INCORPORATED OWNERS OF FORTUNE MANSION, TSUEN WAN v. CHIU NG LING

LDBM 97/2009

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Building Management Application No. 97 of 2009

_________________

_________________

_________________

J U D G M E N T

_________________

Background

1.  The Applicant is the owner’s corporation of Fortune Mansion, Nos. 3-5 Cheong Tai Street, Nos. 2-6 On Wing Street and Nos. 10-18 Tsuen Hing Path, Tsuen Wan, New Territories, Hong Kong (“the Building”).  By an Assent dated 14 March 2005 (“the Assent”), the Respondent became the registered owner of Shop 2 and Store Room 1A on the Ground Floor of the Building (“Shop 2” and “Store Room” respectively).

2.  According to the approved building plan, there should be an area adjacent to Shop 2 designated for use as male and female lavatories (“the disputed area”).  However, the Respondent has been using the disputed area as part of Shop 2.  On 2 January 2009, the Buildings Department issued a letter to the Applicant stating that certain works had been carried out at the Building, i.e. the facilities of the lavatories had been removed; the partition wall between Shop 2 and the Disputed Area had been removed; and the original entrance of the Disputed Area had been blocked (collectively “the illegal works”), which were in breach of the Buildings Ordinance.  The Buildings Department requires the Applicant to remove the illegal works and to reinstate the disputed area in accordance with the approved building plan of the Building.

3.  There is no dispute that the Respondent has been using the disputed area as part of Shop 2.  The Applicant contents that pursuant to Clause 4 of the Deed of Mutual Covenant of the Building which was executed on 12 March 1976 (and was subsequently amended and re-registered in the Land Registry on 20 June 1983) (“the DMC”), the disputed area is part of the common parts and common facilities of the Building, and that by converting the disputed area to his own use without the consent of the Applicant and/or using or permitting to be used the disputed area in such a manner as unreasonably to interfere with the use and enjoyment of the disputed area by any owner or occupier of the Building, the Respondent has contravened Section 34I(1) of the Building Management Ordinance, Cap. 344 (“the BMO”).

4.  Thus, the Applicant claims against the Respondent for the following reliefs:-

(1)  An Order that the Respondent do forthwith reinstate the disputed area to lavatories according to the building plan of the Building;

(2)  An Injunction to restrain the Respondent and/or occupiers of Shop 2 including the tenants thereof whether by themselves, their family members, their servants or authorized persons or agents or otherwise howsoever from continuing use and occupation of the disputed area to the exclusion of the Applicant.

(3)  Costs; and

(4)  Further and/or other relief.

5.  As to the reinstatement of the lavatories, Counsel for the Applicant confirms that the Respondent is only required to reinstate the partition wall between the disputed area and Shop 2, and the entrance to the disputed area.  There is no need for the Respondent to reinstate any other facilities inside the disputed area.

6.  The Respondent, on the other hand, denies that the disputed area is part of the common parts of the Building and that it was a lavatory at any material time.  The Respondent further denies that he has ever been in breach of the DMC.  The Respondent contends that when his mother Madam Wong Shun Kwai (“Madam Wong”), from whom he inherited Shop 2 and Store Room, bought Shop 2 from the developer, namely Shing Hing Fat Investments Limited (“the developer”), the disputed area was included as part of Shop 2, and that there has never been any lavatory from the time Shop 2 was bought.  The Respondent therefore denies that the Applicant is entitled to any of the claims.

7.  The issues in this case are therefore as follows:-

(1)  Whether the disputed area is part of the common parts of the Building or private property belonging to the Respondent;

(2)  Whether the Respondent is in breach of section 34I(1) of the BMO; and

(3)  Whether the Respondent is required to reinstate the partition wall between the disputed area and Shop 2, and the entrance to the disputed area.

Factual dispute

8.  The main factual dispute in this case is whether Shop 2, including the disputed area, was in “L” shape with no partition wall in between when Madam Wong purchased it from the developer.  Apart from the documentary evidence contained in the agreed bundle marked as “AR1”, the Applicant called Ms. Ho Shuk Yee (“AW1”), the chairperson of the Applicant, Madam Ng Bik Chun (“AW2”), the owner of one of the residential units of the Building, as its witnesses; while the Respondent (“RW1”) and his 2 witnesses, namely Mr. Kong Tao Hoi (“RW2”) and Ms. Lau Shuet Mui (RW3”), also testified.  All the witnesses adopted their respective witness statements as their evidence-in-chief.

9.  In their evidence, AW1 referred to 4 photographs showing the entrance of the disputed area which was blocked with bricks, and AW2 stated that when she went to Shop 2 for inspection in 1982 or 1983, Shop 2 was in rectangular shape and not “L” shape as alleged by the Respondent, and the disputed area was not part of Shop 2.  They are both honest and credible witnesses and their evidence were not shaken in any way under cross-examination.  I accept all their evidence.

10.  On the other hand, the evidence of the Respondent and his 2 witnesses are full of inconsistencies.  First of all, in paragraph 3 of the Respondent’s witness statement, it is stated that “After I received the letter before this action from the Applicant and in seeking legal advice, to my surprise I was told and shown that the plan annexed to the assignment of the Property shows that the Property does not cover the part of the area marked pink in Document 1 as annexed hereto”.  However, in his examination-in-chief, the Respondent testified that he knew about the matter in 2005, and under cross-examination he said that he had already known about the matter in 2001 when the Applicant “looked for him”.  Further, when he was asked about the written records of various meetings of the Applicant concerning the disputed area, the Respondent became evasive and even refused to accept the contents of the records.

11.  Although the Respondent contends that the disputed area was included in Shop 2 forming an “L” shape premises, he admitted under cross-examination that there was a wall between the disputed area and Shop 2 under a staircase separating them into 2 units when his late mother Madam Wong bought Shop 2.  He also admitted that the tenant blocked the rear door of Shop 2, which was in fact the entrance of the disputed area in accordance with the building plan.  However, the Respondent insisted that the developer had removed the lavatory facilities before Madam Wong bought Shop 2.

12.  Both RW2 and RW3 stated that Shop 2 was in “L” shape, and that there was no partition wall inside.  RW3, however, admitted that she only went to Shop 2 for a short period of time at the end of 1984 and that she does not have a clear impression of the condition of Shop 2 at that time.  Their evidence clearly contradicted with the evidence of the Respondent.  I do not accept their evidence.

13.  Thus, based on the Respondent’s admission and the evidence of AW1 and AW2, I find that there was a partition wall between Shop 2 (as shown on the building plan) and the disputed area when Madam Wong first purchased Shop 2 from the developer and that the tenant of Madam Wong blocked the entrance to the disputed area.

Is the disputed area common part of the Building or the Respondent’s private property?

14.  Section 2 of the BMO defines “common parts” as follows:-

“(a)    The whole of a building, except such parts as have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner; and

(b)unless so specified or designated, those parts specified in Schedule 1;”

15. Toilets and water closets are included in paragraph 7 of Schedule 1 of the BMO.

16. It is not disputed that the disputed area has never been specified or designated in any instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of any owner.  Thus, it is common part pursuant to section 2 of the BMO.

17. In fact, the Respondent acquired Shop 2 and Store Room under the Assent.  According to the Schedule to the Assent, Shop 2 and Store Room are respectively shown on the Ground Floor Plans annexed to an Assignment registered in the Land Registry by Memorial No. TW 304261 (“the Assignment”) and thereon coloured pink.  The disputed area was not included in the 2 plans annexed to the Assignment.  Thus, the Respondent has never acquired the disputed area under the Assent, and it cannot form part of the Respondent’s private property.

18. Furthermore, pursuant to the Assignment, the developer only assigned “ALL THOSE SHOP NO. 2 and STORE ROOM 1A on the GROUND FLOOR of the said Building and which said Shop and Store Room are respectively shown on the said plans and thereon coloured Pink”.  As mentioned before, the disputed area has never been included in the said plans.  Thus, Madam Wong could not have title over the disputed area to pass it to the Respondent.

19. The Respondent contends that by referring to the plan annexed to a Chinese agreement dated 25 November 1983 (“the Chinese Agreement”), which was the provisional contract for the sale of Shop 2 from the developer to Madam Wong, one can see that Shop 2 covers the disputed area.  The Respondent further contends that the Chinese Agreement and the said plan truly reflect the physical situation of Shop 2 and the transaction between the developer and Madam Wong.  However, there is no evidence that the plan was actually attached to the Chinese Agreement.  The Respondent only found these 2 documents placed together.  Further, the contents of the Chinese Agreement do not mention that the subject properties were shown on the plan.  As such, I do not accept that the said plan was part of the Chinese Agreement.  In any event, the Chinese Agreement was just a provisional agreement and it is superseded by the Assignment.  Madam Wong could not have title over the disputed area.

20. Even if the developer had agreed to sell the disputed area as part of Shop 2 to Madam Wong as alleged by the Respondent, the developer had in fact no title to do so.  The assignment (“the 1^st Assignment”) dated 12 March 1976 made between the developer and Li Siu Foon (“the 1^st Assignee”) was expressed to assign to the 1^st Assignee all those 10 equal undivided 1,390^th parts or shares in the Building together with the exclusive right and privilege to hold use occupy and enjoy to the exclusion of the developer and other owner or owners of the time being of other flats of the Building all that Flat B on the 16^th Floor of the Building, excepting and reserving unto the developer and other owner or owners for the time being of other undivided parts or shares of and in the Building the exclusive right to hold use occupy and enjoy the remaining shops and flats of the Building and the flat roofs and roofs thereof.

21. On the same day, the developer, the 1^st Assignee and Shanghai Commercial Bank Limited entered into the DMC.  It was recited that the parties had agreed to enter into the DMC to define their respective rights and interest in the premises and in the Building.  Clause 1 of the DMC provided that each of the parties granted unto each of the other parties the full right and privilege to the exclusive use occupation and enjoyment and the rents and profits of the part of the Building and the premises set out in the Second Column of the First Schedule to the DMC opposite to the respective names of the grantees as set out in the First Column of the First Schedule.  The name of the developer is stated in the First Column to whom 10 shops spaces on the Ground Floor and the First, Second and Third Floors of the Buildings (790/1,390^th shares in total) were allocated.  The First Column contains a description of the 1^st Assignee, to whom Flat B on the 16^th Floor of the Building (10/1,390^th shares) was allocated.  The name of Shanghai Commercial Bank Limited is also stated in the First Column and is described as “Mortgagee”, to whom Flats A, B & C on the 4^th Floor and Flat Roofs, Flats A, B, C & D on the 5^th to 17^th Floors except Flat B on the 16^th Floor, Flats A & B on the 18^th Floor, Flats A & B on the 19^th Floor and Roof, and the Transformer Room (590/1,390^th in shares in total) were allocated.  There is no plan annexed to the DMC and there is nothing in the DMC which allocated the disputed area to the developer.

22. The developer’s right to dispose of the disputed area must depend on the reservation by it of the right to do what it allegedly did, which was to grant the exclusive use of the disputed area to Madam Wong.  If the developer had wished to reserve something in its own favour, it had to do so expressly and clearly, otherwise its grant will be construed against it and it will not be held entitled to claim any such reservation ( Leung Chiu Lam Paul & Anor v. Poon Loi Cheung Desmond & Anor, CACV 84 of 1998).  In the present case, there is nothing showing that the developer had reserved the disputed area to itself when executing the 1^st Assignment and the DMC.

23. Since the developer executed the DMC before the sale of Shop 2 and Store Room to Madam Wong, the Chinese Agreement cannot override the DMC.  In other words, the developer’s purported sale of the disputed area to Madam Wong, if any, was invalid, and Madam Wong in turn was incapable of validly conferring the right to exclusive possession of the disputed area on the Respondent (see Incorporated Owners of the Lorna Villa v. Chan Yan Wah & Anor [1999] 4 HKC 524 and The Incorporated Owners of Kwan Sen Mansion v. So Kwai Chor trading as Mei Mei Sheung Tim alise Mei Mei Shop,HCMP 134 of 1994, unreported).

24. The Applicant submits that as the Chinese Agreement or the said plan has never been registered in the Land Registry, the same is null and void against the covenantees of the DMC pursuant to Sections 3 and 4 of the Land Registration Ordinance, Cap. 128 (see The Incorporated Owners of Kwan Sen mansion v. So Kwai Chor trading as Mei Mei Sheung Tim alise Mei Mei Shop, supra.).  However, I agree with the Respondent that the non-registration would only make the instrument null and void against subsequent bona fide purchaser or mortgagee for valuable consideration   without notice of the instrument.  In any event, the question is still whether the disputed area is part of Shop 2.

25. The Respondent relies on the cases of Jumbo King Ltd v. Faithful Properties Ltd & Ors [1999] 4HKC 707 and Chan Kwok Hing & Anor v. The Incorporated Owners of Che Wah Industrial Building, DCCJ 3781 of 2008, unreported, and argues that the developer must have reserved exclusive possession of all other parts of the Building including the disputed area save and except the unit of the 1^st Assignee.  However, I agree with the Applicant that Jumbo King and Chan Kwok Hing were decided on their own facts and are distinguished from the present case.

26. In Jumbo King, the 1^st assignment and the deed of mutual covenants, when read together, were clear that the developer had retained exclusive possession over “the rest” of the building that had not been sold to the 1^st assignee (Shops Spaces on the Ground Floor, Shop Spaces on the First Floor etc.).  Further, later dealings with the commercial part of the building, including (1) executing a sub-DMC with a clause stating that those portions of the commercial portion shown and coloured yellow on the floor plans annexed (which included the utility rooms on various floors) being part of the premises to which the developer “is entitled to the exclusive use occupation and enjoyment” or any part or parts thereof may in future from time to time be designated by the developer to be common parts … until so designated that developer shall be entitled to assign the exclusive use occupation and enjoyment of such spaces with any shop or office unit, and (2) the schedule to the sub-DMC allotting the rights of exclusive possession of “the entirety of the first, second, third and fourth floors of the commercial portion including all shops and office units therein” to the developer, were consistent with this view.  As such, so long as the developer had the right of exclusive possession to the utility rooms, he was able to pass such right to subsequent purchasers of undivided shares.

27. In Chan Kwok Hing, it was stated in the 1^st assignment that the developer reserved the exclusive rights over “all factory flats, roofs, flat roofs, car parking spaces and exterior wall” subject to 2 exceptions, namely (1) the factory flat specifically assigned and (2) those parts of such “factory flats, roofs, flat roofs, car parking spaces and exterior wall” that were designated and intended to be used as common parts.  The deed of mutual covenants in that case, however, did not expressly designate any area of the building as common parts.  Though a First Aid Room was not mentioned in the reservation in the 1^st assignment, the developer and the 1^st assignee by executing the deed of mutual covenants at the same time agreed with each other to include the First Aid room under some parking spaces in respect of which undivided shares were allocated.  It was therefore held that the developer did reserve the sole and exclusive right and privilege to hold use occupy and enjoy the First Aid Room.

28. In the present case, the developer only reserved “the remaining shops and flats of the Building and the flat roofs and roofs thereof” in the 1^st Assignment and not “the rest” of the Building.  The schedule to the DMC here, unlike Jumbo King, only allotted the rights of exclusive possession of “10 shops spaces on the Ground Floor”, i.e. the disputed area and a transformer room on the Ground Floor were not included, and the First, Second and Third Floors of the Building to the developer and not “the entirety of the first, second, third and fourth floors”.  Further, the DMC here did expressly designate certain area of the Building, including lavatories, as common parts.  I do not accept the Respondent’s argument that the developer by reserving “remaining shops and flats … and flat roofs and roofs” of the Building in the 1^st Assignment, it had retained exclusive possession of all parts of the Building other than the 1^st apartment being conveyed.

29. It is therefore clear to me that the developer did not reserve to itself the disputed area under the 1^st Assignment or the DMC and therefore had no title to allegedly sell the disputed area as part of Shop 2 to Madam Wong.

30. Moreover, according to the evidence of the Respondent, Madam Wong only purchased Shop 2 and the Store Room from the developer at the end of 1983.  As such, the Respondent and Madam Wong had not yet used or occupied the disputed area when the DMC was executed or amended.  As stated in the Assignment, Shop 2 and Store Room were assigned to Madam Wong subject to the DMC.  Clause 4 of the DMC stipulates that:-

“Each owner shall be bound by and shall observe and perform the following covenants provisions and restrictions:-

…

(q)   The common parts services and facilities referred to in this deed shall include the following :-

(i)   The lavatories … which are not included in any part of the building exclusively owned by one owner or several co-owners as specified in the First Scheduled hereto.”

31. Although I agree with the Respondent that I should not rely on the undated brochure for the Building to determine whether there were lavatories built at the disputed area, I find that the disputed area must be designated for use as “lavatories”, as confirmed by the building plan and the letter of the Buildings Department dated 2 January 2009.  It does not matter whether there were actually lavatory facilities, such as toilet bowls or water pipes existed or demolished before.  The Applicant is not asking for reinstatement of these facilities.  The key issue is whether the disputed area is designated as “lavatories”.  Since, there is also no evidence that any owner owns the “lavatories” exclusively.  Thus, it falls within the definition in Clause 4 of the DMC and forms part of the common parts and common facilities of the Building.

32. The Respondent further contends that the building plan does not show an accurate picture of the developer’s intended design for the Ground Floor when the DMC was executed because it states the words “transformer room” at the place of Store Room.  However, the subsequent change of the words from “transformer room” to “Store Room” in the First Schedule to the DMC and the written record of the meeting of the Applicant dated 12 January 2000 show that the developer had successfully applied for change of user for the transformer room to store room.  The Respondent’s argument in this aspect is misconceived.

33. The Respondent also seeks to rely on the evidence from the Rating and Valuation Department to show that the area intended to be sold would cover the disputed area.  I do not accept this submission at all.  The Rating and Valuation Department’s evidence only concerns with the calculation of rates.  It has no bearing on the title of the disputed area.

34. In the circumstances, I find that the disputed area is part of the common parts of the Building.

Whether the Respondent is in breach of section 34I(1) of the BMO?

35. The Respondent is now using the disputed area exclusively.  There is no dispute that no approval has been given by the Applicant to the Respondent in respect of his use of the disputed area.  Section 34I of the BMO stipulates that:-

“(1)   No person may-

(a)   convert any part of the common parts of a building to his own use unless such conversion is approved by a resolution of the owners’ committee (if any);

(b)   use or permit to be used the common parts of a building in such a manner as-

(i)      unreasonably to interfere with the use and enjoyment of those parts by any owner or occupier of the building; or

(ii)    to cause a nuisance or hazard to any person lawfully in the building.

(2)     Any person who contravenes subsection (1) shall be deemed to be in breach of an obligation imposed on him by the deed of mutual covenant in respect of the building.”

36. Since it is my finding that the disputed area forms part of the common parts of the Building, the Respondent is clearly in breach of section 34I(1)(a) of the BMO by converting the disputed area to his own use without approval from the Applicant.  The partition wall between Shop 2 and the disputed area is also part of the common parts of the Building, as it should be used to separate Shop2 and the disputed area.  The Respondent would not have exclusive use of the partition wall.  Thus, the Respondent is in breach of section 34I(1)(a) of the BMO by removing the partition wall.  He is also in breach of section 34I(1)(b)(i) of the BMO by removing the partition wall and blocking the entrance to the disputed area, which has unreasonably interfered with the use and enjoyment of the disputed area by other owners of the Building.  By virtue of section 34I(2) of the BMO, the Respondent is deemed to be in breach of the DMC.

Is the Respondent required to reinstate the partition wall between the disputed area and Shop 2, and the entrance to the disputed area?

37. Under Clause 4(k)(iii) of the DMC, the Applicant has the power and authority:-

“To remove any structure or installation in the said building which is illegal or contravenes the terms of this deed and to demand and receive from the owner by whom such structure or installation was erected or installed the costs and expenses of such removal.”

38. As the Respondent admits that the removal of the partition wall between Shop 2 and the disputed area and the blocking of the entrance to the disputed area were done after Madam Wong had purchased Shop 2, and such acts were in breach of section 34I of the BMO as aforesaid, the Respondent is clearly liable to reinstate the partition wall and the entrance to the disputed area.  Nevertheless, the Respondent, relying on The Incorporated Owners of Odeon Building and Anor v. Sky Field Development Ltd, HCA 217 of 2005, unreported, contends that since the illegal works were not done by the Respondent himself but were done by his predecessor in title, he should not be liable to reinstate the disputed area.

39. I do not accept the Respondent’s argument in this regard, but agree with the Applicant’s submission that even if the illegal works were not done by the Respondent himself, a mandatory injunction should still be granted against the Respondent.  In Sun Wai Chun v. Fairview Park Property Management Limited, FAMV 1 of 2000, unreported, one of the house owner’s predecessors in title had made alterations to the unit without the approval of the manager of the estate.  A mandatory injunction was made against the house owner after trial (HCA 5782 of 1994).  On application for leave to appeal, the house owner submitted, inter alia, that the deed of mutal covenant only refers to the owner who made the alternations and not refers to her.  The Court of Final Appeal commented that such argument was wholly untenable.  The Court said that each owner subscribes to the deed of mutual covenant and is bound by it.  The benefit and burden of the covenants run with the land.  Further, the deed of mutual covenant clearly falls within Section 41(3) of the Conveyancing and Property Ordinance, Cap. 219, which states that:-

“… a covenant shall run with the land and, in addition to being enforceable between the parties, shall be enforceable against the occupiers of the land and the covenantor and his successors in title and persons deriving title under or through him or them by the covenantee and his successors in title and persons deriving title under or through him or them”

40. Unfortunately, Sun Wai Chun v. Fairview Park Property Management Limited and Section 41(3) of Cap. 219 were not drawn to the attention of Fung J. in Sky Field Development Ltd.   In any event, it seems that the proposition in Sihombing and Wilkinson’s Hong Kong Conveyancing Law and Practice Vol. 1(A) at p. 157B XII [377.1] that “if the breach committed by the predecessor in title was a continuing breach, the present owner would remain liable.  Such would be the case, for example, if an unauthorized structure had been built on the premises or there had been a breach of covenant not to make structural alterations” was not challenged, and that there was just no evidence in that case as to whether the demolition and the conversion of the lavatories involved any structural or unauthorized alterations

41. As aforesaid, the Buildings Department has by its letter dated 2 January 2009 required the Applicant to remove the illegal works and to reinstate the disputed area.  The irresistible inference must be that the illegal works were “structural or unauthorized alterations”.  I accept the proposition in Sihombing and Wilkinson’s Hong Kong Conveyancing Law and Practice as aforesaid and therefore find that the breach committed by the Respondent and/or his predecessors in title is a continuing breach.  As ruled by the Court of Final Appeal in Sun Wai Chun, I find that the Applicant is entitled to enforce the covenant against the Respondent, even though the breaches were committed by his predecessor in title.  I see no reason to refuse the enforcement by way of mandatory injunction.

42. Thus, the Respondent is liable to reinstate the disputed area by rebuilding the partition wall between Shop 2 and the disputed area and re-opening the entrance of the disputed area, notwithstanding the illegal works might have been done by his predecessor in title.

Conclusion

43. By reasons aforesaid, I hereby grant the following orders:-

(1)  The Respondent do within 1 month reinstate the disputed area by rebuilding the partition wall between Shop 2 and the disputed area and re-opening the entrance of the disputed area.

(2)  An injunction that the Respondent and/or occupiers of Shop 2 including the tenants thereof whether by themselves, their family members, their servants or authorized persons or agents or otherwise howsoever be restrained from continuing the use and occupation of the disputed area to the exclusion of the Applicant.

(3)  Costs order nisi: Save where there has been previous costs order, the Respondent do pay the Applicant costs of the proceedings herein, with certificate for counsel, to be taxed on District Court Scale if not agreed.  If there is no further application on costs within the next 14 days, the costs order nisi herein shall become absolute.