Sheenip Industries Ltd. v. Champion Billion Development Ltd.

1995 No. MP 1390

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This is a Vendor and Purchaser Summons issued by the Vendor for declarations that a requisition has been sufficiently answered.

2. Subsequent to the issue of this Originating Summons, the Purchaser has also issued an Originating Summons in HCMP No.1696 of 1995. This was not expressed to be a Vendor and Purchaser Summons under s.12 Conveyancing and Property Ordinance. However, one of the reliefs sought in that subsequent proceeding is a declaration that the Vendor has failed to sufficiently answer a second requisition.

3. The parties are agreed that I should deal with both these requisitions today. As to the rest of the Purchaser's proceedings, the parties are agreed that I should not deal with it, and the parties will in due course consider appropriate directions to be sought from the Court.

1st REQUISITION

4. By a Provisional Agreement for Sale and Purchase made on 16 December 1994, the Vendor agreed to sell and the Purchaser agreed to purchase the property described in the Agreement as "Staircase on 11th Floor, Flat B on 12th Floor and Roof, Kenwood Mansion, No. 15 Playing Field Road, Kowloon". The parties have not been able to agree on the terms of a formal Agreement for Sale and Purchase.

5. The first requisition concerns the Vendor's title to the Staircase. Before I deal with it, however, I shall set out some relevant facts.

Facts

6. The approved plans show that on the 11th Floor, there is a small lobby or vestibule partitioned off from the common corridor. Entrance to this vestibule is gained through a door.

7. The Staircase in question starts inside this vestibule on the 11th Floor and leads to the premises known as Flat B on the 12th Floor. The staircase comprises of a number of risers from the 11th Floor to a "mid-landing", with some more risers leading up to the 12th Floor. Naturally, the lower part of the staircase occupies space on the 11th Floor and the upper part of the staircase occupies space on the 12th Floor.

8. The approved plans also show that no main door is provided to Flat B at the 12th Floor level. It would also appear that there is no access to or egress from the lift on the 12th Floor. There is an identical arrangement for the premises known as Flat A on the 12th Floor which is laid out in a mirror image.

9. These plans were approved prior to the Deed of Mutual Covenant in 1965 and the parties are agreed that there has been no change to the lay-out since then.

10. The Deed of Mutual Covenant was dated 14 June 1965. The Assignment under which the Vendor claims to derive its title to the Staircase was dated 1 April 1966 ("the 1st Assignment").

Issues

11. The first requisition raises the following issues:-

(a) was the Staircase a common area under the Deed of Mutual Covenant?

(b) as the 1st Assignment did not contain any verbal reference to the Staircase (or at least that part of it occupying space on the 11th Floor), did it pass title in the Staircase?

(c) even if the 1st Assignment did pass title in the Staircase, did that position change in 1986 with an Assignment by a mortgagee to the Vendor's predecessor-in-title, and/or in 1992, with an Assignment by that predecessor-in-title to the Vendor?

(a) Staircase was not a common area

12. The DMC recites the fact that a 13-storied building has been constructed on the land.

13. Clause 1 of the DMC provides:-

"Each of the parties hereto hereby grants unto each of the other parties hereto ... full right and privilege to hold use and enjoy to the exclusion of the Grantors the flat floor or roof of and in the said building set out in the Third Column of the First Schedule hereto opposite to the respective names of the Grantees as set out in the First Column of the said Schedule To The Intent that each of the parties hereto shall be entitled to the exclusive use occupation and enjoyment of the flat floor and roof of and in the said building so set out opposite to the names of such parties as aforesaid."

14. In the First Schedule, there is set out in the First Column the names of the 1st purchaser and the developer respectively, and in the Third Column "Flat E on 9th Floor" against the name of the 1st purchaser and then certain other premises against the name of the developer.

15. Amongst these other premises was "Flats A and B of 12th Floor and Roofs". Consequently, exclusive possession was given of "Flat B of 12th Floor" to the developer.

16. What areas were comprised in the description "Flat B of 12th Floor"? The DMC does not refer to any plans. The question must therefore be answered with reference to the physical lay-out of the premises as built, such lay-out being ascertained from the approved plans.

17. The approved plans of the 11th Floor show a number of individual flats, all with doors or doorways leading from the common corridor to each flat.

18. However, no main door or doorway to the premises known as Flat B was provided for on the 12th Floor level. The only door opening for those premises is the door of the vestibule on the 11th Floor leading to the Staircase.

19. It is of course possible for an occupant not to have a main door to one's premises, but a main door is generally the best indication of where common possession ends and where exclusive possession begins.

20. The approved plans having shown the main doors to the individual flats for the other flats on the 11th Floor, I see no reason for the omission of a main door on the 12th Floor, other than that the main door to Flat B was at the entrance to the vestibule containing the Staircase on the 11th Floor. An accidental omission is unlikely as the same arrangement applies to Flat A on the 12th Floor.

21. Accordingly, I accept that, notwithstanding the fact that the entrance is in fact on the 11th Floor, given the physical appearance of the premises as built, the description "Flat B of the 12th Floor" includes the vestibule and the Staircase.

22. I should add that I do not place reliance on the fact that the description is "Flat B of the 12th Floor" rather than "Flat B on the 12th Floor". This may be simply careless drafting, the description of the 1st purchaser's unit being in the same Schedule "Flat E on the 9th Floor".

23. The Purchaser relies on Clause 2 of the DMC which provides:-

"Each of the parties hereto shall have the right in common with the others of the parties hereto and all others having the like right to use for the purpose of access to and egress from the flat floor and roof so granted to each of them the entrance halls lifts staircases and landings in the said building and such of the passages therein as are not included in any of the flats or floors of the said building."

24. In my view, the words "as are not included in any of the flats or floors of the said building" qualify only the reference to "passages" in the building.

25. However it is obvious that whether the Staircase in question is included in the common "staircases" in that clause must depend on whether the Staircase is within Flat B of the 12th Floor.

26. If it is within Flat B of the 12th Floor the exclusive possession of which has been granted, then obviously the staircase cannot be a common area.

27. In the light of the conclusion I have reached above, I find Clause 2 does not assist the Purchaser. In my judgment, the Staircase was not a common area.

28. I should add that in arriving at this decision, I have not taken into account the contents of the Statutory Declaration made by the developer or of the letter from the current Manager of the building, the former stating his intention that the Staircase should form part of Flat B of the 12th Floor and the latter stating their belief that the Staircase was not common area. Nor have I taken into account the comments of Authorised Persons instructed by the Vendor on the "architectural intention". They were in any event not the original architects.

(b) 1st Assignment passed title in the Staircase

29. Regarding point (b), the 1st Assignment assigns to the assignee "All That one equal undivided part or share of and in ... Section A KIL No.4305 and the Remaining Portion of KIL No.4305 And of and in the messuages erections and buildings thereon now known as `Kenwood Mansion' No. 15 Playing Field Road Together with the exclusive right to the use occupation and enjoyment of All That Flat B on the 12th Floor And the Roof thereof of the said building which said Flat and the said Roof with their abuttals and dimensions are more particularly delineated and described on the Plans hereto annexed and thereon coloured pink respectively ...".

30. The Staircase (or at least that part of it occupying space on the 11th Floor) was not expressly included verbally. However, included in the Plans annexed was a Plan of the 11th Floor with the space occupied by the staircase coloured pink.

31. Mr. Tang, Counsel for the Purchaser, accepts that where there is a conflict between the verbal property description in the assignment and a plan, and where the assignment states that the property is "more particularly delineated and [/or] described in the plan", the description in the plan will prevail (Eastwood v Ashton [1915] AC 900 (HL)).

32. Accordingly, in my judgment, notwithstanding the absence of any verbal reference to the Staircase (or at least that part of it occupying space on the 11th Floor) in the 1st Assignment, the Staircase was included by virtue of the annexure of the 11th Floor plan, in which the staircase was coloured pink.

(c) Did the position change with the 1986 and 1992 Assignments?

33. After the 1st Assignment and up to 1986, there was a series of assignments all referring back to the Plans annexed to the 1st Assignment.

34. In 1981, the property was mortgaged to Wayfoong Finance Limited. In 1986, there was a sale by the mortgagee.

35. In the Assignment by the mortgagee, the description of the property was identical to that in the 1st Assignment save that it ended as follows:-

" ... All That Flat B on the Twelfth Floor and the Roof thereof of the Building which said Flat and the Roof with their abuttals and dimensions are respectively shown and coloured Pink on the 12th Floor Plan and the Roof Plan annexed to [the 1st Assignment]".

36. The Plan of the 11th Floor was omitted.

37. However, in my judgment, nothing turns on this. The property sold was "All That one equal undivided 108th part or share" of and in the land. The right to exclusive possession of the Staircase was a right which was enjoyed by the owner of that share. The mortgagee did not reserve to itself exclusive possession of the Staircase. Even if it had attempted to do so, that could not be binding on subsequent purchasers (Lai Wing Ho v Chan Sui Fong [1993] 1 HKLR 319). With respect to Counsel for the Purchaser, Godfrey J. (as he then was) did not hold that one could by a personal licence lawfully assign the right to exclusive possession divorced from shares in the land. That would be a misreading of the judgment.

38. The same reasoning in respect of the 1986 Assignment applies to the 1992 Assignment from the Vendor's predecessor-in-title to the Vendor.

Sufficient Answer to 1st Requisition

39. The Purchaser has not suggested that the matters dealt with above have not been asserted by the Vendor's Solicitors in answer to the Purchaser's 1st requisition. Rather, Mr. Tang has argued the case on the substantive basis that the points did not provide sufficient answers in law.

40. In conclusion therefore, I find that the 1st requisition has been satisfactorily answered.

2nd REQUISITION

41. The 2nd requisition concerns the allocation of the undivided shares in the land.

42. Mr. Chan, Counsel for the Vendor, has complained that the requisition as contained in the correspondence referred to in the Purchaser's Originating Summons is different from its submission as developed in Court.

43. I shall deal first with the argument as so developed before proceeding to examine whether that argument was sufficiently contained in the requisition.

Facts

44. The factual background to the requisition is as follows. The land has been divided into 108 equal undivided shares. The Vendor is the owner of 1/108th shares. The other 107 shares have been allocated to the other co-owners of the land. The allocation can be ascertained from searching the Land Office Register and has also been set out in a Statutory Declaration of the developer.

45. The DMC was executed in 1965. It was, as is common, executed between the developer and the 1st purchaser (commonly called the 1st Owner). It first recites that the land is held by the parties in such shares or proportions as are set out in the Second Column of the First Schedule.

46. The Second Column of the First Schedule states 1/108th shares are held by the 1st Owner and 107/108th shares by the developer.

47. There is no express provision in the DMC as to how the 107/108th shares would be allocated amongst future co-owners.

The Purchaser's Argument

48. The Purchaser's argument as developed in Court is that since the DMC did not expressly contain a method of allocation, any subsequent allocation by the developer required the consent of the 1st Owner. If the developer were given a free rein, he might allocate the shares in such a way as to act unfairly upon the 1st Owner.

49. There having been no such consent, the unilateral allocation was ineffective (so the argument goes) and consequently, the allocation of 1/108th shares to the Vendor (passed through its predecessors-in-title) was ineffective.

50. The argument has been put forward as a matter of construction supported by Clause 4 of the DMC.

51. Clause 3 of the DMC first contains a list of expenses for which each of the parties to the DMC was to pay "his due proportion".

52. Clause 4 has been carelessly worded and I set it out verbatim:-

"The share which each of the party hereto shall be liable to pay or contribute under the last preceding clause hereof (except charges for repairing replacing maintaining and operating the said lifts and charges for electricity for lighting any portion or portions of the said Building for common use) shall be 1/108th shares for each one equal undivided 108th share of and in the said premises and of and in the said building And the share which each of the party thereto other than the owners of the ground or the 1st floor shall be liable to pay or contribute towards payment of charges for repairing, replacing, maintaining, and operating the said lifts in the said building and charges for electricity for lighting any portion or portions of the said building for common use shall be 1/10th share for each one equal undivided 108th share of and in the said premises and of and in the said building."

53. The first part of the clause poses no difficulties. Common expenses (other than those relating to lifts and lighting) would be shared in the same proportion as the allocation of shares in the land.

54. The latter part is difficult to understand. It exempts the owners of the ground and 1st floors from having to pay for the lifts and lighting. However, the rest of the co-owners have to pay (according to Clause 4) 1/10th of those expenses.

55. Since (as it turned out) the owners of the ground and 1st floors were allocated 16 shares, the effect of the latter part of Clause 4 is that the owners of the remaining 92/108th shares would all have to pay 1/10th of the lift and lighting expenses, an arrangement that could clearly result in a large surplus. I add for the sake of completeness that there was no evidence before me as to how these expenses were paid for in practice.

56. The Purchaser's argument based on Clause 4 is that arithmetically, Clause 4 would only be right if the owners of the ground and 1st floors were allocated such a large number of shares (98/108) that the remaining co-owners would between them only have 10/108 shares. That would clearly be unfair to the 1st Owner since he would have to bear a sizeable proportion of the expenses although he only had a small share in the land.

57. It matters not (so the argument goes) that that was not what in fact happened. That was an illustration of the kind of inequity that could result if the developer were free to allocate the remaining 107/108th shares without the consent of the 1st Owner.

No constraint on developer's freedom to allocate shares

58. In my judgment, the proprietary rights which the developer enjoyed as the owner of the 107/108th shares cannot be restricted except by clear wording or by necessary implication. There being nothing to indicate that there were any constraints upon his rights, he was free to allocate the 107/108th shares in whatever manner he thought appropriate.

59. He could not of course water down the 1st Owner's share in the land by increasing the total number of shares, but I can see no reason why he should not be free to allocate the shares in whatever manner he thought appropriate. This freedom is supported by Clause 12 of the DMC which gives co-owners the right to dispose of their shares without reference to other owners. There might be a difference if the DMC had contained a specific allocation of shares and the developer later chose to re-allocate the shares different. That might be a breach of the DMC, but there was no such provision for any specific allocation or method of allocation here.

60. I appreciate that the freedom to allocate might work to the 1st Owner's disadvantage. Co-owners with exclusive possession of large areas might be allocated a small number of shares and thus have to pay only a disproportionately small contribution to expenses. However, in the event of say, resumption or redevelopment, the value of their property would be correspondingly less.

61. I am not able to solve the problem which the latter part of Clause 4 poses. I am driven to conclude that this is an anomalous provision which might have suffered from typographical and/or drafting errors. However, I do not see how the problems of calculation assist the Purchaser's argument.

62. In my judgment, therefore, the Purchaser's argument as developed in Court does not succeed.

Form of 2nd Requisition

63. As to the form which the 2nd requisition took, I agree with the Vendor that the argument as developed in Court was different from the requisition as developed in the correspondence. The argument in Court proceeded on the basis that the consent of the 1st Owner was required to the allocation of shares. The requisition in the correspondence proceeded on the basis that the consent of the owners of the 107/108th shares (save and except the 1st Owner) was required. There having been no argument proffered by the Purchaser on the original form of the requisition, I need not deal with it.

ORDER

64. I therefore make an order in terms of paragraphs (1) and (4) of the Vendor's Originating Summons. I do not see the necessity for making an order in terms of (2) and (3) but shall be happy to hear the parties if they wish to persuade me otherwise.

65. I dismiss paragraph (1) of the Purchaser's Originating Summons.

66. I make an order nisi that the costs of the Vendor's Originating Summons, of the Purchaser's Originating Summons so far as they relate to paragraph (1) and of the hearing be to the Vendor.

Dated 4 July 1995