THE INCORPORATED OWNERS OF ASIA HARVEST COMMERCIAL CENTRE v. GEARING DEVELOPMENT LTD

CAMP 26/2020

[2021] HKCA 1779

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 26 OF 2020

(ON AN INTENDED APPEAL FROM LDBM NO. 263 OF 2016)

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J U D G M E N T

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The Court:

Introduction

1.  By a summons dated 6 May 2020 (“the Summons”), the respondent applies for:

(1)  leave to appeal against the judgment of Deputy District Judge W. Y. Ho (“the Judge”) in the Lands Tribunal dated 29 August 2019, granting the applicant an injunction against the respondent, and ordering the respondent to pay damages; and

(2)  the injunction granted by the Judge be stayed pending disposal of the appeal.

2.  The Judge had earlier dismissed the respondent’s applications for leave to appeal and stay (see [2020] HKLdT 3).

3.  Having considered the papers, we are of the view that it is appropriate to determine the Summons without an oral hearing pursuant to Order 59 rule 2A and rule 14A of the Rules of the High Court, Cap 4A.

Background

4.  The applicant is the incorporated owners of the Asia Harvest Commercial Centre, No. 324 Shau Kei Wan Road, Hong Kong (“the Building”).  The respondent is the owner of a shop on the Ground Floor of the Building (“the Shop”).

5.  The applicant claimed that a wall adjacent to the Shop, described in the proceedings below as the end-wall (“the End-Wall”), was an external wall and therefore a common part of the Building.  The respondent disagreed and contended that the End-Wall constituted part of the Shop, in particular, it was part of the shop front. 

6.  The respondent’s tenants have affixed various installations on the End-Wall, including light boxes and wall-cladding.  Despite the applicant’s repeated requests, the respondent and its tenants had refused to clear the End-Wall of these installations so the applicant commenced proceedings in the Lands Tribunal for declaratory and injunctive relief as well as damages or mesne profits.

The Judgment

7.  In her judgment, the Judge noted the respondent’s arguments:

“7. … the End-Wall is not an external wall and classifies it as part of the ‘shop front’…

11. … the End-Wall is not an external wall because it is not a structural wall. The respondent’s expert (‘Mr Wu’) notes the End-Wall is included in the calculation of the gross floor area and there is a lack of cladding specification on the elevation plans. … both experts agree the End-Wall is only a fire barrier wall, which can be demolished and rebuilt at any time. Mr Wu therefore opines these factors, considered together, indicate the End-Wall belongs to the respondent.”

8.  Having found that the expert evidence was of limited value in determining the ownership of the End-Wall, the Judge held that the issue was one of law.  She accepted the applicant’s submission that the important documents to be considered were the title documents, namely, the Sale and Purchase Agreement of the Shop (“the S&P Agreement”), the Assignment, and the Deed of Mutual Covenant (“the DMC”).  After considering the title documents, the Judge found at [22] that the End-Wall is a common part of the Building as defined in the DMC for the following reasons:

“1) Firstly, there is no share allotted to the End-Wall. The Shop has only been allotted with 91 shares and there is no express mention of the End-Wall being included in the description of the Shop.

2) Secondly, ‘Common Areas’ are defined in the DMC to include external walls and ‘other areas and apparatus intended for common use.’ The experts agree the End-Wall is a fire barrier wall. It is evident from the Code of Practice, the End-Wall is for the service of the building as a whole and not merely for the benefit of the Shop. The End-Wall protects fire from spreading from the adjoining building to the Building. Hence by definition, the End-Wall must be for common use and therefore a common area.

3) Thirdly, I am of the view the End-Wall is an external wall and therefore falls within the DMC definition of ‘Common Areas’.  Although the phrase ‘external wall’ has not been defined in the DMC, by common sense it must be the wall that is on the exterior of the building[1]; one that encloses (whether wholly or partially) the interior of the building. The rationale for designating external walls as common areas is because the external wall functions for the benefit of the whole building and all the co-owners of the building.  Therefore, the responsibility of maintaining an external wall is shouldered by all co-owners.”

9.  The Judge noted that Schedule 1 of the Building Management Ordinance, Cap 344 (“BMO”) includes external walls as common parts. She further noted that the End-Wall had not been specified as being for the exclusive use of the respondent, referring to the definition of common parts in section 2.  The Judge then found that the End-Wall was also a common part as defined in the BMO.

10.  Holding that a wall could still function as an external wall without necessarily being a structural wall, the Judge rejected the respondent’s expert opinion that the fact that the End-Wall was not a structural wall indicated that it was not an external wall.  The Judge also rejected the respondent’s expert opinion that the gross floor area was an important factor in determining ownership because the gross floor area calculation is made for other purposes, for instance, the determination of the permitted plot ratio (Reg 21 of Building (Planning) Regulations, Cap 123F).

11.  Based on her finding that the End-Wall is a common part, the Judge went on to hold that the respondent had been in breach of the DMC and/or BMO as its tenants had affixed various installations on the End-Wall.  The Judge further found that there was no evidential basis for acquiescence or estoppel on the applicant’s part in respect of the respondent’s breaches.

12.  As to the applicant’s claim for damages and mesne profits, the Judge held that a nominal sum of $1,000 per month could be generated from the End-Wall and awarded nominal damages in the sum of $80,000 to the applicant.  She further granted an injunction restraining the respondent and its tenants from placing anything on or occupy or using the End-Wall without the prior written consent of the manager of the Building.  However, she declined to grant the declaratory relief as her judgment had already stated that the End-Wall was a common part.

The Applications for Leave to Appeal and Stay

13.  In the draft Notice of Appeal attached to the Summons, the respondent advances two grounds of appeal:

(1)  Ground 1 contends that, in construing the DMC, the Judge had failed to apply the legal principles set out in Jumbo King Ltd v Faithful Properties Ltd[2] that regard must be had to the factual background against which the DMC was concluded and the practical objects which it was intended to achieve, as understood by a reasonable person rather than a pedantic lawyer.

(2)  Ground 2 sets out matters in the factual background which the Judge had failed to properly consider but would have done so had she applied the legal principles properly.  Had she considered these matters properly, she would have found that the End-Wall was part of the Shop and was not a common part.

14.  Properly understood, the two grounds of appeal boil down to a single complaint that the Judge had failed to properly consider the matters relied on by the respondent, which can be summarised as follows:

(1)  The End-Wall is different from other external walls, in particular, (i) it was built on the lot boundary without any recess to accommodate wall cladding, whereas other external walls are receded; (ii) unlike other external walls, it had no cladding when the occupation permit was issued; (iii) different provisions for wall finishes were made in respect of it when the Shop was first sold; and (iv) it was not a structural wall but a fire barrier which can be demolished and rebuilt (Ground 2(1) – (4));

(2)  The End-Wall is separated from the external walls above it by a canopy (Ground 2(5));

(3)  The End-Wall is the shop front of the Shop, entailing considerations of the practicalities relating to maintaining consistency in appearance and to cleaning (Ground 2(6) – (8)); and

(4)  The plans in the title documents indicated that the End-Wall was assigned together with the Shop (Ground 2(9)).

15.  The respondent further submits that the intended appeal involves a legal question of general public importance concerning construction of documents relating to the ownership of a shop front.

16.  In respect of the stay application, the respondent submits that (1) it is willing to make payment of mesne profit as found by the Judge; (2) there is no evidence of urgency or need for the applicant to obtain possession of the End-Wall; (3) the injunction would cause disturbance to the tenant of the Shop and the tenancy itself; and (4) if the respondent wins the appeal, the costs of complying with the injunction would have been wasted.

Discussion

17.  As the Judge observed in her earlier decision refusing leave to appeal ([2020] HKLdT 3), the crux of the respondent’s complaint is that she had not considered the importance of the End-Wall being part of the shop front.  The physical features of the End-Wall (in terms of recess, cladding, location below the canopy and not being a structural wall), and the practicalities of maintaining consistency in appearance and of cleaning, were relied on to support the argument that it was not an external wall but part of the shop front and therefore part of the Shop.  The respondent is in substance repeating its arguments advanced but lost at trial. 

18.  In addressing the respondent’s “shop front argument” stance in her judgment at [7], the Judge found that the S&P Agreement and the Assignment did not assign a shop front to the respondent:

“18. There is no express clause in either the Assignment or the S&P Agreement which assigns a ‘shop front’ or a ‘shop façade’ to the respondent. Furthermore, there is no clause in either the Assignment or S&P Agreement which assigns or designates any right or interest in the End-Wall to the respondent howsoever.”

19.  She went on to find, in relation to the plans in the title documents:

“19. As for the Floor Plans and Block Plans coloured in Pink, I do not find those plans to be conclusive or even indicative of whether the End-Wall has been assigned to the respondent. The End-Wall is marked as a thick black line and are not marked Pink. The said plans are only 2 dimensional layout plans which do not show the shop front, the shop façade and/or the surface of the End-Wall. Hence the plans do not show whether the said End-Wall or the surface of it was intended to be marked pink.”

20.  Contrary to the respondent’s argument, the Judge did consider “the shop front argument.”  Her reasoning in finding that the End-Wall is a common part cannot be faulted.  There is no merit in the complaint that she did not properly consider the matters relied on by the respondent. The appeal has no reasonable prospect of success, which is required under section 11AA(6) of the Lands Tribunal Ordinance, Cap 17 for leave to be given. No important legal question is involved.  Leave is refused.

21.  We also reject the respondent’s contention set out at [15] above.  The legal principles of how to construe a commercial document relating to land are well settled.

22.  As the appeal has no reasonable prospect of success, the application for stay is also refused.

Disposition

23.  For the above reasons, we dismiss the Summons with costs to the applicant summarily assessed at HK$80,000.

24.  As the Summons is totally without merit, pursuant to Order 59 rule 2A(8), we further order that no party may request our determination to be reconsidered at an oral hearing inter partes.