KUNG MING TAK TONG CO LTD v. PARK SOLID ENTERPRISES LTD AND ANOTHER

CACV 227/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 227 OF 2005

(ON APPEAL FROM HCA No. 1926 OF 2001 )

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JUDGMENT

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Hon.  Le Pichon JA:

1.  I agree with the judgment of Yuen JA and the order she proposes.  

Hon. Yuen JA:

Introduction

2.  The Plaintiff has since 2000 owned shop premises (2B-B) on the 1^st floor as well as the whole of the 2^nd and 3^rd floors of the commercial portion of a building in Tsuen Wan called Fou Wah Centre (“the Building”) which is now nearly 30 years old.  An elevated pedestrian walkway surrounds the entire Building at 1^st floor level.  When the Building was first constructed in 1978, there was one entrance at 1^st floor level providing access to the Building from the elevated walkway.  This entrance is at the southern side of the building (in the direction of Castle Peak Road).

3.  In 1990 (about 12 years after the Building was completed), another  opening at the northern side of the building (in the direction of the MTR station) was carved out of a shop on the 1^st floor so that pedestrians on the elevated walkway could also enter the building from there.  That part of the 1^st floor has been called (in the plan annexed to the Statement of Claim) “the Existing Entrance Lobby”.  It is common ground that it is not a “common part” and that the 2^nd Defendant is the registered owner.  At the same time, there was constructed a staircase (“the New Staircase”) connecting the Existing Entrance Lobby to the two upper floors of the commercial portion.  

4.  Shop 2B-B adjoins the Existing Entrance Lobby and since 1998, the tenant has been selling food from across a counter running the length of the lobby (said to be 13 feet 3 inches).

5.  In 2000, the 1^st Defendant assigned to the Plaintiff the premises I have described in para. 2.  (As a matter of completeness, I should mention that the Plaintiff actually acquired Shop 2B, which had been partitioned into Shop 2B-A and 2B-B).

6.  In 2001, the Existing Entrance Lobby (amongst other parts of the building) was assigned by the 1^st Defendant to the 2^nd Defendant who intended to reduce the width of the lobby in order to create a new shop space between it and Shop 2B-B.  The creation of the new shop space would have prevented the tenant of Shop 2B-B from selling goods  across the counter, although customers could still be served from a small entrance to his shop which adjoins the elevated walkway. 

Proceedings

7.  The 2^nd Defendant’s intention to restrict the width of the Existing Entrance Lobby caused the Plaintiff to institute proceedings in 2001.  The Plaintiff claimed a pedestrian right of way over those parts of the 1^st floor coloured yellow on the plan annexed to the Statement of Claim as Annexure A for “ingress and egress to Shop 2B-B and to the Second and Third Floors of Fou Wah Centre including an unobstructed means of access to Shop 2B-B measuring 13 feet 3 inches adjoining the Existing Entrance Lobby”.  The colouring on Annexure A was amended by the Plaintiff at the hearing before us on 23 November 2006 to comprise the Existing Entrance Lobby and part of the New Staircase. 

Trial

8.  After a 7-day trial, Recorder J. Leong SC dismissed the Plaintiff’s claims.  The learned recorder had a site visit and found as a fact that “there are various other access points into the relevant parts of the building including entry at Ground Floor level and from other points on the First Floor podium level” although the Existing Entrance Lobby was the most prominent for the MTR and the New Staircase was better kept than the other staircase which provided access from street level through to the 3^rd floor.  There is also a lift which provides access to all floors in the commercial portion but apparently it is poorly kept. 

9.  The learned recorder set aside an injunction granted by Deputy Judge Longley in July 2001 in favour of the Plaintiff and granted an injunction against the Plaintiff from trespassing upon the Existing Entrance Lobby.  The learned recorder also ordered the Plaintiff to pay the costs of the action and of a related District Court action.

Appeal

10.  The parties first appeared before us on 17 February 2006.  After examining the conveyancing documents in more detail, the court considered it desirable to recall the parties for further submissions on two issues to which I will refer later. 

11.  The hearing was restored on 23 November 2006 when the Plaintiff initially asked for leave to amend the Notice of Appeal to take into account the issues raised by the court, while the 2nd Defendant produced some plans not previously available.  As events transpired, the Plaintiff eventually decided not to advance any arguments on the matters raised by the court, but it did ask for leave to amend the Notice of Appeal to argue a new point which I will discuss later. 

Relevant background facts

12.  First it may be helpful to set out some of the relevant facts.  The development of the Building was completed in 1978 by Fou Wah Weaving Mills Ltd ("the Developer").  The Building consists of a commercial portion comprising the Ground, 1^st, 2^nd and 3^rd floors and a residential tower block above it.  This appeal does not concern the residential tower block. 

13.  Even before development, mass transit construction was underway nearby (see the plan attached to the Proposed Lease  of Tsuen Wan Town Lot No.233 dated 14 June 1974).  It was a special condition of the New Grant that the Developer was to construct an elevated pedestrian walkway linking the Building to the MTR and surrounding buildings (see the Modification letter dated 3 March 1977). 

14.  However, it would appear from the plans produced to the court at the hearing in November 2006 that it was not until 1990 that the Existing Entrance Lobby was carved out of a shop on the 1^st floor to enable more direct access from the pedestrian walkway in the direction of the MTR (the other access being in the direction of Castle Peak Road) and a new staircase (the New Staircase) built to connect the new entrance lobby with the upper floors of the commercial portion.

DMC : allocation of shares to floors in the commercial portion

15.  In 1978 soon after development, the Developer (if I may use shorthand) "sold" the units in the residential portion whilst retaining the whole of the commercial portion.  A Deed of Mutual Covenant was entered into between the Developer and purchasers of the residential units.  The entire Building was notionally divided into 9,700 shares, of which  5,040 shares were allocated to the commercial portion.  Of those 5,040 shares, the DMC provided that the following shares be allocated to each floor:

- 2,280 shares to the Ground floor;

- 1,320 shares to the 1^st floor;

- 720 shares to the 2^nd floor and

- 720 shares to the 3^rd floor.

(See the First Schedule to the DMC).    

16.  As I mentioned earlier, in 1990 the Developer carved the Existing Entrance Lobby out of a shop on the 1^st floor and constructed the New Staircase connecting the Existing Entrance Lobby to the 2^nd and 3^rd floors.     

17.  The Developer (if I may use shorthand again) "owned" the entire commercial portion until 1997. 

Sale of commercial portion by Developer to 1^st Defendant

18.  In 1997, the Developer agreed to sell the whole of the commercial portion (the Ground, 1^st, 2^nd and 3^rd floors) to the 1^st Defendant.

Sub-sale by 1^st Defendant of parts of 1^st floor

19.  Before completion however, the 1^st Defendant agreed to sub-sell parts of the 1^st floor to sub-purchasers, whilst keeping the whole of the Ground, 2^nd and 3^rd floors.  It was thus in 1997 that the commercial portion first fell into multiple ownership and it became necessary to set out the rights and obligations of co-owners by way of a sub-DMC for the commercial portion. 

What was assigned to 1^st Defendant

20.  As I have mentioned, 5,040 shares had been allocated to the whole of the commercial portion.  As a result of the assignments by the Developer to the 1^st Defendant as well as to the various sub-purchasers,  the 1^st Defendant acquired 4,153 shares and had the exclusive possession of the whole of the Ground, 2^nd and 3^rd floors and parts of the 1^st floor (see the Third Schedule to the Assignment from the developer to the 1^st Defendant dated 27 June 1997).

Shares allocated to certain areas on the 1^st floor

21.  When one subtracts from the 4,153 shares acquired by the 1^st Defendant the shares allocated to the Ground, 2^nd and 3^rd floors (2,280 + 720 + 720 respectively), there were 433 shares left for those parts of the 1^st floor of which exclusive possession was given to the 1^st Defendant.  These parts were described in the Assignment from the Developer to the 1^st Defendant as "portions of the 1^st floor of the Building including the Existing Entrance Lobby, Lavatories, Staircases, Passageways and Shops 1A, 2B, 4B and Storerooms 1 and 2" (see the Third Schedule to the Assignment).

22.  When one further subtracts from those 433 shares the shares allocated for Shops 1A (123 shares), 2B (65 shares), 4B (217 shares), Storeroom 1 (1 share) and Storeroom 2 (1 share)(see the Second Schedule to the Sub-DMC), 26 shares are left as shares owned by the 1^st Defendant for the "Existing Entrance Lobby, Lavatories, Staircases and Passageways" referred to in the Assignment.  The location of these areas can be identified on the plan of the 1^st floor attached to the Assignment.

Sub-DMC

23.  However in the Sub-DMC executed on the same day as the Assignment, some changes were made to the 1^st Defendant’s right to exclusive possession of the "Existing Entrance Lobby, Lavatories, Staircases and Passageways" referred to in the Assignment.

Relinquishment of right of exclusive possession of lavatories and southern staircase and passageways

24.  In the Sub-DMC, the 1^st Defendant expressly relinquished its right to exclusive possession of the lavatories and the staircase and passageways at the southern corner of the 1^st floor.  In clause B-5 of the Sub-DMC, these areas were identified (coloured yellow in the attached plan) as "First Floor Common Areas and Facilities".  They were expressly stated to be "now for common use of the Owners of the Shops on the 1^st Floor". 

25.  As a result of this express relinquishment of the right of exclusive possession of those areas (to which no shares were allocated), the 1^st Defendant would then have held the 26 shares with exclusive possession of:

          (a)  the Existing Entrance Lobby,

(b)  the New Staircase, and

(c)  a narrow fire escape staircase located behind a double set of doors ("the Fire Escape Staircase").

(These areas can be located by comparing the 1^st floor plan attached to the Assignment with the 1^st floor plan attached to the Sub-DMC).

Loss of the 1^st Defendant’s right of exclusive possession of New Staircase

- not argued

26.  One of the matters raised by the court after the first hearing was whether the 1^st Defendant had lost the right of exclusive possession of the New Staircase (ignoring the Fire Escape Staircase as this was not in issue in the case).  This issue arose from the omission of any reference to the New Staircase in the clauses in the Sub-DMC setting out what the 1^st Defendant exclusively used and enjoyed, and the fact that the 1^st Defendant’s 26 shares were recorded in the Sub-DMC as relating to the Existing Entrance Lobby only.

27.  After the parties were asked to assist the court on this matter, and before the second hearing, the Plaintiff sent written submissions arguing that the 1^st Defendant had no right of exclusive possession of the New Staircase and asked for leave to amend the Notice of Appeal.  However the Plaintiff subsequently decided not to proceed with the application for leave to make this amendment.

Restriction in Sub-DMC on Use of Existing Entrance Lobby

- not argued

28.  The second matter raised by the court was whether under the Sub-DMC, the use of the Existing Entrance Lobby is restricted as an entrance lobby only, in light of the factual matrix when the Sub-DMC was executed, including the contemporaneous construction of the New Staircase facing it and the fact that the number of shares allocated to the Existing Entrance Lobby was disproportionately smaller than for shops on the 1^st floor.  However the Plaintiff also did not pursue an appeal along these lines.

Plaintiff’s case

29.  The Plaintiff’s case was based on  an implied grant of an easement of right of way under the rule in Wheeldon v Burrows (1879) 13 Ch. D 31, alternatively an express grant of a privilege existing at the time of the assignments to it. 

30.  The Statement of Claim sought the following declarations:

"(1) A declaration that there is a pedestrian right of way to the extent coloured yellow in Annexure A [amended at the November 2006 hearing before us]  for ingress and egress to Shop 2B-B and to the Second and Third Floors of Fou Wah Centre including an unobstructed means of access to Shop 2B-B measuring 13 feet 3 inches adjoining the Existing Entrance Lobby.

(2) An injunction to restrain the 1^st Defendant ... from derogating from its grant under the Assignments dated 24 January 2000 and 24 February 2000.      

(3) An injunction to restrain the 1^st and 2^nd Defendants ... from interfering, obstructing or interrupting with the pedestrian right of way to the extent coloured yellow in Annexure A for ingress and egress to Shop 2B-B and to the Second and Third Floors of Fou Wah Centre including an unobstructed means of access to Shop 2B-B measuring 13 feet 3 inches adjoining the Existing Entrance Lobby".

31.  Then, at the November 2006 hearing before us, the Plaintiff sought to argue that under clause 3(a) of the DMC (not the Sub-DMC), each owner had the right to pass over “entrances” and “staircases” and so there was “a right of passage over the Existing Entrance Lobby in favour of other owners of the Building for the proper use and enjoyment of their parts of the building, including the Plaintiff as owner of Shop 2B on the 1^st Floor and the whole of the 2^nd and 3^rd Floors for access to Shop 2B and access to the 2^nd and 3^rd Floors via the ... Staircase”. 

32.  The Plaintiff asked for leave to amend the claim to add the following relief:

“(1B)  Further or in the further alternative, a declaration that there is a right of passage over the Existing Entrance Lobby in favour of the Plaintiff to the extent coloured yellow in Annex E for the proper use and enjoyment of the Plaintiff’s respective units in Fou Wah Centre comprising Shop 2B on the 1^st Floor and the Whole of the 2^nd and the 3^rd Floors”. 

The 2nd Defendant objected to the application to amend.

No Wheeldon v Burrows implied grant of easement

33.  I shall deal first with the argument that there was an implied grant of an easement of right of way under the rule in Wheeldon v Burrows. 

34.  I should first point out that an implied grant of easement under the rule in  Wheeldon v Burrows is a peculiar class of interest in land.  It is different from an easement of necessity (as recognised in Wheeler v Saunders [1996] Ch 17, 25) because it goes beyond implying an easement where otherwise it would be impossible to make use of one’s tenement.  It has its own particular requirements which are still frequently disputed (eg whether there are two separate conditions, or one interacting condition).   But most importantly for present purposes, the interests impliedly granted under the unique rule in Wheeldon v Burrows are easements. 

35.  However the concept of easements does not apply to multi-storeyed buildings where owners have equal undivided shares in the land.  That was held by this court (Cons, Fuad and Kempster JJA) in Chiu Shu Choi v Merrilong Dyeing Works Ltd [1990] 1 HKLR 385, 389, a decision which is binding on us.  That an owner cannot have an easement over his own land has been clear doctrine for over two centuries of English law, primarily because of the requirement for separately-owned dominant and servient tenements.  In Merrilong, the court considered an argument based on Wheeldon v Burrows and held that co-owners of multi-storeyed buildings in Hong Kong - who own the land as tenants-in-common holding the land in equal undivided shares - can only govern rights and obligations over the use of areas in their exclusive possession through covenants, not easements.  

36.  On the facts of that case, the court in Merrilong held that the right of passage claimed (the use of the only lift in the building to access 9^th floor factory premises) was “implied by necessary implication” into the deed of mutual covenants – not by way of the proprietary concept of an implied grant of easements, but by way of the contractual concept of an implied term.

37.  The facts in the present case do not justify implying such a covenant.  As the learned recorder found after a site inspection, there are other means of access to the Plaintiff’s premises, albeit less prominent and not as well-decorated.  The Existing Entrance Lobby and the New Staircase were only added after 1990.  Further as I have pointed out, although goods may no longer be handed over the counter of Shop 2B-B if a shop is created between that shop and the narrowed lobby, customers could still be served from the entrance to the shop which adjoins the elevated walkway.  There is no question of a derogation from grant because the Plaintiff’s premises are not rendered unfit or materially less fit for the particular purpose for which the grant was made. 

38.  The Plaintiff has argued that Merrilong has been disapproved in Jumbo King v Faithful Properties Ltd [1999] 3 HKLRD 757.  I do not see anything in the Court of Final Appeal’s judgments that indicates disapproval.  In fact, Lord Hoffman reiterated the law in the following way (p.774 D-F):

“Clause 3 says that each owner, ie Mr Hotung and Mr Cheng, shall hold ‘his’ part of the building subject to ‘the following rights privileges and obligations’.  Since, technically speaking, each of them owned the whole building in undivided shares, the reference to ‘his’ part can only mean the part of which he was allotted exclusive occupation.  So each held such part subject to allowing the other certain rights over it.  One could call these rights quasi-easements because one cannot have a real easement over one’s own property.  But for practical purposes they were easements”.

39.  Although Lord Hoffman said that “for practical purposes they were easements” that is not tantamount to incorporating the law of easements (including unique concepts like Wheeldon v Burrows) into the law of covenants.   

40.  Coming back to the present case, as I understand the argument of the Plaintiff’s leading counsel, he argued that as the right to exclusive possession was part of an owner’s proprietary rights, an owner can grant an easement over the right to exclusive possession only, and that would get over the requirement for separately-owned dominant and servient tenements.  With respect, I do not agree.  It is well-established law that all co-owners have unity of possession over the whole property.  The right to exclusive possession of a particular area derives only from the mutual covenants.  Since a co-owner cannot have an easement over his own land for want of identifiable dominant and servient tenements, there is even less reason for the notion of an easement over what is essentially nothing more than a right to sue other co-owners under those covenants, a right which is even less identifiable as a "servient tenement".

No express grant of a privilege

41.  The Plaintiff also argued that the occupants of Shop 2B-B and the 2^nd and 3^rd floors had at the time of the assignments to it a licence from the 1^st Defendant to use the New Staircase and the Existing Entrance Lobby, which licence became a "privilege" appurtenant to the shares referable to those units and which privilege was incorporated into the express grant to the Plaintiff, either by way of the general words in the assignments and/or by way of s.16(1) Conveyancing and Property Ordinance.

42.  The general words in the assignments relied on are:

“1. ... the Vendor as beneficial owner ASSIGNS to the Purchaser the Property described in the Second Schedule hereto ...

SECOND SCHEDULE 

1. The Property:-

(a) Description, Address, Lot Number, Section and Undivided Shares etc.:

...

(b) Exceptions and Reservations:

...

(c) Easements and other appurtenant rights, if any:-

TOGETHER with and subject to (if any) such rights rights of way privileges easements and appurtenances as set out in the Assignment and Together also with and Subject to all other rights rights of way privileges easements and appurtenances (if any) as at present existing and/or subsisting”.

(Emphasis added).  

43.  Section 16(1) provides:

“Unless the contrary intention is expressed in the assignment, an assignment shall operate to assign, with the land, all rights, interests, privileges, easements or appurtenances in, over, belonging or appertaining to that land or at the time of the assignment used, held, occupied or enjoyed with that land and things attached to the land or permanently fastened to anything attached on the land”.     

(Emphasis added).

44.  Clause 1(c) may have expressed a contrary intention to s.16(1) because the word “interests” does not appear in the clause, but I do not think it matters in this case because what the Plaintiff claims is the express grant of a privilege and not an interest.  

45.  Section 16 is modelled on s.62 Law of Property Act 1925.  It has been held that each of the words “liberty, privilege, easement, right or advantage” in s.62 connotes something which is the subject of individual or class enjoyment, as opposed to general enjoyment.  In Le Strange v Pettefar (1939) 161 LT 300, it was held by Luxmoore LJ (sitting as an additional judge of the Chancery Division) at p.301:

“ The material words of the section [s.62] appear to be ‘liberties, privileges, easements, rights and advantages’.  First, what do these words mean?  A ‘liberty’ must, I think, be something which results from a permission given to, or something enjoyed by, a particular person or body of persons, as distinguished from something enjoyed by sufferance by all and sundry, while a ‘privilege’ describes some advantage to an individual or group of individuals, a right enjoyed by a few as opposed to a right enjoyed by all.  ‘Easement’ and ‘right’ are obviously words not appropriate to universal enjoyment nor is the word ‘advantage’, for it necessarily connotes the enjoyment of something which is denied to others.

It seems to me that something which by sufferance no one is prevented from doing or enjoying cannot properly be described by any of the words ‘liberty, privilege, easement, right or advantage’ for each connotes something which is the subject of individual or class enjoyment as opposed to general enjoyment”.  (Emphasis added).  

46.  I do not see how the right of passage claimed by the Plaintiff can be a “privilege” that appertains only to the shares carrying the right of possession of Shop 2B-B or the 2^nd or 3^rd floors.  The Existing Entrance Lobby and New Staircase do not serve only those areas.  For example, the Existing Entrance Lobby and the descending part of the New Staircase also serve the CLP shop on street level, and a deed was made in 2001 between the 1^st Defendant and CLP in respect of a right to pass over part of the Existing Entrance Lobby (that part being identical to the reduced entrance lobby intended by the 2^nd Defendant). 

47.  In any event, I think the court should be slow to find, except in the clearest case, the sort of privilege that is claimed.  The need for property rights to be capable of being identified with certainty cannot be overemphasized (London & Blenheim Ltd v Ladbroke Ltd [1994] 1 WLR 31, per Peter Gibson LJ at 37 F -H).  The certainty of good title that comes with a thorough checking of title deeds would be destabilized if the court were to be persuaded too easily to accept claims of privileges exercised only by permission and not as of right. 

48.  In practice, difficulties would be created in the course of conveyancing transactions by allegations of undocumented factual advantages claiming elevation to the status of legal privileges.  For instance, in the present case, the “privilege” that the Plaintiff claims in the Statement of Claim is the right of “ingress and egress” to and from Shop 2B-B along a stated length of the Existing Entrance Lobby.  That language suggests (as leading counsel for the appellant accepted) that the claim is for the right to enter and exit the shop from the Existing Entrance Lobby.  But in fact at the date of the assignments there was no means of such ingress and egress.  There was simply a counter over which goods were handed over.  “Ingress and egress” to and from the shop were not accurate descriptions of the “privilege” that was claimed.  That is simply an illustration of the uncertainties that may be created (and which must be avoided as much as possible) in matters of title to land.

49.  I also take the view that, as a matter of policy, the court should not allow acts of neighbourliness to be too readily converted into legal rights which were probably never intended to be created.

 Clause 3(a) DMC

50.  Finally, by a late application for amendment, the Plaintiff sought to advance an argument on clause 3(a) of the DMC which provided:

“Each owner shall hold his part of the said Building and the said premises subject to and with the benefit of the following rights privileges and obligations namely:-

(a) Full right and liberty to go pass and repass over and along the entrances, staircases, landings, passages and walkway in the said Building and the roads and footpaths within the said premises and to use the lifts for all purposes connected with the proper use and enjoyment of his part of the said Building”.

51.  The Plaintiff sought to argue that that clause gave it the express right to use the Existing Entrance Lobby which is the relief it wishes to claim under para. 1(B).  With respect, I do not agree.

52.  The Existing Entrance Lobby (and the New Staircase) were not in existence at the time of the DMC and so any extension of clause 3(a) to them must be examined with caution.  It must be read in conjunction with clause 4(q) of the DMC which provided that entrances and staircases “not included in any part of the building exclusively owned” were common parts. As such, owners had the full right and liberty of passage under clause 3(a) “for all purposes connected with the proper use and enjoyment of his part of the said Building”.   The Existing Entrance Lobby is, it is common ground, exclusively owned by the 2^nd Defendant. 

53.  This interpretation of the DMC is supported by the fact that in Clause B-5 of the Sub-DMC, there was an express relinquishment of the right to exclusive possession of those staircases coloured yellow.  That would not have been necessary if the effect of clause 3(a) was that there was no right to exclusive possession of entrances and staircases.

54.  If the Plaintiff’s argument were correct, that would mean that if a person bought shops on two floors, one on top of the other, and built an internal staircase connecting the two, another shop owner would be entitled under clause 3(a) to demand passage through the staircase to gain access to his own shop.  I do not think that could possibly have been the intention of the parties but that is the effect of the Plaintiff’s argument.  Quite apart from Mr Kotewall’s objections to the application for amendment based on the need for evidence, I do not think leave should be granted for a late amendment to advance this argument. 

Order

55.  For those reasons I would dismiss the appeal with an order nisi that the Plaintiff pay the 2^nd Defendant’s costs of the appeal to be taxed if not agreed. 

Hon. Chu J:

56.  I agree.

Hon. Le Pichon JA:

57.  Accordingly there will be an order in terms of paragraph 55.