THE INCORPORATED OWNERS OF HANG TSUI COURT v. HO FU AND OTHERS

CACV 143/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 143 OF 2010

(ON APPEAL FROM LDBM NOS. 253,256,257 & 259 OF 2009 (CONSOLIDATED))

____________

BETWEEN

________________________________

REASONS FOR JUDGMENT

________________________________

Hon. Cheung JA:

1. I agree with the Reasons for Judgment of Yuen JA.

Hon. Yuen JA:

2. In LDBM252-253, 255-257, 259 and 260 of 2009, the Applicant is the Incorporated Owners of Hang Tsui Court, which is a Home Ownership Scheme residential complex developed by the Hong Kong Housing Authority (“the Authority”).  It comprises 2 residential blocks and a car park block (collectively called “the Estate”). The 10 Respondents are the owners of various flats there. 

3. In 2009, the Applicant sought an injunction against each of the Respondents from bringing dogs into the Estate or keeping them there, in breach of an express House Rule [para. (15)(a)] contained in the Third Schedule to the Deed of Mutual Covenant (“DMC”).  Deputy Judge Kot granted the injunctions. 

4. Five of the Respondents (the 2^nd, 3^rd, 6^th, 7^th and 8^th Respondents) appealed.  For convenience, they will be referred to in these Reasons for Judgment as “the Respondents”.  At the conclusion of the hearing on 16 September 2011 we dismissed the appeal with costs.  Our reasons appear below.

The DMC

5. The material parts of the DMC which contains 3 schedules appear below.  Reference to the House Rules has been italicized for ease of reference. 

5.1 The First Purchaser shall have “the sole and exclusive right and privilege to hold use occupy and enjoy to the exclusion of the Authority All That the First Purchaser’s Flat ...” [cl. 1(b)].

5.2.1 This “sole and exclusive right and privilege to hold use occupy and enjoy any part of the Estate shall be held by the owner thereof subject to and with the benefit of the easements rights privileges and obligations set out in the First Schedule hereto” [cl. 2(a)].

5.2.2 However the First Schedule provides that each flat owner shall “subject ... to the House Rules” be entitled to the easements rights and privileges set out [First Schedule cl. A].

5.3.1 Moreover “the owner of each equal undivided share of and in the said land and the Estate shall at all times hereafter be bound by and shall observe and perform the covenants provisions and restrictions herein contained and in addition the owners shall at all times be bound by the covenants and restrictions contained in the Second Schedule hereto” [cl.2(b)].

5.3.2 The Second Schedule requires the owners “to observe perform and comply with all the covenants and provisions of the said lease this Deed and the House Rules” [Second Schedule cl.(16)].

5.4.1 The DMC gives the Manager the power and function to “make revoke and amend House Rules which must not be inconsistent with the provisions contained in this Deed regulating the use operation maintenance and management of the Estate ... The House Rules set out in the Third Schedule hereto shall come into force on the date of these presents and shall remain in force until revoked or amended as aforesaid.  A copy of all amendments or additions made from time to time to the House Rules shall be exhibited on the notice boards of the Estate and such House Rules and all amendments or additions thereto (hereinafter collectively known as ‘the House Rules’) shall be binding upon all the owners and all persons claiming through or under any owner” [cl.5(c)(2)].

5.4.2 “No dog may be brought or kept upon any part of the Estate or the Common Areas of any building therein” [Third Schedule, House Rules para. (15)(a)].  “Estate” has been defined in the DMC to mean the residential blocks, facilities and car park block.

Respondents’ Argument

6. The Respondents’ argument is that:

(a) the Third Schedule (which contains the House Rules) does not form part of the DMC;

(b) para. (15)(a) of the Third Schedule is inconsistent with the DMC;

(c) therefore para. (15)(a) of the Third Schedule is void and not binding on the Respondents.

6.1 Regarding the argument at (a), that the Third Schedule does not form part of the DMC, Mr Hon for the Respondents relies on the following:

(i) the Manager has been given power to make, revoke or amend the House Rules, and a manager cannot alter the terms of a DMC, therefore the House Rules are not part of the DMC and are subsidiary thereto;   

(ii) if the Schedules were part of the DMC, it would not have been necessary to provide in cl.2(b) that “in addition the owners shall be bound by the covenants and restrictions in the Second Schedule”, or in the First Schedule cl. A that “each flat owner shall subject to compliance with and observance of ... the provisions of this Deed and to the House Rules ... be entitled to ... easements [etc] ...”.

6.2 Regarding the argument at (b), that para. (15)(a) of the Third Schedule is inconsistent with the DMC, Mr Hon relies on certain passages in Deputy District Judge Charles TC Wong’s judgment in Tsang Chi Ming v Broadway Nassau Investments Ltd and Anr [2009] 1 HKLRD 96that the keeping of a pet dog in one’s premises is part of an owner’s right and privilege of exclusive occupation.  Therefore para. (15)(a) prohibiting dogs in the Estate is inconsistent with cl. 1(b) which gives each individual owner quiet enjoyment and exclusive occupation of his flat.                           

Discussion

7. The essential point in our case is that para. (15)(a) was part of the Third Schedule which was contained in the DMC itself.  There is but one document.  It is well-established law that:

“to reject one clause in a contract as inconsistent with another involves a rewriting of the contract which can only be justified in circumstances where the two clauses are in truth irreconcilable. ... where the document has been drafted as a coherent whole, repugnancy is extremely unlikely to occur. The contract has, after all, to be read as a whole; and the overwhelming probability is that, on examination, an apparent inconsistency will be resolved by the ordinary processes of construction”

(Yien Yieh Commercial Bank Ltd v Kwai Chung Cold Storage Co Ltd [1989] 2 HKLR 639, 645 P.C.)

8. One should therefore read the document as a whole to see if para. (15)(a) is reconcilable with cl.1(b).  If they are reconcilable, it matters not whether the House Rules are subsidiary, and it would be immaterial to consider metaphysical notions such as whether the Deed “gave life” to the Third Schedule.  The Respondents’ approach - to look at the “status” of the provisions first and only after that to examine if a “lesser” provision conforms with a “higher” provision - is, with respect, approaching the issue from the wrong end of the telescope.

9. In my view, para. (15)(a) and cl.1(b) are clearly reconcilable.  Whilst cl. 1(b) gives each owner the general right to exclusive occupation of his flat, his enjoyment is qualified by more specific provisions set out in the House Rules of which para. (15)(a) is one.  Given that the residents of the Estate live in flats in close proximity, and even the best-trained dogs occasionally bark, it is clear that the intention of the DMC was to sacrifice what may be regarded as the right of a resident to keep a dog to the need to preserve peace and quiet for other residents.  Once the two provisions are reconcilable, that is the end of the matter.  Para. (15)(a) is an express House Rule and the House Rules are binding on the Respondents.

10. I would only add two points in deference to counsel’s submissions.  Regarding the argument in relation to the Manager’s power to make, amend or revoke House Rules, this does not assist the Respondents.  It is clear that the owners have delegated this power to the Manager and he can make, amend or revoke House Rules, subject always to the provision that they are not inconsistent with the provisions contained in the DMC regulating the use operation maintenance and management of the Estate [cl.5(2)(c)].  As for the repetitions of the need to comply with the House Rules in cl. 2(b) and in the First Schedule cl. A, in fact they reinforce the clear intention of the document that all House Rules (of which para. (15)(a) is one) are to be binding on the owners.   

11. Secondly, as for the Tsang Chi Ming case, it is clear that the ratio of that judgment was that the DMC only authorized the manager to make House Rules regarding the use of the common parts and the access area (para. 54).  The manager however issued a House Rule purporting to cover the whole of the estate, including individual units (para. 60).  Accordingly the judge found the manager had acted ultra vires (para. 65).  No question of ultra vires has been raised in the present case.  

Order

12. For the reasons set out above, the appeal was dismissed with costs of the appeal to be paid by the Respondents (i.e. the 2^nd, 3^rd, 6^th, 7^th and 8^th Respondents) to the Incorporated Owners. 

13. There is one other matter on costs.  At the commencement of the appeal, we drew attention to the fact that large parts of the copies of the DMC in the Appeal Bundle had been blacked out in the photo-copying process, those parts being the most relevant to the issue on this appeal.  This had obviously gone undetected by the Respondents’ solicitors.  Counsel for the Respondents informed us at the conclusion of the hearing that that was because the Bundle had been prepared by the Respondents themselves and not by the solicitors, in order to save on costs.  Subsequently the Respondents’ solicitors explained in a letter dated 19 September 2011 that the Appeal Bundle had been lodged before they were appointed to act.  Even taking those matters into account however, it is obvious that the present solicitors had not perused the documents in the Appeal Bundle, as otherwise they would have noticed the blacking-out of the relevant passages.  Accordingly we would assume that the Respondents’ solicitors would not charge their own clients for perusal of the Appeal Bundle, and trust that it would not be necessary to make any order on this matter.

Hon. Kwan JA:

14. I agree with the Reasons for Judgment of Yuen JA.