plaintiff again relies upon the report of the Architect, Mr David Russell. (Perhaps I might interject here that architects reports were put in by consent between the two parties; neither architect was called for cross-examination.) The relevant part of Mr Russell's report reads:-

"Probably the most serious effect of the structure described in l above "(i.e. the carport)" is the separation of the vehicular route into two. This could cause inconvenience as the driveway does not allow two vehicles to pass each other but it could also cause obstruction to fire fighting appliances in the event of a fire.

 

The two cocklofts are, in my opinion very dangerous, not only to the occupants but also to the other residents. The construction consists mainly of inflammable materials and with no adequate means of escape. A carpark is a 'high risk' area and such a structure could only add to a conflagration."

(I interject that the cocklofts fell out of issue during the course of these proceedings.)

"The remaining area described in 4 above (i.e. the chapel) would not seem to be such a danger. However the number of people occupying the area at any one time could be high and the adequacy of the means of escape could be questioned."

29. Dr. Ding's evidence about the chapel, and that evidence was not disputed, is that it has two doors and that it is on the ground floor. That suggests that the fire risk is indeed not very high. It also seems to me unlikely, as was suggested by the defendant's architect, that fire appliances would seek access to the building by the driveways. The driveways are relatively narrow, it seems more likely that any fire appliance attending a fire in the building would simply park in Nga Tsin war Road and operate from there. No evidence was put before me to suggest that insurance, policies or the premia thereon have been affected. I would have no hesitation therefore in rejecting any argument on this basis.

30. The final matters with which I have to deal are the equitable defences raised by the defendant. The principal defence, is that of Inches, or in layman's terms, delay in bringing proceedings to court. Overlapping with that defence are similar defences, of acquiescence, waiver and delay. The defence of laches requires first that there should have been unreasonable delay in the commencement or prosecution of proceedings; and secondly, that in view of the nature and consequences of that delay, it would be unjust, in all the circumstances, to grant the specific relief sought, which in this case of course is a mandatory injunction against the defendant.

31. The defendant contends that three years elapsed between the assignment to the plaintiff, and the first complaint which, the defendant said, was made in solicitors' letter in September 1980. The defendant then says, and the documents show this to be correct, that another five years elapsed before action was taken in August 1985. The defendant says that it is prejudiced by having this matter hanging over it for such a long period and also by the possible loss of relevant documents and the absence now, in the United States of America, of Dr. Chan. The defendant says that the plaintiff is suffering mere inconvenience by the existing state of affairs at Grace Mansion and this would be more than outweighed by the expense of removal of the structures and the loss of carparking space to the defendant if an order is made against it. The defendant also suggested that there is a lack of bona fides on the part of Mr Chong.

32. It was Mr Chong's evidence that, when he inspected the flat in July 1977, he only went ahead with his inspection and subsequent purchase because a carpark was available for him and because Dr. Chan, who was the previous occupier of the flat, assured him that the carport and a wall at the western side of the, premises would be demolished to give access to No. 3 carparking space. Mr Chong said he complained verbally to both Dr. Chan and Dr. Ding that the carport had not been demolished before the first written complaint in September 1980.

33. Dr. Ding in his evidence said that apart from. reaching agreement to the exchange of carpark No. 4 for No. 3 sometime in 1978, there was no other discussion about carparking, about access or about the existence of the carport and there were no complaints from the plaintiff or Mr Chong.

34. In a statement put in my way of a hearsay notice, Dr. Chan said that he only agreed to the removal of the walls of carparking space No. 3 which at the time was a storeroom. He said that he made no promises about the carport or anything else. For the purpose of these proceedings, I treat what Dr. Chan said in his statement as no more than a bare denial.

35. Nonetheless, I am unable to accept Mr Chong's evidence. Mr Chong quite clearly was anxious from the beginning about having a carparking space. Yet, he was not able to use No. 4 carparking space which was made available to him until the middle of 1980. In the meanwhile, for some 2½  years, he had had to park his car in the street. Mr Chong explained that it was no use to complain during this period because first of all, it took a year for the formalities for the exchange of carpark to be completed, and then a big renovation of Grace Hansion began which prevented all access to the carparking spaces because of the scaffolding and because of the debris which was scattered around.

36. However, the sale and purchase agreement which was executed between the parties contained a provision for the defendant to prepare carparking space No. 3 and for some $15,000 to be retained from the purchase money of the flat and carparking space until that work had been carried out. A date was specified for that cork to be carried out, that was the end of May 1978. As I understood Mr Chong's evidence, that money was released with no apparent objection on his part.

37. So the year of 1979 remains unaccounted for because if the formalities for the exchange of the two carparks took a year, that would take Mr Chong to the end of 1978. What happened then in 1979? The defendant called its builder, a Mr Tse, who has done a great deal of work at Grace Mansion. He said that the renovation of Grace Mansion, which principally consisted of applying mosaic tiles to the whole of the outside of the building, started at the end of l979 and took about five months ending in May 1980. The latter date accords with Mr Chong's recollection. However, as far as the overall period of renovation is concerned, I accept Hr Tse's version of the dates. On the balance of probabilities, that is the sort of period which would be sufficient for the work which was being carried out.

38. It seems to me, therefore, and I so find, that Pit Chong could have used carparking space No. 4 for a substantial part of 1979. I have to ask myself, therefore, why he made no complaint if, as he indicated in his evidence, he could not gain access to the carparking space because there was either a wall at the western end of the property through which he could not drive his car or because there was a gate which was inadequate to give him access. It was Mr Tse's evidence, of course, that there was a gate in that wall through which access could be rained, but it was widened by him at the time of the renovation.

39. No mention was made of the promise made by Dr. Chap, that is, principally the promise to demolish the carport, until the defendant applied to strike out the proceedings, which had been begun by the plaintiff, in 1987. It is true that Dr. Chan's promise was not in issue until the defendant's amended defence raised the equitable defences to which I have referred. Nonetheless, it seems very surprising to me that this promise was not previously raised in correspondence, like so many other different matters and complaints which were raised by Mr Chong through his solicitors. So I reject Mr Chong's evidence about Dr. Chan's promise and about complaints made before September 1980. I am satisfied that no complaint was made to the defendant until September 1980.

40. I am also doubtful about the bona fides of Mr Chong. Even in 1980, when correspondence between solicitors first commenced, it was quite clear that there was no prospect of the defendant giving in and agreeing to the demolition or removal of the carport and chapel. It is difficult to see why Mr Chong should have waited five years before proceeding against the defendant. It is difficult to see that, even if, as Mr Chong said, the parties were neighbours and he was unwilling, as he said, to cause an upset between them. That explanation, if it is an explanation, seems to me inconsistent any way with persistent refusal to pay the management fees which, to say the least, would cause the parties to live in disharmony.

41. I am satisfied, therefore, that there was unreasonable delay in the part of the plaintiff in bringing those proceedings. Nonetheless, is the relief justified? Mr Chong maintained that he should, nonetheless, get the relief, that it would be just for the court to grant it to him. He says, first, that he has to back his car out into Nga Tsin Wai Road. He says this manoeuvre is dangerous. I accept that and indeed so does Dr. Ding. I do not accept however, that it is necessary for him to back out. He gains access to his carparking space by the driveway at the western end of the building. He turns to the left from that driveway into the driveway at the rear of the premises, drives past his carparking space and reverses in. He says he has to drive out in the same manner because there is a pillar to the right hand side of the carparking space which he cannot negotiate. I find that difficult to accept, particularly in the light of the photographs which have been placed before me. Indeed I reject that it is necessary for Mr Chong to back out into Nga Tsin Wai Road.

42. It was argued on behalf of Mr Chong that there is the possibility of fire occurring in the western driveway. If this happened then Mr Chong would not be able to remove his car from his carparking space. I regard that possibility as remote in the extreme and somewhat unrealistic.

43. It is then argued that the chapel which, as I said, occupies the space which was previously Dr. Chan's. clinic, causes a breach of the peace and quiet to which Mr Chong is entitled because he is the occupant of what is admittedly a residential building. Dr. Ding in his evidence says that some 20 persons attend the chapel on Sundays and that on some evenings of the week, a few people attend it. No evidence was given by Hr Chong or led on his behalf that he is in any way disturbed or inconvenienced by the chapel.

44. It was then argued that any inconvenience caused to the defendant by the loss of carparking spaces if the carport is ordered to be demolished was brought upon the defendant itself by selling or leasing individual flats for gain. It is said that the defendant should and could have reserved one or more of the designated carparking spaces for use by the defendant. The carparking requirements as flats were sold or leased necessitated the removal of the chapel from carparking spaces 5 to 8 to the area previously occupied by the clinic.

45. I take that factor into account. I take all the other factors I have mentioned into account in so far as I have not discounted them. I am satisfied that looking at the matter as a whole that I would have no hesitation in saying it would be wholly unjust to grant the relief which is being sought.

(1)    [1979] HKLR 536