TAI FAT DEVELOPMENT (HOLDING) CO LTD v. THE INCORPORATED OWNERS OF GOLD KING INDUSTRIAL BUILDING

CACV 22/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 22 OF 2014

(ON APPEAL FROM HCA NO 104 OF 2006)

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D E C I S I O N

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Hon Barma JA (giving the Decision of the Court):

1.  This was an application by the appellants (the plaintiff by original action and 1^st to 4^th defendants by counterclaim) by Notice of Motion dated 24 September 2014 seeking leave to appeal to the Court of Final Appeal against this court’s judgment dated 27 August 2014, reasons for which were handed down on 23 December 2014. On 20 January 2015, the appellants took out a summons seeking leave to amend the Notice of Motion so as to reformulate certain of the questions proposed to be posed for the consideration of the Court of Final Appeal. Directions were given for the application for leave, and the summons, to be dealt with on paper. This is our decision on that application, and the delay in dealing with it is regretted.

2.  The application is made on the following bases:

(1) That an appeal to the Court of Final Appeal lies as of right pursuant to section 22(1)(a) of the Hong Kong Court of Final Appeal Ordinance (Cap 484) as the judgment sought to be appealed from was a final judgment of this court, and the appeal involves, directly or indirectly, some claim or question to or respecting property amounting to or of the value of $1,000,000 or more.

(2) Alternatively, that leave should be granted pursuant to section 22(1)(b) as the questions involved in the appeal (four were identified in the Amended Notice of Motion) were questions which, by reason of their great general or public importance ought to be submitted to the Court of Final Appeal for decision.

(3) In the further alternative, that leave should be granted pursuant to section 22(1)(b) as the questions involved in the appeal, notwithstanding that they might not be of great general or public importance, otherwise ought to be submitted to the Court of Final Appeal for decision.

3.  Although section 22(1)(a) has now been repealed by section 8 of the Administration of Justice (Miscellaneous Provisions) Ordinance (Ord. No. 20 of 2014), which came into effect on 24 December 2014, it is common ground that this application falls to be considered under the terms of the Hong Kong Court of Final Appeal Ordinance prior to the repeal of section 22(1)(a).

4.  The original action was a claim by the appellants for possession of 13 car parking spaces in an industrial building known as Gold King Industrial Building, of which the appellants were the developers and first owners.  There was also a claim for arrears of rent and mesne profits.  These claims were resisted by the respondent (defendant by original action and plaintiff by counterclaim), the Incorporated Owners of the building, which also counterclaimed for certain declarations, including, pertinently, a declaration that the 13 car parking spaces formed part of the common areas of the building (and therefore were not owned by the appellants). The other declaration sought related to the (on the respondent’s case) invalidity of the lease under which the respondent had leased the 13 car parking spaces from the 1^st appellant.  There was also a counterclaim seeking recovery of the rent paid under the lease.

5.  The trial judge (Suffiad J) concluded that, on the proper construction of the relevant documents, in particular the Deed of Mutual Covenant relating to the building, and the First Assignment relating to a unit in the building, the 13 car parking spaces formed part of the common area of the building.  Accordingly, he dismissed the appellant’s claims in the original action, and granted the declaration to that effect sought by the respondent.  However, he did not grant the other declaration or the monetary relief sought by the respondent in the counterclaim.

6.  In support of the appellant’s application for leave, Mr K M Chong submits that the matter in contention between the parties was the ownership of the 13 car parking spaces, as it was this issue on which all the claims and counterclaims turned.  He pointed in particular to the declaration granted by the judge and upheld on appeal as to the status of the 13 car parking spaces, and submitted that, having regard to the value of the car parking spaces, the disposal of the appeal would immediately confer or impose on the relevant parties a financial benefit or detriment of over $1,000,000.  So far as the value of the 13 car parking spaces was concerned, Mr Chong relied on valuation evidence that was available at the trial, which was to the effect that the spaces, together with one other space, a store room and the external walls of the building, were worth some $7,000,000, and additional valuation evidence submitted for the purposes of this application valuing the 13 car parking spaces at over $17,000,000.

7.  In the event that we were not satisfied that an appeal to the Court of Final Appeal lay as of right, Mr Chong submitted that there were four questions of great general or public importance that arose in this matter, which he formulated as follows:

(1) Whether a form of identification or heading in a deed could prevail over the express wording of the clauses or create ambiguity if no ambiguity would have been present in construing the words of the clauses in the absence of that form of identification or heading.

(2) Whether the special conditions of the government lease for industrial buildings requiring spaces to be provided for ‘parking, loading and unloading’ prohibit the developers and/or the first owners of the lands from selling, disposing of or otherwise dealing with these areas (or part thereof) designated in the building plans for purpose of ‘parking, loading and unloading’ except for use by all co-owners; or restrict their rights and entitlements to sell, dispose of or otherwise deal with the same unless other spaces have been reserved and provided for ‘parking, loading and unloading’ in terms of the percentage stipulated under the Government Grant.

(3) Whether the evidence of subsequent conducts of the parties (including any persons in privity) is admissible as an aid to construction of Deeds of Mutual Covenants in Hong Kong.

(4) Whether the trial judge and the Court of Appeal had adopted a wrong approach by departing from the holistic approach on construction of instrument as expounded by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society (No 1) [1998] 1 WLR 896 and placing too much emphasis on the definition of ‘Common Areas’ under the Definition Clause and the label of ‘Loading and Unloading Areas’ used in the First Schedule to the Deed of Mutual Covenant in respect of the 13 Parking Spaces, without giving proper regard to other relevant of the 13 Parking Spaces, without giving proper regard to other relevant background, in particular, other terms, conditions and covenants in the Deed of Mutual Covenant, the purpose and intent of the Deed of Mutual Covenant, the legal expressions used in the Deed of Mutual Covenant and the subsequent conducts of the parties.

8.  Finally, Mr Chong submitted that leave should also be granted on the “or otherwise” limb of section 22(1)(b).

9.  Dealing first with the question of leave to amend the Notice of Motion, this was not seriously resisted.  Given that the original Notice of Motion had to be filed before the reasons for our judgment were available, and that no prejudice could be caused to the respondent by allowing the proposed amendments to be made, we shall grant the necessary leave to amend, and deal with the application on the basis of the amended Notice of Motion.

10.  So far as the substance of the application was concerned, Mr Andrew Mak, for the respondent, submitted that no appeal lay as of right.  His argument was that having regard to the claims as formulated by the appellants, which were for possession and arrears of rent/mesne profits, the as of right route was not engaged, as the only liquidated claim was for arrears of rent and was less than $1,000,000, while the claims for possession and mesne profits were unliquidated claims and so outwith section 22(1)(a).  He went on to submit that no questions of great general or public importance arose, and that there was no basis for granting leave to appeal on the “otherwise” limb.

11.  With respect to Mr Mak, his submission overlooks the fact that his client had made a claim for declaratory relief as to the ownership or status of the 13 car parking spaces, on which his client has been successful.  As is apparent from paragraph 2 of our judgment, the key issue before us was whether the appellants were the owners of the 13 car parking spaces, or whether those spaces formed part of the common areas of the building.  The question of ownership of those spaces was therefore directly at issue, and the court’s decision against the appellants would have the effect of imposing on them a detriment of a value equivalent to the value of the car parking spaces.  So far as that value was concerned, the only evidence bearing on it was the valuations relied upon by the appellants, which were not challenged by the respondent.  On the basis of either of the valuations put forward (whether at the time of trial or at the time of this application), the car parking spaces were clearly worth comfortably in excess of $1,000,000.

12.  In the circumstances, we are satisfied that this is a case in which an appeal to the Court of Final appeal lies as of right.  That being the case, we do not think it necessary or appropriate to express any views as to whether or not any points of great general or public importance arise, or whether leave ought otherwise to be granted as a matter of discretion.

13.  We therefore grant the appellants leave to appeal to the Court of Final Appeal conditionally, subject to the furnishing of such security as they may be directed by the Court of Final Appeal to provide.  An application should be made to the Court of Final Appeal for the fixing of security within 28 days.  So far as the costs of this application are concerned, we make an order nisi that they should be in the cause of the appeal to the Court of Final Appeal.