CARADO CO LTD v. THE INCORPORATED OWNERS OF CARADO GARDEN

Property law - building management - dispute whether six goods vehicle car parks still owned by original developer - if so whether it enjoyed exclusive use or was limited to using the car parks in common with others - parties rights governed by provisions of New Grant and DMC which were sufficently clear to exclude any contrary implied rights - agreed measure of damages but dispute over their commencement date - Held:

IN THE LANDS TRIBUNAL OF HONG KONG

Lands Tribunal Application No.BM54 of 1996

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JUDGMENT

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1. The Applicant has brought these proceedings pursuant to Paragraphs 1, 2 and 5 to 9 of the Tenth Schedule of the Building Management Ordinance, Cap.344. The dispute between the parties involves the rights relating to Goods Vehicle Car Parks Nos. 1, 2, 3, 4, 5 and 6 of the residential and commercial complex known as Carado Garden, situate at Nos.20-30 Tin Sam Street, Shatin, New Territories, Hong Kong.

2. The Applicant is the registered owner of these six Good Vehicle Car Parks and claims the following relief:

3. The Government in 1987 advertised for public tender, subject to special and general conditions, Sha Tin Town Lot No.313 on which Carado Garden was later built. The project included six residential blocks each of twenty eight storeys high, a four storeys commercial block with three floors of car parks, together with ancillary facilities. The residential units were to be available for sale under the Government's Home Ownership Scheme.

4. The Applicant's tender for Lot 313 in the sum of $326,800,000, was accepted by Government and the Memorandum of Agreement between those parties signed on 23rd October 1987. The General and Special Conditions of Sale were registered in the Land Registry as New Grant No. 12175. The provisions of the New Grant now constitute the conditions of title for Lot 313.

5. Special Condition (23) of the New Grant imposes the following conditions in respect of car parks:

6. The Deed of Mutual Covenant ("DMC") between the Applicant and the first purchaser, was executed on 30th January 1990. Under the DMC, Lot 313 was divided into 104,875 equal undivided shares. The residential units were allocated 40, 45 or 55 shares, which gave their purchasers the exclusive right to hold, use and occupy their particular unit. The 20 commercial units comprised 3,960 shares varying from 110 to 605 shares per unit.

7. The DMC at page 41, set out the allocation of shares for car parks, as follows:

The remaining 9 shares, to make up the total of 104,875 shares, were allocated to the L.P. Gas Compound.

8. The Applicant progressively sold off all of the units represented by the 104,875 shares, except the 6 shares for the six Goods Vehicle Car Parks, which it retained in its ownership.

Ownership and user rights of Goods Vehicle Car Parks:

9. It is now undisputed that the Applicant is the holder of the six shares for the Goods Vehicle Car Parks and their registered owner in the Land Registry. However, the Respondent disputes the Applicant's alleged right to the exclusive use of those car parks. The present dispute may perhaps never have arisen if the DMC had been better drafted. The alleged drafting inadequacies, now make it necessary to consider the provisions of the DMC and the New Grant, in some detail.

10. Counsel for the Applicant, after emphasising that it was the registered owner of the Goods Vehicle Car Parks, drew the Tribunal's attention to Special Condition (14)(e). This empowers owners to sell non-residential parts of Lot 313 designed to be used exclusively for non-residential use, including the car parking spaces required under Special Condition (23), subject only to any assignment before compliance with the New Grant conditions, first obtaining the consent of the Registrar General. A letter from the Director of Lands was adduced, confirming that the Certificate of Compliance was issued on 15th January 1990 and the consent of the Registrar General to an assignment under Special Condition (14) (e), was no longer required.

11. It was submitted that the Building Management Ordinance negatived any legislative intent, to deprive an owner, of exclusive possession of his property. The prohibition in Section 341 of converting any part of the common parts for private use, was to be contrasted with Section 43, which provides that nothing in the Ordinance shall prevent an owner from assigning, selling or leasing his share. Further, pursuant to Section 35 of the Conveyancing and Property Ordinance, Cap.219, where the assignment is for valuable consideration, Part II of the First Schedule, implies a covenant for quiet enjoyment.

12. Counsel for the Applicant also disputed that Special Condition (23) (b) of the New Grant, limited the lawful use of the six Goods Vehicle Car Parks to loading and unloading. The Special Condition, it was submitted, expressly allowed the spaces to be used for "parking" of goods vehicles, as well as for the alternative uses of "loading and unloading." The owner of the spaces could therefore lawfully use, let or licence the spaces for the parking of goods vehicles overnight or for hourly or other periods, without any necessity for loading or unloading.

13. The provisions of the New Grant are tolerably clear. If the documentation did not go further, the Applicant would appear to be in a strong position, to obtain the first order sought. However, it is also necessary to go on and consider the contents of the DMC. Where a conflict occurs between these documents, generally the title conditions will prevail. However, the provisions of the DMC are of immense importance, to the management of multi-storey buildings, in multiple ownership. It is desirable that any apparent conflict between these documents be resolved, where possible, to enable each to be given its full force and effect.

14. The Applicant founds its claim on the fact that it is the registered owner of each of the six Good Vehicle Car Park shares. Counsel for the Applicant then referred to Clause 4 of the DMC and the definitions in Clause 1 of "Share", "Unit" and "Owner." In his submission, the effect of these provisions was that the registered owner of an undivided share of a unit, has the right to the exclusive use, occupation and enjoyment of his unit.

15. In the Applicant's submission, the Respondent's powers as manager under Clause 12, principally extended to various classes of common areas, including Estate Common Areas, Commercial Common Areas, Residential Common Areas and Garage Common Areas, as defined in Clause 1. Counsel pointed out that the Goods Vehicle Car Parks were not included in those very extensive and detailed classes. The Tribunal was reminded of the statement in 1 Woodfall's Law of Landlord and Tenant on the construction of covenants, at paragraph 11.011:

"Where a covenant mentions some things, it is often to be inferred that other things of the same general category which were not expressly mentioned were deliberately omitted. Expressio unius est exclusio alterius."

16. Counsel for the Applicant emphasised that the Goods Vehicle Car parks were not mentioned in any of the definitions of the various classes of common areas. In those circumstances, it was to not open to the Tribunal to hold that they were included by implication. The Tribunal was also reminded that under the new provisions of the Building Management Ordinance, the provisions of a DMC now generally prevail over the Ordinance. In view of the full provisions of the DMC, no assistance was to be found in the Section 2 statutory definition of "common parts" or the provisions of the First Schedule.

17. Counsel for the Respondent accepted that it was necessary to establish that, at least by implication, the Applicant did not enjoy exclusive use of the Goods Vehicle Car Parks. The Respondent first put the Applicant to proof that it was the owner of the six Goods Vehicle Car Parks, pleading that they were part of the common areas. The Respondent alternatively pleaded, that their use by the Applicant was limited by Special Condition (23)(b) of the New Grant, to loading and unloading, in common with other owners and such parties licensees.

18. The latter alternative opposition, is based on the submission that even if the Applicant is the registered owner, its user rights are subject to the scheme of the development, as evidenced by the New Grant and the DMC. The legislative intent and the proper construction of those documents, it was submitted, clearly establishes by necessary implication, that the Applicant does not enjoy exclusive possession of the car parks. To the contrary, the Applicant must allow their use by other owners and their licencees but for the limited purpose of loading and unloading.

19. Counsel for the Respondent submitted that the clear distinction which commences in Special Condition (23) of the New Grant between private residential car parks and goods vehicle car parks, continues in the DMC. Counsel emphasised that the definition of "car parks" in Clause 1 of the DMC is limited to two forms of private residential car parks and does not include goods vehicles car parks. Further, the extensive inclusionary definition of "Estate Common Areas" was wide enough, it was submitted, to extend to goods vehicle car parks.

20. An owner's exclusive rights of use and enjoyment in Clause 2 (a) of the DMC, the Tribunal was reminded, expressly excluded common areas. The Tribunal was also referred to several parts of Clause 12, which it was submitted, gave the Respondent managerial powers over the goods vehicle car parks. Clause 12(d)(2) provides for the management and control of parking motor vehicles and loading and unloading of goods while paragraph (16) gives a general power to prevent contravention of the common area provisions.

21. The alleged private residential car park and common area goods vehicle car park dichotomy, it was submitted, was further evidenced by Clause 22. This contains special provisions applicable to specific parts ofthe Estate. Clause 22(b)(i), (ii) and (iii) is headed "Car Parks" but is expressly limited to those provided for use with residential units. Clause 22 (c) is headed "Loading Areas". I record that the latter, does not expressly refer to goods vehicle car parks.

22. After reviewing the contents of the New Grant and the DMC, in the light of Counsels submissions, several matters are reasonably clear. The Tribunal is satisfied that the Applicant is the registered owner of six equal undivided 104,875 shares in Lot 313. I find that under the DMC, for the purposes of individual ownership, one of those six shares, as specified in the Second Schedule, has been allocated to each of the Goods Vehicle Car Parks. Under these provisions, I find that the Applicant, is the owner of the six Goods Vehicle Car Parks.

23. The scheme of multi-owned property governed by a DMC, usually notionally divides specific parts for individual private ownership with the balance comprising common areas. On this basis, the specifically allocated and notionally individually owned Goods Vehicle Car Parks could not form part of the common areas. These two categories are generally mutually exclusive.

24. However, in view of Counsel for the Respondent's firm submissions to the contrary, I have gone on to consider each of the DMC common area definitions. I hold that the definition in Clause 2 of the "Estate Common Area" is not wide enough to include the Goods Vehicle Car Parks. The other common area definitions, even more clearly, exclude the Goods Vehicle Car Parks. The common area provisions of the Building Management Ordinance, if applicable, would also not have assisted the Respondent.

25. The common area argument was initially developed from Special Condition (23)(c) of the New Grant. However, the Respondent's pleaded Notice of Opposition and submissions, both misinterpreted that provision. Special Condition (23) is not concerned with ownership, or the distinction between individually owned units and common areas. It simply imposes on the Grantee developer, minimum requirements for parking.

26. So far as good vehicles are concerned, Special Condition (23) (b) is silent on whether those spaces were to be individually owned or form part of the common area. The Grantee had the option either to have notionally divided and sold such spaces to individual owners, or to have included them within the defined common areas. The DMC clearly shows by Recital (4) and the provisions of the First Schedule, that the Grantee preferred the first alternative of individual ownership.

27. I therefore hold that the six Goods Vehicle Car Parks do not form part of the common areas. This makes it necessary to go and consider the Respondent's alternative submission that if the parks were owned by the Applicant, it did not have the right to their exclusive use. An owner of land may, of course, as a matter of law not enjoy a right of exclusive use. Owners may grant to others, rights of way or other easements, if usually only over part of their land. In this case the right claimed by the Respondent is over the whole of the Applicant's land.

28. On this important issue the DMC, if considered in isolation, is perhaps less clear. The Applicant purchased Lot 313 for valuable consideration, namely $326,800,000. The DMC, inter alia, later assigned 40 equal undivided to the First Purchaser "together with the exclusive right and priviledge to hold use occupy and enjoy All That Flat F..." The DMC having been so created, the Applicant subsequently sold all the other residential units, to third parties. The sales were perfected by execution and registration of common form assignments. At that stage the Applicant remained the registered owner of the residue of the allocated shares, comprising the six Goods Vehicle Car Parks.

29. If any dispute arose over subsequent purchasers rights to exclusive possession, they could clearly rely on Clause 4 of the DMC which provides:

30. The definition of "Unit" in Clause 2, is in wide terms and means any portion intended for exclusive use by an owner. The Applicant had purchased Lot 131 for valuable consideration and has elected to retain the ownership of the six notionally divided shares, allocated to the Good Vehicle Car Parks. I hold that each of those car parks is a "Unit" within the meaning of Clause 2. I am further satisfied that Clause 4 also applies to those six Goods Vehicle Car Park shares.

31. The Car Parks referred to in Clause 22 (b) of the DMC, while not including Goods Vehicle Car Parks, refer not only to those for use by "Residential Units" but also for "Visitors" patronising the Commercial Units and visiting residents. These limitations assist neither party. The following sub-clause (c) limits the use of "Loading Areas" to loading and unloading of all motor vehicles for non-industrial purposes.

32. These "Loading Areas" are not expressly referred to as Goods Vehicle Car Parks. The Respondent has the power to designate appropriate parts of the common areas as loading spaces. I also observe that the definition of "Commercial Common Areas" expressly recognises such areas when it refers to "the loading and unloading area situated in the Commercial and Garage Block..." I am satisfied that the restrictions imposed by Clause 22 (c) apply to "Loading Areas" but not to the "Good Vehicle Car Parks." The latter are neither within a common area nor limited to loading and unloading but expressly allow goods vehicle parking.

33. Counsel for the Respondent strongly argued that the layout requirements, imposed by Special Condition (23)(b), were to provide a designated space for each of the six major Blocks at which goods vehicles could only be loaded or unloaded. This alleged purpose would clearly be narrower, than the wider right to park, permitted by the New Grant.

34. If the sole or primary purpose of these parks was for loading or unloading, the Tribunal accepts it may have been better achieved and controlled by the Respondent through the exercise of its management powers. There is therefore some force in Counsel for the Respondent's submission, that there could well be major management and other disadvantages, in having such spaces exclusively controlled, at the whim of a particular individual owner.

35. However, if the preferred alternative was to have the spaces controlled by the Respondent or its manager, that could very simply have been achieved by appropriate provisions in the DMC. First, the notionally divided shares for individual ownership, should not have included Goods Vehicle Car Parks and references to their shares in the Second Schedule, should have been omitted. Secondly, the definition of common areas should have been widened expressly to include the Goods Vehicle Car Parks. The DMC provisions are in fact expressly to the contrary.

Declaration for exclusive use, occupation and enjoyment:

36. Whatever the reasonableness or practical advantages of the scheme advanced by the Respondent, it faces the difficulty that far from being supported, it is contrary to the provisions of the New Grant and the DMC. I am satisfied that those two documents clearly establish the Applicant is not only the owner but is also entitled to enjoy the exclusive use and occupation of the six Goods Vehicle Car Parks. There will therefore be judgment for the Applicant in terms of the first order sought.

Injunction:

37. The next order sought was an injunction to restrain the Respondent from hindering or obstructing access or egress by the Applicant to the six Goods Vehicle Car Parks. The allegations relevant to this application concern the recent use of the Goods Vehicle Car Parks, culminating in a letter dated 9th January 1996 to the Applicant's solicitors, from the Respondent's former solicitors.

38. Under the DMC the Applicant's subsidiary, Carado Garden Management Limited, was appointed manager for a period of 10 years from the date of the first Occupation Permit. The Applicant subsequently sold all its shares in its management subsidiary. The management contract was later terminated and the Respondent itself took over the direct management of the Estate from 30th June 1995.

39. Mr. Lee Chung Keung, a former director of the Applicant, gave evidence that until certain incidents in November 1994, the Applicant had enjoyed free and unrestricted access and use of the Goods Vehicle Car Parks. During this earlier period, he frequently visited the Estate in relation to remedial and other works. However, from about mid-November 1994, there were two occasions when he arrived at the Estate in a goods vehicle but after revealing his identity was refused entry. The entrance guard informed him that the vehicle did not display a monthly parking permit. The guard's specific instructions were that the Applicant's goods vehicle, could only park in one of the Goods Vehicle Car Parks, if those spaces were not already occupied by other hourly ticket holders and Mr. Lee purchased an hourly parking ticket.

40. After a series of similar incidents the Applicant instructed its solicitors, who corresponded with the Respondent's solicitors. The stance of the Respondent is set out in the letter from the latter, to the Applicant's solicitors dated 9th January 1996, which concluded with these paragraphs:

41. Evidence of the more recent operation of the House Rules, so far as visitors are concerned, was provided by Mr. Charles Scragg, the Applicant's chartered surveyor. Mr. Scragg stated he visited the Estate by private car during October 1996, for the purpose of completing his Valuation Report, for these proceedings. At the electronically controlled vehicle entrance barrier, he pushed a button and obtained an entrance ticket. On the barrier being raised, he drove into the Estate.

42. Mr. Scragg was then directed by a guard to a parking space. Later Mr. Scragg discovered this space formed half of one of the six Goods Vehicle Car Parks. On inspection he found all six Goods Vehicle Car Parks had been marked to provide 12 car parking spaces. He took phototographs of all these spaces. These appear at pages 16 to 18 of his Report and in the Agreed Bundle at pages 188 to 190.

43. During his visit, Mr. Scragg was told by Mr. Paul Yu, Dip CB(Glas), AIMBM, MAPSA, the Respondent's Estate Manager, that after a 30 minute grace period, visitors were charged for parking at a rate of $12 per hour. When Mr. Scragg was leaving, before he was able to produce his parking ticket to the Cashier, an officer from the Management Office came out, retrieved the ticket and permitted him to leave without payment.

44. Similar evidence was given by the Respondent's Mr. Lee Yiu Hung, who since 1991 had been employed by the various managers of the Estate, as a Car Park Cashier. Mr. Lee stated that residents who own car parks are supplied free of charge with a monthly permit. Visitors are admitted under a parking ticket and charged at an hourly rate. The parking rate for visitors in 1991 was $8 per hour but increased in July 1995 to $12 per hour. He also stated that visitors were not charged for the first 15 minutes and then allowed a 15 minute grace, period before the $12 per hour rate commenced.

45. The remaining witness was the Chairman of the Respondent, Mr. Choy Ping Hung. Although he had expressly confirmed Mr. Lee's evidence, variations developed in his oral evidence. He denied that the Respondent rented out car parking spaces at an hourly rate. He claimed visitors were allowed to enter only for a period of 15 minutes. If the vehicles remained after a warning notice was given, their vehicles were clamped. Unclamping charges were $320 and overtime parking charges were about $14 per hour.

46. Mr. Choy denied that the Goods Vehicle Car Parks were each divided into two parking spaces. He stated any prior 1995 additional markings had since been removed. Mr. Lee, the Car Park Cashier since 1991, who impressed as an honest and reliable witness, later stated he was not aware of any steps taken to remove those markings. Mr. Choy's evidence was also contradicted by Mr. Scragg and the photographs. Mr. Choy conceded he did not have a detailed knowledge of car parking matters. Where a conflict exists, I accept the evidence of Mr. Scragg and Mr. Lee and reject the evidence of Mr. Choy.

47. The stance of the Respondent in the letter of its former solicitors, refusing to allow access to the Applicant except for loading and unloading, is continued in the later filed Notice of Opposition. I find that Mr. Lee Chung Keung was refused access for the Applicant's goods vehicle, unless he was willing to pay a visitor's hourly parking fee. I find his evidence and that of Mr. Scragg and Mr. Lee Yiu Hung, establishes that the Respondent directed visitors to park cars and goods vehicles, in the Applicant's Goods Vehicles Car Parks.

48. On this evidence, I find that the Respondent has hindered and obstructed the Applicant from having access or egress by vehicles to its six Goods Vehicle Car Parks. It matters not whether any earlier periods of obstruction occurred before 30th June 1995. The prior appointed manager supervised car parking, under the Respondent's control. Since 30th June 1995 the Respondent has continued and strengthened its stance. Counsel for the Applicant referred to Scammell's Land Covenants (1996), pages 255 to 262, on the discretion to grant the order sought. On the found facts, I am well satisfied, that this is a proper case to grant the injunction.

Damages:

49. Counsel for the Applicant emphasised the wide power to award damages for loss of use of land even where a party cannot prove any quantifiable financial loss. The following statement from Colin Sara's Boundaries and Easements, page 432, was cited:

50. In the event, the assessment of damages was much simplified by an agreement between the parties. First, it was agreed that the loss of use of the Goods Vehicle Car Parks, would be calculated on their open market rental value. Secondly, that for this purpose the valuations contained in Mr. Scragg's Report would be used. The Respondent's own valuation had been rather higher.

51. The parties further agreed to adopt the open market monthly rental value of each space during 1996 which, in terms of Mr. Scragg's Report, was $2,400 per Goods Vehicle Parking Space. Mr. Scragg, considered that those monthly sums, should be multiplied by 12, because each Goods Vehicle Car Park had been subdivided into two spaces and rented out on that basis. Counsel for the Applicant indicated, that it was content only to claim $2,400 per month, for each of the six car parks.

52. The Applicant claimed damages since November 1994, being the date of the first allegation of refused access. I accept Mr. Lee Chung Keung's evidence that during November 1994, the Applicant's goods vehicles, after their identity was disclosed, were on several occasions denied access, unless they were willing to pay the visitors hourly parking charges.

53. I accept that access was once refused to a goods vehicle driven by Mr. Lee, when he had intended merely to pay a social visit to a relative, living in the Estate. I reject the Respondent's criticism of the nature of that visit. If New Grant Special Condition (23)(b) had limited the use of the Goods Vehicle Car Parks to loading and unloading, it may have had some validity. However, the New Grant also permits the parking simpliciter of goods vehicles, with any obligation to load or unload.

54. Counsel for the the Respondent pointed out that the first formal demand for access was contained in the Applicant's solicitors letter of 21st December 1995 and damages should only run from that date. In any event, he submitted, they should not be assessed for any period before the Respondent took over direct management of the car parks, on 30th June 1995.

55. I have already adverted to the Respondent's powers as the employer of the manager, before it took over the direct management of the car parks on 30th June 1995. The Respondent earlier had ample powers to direct the manager to allow entry to the Applicant without payment. I accept Mr. Lee Chung Keung's evidence that entry was refused from about mid-November 1994. Although not necessary to my ultimate finding, I accept that during that earlier period, the entrance guard staff explained the refusal was in accordance with the Respondent's instructions.

56. Finally, I am satisfied that the letter from the Applicant's solicitors dated 21st December 1995, formally demanding access, does not adversely affect its claim. The letter does not limit the date from which damages run or otherwise amount to a waiver of its rights or remedies arising from any prior refusals. Indeed, it expressly refers to both past losses and, if the infringement continued, to further future losses.

57. When I review the whole of the evidence relevant to damages, I award damages from 14th November 1994 at the rate of $14,400 per month ($2400 x 6) until access and egress is allowed to the Applicant in terms of this judgment. I record that such access and egress must comply with the provisions of the New Grant and the DMC, including any relevant House Rules made thereunder.

Orders:

58. There will be an order nisi that the Respondent pay the Applicant's costs on the High Court scale to be taxed if not agreed; to become absolute, unless within 14 days, application is made to the contrary. There shall also be a Certificate for Counsel. Liberty to apply on any other consequential matters is reserved. Finally, the Tribunal would express its appreciation to both Counsel, who admirably advanced their clients arguments during an application which, at times, was not without its difficulties.

Dated this 19th day of November 1996.