LEUNG CHIU LAM PAUL AND ANOTHER v. POON LOI CHEUNG DESMOND ANOTHER

1998, No. 84
(Civil)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

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J U D G M E N T

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Godfrey, J.A. (giving the first judgment at the invitation of Nazareth, V-P):

Introduction

1. This is an appeal from an order made on 17 February 1998 by Seagroatt, J. on a vendor and purchaser summons. The proceedings raised a question, in relation to a space in the basement of the building in which the apartment agreed to be sold formed part, as to whether title had been shown to that basement space and, if so, whether an objection as to title raised by the purchasers in that connection had been satisfactorily answered by the vendors. The judge answered those questions in favour of the vendors. The purchasers now appeal.

The documents of title

2. The point in question cannot be understood without reference to the documents of title. I will refer first to an assignment ("the 1st assignment") made on 1 February 1974 between Chinsan Enterprises Limited ("the developer") and Joseph KAM Ting Kwong ("the 1st assignee").

3. The 1st assignment recites that there had been constructed, on the land to which it referred, a building known as "Bisney Villas", consisting of a basement for car parking purposes, and two apartments on each floor, from the ground floor to the second floor, both inclusive, for domestic use. It recited that the premises and the building had been divided into six equal undivided sixth parts or shares, and that one such equal undivided part or share had been allocated to each apartment, each with one car parking space, and, in the case of the two apartments on the second floor, each apartment with the corresponding roof thereof. The 1st assignment was expressed to assign to the 1st assignee one equal undivided sixth part or share in the premises, together with the full and exclusive right and privilege to hold, use, occupy and enjoy apartment A on the second floor and the corresponding part of the roof of the building, together with car parking space no. 3 in the basement. There were excepted and reserved, for the developer and/or its assigns and the owners for the time being of the other five undivided sixth parts or shares in the premises, a full and exclusive right and privilege to hold, use, occupy and enjoy all other apartments, car parking spaces, the yard on the ground floor, flower-beds on the basement, other portions of the roof and "all other self-contained portions of the building" (whatever that latter expression may mean).

4. The copy of the plan to the 1st assignment with which we have been provided shows, in addition to the car parking spaces in the basement, another space which is the subject of the dispute which we have been called upon to resolve. This space is next to a staircase in the basement and is, we understand, shown coloured pink on the plan. Although dotted lines on the plan show (presumably) the dimensions of the space, no indication is given as to the physical characteristics, if any, which those lines denote.

5. Also on 1 February 1974, the developer and the 1st assignee entered into a Deed of Mutual Covenant. This recited that there had been constructed on the premises a new four-storey building known as "Bisney Villas" comprising a basement for car parking purposes and two apartments on each floor from the ground floor to the second floor (both floors inclusive) for domestic use for the purposes of sale of the premises and the building had been notionally divided into 6 equal undivided 6th parts or shares one allocated to each apartment (each with one car parking space) in the building.

6. It was recited that the parties had agreed to enter into the Deed of Mutual Covenant in order to define their respective rights and interests of and in the premises and the building in manner therein appearing.

7. Clause 1 of the Deed of Mutual Covenant provided :-

"1. Each of the parties hereto shall for the residue of the said term of years for which the said premises are held from the Crown have the sole and exclusive ownership and the full right and privilege to the use occupation and enjoyment of the portion of the said building which is more particularly described and set out in the Second Column of the First Schedule hereto opposite to the name of such party set out in the First Column of the First Schedule ....."

8. The First Schedule contains in the first column a description of the developer, to whom is allocated the following, i.e., apartment A on the ground floor, apartment B on the ground floor, apartment A on the first floor, apartment B on the first floor, apartment B on the second floor (together with the roof thereof), car parking spaces nos. 1, 2, 3, 4 and 6 on the basement, yard on the ground floor, and flower beds on the basement of the building (5/6th parts or shares).

9. The first column also contains a description of the 1st assignee, to whom is allocated the following, i.e., apartment A on the second floor and the corresponding part of the roof and car parking space no. 5 on the basement of the building (1/6th part or share).

10. There is no plan annexed to the Deed of Mutual Covenant and there is nothing in that Deed which allocates to the developer the basement space to which I have referred. There is nothing to show whether this basement space was or was not "self-contained".

11. I turn finally to the 2nd assignment. This is an assignment made on 12 March 1974, only six weeks or so after the date of the 1st assignment. The 2nd assignment is made between the developer and one Thelma Maria Chan ("the 2nd assignee") who is the predecessor in title of the present vendors. By the 2nd assignment, the developer assigned to the 2nd assignee one equal undivided 6th part or share of the premises, together with the full and exclusive right and privilege to hold, use, occupy and enjoy, first, apartment A on the ground floor of the building; secondly, car parking space no. 2 (which I think must be a mistake) on the basement of the building; thirdly, the space in the basement of the building coloured pink on the basement plan (being the space about which the present dispute has raged); fourthly, all that portion of the yard on the ground floor of the building shown pink on the ground floor plan; and fifthly, all that flower-bed on the basement of the said building also shown coloured pink on the basement plan.

12. So, in the case of the 2nd assignment, there was an attempt (whether it was or was not successful) to confer on the 2nd assignee a right to the exclusive use of the basement space with which we are now concerned.

The issue

13. The issue in the present proceedings as to the basement space arises because the purchasers have taken an objection to the title of the vendors to assign this right to them. The purchasers object that, although the 2nd assignment purports to confer on the 2nd assignee the right to exclusive use of the basement space, the developer had no title to grant such a right to the 2nd assignee. The parties' rights are defined, say the purchasers, in the Deed of Mutual Covenant; and, they say, there is no reservation of the basement space made in the 1st assignment; the expression "or other self-contained portions of the building" is not apt to comprehend the basement space; and the basement space is not allocated to the developer in the First Schedule to the Deed of Mutual Covenant or anywhere else.

14. In these circumstances, say the purchasers, the developer could not successfully have granted a right to exclusive use of the basement space to the 2nd assignee. The 2nd assignee was unable to pass on the benefit of this and the purchasers therefore would not get the benefit of that right. The purchasers would simply have the same right to non-exclusive occupation of the basement space as of the rest of the basement (other than the car park spaces and flower-beds within it).

The vendors' answer to the objection

15. To this objection, the vendors reply that the developer was entitled to the exclusive right and privilege to use, occupy and enjoy the whole of the development, including the space on the basement, not otherwise allocated. The word "self-contained portions of the building" in the 1st assignment were apt to include the basement space. The plan to the 1st assignment as well as the plan on the 2nd assignment show lines which demarcate the space as something separate from the rest of the basement. The intention of the developer is clear. It was that this space should be reserved to the developer, and the right to the exclusive use of this space should be available for the developer for assignment to any other assignee of an apartment in the building.

Conclusion

16. I have to say that, for my part, I prefer the argument for the purchasers. The right of the developer to dispose of this basement space must depend on a reservation by the developer of the right to do what he did, which was to grant the exclusive use of this basement space to the 2nd assignee.

17. But where do we find any such reservation?

18. In my judgment, it is much too slender a foundation for a finding of such a reservation to refer to the vague expression "other self-contained portions of the building" in the 1st assignment (and the 2nd assignment) and to buttress this by a reference to the plans on the 1st assignment (and the 2nd assignment) which do show lines demarcating the basement space but show nothing else. If a vendor wishes to reserve something in his own favour, he has to do so expressly and clearly, otherwise his grant will be construed against him and he will not be held entitled to claim any such reservation. This is just such a case. There is nowhere near sufficient clarity about the alleged reservation to justify the conclusion that the developer succeeded in reserving this basement space to itself.

19. For these reasons, I would hold that the vendors here failed satisfactorily to answer the objection as to the title raised by the purchasers, and accordingly I would hold the purchasers entitled to succeed in these proceedings. I appreciate that in this I am differing from the learned judge, who took a more robust view of the matter, but there it is.

The result

20. Accordingly, I would allow the appeal.

Rogers, J.A. :

21. I find this case troubling.

22. Turning to the first assignment, that from Chinsan Enterprises Limited to Joseph Kam Ting Kwong of 1st February 1974, Chinsan reserved to itself "the full and exclusive right and privilege to hold use occupy and enjoy" various parts of the premises which are sufficiently identified, but at the end of the list of portions retained there were the words "and all other self-contained portions" of the said building.

23. The assignment itself contained no clue as to what those self-contained portions were. It was the Defendants' case (the Respondents in this Court) that those words referred to a portion to the left of a communal staircase as shown on a plan of the basement floor annexed to the conveyance.

24. It may have been open to the Defendants to have adduced evidence that this area on the left of the staircase as shown on the plan was a self-contained area at the time of the conveyance. At the moment, even on what we have been told by counsel, I have my doubts that it would properly be identified as a self-contained portion.

25. The Deed of Mutual Covenant which is dated the same day provides in Clause 1 the parts of the premises of which the two parties had the sole and exclusive ownership and the full right and privilege to the use and occupation and enjoyment. That was said to be more particularly described in the second column of the First Schedule. Clause 1 also contained the words "with the appurtenances thereto".

26. The Judge below considered that the words "with the appurtenances thereto" was sufficient to include this portion to the left of the staircase. It is a part which is clearly adjacent to a triangular shaped portion of the yard on the ground floor. We have been told at the end of counsel's speech that there was a staircase on the portion to the left of the communal staircase which leads up to that triangular portion of the yard. We are told that the triangular portion is now used as a flower bed and that this staircase is not shown on any of the plans. The staircase may constitute an appurtenance but, in my view, the evidence is simply not there to show that the basement portion to the left of the communal staircase or any staircase to which I have just referred i.e. one in that left hand portion is, or was at the date of the Deed of Mutual Covenant, an appurtenance to the triangular portion of the yard.

27. In my view, therefore, this appeal must succeed for the reasons given by Godfrey, J.A. but I would add that I consider that there may have been some lacuna in the conveyancing documentation. In the first place, in the first conveyance there was a discrepancy between the carpark shown on the plan and that referred to in the body of the assignment. It also seems that the vendors, the Defendants (the Respondents in this Court) and their predecessors have probably enjoyed exclusive use of this portion to the left of the staircase. The portion over which there is a dispute as to whether there is a right to exclusive possession may, in reality, not be that important in the overall context and the property has doubtless dropped in value to a significant extent since the date of the original agreement.

28. I would therefore allow the appeal not without some sympathy to the Respondent.

Nazareth, V.-P.:

29. I also agree that the appeal must be allowed for the reasons given by my Lords. Since we are disagreeing with the judge, I add the following.

30. The "basement space" that has occasioned these proceedings was neither excepted nor expressly reserved for the exclusive use of the developer, Chinsan, in its first assignment, i.e. the assignment of 1 February 1974, nor in the Deed of Mutual Covenant of that same date. However, Mr Yau has struggled vainly to bring it within the exception in the first assignment, specifically the words "other self-contained portions". He contended that since these words are ambiguous, they should be construed by reference to Chinsan's intention which, he says, was to reserve the exclusive use of the basement space. That intention, he says, can be inferred from the following matters and consideration:

(1) That the second assignment by Chinsan a month later to Miss Thelma Chan (the vendor's predecessor in title) was so short a time after the first assignment and the Deed of Mutual Covenant, that it must indicate that it was always Chinsan's intention to reserve the basement space for the exclusive use of either the developer or an assignee of the developer;

(2) He relies upon the general necessity there must have been and must be for some self-contained areas, possibly switchboard rooms or the like;

(3) He relies upon the particular necessity which, he says, existed for access to be gained to an adjoining flowerbed which was only possible, he says, from this basement space. Regrettably there is no evidence before us that this was so.

31. As to his earlier two points, I am quite unable to infer the intention contended for from those matters.

32. That said, I have to acknowledge that plainly Chinsan must have had some purpose or intention in demarcating the basement space and in doing so before the first assignment was entered into and the Deed of Mutual Covenant executed. Indeed, the intention may possibly have been what Mr Yau contends for but there is simply no evidence or acceptable way in which that intention can be gathered. Nor, as I have said, has there been any exception or reservation made in the first assignment or the DMC. In those circumstances the appeal must be allowed.

33. Accordingly, the appeal is allowed. We will now hear counsel upon the order to be made.