CHAO KING LIN v. DIAMOND-HARBOUR HOLDINGS CORPORATION

HCMP1296/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.1296 OF 1999

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J U D G M E N T

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The application

1. This is a vendor and purchaser summons taken out by the Plaintiff purchaser. The Plaintiff purchased from the Defendant vendor the property known as Flat A on the 9th Floor ("Flat 9A") and Carport No.15 of Yee Yuen Mansion, No.305-307 Prince Edward Road, West, Kowloon ("the Property"). The completion date of the sale was fixed for 25th February 1999. The Plaintiff contended that the Defendant had failed to show a good title to the Property and the sale was not completed and the present summons was taken out. The Plaintiff is seeking, among other things, declarations that the Defendant had failed to show a good title to the Property and the requisitions had not been answered.

The background

2. Very briefly, the background of the case is as follows. In 1964, Yee Yuen Mansion ("the Building") was constructed. It is a 9-storey building with 45 flats (five flats on each floor) and 45 carports. The developers of the Building began to sell the flats and carports to individual owners. On 9th March 1968, Cheung Shun Lan ("Cheung") became the owner of Flat A on the 5th Floor ("Flat 5A") and Carport No.15. On 15th July 1971, she further became the owner of Flat 9A and Carport No.18.

3. On 9th November 1971, when Cheung was still the owner of the two flats and the two carports, she assigned Flat 5A and Carport No.18 to a purchaser. Flat 5A was originally assigned to Cheung together with Carport No.15 and not No.18. Then on 12th July 1984, Cheung assigned Flat 9A and Carport No.15 to another purchaser. Flat 9A was originally assigned to Cheung together with Carport No.18.

4. After a number of transactions, the Defendant eventually became the owner of Flat 9A and Carport No.15. The Defendant sold the Property to the Plaintiff and the present problem arose.

The Plaintiff's case

5. In gist, the question of title concerns Carport No.15. The Plaintiff's case is that Carport No.15 could not be carved out from Flat 5A and then disposed of together with Flat 9A. It is said that Flat 5A and Carport No.15 were together allotted 1/45th equal and undivided shares in the Building and could not be carved out from one another. Cheung, therefore, could not assign Carport No.15 together with Flat 9A to the Defendant's predecessors-in-title and likewise the Defendant is not able to assign Carport No.15 to the Plaintiff.

Lai Wing Ho

6. Reliance was placed on Lai Wing Ho v. Chan Siu Fong [1993] 1 HKLR 319. Godfrey J. (as he then was) said at p.324 to 330 :

" 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 grantee. Such licence might be either personal to the grantee or assignable by the grantee; and, if the latter, it will be enforceable 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."

That was a case where the owner of the top floor and the roof of a building assigned the roof and the top floor separately to different purchasers. The top floor and the roof were originally allotted 2/78th equal undivided shares in a building. The assignment of the roof did not include the owner's 2/78th shares in the building. The owner later assigned the 2/78th shares together with the exclusive right to use the top floor, but exclusive of the main roof. It is in this context that Godfrey J. expressed his opinion that the assignment of the roof was in the form of a licence which may either be personal to the grantee or assignable by the grantee. Such a licence could not be enforceable against the other co-owners of the building.

No restrictions in the Deed of Covenant

7. In the present case there is a Deed of Covenant dated 10th July 1964 ("the Deed") which regulates the rights of the co-owners. The question to be asked is whether there is any restriction in the Deed which would preclude Cheung from assigning Carport No.15 instead of No.18 to her purchaser when she assigned Flat 5A. Clause 4 of the Deed provides that :

" Every owner for the time being of any undivided share in the said premises and the said Building shall have the full right and liberty without reference to the owner or owners of any other undivided share or shares in the said premises and the said Building or any person or persons otherwise interested in any other undivided share or shares in any way whatsoever and without the necessity of making such other owner or any such other person or persons a party to the transaction to sell, assign, mortgage, lease, licence or otherwise dispose of or deal with his share or interest in the said premises and the said Building together with the said full right and privilege to hold use occupy and enjoy the flat roof or portion thereof and car parking space or spaces held therewith subject to and with the benefit of these presents."

8. Mr Lam, Counsel for the Plaintiff, argued that words "held therewith" means that the carport must be held with the flat. In other words, in the context of this case, Carport No.15 could only be disposed together with Flat 5A and not Flat 9A.

9. I am unable to construe Clause 4 in this manner. This clause merely confers the rights of ownership to the owners of the flats and carports. The Deed did not specify the percentage of shares allotted to the individual flats and carports. It also did not pair the flats with the carports. I am unable to construe Clause 4 as prohibiting Cheung from assigning Carport No.15 together with Flat 9A. Cheung at one time was the owner of the two units and the two carports, holding 2/45th undivided shares in the Building. That being the case, I am of the view that when she assigned Flat No.5A, she could assign Carport No.15 in the same transaction as well. I do not see Clause 4 as imposing a restriction on her right to do so because there is simply no such restriction.

Assignment of Carport No.18 was clearly intended

10. The assignment by Cheung in 1971 of Carport No.18 was, in my view, clearly intended by her. It was not a mistake. The property that was assigned was specified in the Assignment to be Flat 5A and Carport No.18. The original Assignments of Flat 5A and Carport No.18 were respectively identified. The assignment in 1971 was subject to the following exception :

".... EXCEPTING AND RESERVING unto the owners and co-owners for the time being of the remaining parts or shares of and in the said Kowloon Inland Lots Nos.2976 and 2977 the full and exclusive right to the use occupation and enjoyment of all the remaining flats car ports and roof of the said Building other than the said Flat and Car Port No."

Although the numerical "18" was not stated in the reservation, it is clear that the "said Flat and Carport No." referred therein were Flat 5A and Carport No.18 because they were the subject matter of the assignment.

Subdivision of the owner's share

11. I think the legal basis in which Cheung assigned Carport No.18 in 1971 was by way of a subdivision of her shares in the two flats and carports. Although there was no written document regarding the subdivision, in reality that was what happened. The purchaser was not in anyway prejudiced by the lack of written document on subdivision. Ultimately he was still able to acquire 1/45th share in the Building. This included Flat 5A and Carport No.18. It is not necessary for me to postulate what fraction of the 1/45th share Cheung allocated to the flat and the carport. Suffice to say that she clearly did not allocate all the 1/45th share to the flat. More importantly, Flat No.5A and Carport No.18, at the end, still consist of 1/45th share.

Difference in approach

12. Le Pichon J. in Hinex Universal Design Consultants Co. Ltd. v. Chan Lai Hing [1997] CPR 380 at p.384 stated that a subsequent owner has the same unfettered right as the developer in the allocation of undivided shares vested in him subject to any prior provision which existed in the DMC or some other document.

13. Deputy Judge Chung (as he then was) in Summit Investment Ltd. v. Shia Ning Enterprise Ltd. [1999]2 HKLRD 796 was also of the view that this right was available to a co-owner.

14. In Finworld Development Ltd. v. Siriban Ltd. HCMP No.3307 of 1992, Barnett J., however was of the opinion that a co-owner could not subdivide his own interest in a multi-storey building. The reasoning being that the co-owners collectively have a legitimate interest in knowing if one of them intends to subdivide his shares or interest and how the specified area to which exclusive jurisdiction attaches by virtue of that interest would itself be divided.

15. In my view, as a matter of principle, I see the right of an owner in subdividing his shares, unless restricted by the title deeds, as being unfettered. I prefer to adopt the Hinex line of cases.

Was Carport No.15 assigned in 1971 as well?

16. Mr Lam argued that in 1971 when Cheung assigned Flat 5A, she must have assigned Carport No.15 as well. She did not reserve Carport No.15 to herself because Flat 5A and Carport No.15 were designated as 1/45th share without any differentiation. This is by virtue of s.17 of the Conveyancing and Property Ordinance which provides that :

" Unless the contrary intention is expressed in the assignment, an assignment shall operate to assign all the estate, right and interest in the land assigned which the assignor has in that land and which he has the power to assign."

Hence in 1984, when she assigned Carport No.15 together with Flat 9A, she simply was not capable of doing so.

17. Reliance was also placed on the case of Sheenip Industries Limited v. Champion Billion Development Limited HCMP No.1390 of 1995 in which a staircase in a property was not expressly included in a subsequent assignment, Deputy Judge Yuen (as she then was) held that the right to exclusive possession of the staircase was a right which was enjoyed by the owner of that share. The staircase was included in the assignment of the specified undivided shares of the land. The mortgagee did not reserve to itself exclusive possession of the staircase, even if it had attempted to do so, that could not be binding on subsequent purchaser.

Contrary intention

18. The operation of s.17 is expressly subject to contrary intention. In 1971, Cheung was the owner of both carports. In the reservation of the Assignment of 1971, she clearly had reserved her right to the ownership of Carport No.15. In my view the 1971 Assignment did not assign her interest in Carport No.15.

19. I really do not see the validity of the argument that because the assignment of Carport No.15 in 1984 was conducted 13 years after the assignment of Carport No.18, therefore the contrary intention was not shown in 1971. In my view, one really has to look at the wording of the Assignment of 1971 to determine what was the intention of Cheung. As I have indicated earlier, the intention was to assign Carport No.18 and not No.15 together with Flat 5A.

Practical point of view

20. The present owner of Flat 5A and Carport No.18 would be astounded to be told that notwithstanding his ownership of these assets, he is also the legal owner of Carport No.15 and that he only has a licence in respect of Carport No.18. It is too absurd to think that the present owner of Flat 5A would assert a right to Carport No.15. Flat 5A had been assigned together with Carport No.18 since 9th November 1971. Likewise, for Carport No.15, there had been three subsequent assignments since Cheung became the owner, namely, on 12th July 1984, 29th October 1993 and 30th July 1996. From a practical point of view, the right of the Defendant to assign Carport No.15 can hardly be challenged.

Good title shown

21. In my view, the Defendant had shown a good title to the Property and the requisitions to title had been answered when the Defendant stated there was no restriction in the Deed for the assignment of Carport No.15 separately.

Jumbo King

22. The position is that in 1971, Cheung only assigned Flat 5A and not Carport No.15. Even assuming, as a result of the assignment, the whole of the 1/45th undivided share was assigned, and there was no more undivided share attached to Carport No.15, I am of the view that Cheung still had the exclusive right to use this carport. This right was originally vested in the developers and later by subsequent assignments became vested in Cheung. In 1984 when she assigned Carport No.15, she was still the owner of an undivided interest in the Building by reason of her ownership of Flat 9A. By virtue of her interest in the Building, she clearly could assign this carport which she had an exclusive right and confer a good title on the purchaser.

23. In Jumbo King Ltd. v. Faithful Properties Ltd. [1999] 2 HKC 507 the vendors of a property wished to assign utility rooms and flat roofs in a building which had not been allotted any shares. It was held by Godfrey JA that :

"..... But the developer can be treated as entitled to the exclusive use of the utility rooms, etc if the relevant assignments and deeds of mutual covenant are to be read as granting to the developer, himself retaining undivided shares, rights, incident to his ownership of those shares, for the exclusive use of the utility rooms, etc to the exclusion of the other owners of undivided shares. And if he can be so treated, he can, when disposing of his own undivided shares, confer on the grantee under such a disposition, as an incident to that grant, the exclusive use of the utility rooms, etc to which he was himself entitled."

Rogers JA. was also of the same view. He held that :

" It follows, therefore, that for anyone to enjoy rights of exclusive possession of part of a property he must be a co-owner, in other words, the owner of undivided shares. On the other hand, provided there is a valid assignment of part of the legal estate there is no reason why the vendor who is selling his right of exclusive enjoyment to some part of the building and assigning part of the legal estate by transferring the undivided share could not assign his exclusive right of enjoyment of some other part of the building which he enjoys by virtue of the deed of mutual covenant."

24. Jumbo King was not relied upon by the Defendant when the requisition was raised. However, on the question of title, this case clearly shows that the Defendant has a good title to Carport No.15.

Another case

25. Mr Lau, Counsel for the Defendant also referred to Mann Kam Foon Teresa v. Top Brain International Ltd. [1997] CPR 403. The issue there was whether there was an obligation on the vendor to the sale of a car park to show that the car park must carry with it a share in land. Waung J. held that the answer must be "No". He was not persuaded that in principle, a property must carry a share in land to enable a good title to be given. This case was clearly correct in the light of Jumbo King because the vendor there had the exclusive right to the carpark although he was not given any specific shares when he acquired it.

Conclusion

26. As the Defendant had shown a good title to the Property and had answered the requisitions, the Plaintiff's application is dismissed.

27. I will accede to the Defendant's Counterclaim and grant the following relief, namely :

i) a declaration that the Defendant vendor had shown a good title to the Property and had sufficiently answered the requisitions raised by the Plaintiff;

ii) specific performance of the sale and purchase agreement which, as requested by Mr Lam, will take place within one month after the judgment.

28. I will make an order nisi that each party is to bear its own costs of the application because although I have found that the Defendant had shown a good title and answered the requisition, the legal position regarding the carport is not a straightforward one and it is reasonable for the Plaintiff to issue this application to clarify the position.