Incorporated Owners of Homantin Mansion v. Power Rich Investment Ltd. and Another

Building Management
Case No. 41 of 1996

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HEADNOTE

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Building Management - Deed of Mutual Covenant - Adverse Possession - Common Area - Limitation Ordinance, Cap. 347, s. 7(2) - Building Management Ordinance, Cap. 344, s. 34I - Building Management Ordinance, Cap. 344, s. 45(3) - Lands Tribunal Ordinance s. 8A.

Yard immediately outside ground floor flat unit enclosed for well over 20 years. The yard was originally delineated as part of the common areas of the building in which the ground floor unit was situated. The owners incorporated of the building seeks an injunction order requiring the enclosing structures to be demolished so that other owners may have access to the yard. The ground floor unit owner contends that by virtue of s. 7(2) of the Limitation Ordinance, adverse possession over the yard acquired against the owners incorporated and other small owners. The owners incorporated argues that the Limitation Ordinance does not apply since the application was not one for recovery of land but for enforcement of the deed of mutual covenant pursuant to s. 34I of the Building Management Ordinance.

Held: (1) The case cannot be resolved without having regard to the applicability of s. 7(2) of the Limitation Ordinance. (2) If the ground floor unit owner is entitled to adverse possession over the yard, this application by the owners incorporated in effect amounts to an action for recovery of land although it is said to be one for enforcement of the deed of mutual covenant only. (3) The jurisdiction of the tribunal is restricted by s. 45(3) of the Building Management Ordinance which provides that the tribunal does not have jurisdiction to make any order which would, if made, have the effect of rendering void, negativing or substantially varying in whole or in part any contractual or proprietory right enjoyed by any owner or occupier or otherwise referred to in the terms and provisions of an instrument which is registered in the Land Registry including a deed of mutual covenant. (4) However one interprets s. 45(3) of the Building Management Ordinance, an ensuing order made under this application may fall foul of this subsection. (5) Adverse possession over common areas subject to the Building Management Ordinance raises serious implications and complication which may not be within the original contemplation of s. 7(2) of the Limitation Ordinance. (6) In view of doubtful jurisdiction and important policy and legal issues, application transferred to the High Court pursuant to section 8A of Lands Tribunal Ordinance.

IN THE LANDS TRIBUNAL OF HONG KONG

(Building Management Case No. 41 of 1996)

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REASONS FOR DECISION

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The Applicant herein is the Incorporated Owners of Homantin Mansion ("the Building") and the First Respondent is the present registered owner of the property situate and known as Flat 101 on the Ground Floor of the Building ("the subject premises"). There is no real dispute that the Second Respondent is G-Wah Engineering Limited. Immediately outside the frontage of the subject premises is a rectangular yard measuring approximately 35 ft. x 16 ft. which is now enclosed by a parapet wall, wired fence and a locked gate ("the yard"). The yard is also partially covered by soft materials. The Applicant concedes that the yard has been enclosed since 1977. The First Respondent has called evidence to the effect that the yard was first enclosed in 1950's, no later than 1960's in any event. I need not resolve this conflict because the Applicant, quite properly, concedes that the yard has been enclosed for well over 12 years.

2. It is the Applicant's case that the yard forms part of the common areas of the Building within the responsibility of the Applicant, that the Respondents have, in breach of the Deed of Mutual Covenants binding on all owners of properties within the Building, wrongly converted the yard to their exclusive possession and use. Pursuant to section 34I of the Building Management Ordinance, Cap. 344, the Applicant seeks an appropriate order from the Tribunal requiring structures enclosing the yard to be demolished and an injunction order restraining the Respondents from further possessing or using the yard to the exclusion of other owners of properties within the Building. The Respondents do not admit that the yard forms part of the common areas of the Building. Having heard the parties and examined the relevant documents, I can safely take the yard as part of the common areas of the Building. However, this does not mean the end of the Respondents' case. The Respondents rely on, and expressly pleaded, section 7(2) of the Limitation Ordinance, Cap. 347. That subsection says:-

"No action shall be brought by any other person to recover any land after the expiration of 12 years from the date on which the right of action accrued to him, or, if it first accrued to some person through whom he claims, to that person......."

3. As mentioned earlier, the Applicant has conceded that more than 12 years have expired since the enclosure of the yard. If section 7(2) of the Limitation Ordinance applies, the First Respondent has by the time the Applicant made this application obtained adverse possession of the yard. The yard having ceased to be common area of the Building, the Applicant cannot maintain any claim or right over the yard. Not to be outdone, Mr. Pow for the Applicant contends that section 7(2) of the Limitation Ordinance does not apply because his client is not applying to recover any land. This application does no more than to seek to enforce a deed of mutual covenant in accordance with the Ordinance. Both Mr. Pow for the Applicant and Mr. Lin for the Respondents have done extensive research into the legislative background and common law affecting this application. They have put very challenging points of law before the Tribunal.

4. However ingenious Mr. Pow puts the basis of his client's case, the truth of the matter is that if the First Respondent has indeed by virtue of section 7(2) of the Limitation Ordinance, Cap. 347 obtained adverse possession of the yard, this application has the effect of recovering from the Respondents a piece of land. It, therefore, appeared to me that I had to decide whether the First Respondent had obtained adverse possession of the yard. Having reviewed all the evidence, I was about to make a number of findings of fact pertinent to the issues before me when I noticed section 45(3) of the Ordinance. That subsection says:-

"Subject to the provisions of this Ordinance, nothing in this section or the Tenth Schedule shall be construed to vest in the tribunal jurisdiction to make any order which would, if made, have the effect of rendering void, negativing or substantially varying in whole or in part any contractual or proprietory right enjoyed by any owner or occupier or otherwise referred to in the terms and provisions of an instrument which is registered in the Land Registry including a deed of mutual covenant (if any)."

5. The construction of section 45(3) of the Ordinance is not without difficulties. For example, should the otherwise in "any contractual or proprietory right enjoyed by any owner or occupier or otherwise referred to in the terms and provisions of an instrument which is registered in the Land Registry" be construed as a para-phrase of the clause "enjoyed by any owner or occupier" or just alternative to "owner or occupier"? In the former case, the Tribunal has no power to render a decision that would render void, negative or substantially vary in whole or in part any contractual and proprietory right even though such right cannot be found in an registered instrument? In the latter case, only those rights founded on a registered instrument are untouchable by the Tribunal? In either case, it seems to me, this subsection prevents the Tribunal from exercising jurisdiction over the dispute because it is one between rights now being claimed by the Applicant based on a registered deed of mutual covenant and a right now being claimed by the Respondents based on common law or statute. In whoever's favour the Tribunal decides, the decision will fall foul of section 45(3) of the Ordinance. The proper course, in view of the circumstances, would be to transfer the matter to the High Court under section 8A of the Lands Tribunal Ordinance, Cap. 17.

6. There is also another, I should think more important, reason for deferring to the infinite wisdom of the High Court. It is the experience of the Tribunal that similar cases of individual flat owners encroaching upon parts and pieces of common areas abound. These were allowed, actually by sufferance, to occur in the days when building or estate management was not quite rigorously and properly regulated by statute and many deeds of mutual covenants were quite clearly examples of bad drafting or selfish motivation. If the Tribunal or any court were to hold that section 7(2) of the Limitation Ordinance protects those who have gained adverse possession of parts or pieces of common areas, the consequences can be disastrously enormous for building management by owners incorporations and aspects of public administration like enforcement of sanitary standards and fire prevention. Moreover, once adverse possession in these cases is recognized, serious complications for property rights will arise. Small unit owners are entitled to a number of undivided shares in the plot where their building stands plus exclusive use of the unit they have purchased. Further irregularly acquired rights over space used to be a part of the common areas raises the problem of whether undivided shares over the common plot have to be adjusted for the purposes of conveyance and compensation in the event of destruction of the building or resumption of the common plot. The problem should not be resolved without careful consideration. I suppose section 7(2) of the Limitation Ordinance was not framed with the special case of adverse possession of common areas in multi-storey buildings in mind. I would like to see this major policy problem fixed by statute, amending the Limitation Ordinance if necessary, after extensive public consultation instead of by judicial justification. I am inclined to think that adverse possession over common areas subject to the Ordinance should not be permitted. But I may be wrong. The public and the executive arm of the government will definitely benefit from advice from older and wiser judges after they have had the opportunity to study this case.

7. In the premises, I order that this case be transferred to the High Court, parties to appear before a master of the High Court on a date to be fixed by the Registrar of Supreme Court for further directions on the future conduct of this case. Costs reserved to the High Court.

Dated 30 August 1996