LAI WING HO AND ANOTHER v. CHAN SIU FONG

[An owner of undivided shares in land cannot create or assign a right to the exclusive use of any part of that land separately from his undivided shares]

1992, No. MP2835

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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    "The cloud-capp'd towers, the gorgeous palaces, the solemn temples" of the poet's imagination are become reality here in Hong Kong. But (except on the Peak) not all Hong Kong's towers are "cloud-capp'd". Many are (or should be) capped with nothing more poetic than a flat roof. A flat roof is, as such, of little use for anything but sunbathing. But to those anxious to squeeze the maximum advantage out of any available building space, such a roof presents a different attraction. There are some extra dollars to be made by the simple process of creating, legitimately or otherwise, an extra apartment on top of the roof. That is what has happened at Ruby Mansion, 42 Nullah Road, Kowloon. It has led to the dispute as to title between vendor and purchaser which I am called on in this case to resolve.

1. Ruby Mansion is not the only multi-storey building where the same thing, or sort of thing, has happened. What I decide in this case may be of some importance to the owners and occupiers of units in other multi-storey buildings. At the conclusion of the hearing, therefore, I said I would take time to consider the case. On 30th October 1992, having decided that the dispute ought to be decided in a sense favourable to the vendor, I pronounced in favour of the title accordingly and I now set out my reasons for doing so.

2. In reciting the facts I can begin with the Deed of Mutual Covenant ("the DMC") dated 25th September 1975 affecting the premises. There were two parties to the DMC; (1) East Asia Investment and Mortgage Company Limited, described as "the First Owner"; (2) Chiu Yau and Lam King Chun, described as "the Second Owners". The DMC recited that the premises were held by the parties in the shares or proportions set out in the Second Schedule. (In the Second Schedule, it was declared that the premises were then vested in the First Owner and the Second Owners as tenants in common, as to 76 equal undivided 78th parts or shares thereof in the First Owner, and as to the remaining 2 equal undivided 78th parts or shares thereof in the Second owners as joint tenants.) The DMC recited that there was then constructed on the premises the 12-storey building known as No. 38, 40 and 42 Nullah Road, Kowloon; this is the building now known as Ruby Mansion. The DMC finally recited that the parties had agreed to enter into the DMC in order to define their respective rights and interests of and in the premises and the building, in manner thereinafter appearing. Reverting to the Second Schedule, this further declared that the 78th equal undivided parts or shares of and in the building were allotted and made up in the following manner.

SHARES

3. By the operative part of the DMC, each party granted the other 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 opposite to the respective names of the grantees as set out in the first column of the First Schedule. The rights granted to the First Owner were rights in respect of the ground, first, second, third, fourth, fifth, sixth, seventh, eighth, ninth, tenth, eleventh floors, and all the flat roofs, main roofs, open yards, external walls and all other spaces not intended for common use of Nos.38 and 42 Nullah Road; and the ground, first, second, third, fourth, sixth, seventh, eighth, ninth, tenth, eleventh floors and all the flat roofs, main roofs, open yards, external walls and all other spaces not intended for common use of No.40 Nullah Road. The rights granted to the Second Owners were rights in respect of the fifth floor of No.40 Nullah Road.

4. The DMC contained a number of provisions in common form relating to the enjoyment, maintenance and management of the building for the benefit of the "owners". The word "owners" was defined so as to include each person in whom for the time being the legal estate in any undivided shares in the premises and the building was vested and every joint tenant or tenant in common of any such share.

5. It will be recalled that the 11th floors and main roofs (the 11th floors were the top floors) were allotted 2 shares per unit.

6. By an indenture dated 11th January 1980 and made between (1) East Asia Investment and Mortgage Company Limited as vendor; (2) Chan Kit Lai and Chan Yui Lung as confirmors; and (3) Leung Yuk Ming as purchaser, 2 equal undivided 78th parts, or shares of in the building, together with the exclusive right and privilege to the use occupation and enjoyment of the eleventh floor and its main roof of No.42 Nullah Road, were assigned and confirmed to the purchaser subject to and with the benefit of the terms and conditions of the DMC. The puchaser covenanted with the vendor that the purchaser would during the residue of the term of the Crown Lease pay 2/78th shares of the rents of $12.50 and $25 thereby reserved.

7. By an indenture dated 14th March 1980 and made between (1) Leung Yuk Ming as vendor and (2) Ng Tak Ki as purchaser, it was recited that the vendor had agreed with the purchaser for the sale to the purchaser of the right to the exclusive use occupation and enjoyment of the main roof of No.42 Nullah Road to the purchaser; and the vendor purported to assign to the purchaser "all that the right to the exclusive use occupation and enjoyment of all that the main roof of the said No. 42 Nullah Road (thereinafter referred to as "the said main roof") and all other rights, rights of way (if any) and other rights, privileges, easements and the appurtenances thereto belonging or appertaining or therewith at any time used held occupied or enjoyed and all the estate right title interest property claim and demand whatsoever of the vendor therein." The indenture contained covenants for title on the part of the vendor. The purchaser covenanted with the vendor that the purchaser would, during the residue of the term of the Crown Lease, pay half of 2/78th shares of the rents of $12.50 and $25 thereby reserved.

8. The indenture of 14th March 1980 was not expressed to assign to the purchaser, and did not assign to the purchaser, the 2/78th shares in the premises held by the vendor nor any interest in those 2/78th shares. It was expressed to assign only a right to the exclusive use occupation and enjoyment of the main roof of 42 Nullah Road, divorced from any interest in the 2/78th shares which, under the DMC, had been allotted to the 11th floor and main roof of 42 Nullah Road as one unit. I shall return later in this judgment to a consideration of the effect of this indenture.

9. By an indenture dated 22nd April 1980 and made between (1) Leung Yuk Ming as vendor and (2) Ho Tung Sik and Lam Siu Fung as purchasers, the vendor assigned to the purchasers his 2 equal undivided 78th parts or shares in the premises together with the exclusive right and privilege to the use occupation and enjoyment of all that the 11th floor exclusive of the main roof of No.42 Nullah Road. The purchasers covenanted with the vendor that the purchasers would, during the residue of the Crown Lease, pay half of 2/78th shares of the rents of $12.50 and $25 thereby reserved.

10. This indenture of 22nd August 1980, although it operated to assign to the purchasers the vendor's 2/78th shares, was not expressed to assign to them any right to the use occupation and enjoyment of the main roof of 42 Nullah Road. Since the vendor had already expressed himself to assign to somebody else the use of the main roof, this exclusion was only to be expected.

11. By way of subsequent indentures dated respectively 24th July 1980, 22nd December 1984 and 15th May 1992, the 2/78th shares devolved on Chan Siu Fong, the defendant in this action. None of these indentures were expressed to assign any right to the use of the main roof; each of them, although operating as an assignment of the 2/78th shares, was limited, so far as the premises of which use and enjoyment was given, to the 11th floor.

12. Since the indenture of 14th March 1980, there have been further dealings with the main roof of 42 Nullah Road.

13. By an indenture dated 12th January 1988, Ng Tak Ki purported to assign his interest therein to Lui Chun Nui; and by an indenture dated 11th December 1988, Lui Chun Nui purported to assign that interest to herself and Yung Siu Mui by way of gift.

14. By the abovementioned sale and purchase agreement dated 28th July 1992, the defendant ("the vendor") agreed to sell to the plaintiffs ("the purchasers") the 2/78th shares in Ruby Mansion "together with the sole and exclusive right and privilege to hold use occupy and enjoy" the 11th floor of the building, but excluding the roof.

15. By a letter dated 18th August 1992, the purchasers' solicitors raised an objection to the title. They said that doubts had arisen as to (1) whether the allocation of 2/78th parts or shares should include "the said property and its main roof"; and (2) "how to define the rights and interest of the said property and the said main roof". They suggested that "such misallocation" (as they called it) might adversely affect the property.

16. The purchasers maintained these objections before me. They argued that acts or omissions on the part of the "owner" of the main roof might constitute breaches of the provisions of the DMC and lead to enforcement action being taken against them as owners of the 2/78th undivided shares allocated to the 11th floor of the building and the main roof. They claimed in these proceedings a declaration that the vendor's title was defective (but, alternatively, a declaration in the contrary sense, if the court was against them).

17. As I have already said, having reached the conclusion that the purchasers' objection to the title was not well founded, I pronounced on 30th October 1992 in favour of the title.

18. What the vendor agreed to sell to the purchasers was 2/78th shares in Ruby Mansion "together with the sole and exclusive right and privilege to hold use occupy and enjoy the 11th floor". I entertain no doubt that the vendor has shown a good title to these 2/78th shares. Equally, I entertain no doubt that, under the scheme created by the DMC, no owner of any of the other shares could succeed in establishing any right in himself inconsistent with or adverse to the rights in respect of the 11th floor expressed to be conferred on the owner of these 2/78th shares. Nor, a fortiori, could an "owner" of the main roof. So the vendor's title is in my judgment unassailable.

19. But the case does raise, obliquely, some profound questions about the rights of co-owners of multi-storey buildings in Hong Kong, and I do not think it would be right for me to part with it without making some attempt to resolve those questions.

20. The solution many years ago found, in Hong Kong, to the problems created by the wishes of prospective purchasers to become owners of units in multi-storey buildings lay in turning to advantage the concept of the tenancy in common which has for centuries formed part of English land law. But co-ownership in English land law (of which tenancy in common is one type) has a number of essential characteristics, among which is unity of possession. Each co-owner is as much entitled to possession of every part of the property as each of his other co-owners. "Their occupation is individed, and neither of them knoweth his part in severall" : see Coke on Littleton, s.292, at p. 189b. No doubt in practice, the provisions of the deed of mutual covenant would be construed so as to preclude any co-owner claiming under it to complain of an agreement in respect of the taking of exclusive possession of part of the building by a person expressed to be granted that right. In theory, however, it is impossible for the co-owner's rights to possession of the whole to be limited in any way; for such limitation would be repugnant to the nature of his co-ownership.

21. The result is that while a tenant in common can assign his interest in the premises, i.e., his shares which he holds in co-ownership, he cannot create, or convey, or assign any right to exclusive possession of part only of the premises, being a right capable of subsisting as a legal estate in land and binding on his co-owners as well as himself. Where a deed of mutual covenant is expressed in terms which purport to entitle a tenant in common in right of his undivided shares to exclusive use of part of the building, for example, the top floor and the main roof above it, the nearest he can get to assigning the roof will be to grant a licence, binding on him personally and on his personal representatives, but not otherwise on his successors in title, permitting the use of the main roof by the granee. Such licence might be either personal to the grantee or assignable by the grantee; and, if the latter, it will be enforecable by an assignee of the licence against the grantor or his personal representative. But it will not be enforceable against the other co-owners of the premises or against anybody else.

22. In the present case, I have not of course had the benefit of any argument on behalf of the present ``owner" of the roof subject to the grant expressed to be made by the indenture of 14th March 1980. That "owner" is not a party to these proceedings and nothing said in this judgment will bind him. But it is the fact that, if I am right, the title of that "owner" and of any other "owner" similarly placed, must be regarded as no title at all.

23. This case should, therefore, lead to some radical rethinking about the rights of owners of buildings in multi-occupation on the part of solicitors advising prospective purchasers of rights to use a main roof divorced from any interest in any undivided shares in the property.

24. The purchasers must pay the vendor's costs of these proceedings (unless otherwise agreed between them).