KOO SUN YIU v. VICTORISON DELIVERY LTD. and Others

1995, No.PI1157

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

PERSONAL INJURIES LIST

--------------------

--------------------

-----------------------

J U D G M E N T

-----------------------

Background

1. On 3rd December 1992, the Plaintiff sustained serious injuries in the common parts of a building. The 3rd Defendant were the owners of the building at the time of the accident. The 2nd Defendant is a corporation ("the corporation") and was registered under the Building Management Ordinance (Cap.344) ("the Ordinance") in respect of the building. It was incorporated on 17th May 1993, some five months after the accident.

2. The Plaintiff proceeds, inter alia, against the 2nd Defendant to enforce the liabilities of the owners of the common parts of the building, pursuant to section 16 of the Ordinance.

3. The 2nd Defendant obtained an order for a trial on a preliminary issue as to whether section 16 of the Ordinance bears the construction that the liabilities of the owners in relation to the common parts of the building which accrue prior to the incorporation of the owners pursuant to the said Ordinance can be enforceable against the incorporated owners.

4. The 2nd Defendant contends section 16 does not bears such a construction, whereas the Plaintiff contends it does.

Agreed facts

5. By way of agreed facts, it is stated that all the owners on 3rd December 1992, date of accident, were owners on 17th May 1993, date of incorporation, but there were two new owners after the date of accident, namely, Mr Li Chi Fung who acquired an interest in the building by assignment on 19th July 1993 and Joyful Sun Co. Ltd. who acquired an interest in the building by assignment on 3rd March 1993. However Joyful Sun already owned other units in the building at the time of the accident.

Section 16

6. Section 16 is as follows :

"16. When the owners of a building have been incorporated under section 8, the rights, powers, privileges and duties of the owners in relation to the common parts of the building shall be exercised and performed by, and the liabilities of the owners in relation to the common parts of the building shall, subject to the provisions of this Ordinance, be enforceable against, the corporation to the exclusion of the owners, and accordingly -

(a) any notice, order or other document which relates to any of the common parts of the building may be served upon the corporation at its registered office; and

(b) any proceedings in the tribunal in respect of any of the common parts of the building may be brought and pursued by or against the corporation."

Construction

7. The first task in the construction is to look at the section to see if it contains provisions dealing specifically with liabilities prior to the incorporation. It does not. Nor does it specifically restricts the extent of the liabilities. All it provides is that when the owners have been incorporated, the liabilities of the owners in relation to the common parts of the building shall be enforceable against the corporation. Owner is defined in section 2 as meaning a person who for the time being appears from the Land Registry record to be the owner of an undivided share in the building.

8. Although the section may appear to be in wide terms, my view is that the corporation does not assume liabilities incurred prior to its incorporation. The corporation which is a distinct legal entity, this being clear from s.8(2)(a), and created by statute should only assume the prior liabilities if the Ordinance expressly so provides.

9. The owners in a multi-storey building may change from time to time. The owners may be different at the time of incorporation from those at the time of the accident, either wholly or partially. In construing section 16, the outcome should not depend on individual situation of a case such as the present, where all the owners at time of accident were also owners at the time of incorporation because there may be cases where the owners may be entirely different. Instead one should ask what is the intent of the legislation in respect of the liabilities of the owners that were incurred prior to the incorporation.

10. If a tort occurred in the common parts of the building prior to the owners' incorporation, the third party's cause of action would be against the owners of the common part at the time of the tort if no corporation was formed. At the time of the incorporation, it is the current owners that agree to the incorporation. They may be totally different from those who were owners at the time of the accident. If the corporation assumes liabilities of the owners that may incur from the date of incorporation then this fits naturally with the consequence of the incorporation. The contrary interpretation will strain the language of the section.

11. Mr Bharwaney, Counsel for the Plaintiff, relied on Grenville House Ltd. & Ors v. The Incorporated Owners of Grenville House [1978] HKLR 235. McMullin J. found that under section 16 of the Multi-storey Buildings (Owners Incorporation) Ordinance, (this is the former title of the Ordinance) the rights and duties of the corporation in matters of suit touching the common parts of the property are limited to circumstances which concern all the owners as a result of their joint interest in the due maintenance management and control of those parts. He held that :

" For those limited purposes the body of the owners may be said to consist of every individual who ever has been a constituent of the corporation. It matters not that at the time of issuing the writ the body of the constituents is not the same as it was at the time of accrual of the action any more than it would matter that that body is not the same at the time of judgment even though it had been the same at the time of issue of the writ. In pursuing those purposes it is serving the interests of all including those who are no longer constituents but have been damnified and those who are now constituents and have never been damnified. For a major purpose of the incorporation of the owners is to facilitate convenience in suit."

12. The argument is that if after incorporation, the change in individual ownership does not affect the "persistent persona" of the corporation, then it is also not unfair for the corporation to assume the liabilities of the owners that had been incurred prior to the incorporation.

13. It is clear from the facts of Grenville House that the corporation there came into existence before the tort was committed. Although McMullin, J. said that it matters not that at the time of issuing the writ the body of the constituents is not the same as it was at the time of accrual of action, the learned judge was not dealing with a situation such as the present where the corporation only came into existence after the tort was committed.

14. Furthermore there is one important difference. Whereas the owners can arrange how the corporation should conduct the management of the building from the time of its incorporation, such as by effecting third party liabilities insurance of the common parts of the building, the same cannot be said of pre-incorporation matters. Using the same example, I just cannot see how the corporation could possibly obtain an insurance coverage on a liability which had already been incurred if none was obtained before.

15. Grenville House is certainly a binding authority as far as post-incorporation liabilities are concerned, but in my view has no application to liabilities that had occurred prior to incorporation.

Conclusion

16. The answer to the issue is "no".

17. As this is the first time that construction of the section is required on pre-incorporation liabilities, I will make an order nisi that each party bears its own costs in this application.

(P. Cheung)

Judge of the High Court