FALCOME COMPANY LTD v. THE INCORPORATED OWNERS OF ZJ 300 AND ANOTHER

HCA 1744/2023

[2024] HKCFI 2992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1744 OF 2023

(Transferred from LDBM 52/2022)

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J U D G M E N T

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DHCJ Yuen:

Introduction

1.  These proceedings concern a dispute over the change of name of a commercial building at 300 - 306 Lockhart Road, Hong Kong (“the Building”). The developer and the first owner of the Building was Kiu Fu Development Company Limited (“Kiu Fu”) which was dissolved on 13 June 2014.  The Building was originally named “Kiu Fu Commercial Building” in English and “橋阜商業大廈” in Chinese (“the Old Name”).  It is now known as “ZJ300” in English and “浙江興業大廈” in Chinese (“the New Name”) pursuant to an owners’ resolution passed on 14 August 2019 (“the Resolution”).

2.  The parties to the proceedings, originally commenced in the Lands Tribunal (“LT”), are as follows.  The plaintiff is the registered owner of Unit A on the 8^th floor (“Unit 8A”) of the Building. The 1^st defendant are the Incorporated Owners (“IO”) of the Building, originally the only respondent in the LT proceedings.  The 2^nd defendant, by consent added as a respondent in the LT,  is the registered owner of 1/F and yard, 2/F and flat roof, 3/F, and flat roof C on 4/F of the Building (“1/F – 4/F Units”).  The 2^nd defendant claims it has the right to name the Building (“Naming Right”) by virtue of a covenant contained in Section II Clause 7(e) (“the Naming Right Clause”: § 9 below) in the Deed of Mutual Covenant of the Building (“DMC”), and that in any event, there was a valid change of name pursuant to the Resolution.

3.  The plaintiff’s case is that the change of name of the Building is invalid for two reasons:-

-  the Naming Right Clause does not comply with the provisions of s.41(2) of the Conveyancing and Property Ordinance (“CPO”), and is therefore not enforceable. This subsection provides: “This section applies to any covenant, whether positive or restrictive in effect —

(a)  which relates to the land of the covenantor;

(b)  the burden of which is expressed or intended to run with the land of the covenantor; and

(c)  which is expressed and intended to benefit the land of the covenantee and his successors in title or persons deriving title to that land under or through him or them”.

-  the name of the Building cannot be changed without the consent of all current co-owners. As the Resolution was not passed with the consent of all current co-owners, but only those present at the meeting (albeit unanimously), it is unenforceable.

4.  The plaintiff sought the following relief (it would appear that the Notice of Application in the LT was not amended after the 2^nd defendant was added as a respondent):-

(1)  a declaration that the Resolution was not enforceable and/or effective and that the IO was not entitled to change the name of the Building without the consent of all co-owners; and

(2)  an injunction compelling the IO to:-

(a)  obliterate or remove the inscriptions and/or plaque(s) in the Building which had been made or erected in furtherance of the change of the Building's name to the New Name;

(b)  withdraw a Memorandum on Change of Name of Building from the Land Registry (§§27-28 below); and

(c)  arrange for the name of the IO to be changed to “the Incorporated Owners of Kiu Fu Commercial Building (橋阜商業大廈業主立案法團)”.

5.  On 23 November 2023, a master ordered that the IO be excused from all further hearings including the trial.

6.  The 2nd defendant has defended the change of name on the basis that:-

(1)  the Naming Right Clause complies with s.41(2) CPO as it is an interest in land and relates to the land of the covenantors (the owners other than Kiu Fu),the burden of which covenant was expressed or intended to run with the land of the covenantors, and which was expressed and intended to benefit the land of the covenantee (Kiu Fu), of which the 2nd defendant is successor in title.  Accordingly, the covenant in the Naming Right Clause binds not only the original parties to the DMC, but all subsequent co-owners of the Building;

(2)  alternatively, the Resolution was validly passed and is binding on all co-owners pursuant to the DMC;

(3)  it is unjust and inequitable for the Court to grant the relief sought by the plaintiff, since it has been guilty of undue delay in commencing the present proceedings, and a reversal of the change of name now would be prejudicial to the 2^nd defendant.

Background

7.  As mentioned above, the developer and the first owner of the Building was Kiu Fu.

8.  On 20 June 1992, Kiu Fu (as “First Owner”) entered into the DMC with Fonda Development Limited (as Second Owner) and the manager Kiu Kwong Investment Corporation Limited (as Manager).

9.  In the Naming Right Clause on page 12 of the DMC, it is expressly excepted, reserved and granted unto the First Owner, its successors and assigns “the exclusive and unrestricted right and privilege to give whatever name for the Building or any part(s) thereof and to designate and change the name of the Building or any part(s) thereof at any time or times and from time to time …”.

10.  On 22 June 2001, the plaintiff became the registered owner of Unit 8A pursuant to an assignment from the then owner’s mortgagee.

11.  On 8 March 2011, the 2^nd defendant entered into an agreement to purchase the 1/F – 4/F Units from Kiu Fu.  On 17 May 2011, they entered into a supplemental agreement for sale and purchase (“Supplemental Agreement”), and on the same day, executed an assignment. 

12.  The Supplemental Agreement and the assignment stated that, together with the 1/F – 4/F Units,  Kiu Fu would assign to the 2^nd defendant “all the Rights and Privileges” set out in a schedule, being “all the exclusive rights, powers, interests, entitlements, benefits, privileges, authorities, exceptions, reservations, discretion and grants (‘Rights and Privileges’) under the Deed of Mutual Covenant and Management Agreement (‘DMC’) as shown on pages 11-15 of the DMC hereto attached”.  As mentioned above, the Naming Right Clause appears on page 12 of the DMC.

Proposal to change the name of the Building 

13.  In early 2018, the 2^nd defendant proposed to change the name of the Building.  It informed the other co-owners of the Building of its intention to do so.

14.  The proposal to change the name was brought up in owners’ meetings on three occasions:-

(1)  the minutes for the meeting on 19 April 2018 recorded that since the 2^nd defendant became “the first owner” of the Building in 2011, it had not exercised the naming right for many years, and it proposed to change the name of the Building on 1 January 2019.  It sought the views of the other co-owners, and as an indication of sincerity, offered to finance the refurbishment of the Building’s lobby and lighting system (“the Refurbishments”). Out of nine co-owners present at the meeting (representing 223.72 shares of the 628 undivided shares in the Building), seven (representing 193.72 shares) voted in favour of the proposal pending review of the new name and the proposed design plan for the lobby, one co-owner (representing 10 shares) objected, and one (representing 20 shares) had “no opinion”;

(2)  the minutes for the meeting on 31 October 2018 recorded that the first owner (named as the 2^nd defendant) exercised the Naming Right to change the name of the Building with effect from I January 2019, the provisional name being  “浙江中心” and “Zhejiang Centre”;

(3)  the minutes for the meeting on 13 December 2018 recorded that the first owner (named as the 2^nd defendant) had revised the proposed new name of the Building to “浙江興業大廈” and “ZJ300”. None of the 13 co-owners (representing 312.58 shares or 49.77% of the undivided shares in the Building) present at the meeting opposed the proposal.  It would however be noted that the agenda for the meeting only referred to “report on the new name of the Building” (emphasis added).

15.  On 1 March 2019, the chairman of the IO signed a Memorandum on Change of Name of Building (“1^st Memorandum”) stating that a resolution had been passed on 13 December 2018 for the change of the name of the Building to “浙江興業大廈” and “ZJ300”, which memorandum was lodged for registration at the Land Registry. 

16.  However, on 26 March 2019, the Land Registrar sent a set of Scrutineer’s Notes (“1^st Scrutineer’s Notes”) asking whether the 2^nd defendant had capacity to act for all owners of the Building to change the name of the Building.  As the 1^st Memorandum itself did not refer to the 2^nd defendant, presumably the Land Registrar had noted the 2^nd defendant’s assertion of its naming right from the minutes of the meeting on 13 December 2018: (§14(3) above).   

17.  On 2 April 2019, the 2^nd defendant’s solicitors replied, referring to the Naming Right Clause.    

18.  On 12 April 2019, there was another owners’ meeting, the minutes of which recorded that the application for the change of the name of the Building to “浙江興業大廈” and “ZJ300” has been submitted by lawyers to the relevant government authorities.  There was no reference to the 1^st Scrutineer’s Notes.

19.  On 16 April 2019, the Land Registrar sent a second set of Scrutineer’s Notes (“2^nd Scrutineer’s Notes”) stating that “it appears that the right to change the name of a building is not an interest in land”, and the Naming Right was a “personal right that may not be binding on other co-owners”, and therefore there was doubt whether the 2^nd defendant had capacity to change the name of the Building. 

20.  On 2 May 2019, the 2^nd defendant’s solicitors referred the Land Registrar to the minutes of the 13 December 2018 owners’ meeting.

21.  In a letter dated 8 July 2019 to the 2^nd defendant’s solicitors, the Land Registrar informed them that the 1^st Memorandum would continue to be withheld from registration, as the Naming Right is a personal right incapable of binding other co-owners of the Building, citing the Court of Appeal decisions in  Lamaya Ltd v Supreme Honour Development Ltd [1991] 1 HKC 198 and Pak Fah Yeow Investment (Hong Kong) Co Ltd v Proper Invest Group Ltd [2009] 3 HKC 385 in support of the proposition. 

22.  The Land Registrar also noted that the minutes of the 13 December 2018 meeting only recorded that the owners did not raise objection to the change of name, and “there is no record that a formal resolution was passed in accordance with the relevant requirements set out in Sub-section B of Section VII of the DMC (“Section VII B”: §24 below) to change the name of the Building”.

23.  The Land Registrar had presumably noticed that the agenda and minutes for that meeting referred to “report on the new name of the Building” and the “exercise by the first owner (the 2^nd defendant) of its naming right” respectively.  

24.  Section VII B of the DMC is concerned with “meetings of the Owners to discuss and decide matters concerning the Land and the Building”.  Clause 10 thereunder provides that “a resolution shall be validly passed if passed with a simple majority of the vote by the Owners who are present … at the meeting …”.  Clause 13 provides that “all resolutions passed at a meeting duly convened and held shall be binding on all owners”. 

25.  Subsequent to the Land Registrar’s letter above, the IO called an extraordinary meeting of the owners (“EGM”) for 14 August 2019.  The agenda for the EGM, in contradistinction to that for the meeting on 13 December 2018, included an item for “approval [the correct translation should be “passing”] and ratification (通過並追認) of the change of the name of the Building in Chinese to “浙江興業大廈” and in English to “ZJ300” with effect from 1 March 2019” (“item 7”).

26.  On 14 August 2019, the EGM was held.  Twelve co-owners (representing 49.26% of the undivided shares in the Building) were present.  It is relevant to one of the arguments at trial that, although the plaintiff was not present, the owner of Unit 4A, Genoa Land Investment Ltd (“Genoa”), was present through Ng Yiu Hoi.  I will discuss this argument later in this Judgment (§65).  The minutes recorded that pursuant to the discussion at the 12 April 2019 meeting (§18 above), the lawyers had submitted an application to the relevant government authorities for the change of name, and that to complete the relevant procedure, the management company, acting in accordance with the lawyers’ instructions, proposed that item 7 be passed as a resolution.  The minutes recorded that after discussion, the owners present unanimously passed the Resolution. 

27.  On 20 April 2020, the chairman of the IO signed another Memorandum on Change of Name of Building (“2^nd Memorandum”) stating that a formal Resolution has been passed unanimously by all owners present at the EGM on 14 August 2019 “for approval and ratification of the change of name of the Building to ‘浙江興業大廈’ in Chinese and ‘ZJ300’ in English with effect from 1^st March 2019”.

28.  On 22 April 2020, the 2^nd Memorandum was registered at the Land Registry.

29.  By a notice dated 30 June 2020, the management company notified the owners of the Building of the registration of the 2^nd Memorandum. 

30.  Nearly a year later, on 25 June 2021, the plaintiff’s solicitors wrote to the IO, stating that their client had only recently been aware from the Land Registry that a memorandum of change of name had been registered against the Building, and asserting that since the right to change the name was reserved to Kiu Fu, which was dissolved on 13 June 2014, the right to change the name is vested in all the owners of the Building.  They put on record that the plaintiff had never attended the EGM and had not consented to the change of name.  They requested an explanation of the “grounds, power and legal authority” to pass the Resolution, and demanded withdrawal or cancellation of the registration of the 2^nd Memorandum.    

31.  On 12 May 2022, the plaintiff commenced proceedings at the LT, which as mentioned above, were transferred to the High Court on 13 September 2023.

Issues

32.  The issues are as follows:-

(1)  Whether the Naming Right is enforceable by the 2^nd defendant against all other co-owners;

(2)  Whether the Resolution is binding on all co-owners including the plaintiff; and

(3)  Whether the plaintiff should be barred by laches from equitable relief.

Whether the Naming Right is enforceable by the 2^nd defendant against all other co-owners

33.  As far as Issue (1) is concerned, the plaintiff’s case is that the Naming Right Clause is unenforceable against co-owners who are not privy to the DMC (such as itself), because it is not an interest in land and does not comply with the provisions for enforceability under s.41(2) CPO.  It relies on the Court of Appeal decisions in Lamaya and Pak Fa Yeow.

34.  The 2^nd defendant accepts that those decisions are binding on this court. However, it reserves the right to challenge those decisions if the matter proceeds to an appeal, and has asked this court to set out its views insofar as they may be of assistance to the higher court.  Accordingly, I discuss Issue (1) briefly at §§68-79 below.

Whether the Resolution is binding on all co-owners including the plaintiff

35.  As for Issue (2), the 2^nd defendant’s primary contention is that the Resolution is binding on all co-owners including the plaintiff as it was validly passed in accordance with the provisions for meetings of the owners in Section VII B of the DMC (§24 above), as a notice of the EGM proposing the passing of a resolution to change the name of the Building was properly circulated by the IO and the management company to all owners, the EGM met the quorum requirements, and the Resolution was passed by a simple majority (indeed,  unanimously).

36.  The plaintiff claimed that it did not receive notice of the EGM, but through its leading counsel has explicitly confirmed that it does not challenge the validity of the Resolution on that ground.  Nor has it challenged validity on the ground of any misrepresentation of the 2^nd defendant’s rights asserted on its behalf at the meetings.   

37.  Rather, the plaintiff’s contention is that it is necessary for all current co-owners of the Building to agree to a change of name, notwithstanding the provisions for the passing of resolutions in the DMC.  As the Resolution was not passed with the consent of all current co-owners, the plaintiff says it is unenforceable.  Reliance was placed on §18 of Rogers VP’s judgment in Pak Fah Yeow.  

38.  In Pak Fah Yeow, clause 3 of the DMC gave the naming right of the building to the second owner who assigned its unit to the defendant, who then sought to change the building’s name.  The plaintiff challenged the defendant’s right on two grounds: (a) the naming right was not enforceable against other owners, as held in Lamaya; and (b) clause 13 of the DMC provided that subject to the second owner’s naming right, “the name of the Development shall not be changed … without the unanimous consent of all the Owners of the Shares of the Development”.  There was no unanimous consent because the plaintiff had all along objected to the change of name. 

39.  The Court of Appeal (Rogers VP, Le Pichon and Hartmann JJA) followed Lamaya and upheld the plaintiff’s challenge on ground (a).  As for ground (b), the defendant argued that if clause 3 was not binding, then clause 13 (on which the plaintiff relied) was also not binding because it also related to the naming right.  Since clause 13 did not apply, unanimous consent as per that clause was not required.  At first instance, DHCJ Au (as he then was) held that clause 13 prescribed the kind of resolution that required unanimous consent, and was a procedural provision governing the conduct of passing the resolution at an owners’ meeting.  It was not by nature a naming right covenant, and therefore it was binding on the parties (§§65-66).  On appeal, Rogers VP (giving the judgment of the court) upheld DHCJ Au’s approach on the effect of clause 13, affirming the holding that that clause related to the mode of conduct of an owners’ meeting (§17).  In other words, even though the resolution related to the name of the building, the procedural provision was applicable, the owners being bound if there is a compliant resolution.

40.  Having affirmed DHCJ Au’s approach on ground (b), Rogers VP then said at §18: “In my view, quite irrespective of the provisions of clause 13, it would be necessary for all the owners of the building to agree to the change of name” (emphasis added).  That was all that was said on this point.  

41.  This statement of Rogers VP, which would appear to be obiter, was said to be an “alarming” suggestion (Merry, “Do Naming Rights Run with Land?” 2011 Conveyancer and Property Lawyer, Issue 3, 237, 240).  

42.  Putting Mr Merry’s comments on one side, in Pak Fah Yeow Rogers VP did not explain why, if the DMC did not contain clause 13, a majority vote passing a resolution to change the name of the building would not bind all owners (although neither the CFI nor the CA judgment set out the DMC provision permitting a majority resolution).    

43.  Rather, the ratio of both DHCJ Au and the Court of Appeal on ground (b) was that when deciding the name of the building, the current co-owners were bound by the provisions of the DMC governing the conduct of meetings.  Applying that ratio to our case, where there is no provision in the DMC requiring unanimous consent like clause 13, the current co-owners would be bound by the provisions of the DMC in Section VII B.

44.  In our case, in challenging the binding effect of the Resolution, the plaintiff (relying on Rogers VP’s statement in §18 Pak Fah Yeow) submitted that the consent of all current co-owners was necessary for a change of name (presumably on the basis that any rights of Kiu Fu, which has been dissolved, may be ignored: Incorporated Owners of Cheong Wang & Cheong Wai Mansion v Government of the HKSAR [2001] 1 HKLRD 483, at 487). 

45.  Before discussing the above submission, I note that the plaintiff accepted that if the Building never had a name at all, then it may be in the “common interest” (as to which phrase, see §50 below) of the co-owners to give it a name.  That is common sense.  The name of a building (as opposed to the name of a street and a number) is a convenient way to refer to a location, customarily used especially for commercial buildings in Hong Kong (see the observation of Cons J (as he then was) in Union Insurance Society of Canton Ltd v The HongKong Land Co Ltd HCA386/1977, 5 Dec 1977, p.4). 

46.  Since it would be in the “common interest” of co-owners to give the building a name if it did not originally have one, I do not see why a change of name would be any different. For example, if the original name is confusingly similar to the name of another building (and consequently correspondence or visitors get sent to the wrong location), it must be in the “common interest” of the co-owners to decide to change its name.   

47.  More importantly, if all current co-owners acting together can decide to change the name of the Building, there is no reason why that decision cannot be made by a majority who reached that decision in accordance with procedures agreed in the DMC.  Section VII B starts with these words: “From time to time there shall be meetings of the Owners to discuss and decide matters concerning the Land and the Building …” (emphasis added).  Construed literally and purposively, those words are wide enough to include owners deciding the name of the Building.  

48.  The plaintiff argued however that a decision to name the building was a matter outside the proper purpose of the DMC.    Pausing there, it seems to me that that argument contradicts the ratio of Pak Fah Yeow on ground (b), as the courts’ focus on compliance with clause 13 was the clearest indication that the name of the building was a matter which was properly governed by the DMC. 

49.  It would also be noted that in the Notice of Application, the plaintiff did not challenge the power per se of the IO to put forward the change of name for the EGM. It only “challenged the enforceability and/or effect of the Resolution and the changes of name …” (§5).  However since the proceedings were commenced in the LT, I will say no more about pleadings. 

50.  In the course of the hearing, the question was raised whether, assuming the name of the Building was not a matter governed by the DMC, it was a matter covered by s.18(2)(g) of the Building Management Ordinance cap. 344 (“BMO”) which gives an IO a discretion to act on behalf of the owners “in respect of any other matter in which the owners have a common interest”.  

51.  The plaintiff argued that it was held in The Incorporated Owners of One Beacon Hill v Match Power Investment Ltd [2012] 5 HKLRD 375 that co-owners of a building would only have a “common interest” in a matter when the matter involves a legal right or interest common to all the co-owners, and that in our case the naming right was only the legal right of Kiu Fu (which the 2^nd defendant says it had succeeded to) and not a legal right common to all co-owners.

52.  One Beacon Hill concerned the power of an IO to sue for poor construction of the common parts of a development, where in the unique circumstances of that development, the developer had entered into one type of agreement with those purchasers who purchased units before completion of construction (“pre-completion agreements”), and another type of agreement with those purchasers who purchased units after completion of construction (“post-completion agreements”).  There were contractual terms regarding the standard of construction of the common parts in the pre-completion agreements, but not in the post-completion agreements.  In other words, different contractual duties were owed by the developer to pre- and post-completion purchasers.  However, the IO purported to act for all owners in an action against the developer, relying on the contractual terms for the standard of construction which appeared only in the pre-completion agreements.

53.  The developer applied to strike out the action on the basis that the IO had no locus to sue for breach of the pre-completion agreements.  The IO argued it did have locus by virtue of s.16 and s.18(2)(g) BMO.

54.  Section 16 provides that the rights of owners in relation to the common parts of a building shall be exercised by the IO.  The Court of Appeal (Cheung CJHC, Lam JA and Barma J) held that the section did not apply in that case because, even though common parts were involved, the right to sue on the standard of construction in the pre-completion agreements only accrued to the pre-completion purchasers, and not to all co-owners. 

55.  As for the IO’s argument based on s.18(2)(g), Cheung CJHC (as he then was) held that “common interest’ is limited to a common legal interest, that is, a legal right or liability common to all the co-owners …” (§§53 and 69), and therefore that section also did not apply, because the legal right to sue on the standard of construction in the pre-completion agreements was not common to all the co-owners.   

56.  In our case, the plaintiff submitted that since the naming right is only an interest of the 2^nd defendant, and not of each owner, there is no common legal interest. 

57.  However, it would be noted that the Court of Appeal in One Beacon Hill did not confine the application of s.18(2)(g) to an IO’s locus to sue.  Cheung CJHC referred to a passage in the judgment of the Court of Final Appeal in Jikan Development Ltd v Incorporated Owners of Million Fortune Industrial Centre (2003) 6 HKCFAR 446, where Litton NPJ said that s.18(2)(g) deals with “management matters”, giving various examples of management of a building.  Thus, the Court of Appeal (Cheung, Yeung and Tang JJA) held in The Incorporated Owners of Swiss Towers v Chow Yum Wah CACV122/2006, 20 October 2006, that the words “any other matter in which the owners have a common interest” were “referable to the management and maintenance of the buildings and matters relating to such purposes” (§13).

58.  It seems to me that, even if (for argument’s sake) the naming of the Building did not fall within the proper purpose of the DMC (which argument I do not accept by reason of the ratio on ground (b) of Pak Fah Yeow, as well as a literal and purposive construction of Section VII B), that act is a matter related to its management in which the owners have a common interest, and thus falls within s.18(2)(g). 

59.  Given that the Resolution was passed by a valid quorum after proper notice was given to all owners, I conclude that pursuant to clause 13 of Section VII B, the Resolution is binding on all co-owners of the Building, including the plaintiff. The IO had the power to effect the change of name of the Building on behalf of the owners.

Whether the plaintiff should be barred by laches from equitable relief

60.  However, if I am wrong on the above conclusion, I shall set out my views on Issue (3) i.e. whether the plaintiff should nevertheless be barred from seeking equitable relief on the ground of laches.

61.  The 2^nd defendant relied essentially on the following matters:-

(1)  The plaintiff must have been aware of the change of name much earlier than June 2021, because (among other things):-

(a)  the notice of the EGM of 14 August 2019 was circulated to all owners of the Building on 28 July 2019;

(b)  the minutes of meetings (including the EGM held on 14 August 2019) at which the change of name was referred to were circulated to all owners. 

(2)  As mentioned in §26 above, the EGM on 14 August 2019, although not attended by the plaintiff, was attended by a representative of Genoa (the owner of Unit 4A), which company is related to the plaintiff in that they share common directors and common shareholders. Genoa voted in favour of the Resolution.  The 2^nd defendant submitted that the plaintiff must therefore have been aware of the change of name much earlier than June 2021.

(3)  The plaintiff’s delay in bringing the proceedings caused prejudice to the 2^nd defendant, as it expended money on the Refurbishments in the belief that the change of name of the Building would not be challenged.

62.  The relevant principles applicable to laches are as follows:-

(1)  If the plaintiff has not been reasonably diligently in seeking relief, and in consequence the position of the defendant has been prejudiced or it would now be unjust or unreasonable to grant the relief, the plaintiff will be debarred from pursuing his remedy on the ground of laches: Chitty on Contracts (35th Ed.) §§32-139.

(2)  Where the plaintiff’s delay caused the defendant to have reasonably acted to his detriment in reliance on the delay, laches may apply: Meagher, Gummow and Lehane's Equitable Doctrines and Remedies (5th Ed.) §38-025.

63.  First, as far as actual knowledge of the change of name is concerned, the undisputed evidence of Che Wang Kin, the chairman of the IO, was that the notices of meetings and minutes were circulated to all owners.  Under Section IX Clause 2 of the DMC, the address of the unit is deemed to be the address for service unless the owner provided the manager with an address within the jurisdiction for service of notices.  Although I accept the evidence of Hui Kit Wai, a director of the plaintiff, that the unit was unoccupied at the relevant times, and that she only came to know that the Building’s name had been changed when the plaintiff’s auditors did a land search at the Land Registry, there was no evidence that the plaintiff had provided the manager with an alternative address for service.  I therefore find that the plaintiff is deemed to have had notice of the EGM and the minutes, and there has been delay in bringing the proceedings.

64.  As a matter of completeness, I should mention that the 2^nd defendant also relied on the posting of minutes at the lobby of the Building and an opening ceremony.  However, there is no provision in the DMC that posting at the lobby would be deemed to be notice (cf  Section VII A Clause 4, dealing with appointments, revocations and variations of appointments to the Owner’s Committee) and there is no evidence that the plaintiff’s representative had visited the Building at the times of posting or the opening ceremony.  

65.  As for the 2^nd defendant’s reliance on Mr. Ng’s attendance at the EGM, I accept the evidence of Ms Hui and Mr Ng that the plaintiff and Genoa have independent teams dealing with management of the properties in each company’s portfolio.

66.  Even though the plaintiff was guilty of delay however, what is important in considering the laches argument is whether the 2^nd defendant has suffered any prejudice as a result of the delay. I accept that the 2^nd defendant had indeed expended money on the Refurbishments, but it is clear on the evidence that that was prior in time to the EGM.  The invoices issued in respect of the Refurbishments were dated between 14 November 2018 and 10 June 2019, before the EGM held on 14 August 2019 which was called as a result of the two Scrutineer’s Notes from the Land Registrar dated 26 March 2019 and 16 April 2019 and the letter dated 8 July 2019.

67.  It would thus appear from the dates of the invoices that the 2^nd defendant had already incurred all its liabilities for the Refurbishments well before the EGM, and as such, the plaintiff’s delay in bringing the proceedings did not cause the 2^nd defendant any prejudice.  Nor do I see any reason why it would be unjust or unreasonable to grant relief when the 2^nd defendant was or must have been aware of the legal obstacles in the way of its exercise of the naming right.

Views on enforceability of naming rights covenants

68.  Lamaya and Pak Fa Yeow are of course binding on this court but the 2^nd defendant has reserved the right to argue on appeal that a naming right covenant does comply with s.41 CPO, and has asked me to express my view on these decisions in case it may be of assistance to the higher court.

Lamaya

69.  Lamaya relied on three bases in arguing that its exercise of a naming right was binding on co-owners:-

(1)  the naming right was an easement or appurtenant right.  This was not pursued on appeal, as Lamaya’s leading counsel conceded that the right to name a building is not an interest in land capable of passing directly by assignment (at p.201B).

(2)  the right is enforceable pursuant to s.41 CPO because its predecessor in title expressly reserved, and other co-owners at the time who were parties to the deed of mutual covenant acknowledged and granted to the predecessor in title and its assignees, the absolute right and liberty to name or change the name of the building.

(3)  as an alternative argument on appeal, it contended that the naming right was enforceable against co-owners as a direct contractual obligation when the co-owners accepted assignment of their own shares “subject to and with the benefit of” the DMC (at p.201B-C).

70.  In respect of Lamaya’s second argument, the Court of Appeal (Cons VP, Kempster JA and Mortimer J) held that the naming right does not fall within s.41(2)(c), which provides that a covenant only binds subsequent assignees of parties to a deed of mutual covenant if the covenant “is expressed and intended to benefit the land of the covenantee and his successors in title or persons deriving title to that land under or through him or them”, as the naming right covenant does not touch and concern the land in the sense of benefiting the land (at p.203H-I).

71.  Cons VP (giving the judgment of the court) adopted the test of whether a covenant touches and concerns the land of the covenantee as formulated by Bayley J in Congleton Corp v Pattison (1808) 103 ER 725 (followed in Kumar v Dunning [1989] 1 QB 193, 200):-

“the covenant must either affect the land as regards mode of occupation [the first limb], or it must be such as per se, and not merely from collateral circumstances, affects the value of the land [the second limb]”.

72.  Applying that test, Cons VP held at p.204A-B:-

“We cannot accept that the right to name the building as a whole in any way benefits the exclusive occupation of any particular floor or the roof above it [the first limb]. The commercial value is intrinsic in the right itself, and would remain the same whether the person holding it had the right to any occupation at all [the second limb]” (emphasis added).

73.  As discussed in §§78-79 below, the italicized passages relating to the two “limbs” are, in my view, key to understanding the ratio.

Pak Fah Yeow

74.  In Pak Fah Yeow, Rogers VP (giving the judgment of the court) said that there was force in the argument that the authority of Lamaya was somewhat diminished by the fact that there had been a concession by leading counsel on appeal that the right to name a building is not an interest in land capable of passing directly by assignment. That said, he considered that it would be difficult for the court to overrule Lamaya when it has been followed for the past 20 years (§13).

75.  The court of appeal gave leave to appeal (CACV 311/2008, 29 May 2009) to the Court of Final Appeal on the question “whether a covenant in a deed of mutual covenant creating, governing and/or in relation to the naming right of a building relates to or touches and concerns the land within the meaning of s.41(2) of the Conveyancing Property Ordinance and/or common law, and is therefore enforceable against all the owners of the land, hence whether [Lamaya] … should be overruled”.

76.  However, it appears that the defendant did not pursue an  appeal to the CFA.

77.  As mentioned above, in our case the 2^nd defendant has challenged the correctness of Lamaya (and hence, Pak Fah Yeow).  It argued that Cons VP seemed to equate “land” with the owner’s right of occupation only, whereas a covenant still touches and concerns the “land” even though it may require nothing to be done on the land itself, but is only for the payment of money (eg a tenant’s covenant to pay rent and insurance), as illustrated in Kumar (a covenant by a surety guaranteeing the tenant’s performance of his covenants).  Thus, the 2^nd defendant argues, as the naming right covenant affects the value of its share of the land, it does touch and concern its land.

78.  It seems to me that the ratio of Cons VP’s judgment, which is founded on the classic formulation in Congleton, is this: regarding the first limb, the naming right related to the whole of the building, when the alleged covenantee only has a share giving it occupation (exclusive possession) of only a part. There is no real connection between the subject right (pertaining to the whole of the building) and occupation of the subject land (the unit for which the alleged covenantee has exclusive possession).  This is unlike say, a right to affix chimneys which is a right which touches and concerns that part of the land to which the chimneys may be affixed.  The same may be said of advertising rights over external walls.

79.  Regarding the second limb, although the right to name a building may be of commercial value, that value lies only in the intangible, unquantifiable perceived prestige of having a building called by the name of say, one’s company, when the company may not even have a presence (or only occupation of a tiny space) in the building.  Such commercial value as there may be only arises from the collateral circumstances of the perceived prestige.  If the owners of a piece of land decide not to give a name to the building on it, its value does not diminish.  If they decide to call it by a neutral name, say 300 Lockhart, its value does not increase.  If that is the case for that piece of land, there is no reason why, if the right is given to the owner of a neighbouring piece of land, that should affect the value of the neighbouring land.  As such, the naming right does not touch and concern the land.  This is unlike say, a tenant’s covenants.  Some covenants of course require the tenant to do something on the land.  But even covenants for the payment of money (such as rent and insurance) are related to what he does on the land.  Those covenants therefore touch and concern the land.  In Kumar, it was held that a surety’s covenant similarly touches and concerns the land as it ensures the tenant’s performance of those covenants which provides the value of the land.  The right to the surety’s covenant therefore clearly affects the value of the land.

Order 

80.  For the above reasons, I am of the view that while the Naming Right Covenant is not enforceable against the other co-owners under s.41 CPO, the Resolution was validly passed and is binding on all co-owners pursuant to the DMC. The plaintiff’s claim should therefore be dismissed.  It is agreed that costs should follow the event with certificate for two counsel.  Insofar as the IO is concerned, as no submissions have been made to me regarding its costs, it may have liberty to apply.