WUI FUNG LEE INVESTMENT CO LTD v. THE INCORPORATED OWNERS OF HONG KONG MANSION, CAUSEWAY BAY

CACV 571/2019

[2020] HKCA 1048

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 571 OF 2019

(ON APPEAL FROM HCA NO 2197 OF 2013)

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J U D G M E N T

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Hon G Lam J (giving the judgment of the Court):

Introduction

1.  The question in this appeal is whether a small area (with a floor area of no more than 80 ft²) on the mezzanine floor of Hong Kong Mansion (“Building”), at 1 Yee Wo Street, Causeway Bay, belongs to the plaintiff or is a common part of the Building.  As in the judgment below, we shall refer to that area as the “Disputed Area”.  The issue turns on the true construction of the conveyancing documents in light of the relevant background.

2.  The appellant here, who was the defendant below, is the incorporated owners of the Building formed in August 1982.[1]  The respondent, who was the plaintiff below, is a private company who in 1974 purchased from the developer certain parts of the Building, apparently including the Disputed Area.

The facts

3.  Between 1962 and 1966, the developer, Hing Wan Investment Co Ltd (“Hing Wan”), constructed the Building on the land in question it held under Conditions of Sale from the Government.[2]  The Building consists of a lower commercial portion for shops and offices (which includes the basement, ground floor, mezzanine floor, 1^st floor and 2^nd floor), and an upper portion with residential units from the 3^rd floor to the 23^rd floor.  The ground floor is divided into a number of shop spaces designated from A to V and X.  The mezzanine floor is also divided by partition walls into a number of units designated from A to L, N to V and X, located above the corresponding ground floor shops.[3] 

4.  The Disputed Area was a rectangular room marked “Bloom Store (non‑domestic)” on the mezzanine floor plan dated 20 January 1966 amongst the building plans approved by the Building Authority.  It is located along the southern side of the mezzanine floor, between Units F and G, and is (mostly) immediately above the entrance hallway in the ground floor.

5.  In around 1962, Hing Wan began selling interests in the Building, even though its construction was yet to be completed.  A sales brochure was produced at around that time.  In particular, on 23 August 1962, Hing Wan entered into an agreement for sale and purchase with one Tse Ying for the sale of 1/353^rd undivided share of the Building together with the exclusive right to occupy Flat I on the 13^th floor.[4]

6.  The Building was completed in 1966 and an occupation permit was issued in March 1966.  On 15 April 1966, pursuant to the agreement of 23 August 1962, and divesting itself of any part of the Building for the first time, Hing Wan entered into an assignment (“First Assignment”) of 1/353^rd share of the Building to one Tse Po Har as an assignee (“First Owner”), with Tse Ying joining as confirmor, and granted her the full right and privilege to hold, use, occupy and enjoy Flat I on the 13^th floor.  By the same assignment, in a “Regrant Clause” (as referred to and set out in §26 below), the First Owner in turn granted Hing Wan the full right and privilege to hold, use, occupy and enjoy certain other specified areas of the Building.  Whether this had the effect of reserving to Hing Wan the right to exclusive possession of the Disputed Area is in issue in these proceedings.

7.  On 23 April 1966, Hing Wan and the First Owner executed a Deed of Mutual Covenant (“DMC”) in respect of the Building.  The plaintiff and the defendant also disagree as to whether the Disputed Area is a common part of the Building under the provisions of the DMC.

8.  At some point, possibly at around the same time as the registration of the First Assignment or the DMC, a “control card” was lodged with or prepared by the Land Registry, as a record of the assignment of shares to specific parts of the Building.  There the ground floor shop units that include a mezzanine floor area attached to them are specified.[5]  One undivided share was allocated to each of the 23 ground floor shops with the exception of 5 shops that were allocated 2 shares each,[6] but the number of shares allocated does not correspond to whether or not there is a mezzanine floor area attached.  The 1^st and 2^nd floors were each given 10 shares as a whole; the basement 6 shares; the residential flats 1 share each (there being 296 flats); and the roof 3 shares.  The shares thus allocated totalled 353.  No share was allocated to the mezzanine floor, the transformer room, the flat roofs, or the external walls.

9.  After the DMC was executed, Hing Wan continued to dispose of other units in the Building.  In particular, on 25 April 1966, it assigned 17 undivided shares in the Building together with the right to possession of Shop M on the ground floor, Shops N and O on the ground floor (including the corresponding units on the mezzanine floor), the entire 1^st floor and Flats I, J, K and L on the 3^rd floor (including flat roofs), to Ruby Enterprises Ltd (the “25 April 1966 Assignment”).

10.  In about October 1970, Hing Wan rented out Shop G on the ground floor and the mezzanine floor above Shop G (including the Disputed Area) to a tenant.  By the end of the tenancy in 1974, there was already no partition wall between the Disputed Area and that part of the mezzanine floor directly above Shop G.

11.  On 5 March 1974, Hing Wan assigned to the plaintiff herein 11 undivided shares of the Building together with the right to exclusive occupation of the basement, the driveway serving the basement, and Shops G, H, I and J on the ground floor including the mezzanine floor above each of those shops “more particularly shown and coloured Pink” in the mezzanine floor plan attached to the assignment (the “1974 Assignment”).  The Disputed Area was among the parts coloured pink in that floor plan, which showed the Disputed Area as part of Unit G without a partition wall.

12.  In 1983 to 1984, the plaintiff conducted alteration works to its premises on the ground floor and mezzanine floor, as shown on the alteration and addition plan approved by the Building Authority.  In that plan, similarly, the Disputed Area was shown as being included within the unit marked “G” on the mezzanine floor without any partition wall.  At some point after 1983, the plaintiff installed a perforated metal roller gate at the northern boundary of the Disputed Area with the corridor.

13.  Hing Wan was dissolved on 30 September 1986.

14.  From November 1986 onwards, the plaintiff had rented out Shops G, H, I and J on the ground floor and the mezzanine floor above, including the Disputed Area, to third‑party tenants.

15.  It appears to be in April 2012 that the defendant began to assert that the Disputed Area was part of the common areas of the Building.  The plaintiff refused to accept that claim.  The dispute escalated to the point that in July 2013, the defendant, unilaterally and without the plaintiff’s (or its tenant’s) knowledge, removed the metal roller gate at the Disputed Area and installed a locked wooden door in its place, and claimed to have repossessed the Disputed Area.

The proceedings below

16.  On 13 November 2013, the plaintiff brought the action below against the defendant claiming (1) a declaration that the plaintiff had since the 1974 Assignment been the legal and beneficial owner of the Disputed Area, or alternatively that the plaintiff had acquired possessory title to the Disputed Area by adverse possession; (2) an order requiring the defendant to remove the wooden door and deliver up vacant possession of the Disputed Area; and (3) damages for trespass, nuisance or breach of the DMC.

17.  The defendant denied the plaintiff’s claims and counterclaimed for (1) a declaration that the Disputed Area was and is part of the common parts of the Building; (2) an order that the plaintiff deliver up vacant possession; and (3) damages for breach of the DMC and the Building Management Ordinance.

18.  In his judgment dated 12 November 2019, the trial judge, Wilson Chan J (“Judge”), decided that based on the First Assignment, the DMC, and the 25 April 1966 Assignment, Hing Wan had reserved to itself the right to exclusive possession of the Disputed Area.[7]  He also found that by the 1974 Assignment, Hing Wan intended to and did assign the right to exclusive possession of the Disputed Area to the plaintiff.[8]  He found it unnecessary to address the plaintiff’s alternative case of adverse possession.[9]  By way of relief, he granted the declaration sought by the plaintiff and an order for removal of the wooden door and delivery of vacant possession, as well as mesne profits from 24 September 2013 at the rates agreed between the parties[10] and damages for trespass, nuisance and breach of the DMC represented by the cost of the metal roller gate in the sum of $9,000.[11]

The appeal

19.  On this appeal, the defendant attacks the Judge’s construction of the First Assignment[12] and the DMC, contending that he erred in holding that Hing Wan had reserved unto itself the exclusive right to possession of the Disputed Area.  It is contended that the Disputed Area does not have any undivided share attached to it and forms part of the common areas of the Building and is, as such, incapable of being transferred exclusively to any purchaser.  In other words, there is no dispute that by the 1974 Assignment, Hing Wan did purport to confer the right to exclusive possession of the Disputed Area on the plaintiff.  The contention is that Hing Wan could not rightfully and validly do so.

20.  The defendant also contends that the Judge erred in failing to rule on and reject the plaintiff’s alternative case of adverse possession.  It submits that the plaintiff had occupied the Disputed Area as a co‑owner of the Building and that such occupation was therefore “as of right”, not “as of wrong”,[13] and, as such, not capable of founding a claim for adverse possession.  It is unnecessary for us to deal with the alternative case, as the plaintiff has not raised it by a respondent’s notice.

Principles of construction

21.  There is no dispute between the parties on the applicable principles of construction.  The construction of a document involves the ascertainment of the meaning that the document would convey to a reasonable person having the background knowledge available to the parties at the time of the document.  The court reads the document as a whole, giving the words used their natural and ordinary meaning in the context of the document, the parties’ relationship and all the relevant circumstances known to them: see Jumbo King Ltd v Faithful Properties Ltd & others (1999) 2 HKCFAR 279, 296; Bank of Credit and Commerce International SA v Ali & others [2002] 1 AC 251, §8.

Building plans

22.  Counsel for the defendant, Mr K M Chong and Mr Stony Chan, pray in aid the approved building plans of January 1966 for the ground floor and mezzanine floor as part of the factual matrix.  They submit that the design intention evident from those plans was that the Disputed Area was to be an area separate from Unit F to its west and Unit G to its east, as there were partition walls between them.  They point to the notation “Office For Shop” or “For Shop” marked on the shop spaces on the building plans and the different notation of “Bloom Store (non‑domestic)” on the Disputed Area, and submit that the Disputed Area was not intended to be used as part of Units F to J on the mezzanine floor.

23.  There is no dispute that the Disputed Area was, on the building plans and, therefore, as built, a separate room from the neighbouring Units F and G.  Indeed, it was on the plaintiff’s case a “self‑contained portion” which therefore fell within the Regrant Clause.  But it does not follow from this or from the functionality of the room that the First Assignment or the DMC conveyed the meaning and intention that the Disputed Area was to be for the occupation and enjoyment of all co‑owners or, indeed, that it must remain permanently a separate area or room.  Architectural design intention does not necessarily equate to conveyancing intention.  The Disputed Area was a rectangular space with window frontage which could serve a wide range of use.  The partition walls were non‑structural brick walls, and no statutory approval was required for their removal.[14]  We take the building plans and the physical configuration of the Building into account as part of the background for construing the First Assignment and the DMC but, as will be seen below, we do not agree with the defendant’s conclusion.

Sales brochure

24.  Reliance is also placed by the defendant on the sales brochure of 1962.  The relevant page contained a small mezzanine floor plan showing the various units above the ground floor shops.  The area between Unit F and Unit G was chequered, as were the areas immediately outside the lift shafts.  The defendant submits that this demonstrates that the Disputed Area was not intended to be sold.  We do not agree.  As the Judge pointed out, the mezzanine floor plan in the sales brochure contained obvious errors.[15]  It did not even depict the Disputed Area as a separate room.  Even if it represented Hing Wan’s subjective intention in 1962 as to what it could sell, it was not a reliable basis for construing the First Assignment or the DMC which came into existence in 1966.  Further, even if there was an intention not to market the Disputed Area for sale separately at that point, it does not follow that it would become a common part, as opposed to a part to be retained by Hing Wan.

The First Assignment

25.  Conveyances of units in a multi‑storey building in Hong Kong are often referred to in common parlance as assignments of the relevant flats, shops or units in the building.  Almost invariably, however, they are actually in law assignments of notional undivided shares in the land and building, the shares being “undivided” in the sense that they are shares not of some parts only of the building but shares in the legal estate of the property as a whole, together with the right to exclusive possession and enjoyment of specified parts of the building.[16]

26.  So it was in the case of the First Assignment, by which Hing Wan assigned 1/353^rd undivided share of the Building to the First Owner.  That assignment was entered into 8 days before the DMC and, therefore, unlike subsequent assignments, it was not made subject to and with the benefit of the DMC.  Without more, as the Judge observed, the First Owner would have a right of possession to every part of the Building in common with Hing Wan, there being “unity of possession” among co‑owners as tenants in common.  That is why by the First Assignment, Hing Wan granted the First Owner the full right and privilege to hold, use, occupy and enjoy Flat I on the 13^th floor, and, in turn, the First Owner granted, by a clause that has been referred to as the “Regrant Clause”:[17]

“ to the Vendor [i.e. Hing Wan] the Confirmor and others the co‑owners other than the Purchaser [i.e. the First Owner] from time to time of the said premises (if any) full right and privilege to hold use occupy and enjoy ALL THOSE remaining self‑contained portions flats basements mezzanine floors and shops including the open yards (if any) thereof the exterior walls of the said buildings the flat roofs and other roofs thereof and the driveway and the loading and unloading spaces in the basement thereof and the transformer room of the said buildings and other portions (not otherwise intended to be used for the common enjoyment of the co‑owners and co‑occupiers for the time being of the said messuages or buildings) comprised in the said messuages or buildings save and except the said Flat ‘I’ on the Thirteenth Floor thereinbefore and hereinbefore granted by the Vendor and the Confirmor to the Purchaser and to receive the rents and profits thereof to the exclusion of the Purchaser to the intent that they should have in all respects the rights of an absolute owner thereof …”

27.  The Judge, agreeing with the plaintiff, held that under the Regrant Clause, the First Owner granted to Hing Wan, among other things, the right to exclusive possession of the entirety of the mezzanine floor and all the remaining self‑contained portions in the Building, including the Disputed Area.  He considered that the words in parentheses towards the end of the Regrant Clause, viz “(not otherwise intended to be used for the common enjoyment of the co‑owners and co‑occupiers for the time being of the said messuages or buildings)”, qualify only the phrase “other portions” immediately before them, and not all of the parts identified in that clause.[18]

28.  The defendant disputes this construction but, in our view, the Judge’s conclusion is correct.  First, the qualifying words in parentheses do not appear at the end of the list, but are followed by the phrase “comprised in the said messuages or buildings”.  Mr Chong submits that that phrase, like the words in parentheses, also qualifies the entire list.  We do not read the clause in this way.  The specific parts mentioned in the list are parts “of the said building” or parts “thereof”.  The phrase “comprised in the said messuages or buildings” is far more apt to be read with “other portions”.  It seems to us that the last item listed in the Regrant Clause is not simply “other portions” as Mr Chong submits, but

“ other portions (not otherwise intended to be used for the common enjoyment of the co‑owners and co‑occupiers for the time being of the said messuages or buildings) comprised in the said messuages or buildings”.

29.  On this basis, as a matter of syntax, it is difficult to see how the words in parentheses, appearing in the middle of the definition of this last item, can be read as qualifying the earlier items in the list.  Also, linguistically, while the qualifying words in parentheses read well with the words “other portions”, they appear awkward when sought to be read with the earlier items.

30.  Further, the words in question are not apt to qualify the earlier items in the Regrant Clause having regard to their content.  As the Judge pointed out, in particular, they cannot sensibly qualify “flats”, “driveway” and “transformer room”.  We share the Judge’s view that it would be non‑sensical to suggest any residential flats could somehow be “otherwise intended to be used for the common enjoyment of the co‑owners and co‑occupiers”. There being only one driveway in the Building, leading from the ground floor to the basement, and only one transformer room in the basement, it would also make no sense for the Regrant Clause to include them as a specific item in the list but then, in the same breath, by the general qualifying words, remove them as being “otherwise intended to be used for the common enjoyment of the co-owners …”.[19]

31.  Read in context, the purpose of the Regrant Clause is not in doubt.  As a developer commencing to divest itself of an interest in the Building, Hing Wan could be expected to wish to specify the parts that were intended to be retained in its possession to the exclusion of the First Owner.  This was done in the actual document by enumeration of the specific parts granted to and effectively reserved by Hing Wan, with a residual category at the end consisting of all other parts comprised in the Building that have not been specifically named and that are not intended for the common enjoyment of the co-owners.  In this way, what was granted neither to the First Owner nor to Hing Wan exclusively would be parts of which both would have rights to possession or, in other words, common areas.

32.  We agree with the Judge’s view that the defendant’s construction would defeat the purpose of the Regrant Clause seen in its proper context.  It would lead to much uncertainty and circularity in that even for the parts specifically identified in that clause, it would be necessary first to ascertain whether or not they were intended for common enjoyment before one could determine whether or not they fell within the scope of the regrant to Hing Wan.  If that were the intention, the clause need only have stated that all parts of the Building, not otherwise intended for the common enjoyment of the co-owners, were granted to Hing Wan (except those granted to the First Owner); the list of enumerated parts would be mere surplusage.[20]  That the draftsman went to the trouble of setting out a comprehensive list strongly militates against the defendant’s construction.

33.  There is nothing surprising in that list itself.  The allocation of the right to possession of the basement, mezzanine floor and driveway could be of no conceivable interest to the First Owner who acquired a flat on the 13^th floor for residential purposes.[21]  As for the transformer room, while its function serves the entire Building, it is not surprising that possession was reserved by Hing Wan, as subsequently expressly stipulated in the DMC.[22] Indeed, as the Judge said, it would be far‑fetched to suggest that the parties to the First Assignment intended that the First Owner would share with Hing Wan the right to possession of such non‑domestic parts as the mezzanine floor including the Disputed Area.[23]  In contrast, it may be noted that the ground floor is not specifically listed in the clause, no doubt because there are parts such as hallways and entrance lobbies there which a flat owner in the upper floors will need to use. 

34.  Counsel for the defendant submit that the Judge’s construction would lead to an absurdity.  They submit that the mezzanine floor comprises, among other things, “Store” and “Female Lav.”, which also fit the description “remaining self‑contained portions” found in the Regrant Clause. Unless the qualifying words apply to them as well, these areas would be capable of being sold by the developer for exclusive occupation and enjoyment by an individual purchaser.  This, it is submitted, would be absurd.

35.  We do not agree with this submission.  As explained above, how the mezzanine floor was to be used or disposed of was not a matter that concerned the First Owner.  There is nothing absurd for the parties to the First Assignment to agree that the parts listed in the Regrant Clause, including the mezzanine floor, would be reserved for the possession of Hing Wan.  It would be for Hing Wan to decide how it intended to divide up and allocate the space on that floor.  There is no evidence that the “Store” on the mezzanine floor had throughout served as an electricity room for the Building or for that floor.  The building plan itself provides no basis to conclude that it would be absurd if the “Store” and “Female Lav.” could be used for other purposes.

36.  In conclusion, we agree with the Judge that under the First Assignment, the entirety of the mezzanine floor was granted to Hing Wan to the exclusion of the First Owner.

DMC

37.  The DMC, executed by Hing Wan and the First Owner 8 days after the First Assignment, does not in any way define the common parts of the Building. Recitals 3 to 5 provide:

“ 3. For the purposes of the sale of shops basements apartments and other portions in the said building, the said premises and building have been notionally divided into 353 equal undivided parts or shares and one or more of such shares is intended to be assigned to the Purchaser or Purchasers thereof together with the rights to the exclusive use occupation and enjoyment of one or more of the set shops basements or apartments or any other portions as shown on the assignment plans to be next to the assignments thereof.

4. By an Assignment bearing even date herewith[24] and made between the Vendor of the first part and Tse Ying as Confirmor of the second part and the [First] Owner of the third part the Vendor assigned and the said Tse Ying assigned and confirmed unto the [First] Owner ALL THAT One equal undivided 353^rd part or share of and in the said premises and building together with the full right and privilege to hold use occupy and enjoy to the exclusion of the Vendor and the said Tse Ying ALL THAT Flat ‘I’ on the Thirteenth Floor of the said building shown on the Plan annexed to the said Assignment.

5. In order to provide for the proper management operation servicing maintenance repair and insurance of the said premises and new building the parties hereto have agreed to enter into this Deed for the purpose of defining and regulating the rights and interests and obligations of themselves and all subsequent owners in respect thereof.”

38.  Clauses 1 and 2 of the DMC provide:

“ 1. The Vendor [i.e. Hing Wan] shall for all times hereafter for which the said premises are held under the said Conditions have the full right and privilege to hold use occupy and enjoy to the exclusion of the [First] Owner all those shops basements apartments other portions in the said building (save and except only the said Flat ‘I’ on the Thirteenth Floor thereof assigned to the [First] Owner) together with the appurtenances thereto and the entire rents and profits thereof and the exterior walls flat roofs and other roofs and the drive way (if any) and the loading and unloading spaces (if any) and car parking spaces (if any) and also the transformer room of the said premises.

2. The [First] Owner shall for all times hereafter for which the said premises are held under the said Conditions have the full right and privilege to hold use occupy and enjoy to the exclusion of the Vendor or that said Flat ‘I’ on the Thirteenth Floor in the said Building and the appurtenances thereto and the entire rents and profits thereof.”

39.  It can be seen that, again, by these two clauses the DMC specifies what is placed into the exclusive possession of Hing Wan and the First Owner respectively without positively specifying what the common areas are, which must therefore be taken to be, by elimination, the parts that do not fall within either clause.  Clause 2 presents no difficulty.  The crucial provision is clause 1.

40.  Clause 1 does not follow the same wording as the Regrant Clause in the First Assignment.  It was not well drafted: looked at on its own it is not clear what “other portions in the said building” encompass.  The Judge nevertheless considered that it should be construed in such a way that it does not achieve a result inconsistent with the Regrant Clause.[25] The defendant has no dispute with this approach.  Indeed, counsel submit that the DMC should be construed in light of the First Assignment.  We have no doubt that this is correct.  Plainly the First Assignment may be used as an aid to the construction of the DMC.[26]  The two instruments are clearly related.  They were executed between the same two parties.  The First Assignment was referred to in a recital of the DMC.  The relevant clauses in both instruments were intended to deal with the same subject matter.  It could not have been intended that the clauses should have meanings inconsistent with each other.

41.  Properly construed, it seems to us that the “other portions in the said building” in clause 1 of the DMC includes the mezzanine floor that was granted to Hing Wan under the First Assignment.

The 25 April 1966 Assignment

42.  The defendant contends that the Judge erred by taking account of the 25 April 1966 Assignment in construing the First Assignment and the DMC.  In our view the Judge was simply examining whether under the 25 April 1966 Assignment, Hing Wan also reserved the Disputed Area to itself, and concluded that it did.[27] He did not use this subsequent instrument for the purpose of interpreting the First Assignment and the DMC.  This complaint therefore fails.

Clauses 3, 5, 13 and 14(b) of the DMC

43.  The defendant further submits that the combined effect of clauses 3, 5, 13 and 14(b) of the DMC is that, unless an undivided share has been allocated to a specific part of the Building, that part is incapable of forming the subject matter of isolated ownership and cannot be sold separately. 

44.  There is no dispute over the general principle: a right to exclusive possession of a specific part of a building, arising out of covenants between co-owners, cannot be transferred on its own without an assignment of undivided shares in the building: Jumbo King, pp 290G & 298E; Lai Wing-ho v Chan Siu-fong [1993] 1 HKLR 319.  This is consistent with the clauses referred to by the defendant. For example, clause 13 provides:

“ The right to the exclusive use occupation and enjoyment of any shop basement or apartment or other portion shall not be sold, assigned, mortgaged, charged, leased or otherwise dealt with separately from the undivided share or shares with which the same is held.”

Like any other part of the Building, the Disputed Area cannot be sold or transferred in itself except as an incident of an assignment of one or more undivided shares.  So far, this is uncontroversial. 

45.  What is contentious is the next step of the defendant’s argument, namely, that because no share had been allocated to the Disputed Area as evidenced by the control card, it was incapable of being transferred, and Hing Wan could not validly dispose of it by the 1974 Assignment as it did.

46.  The defendant’s counsel argue that the control card is strong evidence of the allocation by Hing Wan, as the developer, of shares in the Building.  They submit that when it made the 1974 Assignment to the plaintiff, Hing Wan was not entitled to change the allocation.  It is unnecessary to discuss the status and effect of the control card or whether Hing Wan was entitled to alter the allocation of shares stated therein, because in our view Hing Wan did not purport to make any such alteration.  What it did in 1974 was to assign to the plaintiff the right to possession of the Disputed Area (to which no share had been specifically allocated) as well the right to possession of parts to which 11 undivided shares in total had been allocated,[28] together with those shares.  There was no attempt to rewrite the control card at all.  The defendant is unable to explain why this is impermissible.  Nor did the enactment of the Multi-Storey Buildings (Owners Incorporation) Ordinance (Cap 344)[29] in 1970 affect the position.  “Common parts” as defined in that Ordinance excluded “such parts as have been specified or designated in an instrument registered in the Land Office as being for the exclusive use, occupation or enjoyment of an owner”.  The Disputed Area was thus excluded by virtue of the First Assignment, as explained above.

47.  The point seems to us to be covered squarely by the decision in Jumbo King.  There, in the main DMC, 482/720^th undivided shares were allotted to the commercial portion of the building, including shop spaces, offices and a flat roof.  Those shares were subdivided into 482,000/720,000^th shares which were allotted by a sub‑DMC to the shop spaces.  No share was allotted to the flat roof or the utility rooms on the commercial floors.  It was argued that the developer could not validly assign the right to occupy the utility rooms and the flat roof after the sub‑DMC was executed (except by way of a personal licence), because they were not “attached” to any shares; a right to occupy which had not been attached to any specific shares could not be assigned.  Rejecting this argument, Lord Hoffmann NPJ said (at p 298E-I):[30]

“ I do not agree. A covenant which will run with the land must be made between owners of land, including owners of undivided shares in the same land: see section 41(7) of the Conveyancing and Property Ordinance. Cap. 219. It must also relate to the land, but since the owner of any undivided share has a share in the whole building, a covenant concerning the occupation of any part will relate to his land. Thus both requirements were satisfied in this case. Mr Hotung [the developer] was entitled, as against anyone bound by the first DMC, to the exclusive occupation of the parts of the building in question. He had the same rights, in respect of the parts within the Commercial Portion, against anyone bound by the sub‑DMC. He could therefore assign those rights to Target and covenant with Target, as owner of 204,587 shares, that it should have exclusive occupation of those parts. In my opinion, if an owner in common of some undivided share in a building has the right, under a covenant with him as such owner, to occupy a specific part of the building, there is no conceptual objection to his assigning the right to occupy together with any undivided share. Thus Mr Hotung, who was entitled to occupy the roof spaces, utility rooms and so forth under covenants made with him as owner of 719 out of 720 shares (in the case of the first DMC) and as owner of 474,601 out of the 482,000 shares (in the case of the sub‑DMC) to which occupation of the Commercial Portion was attributable, was entitled to assign those rights of occupation to Target together with 204,587 of those shares, notwithstanding that they had not previously been ‘attached’ to any particular number of his undivided shares.” (emphasis added)[31]

48.  Mr Chong submits that the relevant provisions of the DMC in the present case distinguish it from Jumbo King.  Clause 13, the main provision relied upon, has been set out in §44 above.  In addition, clauses 3, 5 and 14(b) provide:

“3. One or more undivided 353^rd part or share in the said premises and building and the full and exclusive right and privilege to hold use occupy and enjoy such shop basements apartments or any other portion shall be held by the person or persons from time to time entitled thereto subject to and with the benefit of the easements, rights, privileges and obligations pertaining thereto.”

“5. Every owner for the time being of any undivided share in the said premises and building shall have the full right and liberty without reference to the owner or owners of any other undivided share or shares in the said premises and building or any person or persons otherwise interested therein in any way whatsoever and without the necessity of making such other owner or such other person or persons a party to the transaction to sell, assign, mortgage, lease, licence or otherwise dispose of or deal with his share or interest in the said premises and building together with the said full right and privilege to hold use occupy and enjoy the shop basement or apartment or any other portion held therewith subject to and with the benefit of these presents.”

“14(b) The words ‘Owner’ or ‘Owners’ shall include the person or persons for the time being in whom the legal estate in any undivided share in the premises and building is vested for the residue of the term created by the Crown Lease or pursuant to any Conditions of Sale and …”

49.  It is not clear whether there were any similar provisions in the DMC concerned in Jumbo King,[32] but in any event we do not accept that these provisions have the effect contended for.  Where undivided shares have been allocated to particular portions of the Building, clause 5 provides that the owner of particular shares can dispose of them together with the right to occupy portions of the Building held with those shares. Conversely, clause 13 precludes an owner from disposing of those portions separately from those shares.  But in our opinion these clauses do not deal with the disposal of portions of the Building to which no undivided share has been specifically allocated in the first place.  They do not negate the position set out in the above passage in Jumbo King.

50.  It follows that Hing Wan, who as explained above was entitled to the exclusive possession of the Disputed Area under the First Assignment and the DMC, was at liberty to assign that right together with the 11 undivided shares in the Building to the plaintiff as it did by the 1974 Assignment.  Such an assignment did not involve any alteration in the allocation of undivided shares.  Nor did it involve a pure transfer of a right to occupy without an assignment of undivided shares in the legal estate.

51.  As the Judge mentioned, a similar exercise had been done in 1966 — when the right to occupy the flat roofs of the Building, which were not allocated any undivided share according to the control card albeit expressly reserved to Hing Wan under the First Assignment and the DMC, was assigned to Ruby Enterprises Ltd together with the right to occupy other parts along with 17 undivided shares that had been allocated to those other parts, under the 25 April 1966 Assignment (see §9 above).  No one has ever taken issue with the efficacy of the assignment of the flat roofs in this way.[33]  The defendant has not been able to point to any difference in the applicable analysis.

Conclusion

52.  For the above reasons, the appeal is dismissed with costs to the plaintiff, to be taxed if not agreed, with a certificate for two counsel.