THE INCORPORATED OWNERS OF PARC REGAL v. PIZZICATO LTD

HCA 1587/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1587 OF 2006

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

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

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

R U L I N G

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

Introduction

1.  This is a substantial action in which the incorporated owners of a luxury block of flats in Homantin are seeking to recover the cost of repairs to the external walls of the tower blocks which comprise the development.  The claim is in excess of HK$21 million.  The basis of the claim is that the Defendant, which is part of the Wheelock Group of companies and the developer of these flats which are known as Parc Regal, retains the obligation to maintain and to keep in good repair the common parts of these buildings which, and there is no dispute about this, include the external walls.

2.  The Defendant says that it has no such liability which now rests with the incorporated owners.

3.  The matter before me is an application by the Defendant to oblige the Plaintiff to withdraw interrogatories served on it on 22 April this year.  This basis of the application is that these interrogatories are not admissible in the sense that they do not come within the terms of Order 26 rule 1(1) RHC which provides that;

“A party to any cause or matter may in accordance with [Order 26]serve on any other party interrogatories relating to any matter in question between the applicant and that other party in the cause or matter which are necessary either –

(a)  for disposing fairly of the cause or matter; or

(b)  for saving costs.”

4.  These are objected to because they do not serve that purpose and that, even if they did, they should, as a matter of discretion, be refused because they are late, the trial of the action being listed for 6 days starting on the 3 June.

5.  There is also a summons by the Plaintiff for permission for it to serve a supplemental witness statement by Mr Lo Hoi-ming who is a resident at Parc Regal and an active member of the management committee.  This is also objected to because it is said that its contents are inadmissible.  This statement is also referable to the purpose of the interrogatories to which I will now turn.

The Interrogatories

6.  Mr Clark Wong, who appears for the Plaintiff, has explained that their purpose is to establish from the Defendant’s answers whether and to what extent the Defendant, its agents and/or other associated companies have made use of the external walls and other common parts of the development since the completion of the buildings and the start of the sale of the various units within the development to their purchasers.

7.  Put shortly, Mr Wong says that there already is clear evidence, which is not disputed, that substantial advertisements had been hung from the external walls to draw attention to the availability of units for sale within the development.  There is also a question designed to establish whether permission for such advertising had been given by the Plaintiff.  In a similar vein is a question [number 2] as to whether the Defendant by itself or through its agents or associated companies, two of which are named, have ever used, occupied or enjoyed to the exclusion of other owners or occupiers of the development the common areas and facilities or installed any equipment there and if so, whether any approval had been given by the Plaintiff.  Three specific instances of such use are cited, these being filming at the swimming pool complex, the installation of a satellite dish for television reception and the installation of air-conditioning in the lift lobby of Tower 3 on the 19/F or any other lift lobby in the development.  The question there goes on to demand information as to the source of electricity for this air-conditioning supply.  Lastly, and perhaps in a slightly different category, is a request to determine whether all or some of the penthouse units of the development were assigned with the flat roofs attached to them.  This question relates to 12 such units.

The argument

8.  Miss Sit, who appears for the Defendant, has taken the sharpest objection to these interrogatories, both as to their relevance and also as to their form.  If she fails on these objections, she submits that they should be withdrawn as a matter of discretion.

9.  Dealing with relevance first, her objection is that where the court will primarily be engaged in the task of deciding, largely on a proper construction of the DMC, what had been conveyed to the various owners of the flats and what the Defendant had reserved to itself.  Miss Sit refers to the general rule that subsequent behaviour or conduct is inadmissible to interpret a written agreement.  This rule is subject to exceptions to which I will need to refer presently.  Miss Sit’s point is that whatever the Defendant may or may not have done in relation to the common parts, such as hanging large advertising banners on the external walls or allowing promotional videos for another development which it was launching to be filmed at the swimming pool complex is neither here nor there in terms of proving that the Defendant by its conveyances had retained the common parts for itself and for which it therefore had the duty to repair.  This is the real argument of substance between Miss Sit and Mr Wong on the interrogatories.

10.  Mr Wong submits that he is able to come within the second of the exceptions to the rule that both counsel have referred to by showing that the conveyance is unclear and/or ambiguous in respect of what had been conveyed in which case subsequent conduct would become admissible, which is what these interrogatories are directed to.

11.  The general rule on admissibility of subsequent actions is stated in Chitty, Vol I para 12-126.  In James Miller & Partners v Whitworth Street Estate (Manchester) Ltd [1970] AC 572, 603 it was decided that;

“…it is not legitimate to use as an aid in the construction of the contract anything which the parties said or did after it was made.”

The exceptions which Chitty has identified are these, the second and the sixth being the only one’s that might be said to apply in this case;

“(i)   where the contract is oral or partly oral;

(ii) where a conveyance is unclear or ambiguous with respect to the land conveyed by it;

(iii)    to show that an agreement, or a term of an agreement, is a sham;

(iv)    to show whether there was a contract and what the terms of the contract were;

(v) to show that the terms of a contract have been varied or enlarged; and

(vi)    to found an estoppel.” [emphasis provided]

12.  In advancing the exception based on the conveyance being unclear or ambiguous, Mr Wong has referred to two English Court of Appeal decisions, the first of which, Ali v Lane [2006] EWCA Civ. 1532 is the only one that I need to refer to.  This was a boundary dispute, in the proper sense, where the court had to decide where the boundary between two properties lay against the background of a claim for adverse possession.  I have said enough to explain that the case before me and Ali v Lane are quite different in type and scope.  What Ali v Lane upheld was that evidence of subsequent conduct was admissible in cases of ambiguous or unclear conveyances.  The court referred to other authorities which bore on the general rule prohibiting the admissibility of subsequent conduct in order to determine the effect of a contract and also the reasoning behind the exceptions to the rule where a conveyance is unclear or ambiguous in respect of the conveyed land.  Carnwarth LJ at para. 26 of his judgment referred to the justification for this exception as explained by Megarry J (as he then was) in Neilson v Poole [1969] 20 P & CR 909, in which he was of this view:

“… in the construction of the parcels clause of a conveyance and the ascertainment of a boundary the court is under strong pressure to produce a decisive result.  The prime function of a conveyance is to convey.  As to any particular parcel of land, either the conveyance conveys it, or it does not; the boundary between what is conveyed and what is not conveyed must therefore be proclaimed.  The court cannot simply say that the boundaries are uncertain, and leave the plot conveyed fuzzy at the edges, as it were.  Yet modern conveyances are all too often indefinite or contradictory in their parcels.  In such circumstances, to reject any evidence afforded by what the common vendor has done in subsequent conveyances seems to me to require justification by some convincing ground of judicial policy; and I have heard none.” (p 915)

At para. 33 Carnwarth LJ also referred to another judgment of Megarry J, St Edmundsbury & Ipswich Diocesan Board of Finance & Another v Clark (No. 2) [1973] 1 WLR 1572, 1585-6, where he provided further explanation why, in the context of boundary disputes, a special rule was justified:

“One may accept to the full that it does not apply to commercial contracts or, for that matter, to any language of obligation, whatever the document.  If the question is what one party is obliged to do under some document, the effect of measuring the obligation by what in fact that person has done under the document is to convert into a binding obligation what may have been done as of grace or to promote good relations or to avoid argument ….

In the Watcham case itself, as in Neilson v Poole, the matter in dispute was a matter of boundaries; and the application of the doctrine in this field involves very different considerations.  Parcels clauses and plans in a conveyance not infrequently give rise to disputes on the application of what appears on the piece, of paper to what lies physically on the ground.  Even if there is no uncertainty as to the meaning of words used or the ambit of what is coloured on the plan, there may still be serious problems of application.  Furthermore, in these problems of application the passage of time often brings its own cure: the passing of 12 years may stifle an incipient boundary dispute, whereas it would do nothing to resolve the extent of a contractual obligation.  In such circumstances, it seems to me that the doctrine may still play a useful part.”

13.  Miss Sit accepts that this exception applies in such instances and also the reasons why the exception exists, but she submits that what may be a salutary exception in respect of a boundary dispute proper (if I can so term it) where the physical features on the ground may be at variance with the terms of the conveyancing documents and the court would be assisted by evidence of how the parties treated the various parcels of land after the conveyance, these notions have no place in this dispute.  She submits that the boundaries of what has been conveyed, the various units, is beyond doubt.  The common parts as defined in the conveyancing documents are also clear as are their boundaries.  What the court is charged with in this case is not about determining boundaries but whether obligations to repair and maintain common parts remained with the developer [the Defendant] or whether they were also conveyed, in this instance to the Plaintiff.

14.  In my judgment, Miss Sit’s analysis is the correct one.  There is at this stage good prima facie evidence that the Defendant hung advertising banners from the external walls and used the swimming pool complex to film its own promotional video for another of its developments.  These activities may amount to acts of trespass, for which damages may be ordered or an injunction granted, but they cannot assist the trial judge in deciding what is essentially a paper exercise of interpreting the various prime documents in the case and the Building Management Ordinance.

15.  These would be very effective interrogatories in a trespass action by the incorporated owners against the Defendant in the event that the Defendant were to succeed in this action by showing that it had conveyed not only the units but also the common parts but, this is not the issue in this case.

16.  This being my view of the way that the issues lie, the Plaintiff cannot rely on extrinsic evidence based on unclear or ambiguous conveyances which is not the case in this matter.

17.  But Mr Wong also relies on another of the exceptions to the rule against extrinsic evidence which is that such evidence can be used to found an estoppel.  It is therefore necessary to look at the terms of the estoppel which is pleaded in the Amended Defence and Counterclaim para. 30 [A/51-52].  Miss Sit submits that this estoppel has nothing to do with the use or otherwise of the “Common Areas and Facilities”.  It is based on an allegation by the Defendant that the relevant parties had acted on the common assumption that the Plaintiff and its building managers would maintain these areas in good repair and condition.  Given the importance of the way that the plea of estoppel is taken I ought to set it out in full:

“30.  Further, the Plaintiff is estopped from asserting that the Defendant is liable for repairing or maintaining the external walls of the Property because:

30.1  The Defendant as owner of the 2 Undivided Shares allocated to the Common Areas and Facilities on the one hand and the Manager, acting on behalf of all the Owners, and the Plaintiff since its incorporation on the other had all acted on the common assumption that the Manager and the Plaintiff are responsible for maintaining the Common Areas and Facilities in good repair and condition.

30.2  In particular:

(1)   the Manager and the Plaintiff have at all material times undertaken the responsibility for maintaining in good repair and condition all components of the Common Areas and Facilities as defined in the DMC and set out in paragraph 6 above including the external walls;

(2)   the Manager and the Plaintiff have at all material times paid for such maintenance out of the contribution of the Owners towards the management expenses pursuant to Clauses 16 and 17 of the DMC;

(3)   the Manager and the Plaintiff have never at any material time sought to collect or collected from the Defendant as owner of the 2 Undivided Shares allocated to the Common Areas and Facilities any contribution to such management expenses;

(4)   the Defendant as owner of the 2 Undivided Shares allocated to the Common Areas and Facilities has never at any material time paid any contribution to such management expenses or accepted or undertaken the responsibility for maintaining in good repair and condition any part of the Common Areas and Facilities.

30.3  By the conduct referred to in paragraph 30.2 above the Defendant and the Plaintiff and the Manager made manifest to one another their common assumption referred to in paragraph 30.1 above.

30.4  Had the Plaintiff or the Manager sought to make the Defendant as owner of the 2 Undivided Shares allocated to the Common Areas and Facilities liable for maintaining in good repair and condition any part of the Common Areas and Facilities, the Defendant would have taken steps to assign to the Manager the 2 Undivided Shares allocated to the Common Areas and Facilities referred to in paragraph 3 above.

30.5  In the premises it would be inequitable for the Plaintiff to be allowed to make its claim in these proceedings contrary to that common assumption.”

18.  It is very plain therefore that extrinsic evidence would not be admissible to establish an estoppel of this sort and in any event, I would have thought that the evidence sought to be led would be on behalf of the party seeking to establish the estoppel, in this case the Defendant and not the Plaintiff.

19.  I conclude therefore that extrinsic evidence would not be admissible on the pleaded issues in this case and as the interrogatories in number 1 and number 2 go to support such a case they ought to be withdrawn, and that is my order.

20.  As to number 3, I take this to fall into a slightly different category because it seeks to obtain disclosure of precisely what was conveyed.  Miss Sit says that these assignments [being public documents] can be obtained by the Plaintiff which is what they have been doing.  Insofar as the assignments will provide the answer as to whether the flat roof went with the conveyance, that would be admissible to establish what is part of a unit and what is a common area or facility.  I am of the view that this is admissible.  Whilst the information should be provided in the form and to the extent that I will indicate in a moment, what I wish to make clear is that the precise use to which this information is to be put by the Plaintiff must remain for debate and decision at the trial itself.  I am allowing the interrogatory at this stage only because it seems to me essential to determine before trial what was conveyed and what was reserved as a common area in respect of these 12 units.

21.  I direct that by 4:30 pm on the 22 May the Plaintiff should supply the Defendant with the list of the outstanding assignments which it has not as yet obtained, and that the Defendant do provide the outstanding answers no later than 4:30 pm on the 2 June 2009.

Discretion

22.  Having adjudged interrogatory number 3 as relevant, it follows from the direction that I have just given as to the way that it should be answered, that as a matter of discretion, it should be answered.  The information requested is plain on the face of the interrogatory, I have already held it to be relevant and although somewhat late in coming, I do not believe that the information will be difficult or in any way onerous to obtain so far as the Defendant is concerned.

Mr Lo Hoi-ming’s supplemental witness statement

23.  This goes hand in hand with the interrogatories which I have directed should be withdrawn.  It seems to me that this evidence could only go to support a claim for damages for trespass in the event that the common areas had been conveyed by the Defendant and also in a personal action by the Plaintiff against the Mr Tse referred to in Mr Lo’s witness statement who once resided in B13 at Tower 3.  The statement is not relevant nor admissible in this action as it is constituted and I propose to refuse its adduction into evidence on that ground.

Costs

24.  On the Plaintiff’s interrogatory summons, I direct that these should be costs in the cause.  The Defendant has substantially succeeded in the sense that number 1 and 2 will have to be withdrawn, but the Plaintiff has had to come and get its order on number 3 in which it has been successful.  So for that reason, costs in the cause, which will be an order nisi.

25.  As to the summons relating to Mr Lo’s witness statement, this has failed.  It has occupied very little time in the arguing, and I would have thought that no order for costs is the right order which will at least spare the parties the expense and arguments on taxation which would have followed had I made an order for costs between the parties.  This too will be an order nisi.