黎偉雄 對 信和物業管理有限公司

CACV 222/2019

[2020] HKCA 448

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 222 OF 2019

(ON APPEAL FROM LDBM 142/2017)

________________________

________________________

J U D G M E N T

________________________

Hon Lam VP (giving the Judgment of the Court):

Background

1.  This is the Applicant’s appeal against the judgment of Judge Simon Lo (“the Judge”) in LDBM 142/2017. He is an owner in one of the residential units in an estate known as Maritime Bay, Tseung Kwan O, New Territories, Hong Kong (“the Estate”).  Apart from two residential blocks (starting from 2^nd to 47^th floors), there are also shop units in the Estate at the Upper Ground and Ground floors.  At the time of the trial the Applicant was also the Chairman of the Owners Committee of the Estate.  The Respondent is the Manager of the Estate.

2.  The appeal focuses on the issue whether a public pedestrian way (“the PPW”)on Upper Ground Floor is part of the common areas of the Estate.  It is ultimately a question of construction of a Deed of Mutual Covenant of the Estate dated 24 March 1999 (“the DMC”).

3.  The obligation to provide and maintain the PPW is laid down in the Government Lease in the form of the Conditions of Sale dated 27^th March 1995 (“the Grant”) by which the land on which the Estate was developed was granted to Great Land (HK) Limited (“Great Land”).  The PPW provides access leading to a footbridge which links up with other estate developments in the vicinity and a MTR exit.

4.  The Grant contained several provisions which are relevant for present purposes.  Special Conditions 12 and 13 of the Grant provided:

“ (12) (a) The Purchaser shall at his own expense and in all respects to the satisfaction of the Director lay form, provide, construct and surface such segregated pedestrian way or path (together with such stairs, ramps and escalators as the Director in his absolute discretion may require) at such positions within the lot and any building or buildings erected or to be erected thereon and at such levels as the Director may require, in such manner, with such materials and to such standards, levels, alignments and designs as the Director shall approve. The pedestrian way or path shall follow the shortest possible routes and shall be so constructed and designed as to:-

(i)  link up each and every building erected or to be erected on the lot; and

(ii)  link up all the major facilities within the lot including the residential blocks, open space and other facilities provided therein.

(b)  The Purchaser shall at all times throughout the whole of the term hereby agreed to be granted manage and maintain at his own expense the pedestrian way or path (together with such stairs, ramps and escalators as may be required by the Director) to be provided under sub-clause (a) of this Special Condition in good and substantial condition and repair in all respects to the satisfaction of the Director.

(13) (a)  The Purchaser shall at his expense and in all respects to the satisfaction of the Director provide adequate structural support and landing space at the perimeters of the building or buildings erected or to be erected on the lot between the points R and S through T as shown and marked on the plan annexed hereto and at such level as shall be approved by the Director to receive the future footbridge (if any).

(b)  When demanded to do so by the Director, the Purchaser shall within 12 months of such demand provide at his own expense and in all respects to the satisfaction of the Director provide at such levels of and with such alignment in the building or buildings erected or to be erected on the lot as the Director may approve and keep open 24 hours a day a free public pedestrian way.  The public pedestrian way shall have a width of 6 metres and follow the shortest possible route as to link up the footbridge referred to in sub-clause (a) of this Special Condition and the adjacent lot or premises at the location as marked and shown as UVW or at such other location to be approved by the Director.”

Special Conditions (20) and (24) are also relevant:

“(20) The Purchaser shall provide and maintain at his own expense, to the satisfaction of the Director and in accordance with the requirements of the Director street lighting and other street furniture within the pedestrian way referred to in Special Condition No. (12) hereof and public pedestrian way referred to in Special Condition No. (13) hereof and the Purchaser shall illuminate and keep such areas illuminated at his own cost and to the satisfaction of the Director. In the event of non-fulfilment of the Purchaser’s obligations under this Special Condition, the Government may at the cost of the Purchaser carry out and maintain such illumination and provide and maintain such street furniture and the Purchaser shall pay to the Government and demand the cost thereof.

…

(24) (a) Notwithstanding that the General and Special Conditions herein shall have been observed and complied with to the satisfaction of the Director, the Purchaser shall not assign, mortgage, charge or part with the possession of or otherwise dispose of the lot or any part thereof or any interest therein or enter into any agreement so to do except by way of an assignment or other disposal of undivided shares in the whole of the lot together with the right to the exclusive use and occupation of individual floors and units in any building or buildings erected thereon and even then such assignment or other disposal shall be subject to the following conditions:-

(i)  the Purchaser shall first submit to and obtain the approval in writing of the Director to a Deed of Mutual Covenant and a Management Agreement to be entered into between the Purchaser and the assignees from him of undivided shares in the whole of the lot;

(ii)  the said Deed of Mutual Covenant and the said Management Agreement shall be in such form and shall contain such provisions as the Director shall approve or require and the same (and any approved amendment or amendments thereto) shall be registered by memorial against the lot in the Sai Kung New Territories Land Registry.

(iii)  upon being given approval to such Deed of Mutual Covenant and Management Agreement, the Purchaser shall adhere thereto and no amendment thereto shall be made without the prior written consent of the Director;

(iv)  any assignment or other disposal of any other undivided share or shares in the lot or any underletting shall be subject to and with the benefit of the said Deed of Mutual Covenant and the said Management Agreement;

(v)  in the said Deed of Mutual Covenant the Purchaser shall allocate to those parts of the lot which comprise the common areas of the lot including footpaths, pedestrian bridges, walkways, roads, gardens, open spaces, non-building area, loading and unloading spaces for refuse collection vehicles, and any recreational facilities and all other common parts, amenities and facilities, toilets, air-conditioning plant and equipment, refuse collection equipment and facilities, treatment and disposal plant, lobbies, stairways, escalators, arcades, common entrances, halls, passageways, and lifts contained in the lot, a number of undivided shares in the lot which in the opinion of the Director shall be appropriate to such common areas;

(vi)  the Purchaser shall assign free of costs the undivided shares referred to in sub-clause (a)(v) of this Special Condition to the Owners’ Corporation at its request when it is formed pursuant to the Building Management Ordinance (Cap 344);

(vii)  the Purchaser shall not assign mortgage or charge (save by way of building mortgage or charge under Special Condition No.(22)(c) thereof) or otherwise dispose of or part with the possession of any of the undivided shares referred to in sub-clause (a)(v) of this Special Condition or any interest therein or enter into any agreement so to do save by way of assignment to the Owners’ Corporation pursuant to sub-clause (a)(vi) of this Special Condition;

(viii)  management of the lot shall be given free of costs to the Owners’ Corporation at its request when it is formed pursuant to the Building Management Ordinance (Cap 344).

(b)  The Purchaser having complied with these Conditions, and notwithstanding anything herein contained, sub-clause (a) of this Special Condition shall not apply to:-

(i)  an assignment, underletting or charge of the lot as a whole, or

(ii)  an underletting of a part of the building erected thereon.”

5.  The management of the Estate is governed by the DMC entered into between Great Land (as First Owner), Siu Ka Nang and Leung Suk Yin (as Second Owners) and the Respondent (as Manager). 

6.  The interest in the Estate was notionally divided into 5,411 equal undivided shares which were allocated in the manner set out in Part I of the First Schedule of the DMC.  The 5,411 equal undivided shares have been allocated as follows:

“ COMMERCIAL ACCOMMODATION:

G/F	322
UG/F	251
	573

CAR PARKING SPACES: (225 NOS. @1 SHARE EACH)	225
Common Areas (including Club House)	733

SUMMARY:
RESIDENTIAL ACCOMMODATION:
BLOCK 1	1,986
BLOCK 2	1,894
COMMERCIAL ACCOMMODATION	573
CAR PARKING SPACES (225 NOS. @1 SHARE EACH)	225
COMMON AREAS (INCLUDING CLUB HOUSE)	733
TOTAL	5,411”

7.  The DMC contained the following provisions which are relevant for the purpose of this appeal:

(a)  Section B contained the following definitions:

“Commercial Common Areas	means those parts of the Commercial Development the exclusive use and enjoyment of which has not been assigned to any owner including, but not limited to ramps, entrances, lobbies, corridors, air conditioning plant rooms, lavatories but excluding anything contained within the Estate Common Areas, Residential Common Areas and the Garage Common Areas;
Commercial Common Services and Facilities	means those facilities in on or under the Estate and which serve the Commercial Development as a whole including, but not limited to, ducting, pipes, cables wiring, plant and machinery, electrical installations, fittings, equipment and apparatus, air conditioning plant and equipment but excluding anything contained in the Estate Common Services and Facilities the Residential Common Services and Facilities and the Garage Common Services and Facilities;
Commercial Development	means those areas on the ground floor, upper ground and external walls thereof within the Estate indicated on the Approved Plans for commercial use;
Commercial Unit	means a Unit situate in the Commercial Development;
Common Areas	means the Estate Common Areas, Residential Common Areas, the Commercial Common Areas and the Garage Common Areas;
Common Services and Facilities	means the Estate Common Services and Facilities, the Residential Common Services and Facilities, the Commercial Common Services and Facilities and the Garage Common Services and Facilities;
Estate	means the entire development on the Land known as Maritime Bay and comprising:- (i)  the Residential Development; (ii)  the Commercial Development; (iii)  the Garage; (iv)  the Common Areas; and (v)  the Common Services and Facilities.
Estate Common Areas	means those parts of the Estate the exclusive use and enjoyment of which has not been assigned to any owner including, but not limited to the roads, driveways, lanes and footpaths; landscaped open areas, loading and unloading spaces and areas; entrances, lobbies, staircases, ramps, landings, corridors and passages; refuse storage chambers; sewage treatment rooms, machine rooms, pump rooms, transformer and switch rooms, plant and equipment rooms and store rooms, on or in the Land and the Estates; the foundations, structure and external walls (other than those parts of the external walls forming part of the Commercial Development) of the buildings erected on the Estate; the management office and any other space on or in the Land and the Estate used for office or other accommodation of watchmen or caretakers or other staff employed on or in or for the Land and the Estate and all other communal areas within the Land and the Estate not used for the sole benefit of any owner or group of owners;
Estate Common Services and Facilities	means those facilities in on or under the Estate and which serve the Estate as a whole including, but not limited to, sewers, gutters, drains, watercourses, wells, pipes and ducts; pumps, tanks and sanitary fittings; wires, cables, electrical installations, fittings, equipment and apparatus; communal television and radio aerials, satellite signal or Cable television receiving equipment and associated equipment; fire protection and fire fighting systems, equipment and apparatus; security system, equipment and apparatus; refuse disposal equipment; lifts; escalators; air-conditioners and fans; and street lighting and other street furniture within the pedestrian way referred to in Special Condition No. (12) of the Government Grant and public pedestrian way referred to in Special Conditions No. (13) of the Government Grant and any other installations, systems, plant, equipment, apparatus, fittings, services and facilities used or installed in or for the benefit of the Land and the Estate as part of the amenities thereof and not for the sole benefit of any owner or group of owners;
Land	means the land registered at the Sai Kung New Territories Land Registry as Tseung Kwan O Town Lot No. 49;
Residential Common Areas	means those parts of the Residential Development the exclusive use and enjoyment of which has not been assigned to any owner including, but not limited to, entrances, lobbies, staircases, landings, corridors and passages, lift wells, plant and equipment rooms, roofs, the Recreational Areas and Facilities but excluding anything contained within the Estate Commons Areas, Commercial Common Areas and the Garage Common Areas;
Residential Common Services and Facilities	means those facilities in on or under the Estate and which serve the Residential Development as a whole including but not limited to, ducting, pipes, cables, wiring, plant and machinery, electrical installations, fittings, equipment and apparatus and lifts but excluding anything contained in the Estate Common Services and Facilities, the Commercial Services and Common Facilities and the Garage Common Services and Facilities;
Residential Development	means the two residential tower blocks erected on the Estate as indicated on the Approved Plans for residential use;
Residential Unit	means a Unit situate in the Residential Development;
Unit	means a part of the Estate and exclusive use and enjoyment of which has been or is intended to be assigned to an owner.”

There is no definition for Commercial Accommodation.  However, it is noteworthy that there are Common Areas and Common Services and Facilities within the Commercial Development.  

(b)  Section C dealt with the rights of the owners, in particular the exclusive right and privilege to hold, use and occupy and to make additions, improvements to his Residential Unit or Commercial Unit:

“Rights attaching to each share	1.   Each share shall during the residue of the term and any renewal thereof subject to the covenants and terms contained in the Government Grant and in this Deed be held by the person or persons from time to time entitled thereto together with: (a)  the full and exclusive right and privilege to hold, use an occupy the Unit designated opposite to it in the First Schedule hereto; and (b)  subject to the House Rules, the benefit, insofar as applicable, of the easements, rights and privileges set out in Part I of the Second Schedule; but subject to the exceptions and reservations set out in Part II of the Second Schedule.
Rights of First Owner	2.   The First Owner shall during the residue of the term and any renewal hereof subject to the covenants and terms contained in the Government Grant and in this Deed have the full and exclusive right and privilege to hold, use, occupy and enjoy the whole of the Land and the Estate Together with the appurtenances thereto save only the First Assigned Premises and the common Areas.
Rights of Second Owner	3.   The Second Owner shall during the residue of the term and any renewal thereof subject to the covenants and terms contained in the Government Grant and in this Deed have the full and exclusive right and privilege to hold, use, occupy and enjoy the First Assigned Premises Together with the appurtenances thereto.
Right to make additions etc.	4.   Each owner of a Residential Unit or Commercial Unit shall have the right subject to the House Rules to make or install in his own Unit at his own expense any additions, improvements, lights, fittings, fixtures or decorations which can be installed, fixed and removed without structural alteration or damage and without affecting the existing design or external appearance of the façade or elevations of any building and each such owner shall have the right to remove the same at his own expense.”

(c)  Section E dealt with the obligations of the owners in respect of his Residential Unit or Commercial Unit:

“Rates and taxes	4.   All existing and future taxes, rates, assessments, property tax and outgoings of every description for the time being payable (Government Rent excepted) in respect of any Unit or of any other part of the Estate the exclusive use, occupation and enjoyment of which has been assigned to any owner shall be borne by the owner thereof who shall pay them directly to the appropriate authority.
Utilities	5.   Charges for the supply and consumption of water, electricity, gas and other utilities in connection with any Unit shall be paid directly to the appropriate utility company or authority by the owner of such Unit.
Management charges	6.   Each owner shall upon demand pay to the Managers the Management Charges in respect of any Unit owned by him, calculated in accordance with the provisions of Section J of this Deed.
Repairs	7.   Each owner, at his own expense, shall keep: (a)  the interior of each Residential Unit or Commercial Unit of which he is for the time being the owner and of any other part of the Estate the exclusive use, occupation and enjoyment of which has been assigned to him, and the doors and windows thereof, and all the fixtures and fittings, plumbing, electrical and other installations therein; and (b)  any Carpark of which he is for the time being the owner; in good any substantial repair and condition and shall preserve and maintain the same in a manner consistent with the preservation of the Land and the Estate as a high quality residential/commercial estate.”

(d)  Section J dealt with the management charges and Clause 1 covered costs to be borne by all the owners.  Of particular relevance for present purposes are the following sub-paragraphs in Clause 1:

“Costs to be borne by all the owners

1 … (e)  the costs of maintaining and keeping in good repair and condition the Common Areas; (f)  the costs of cleaning and lighting the Common Areas; (g)  the costs of maintaining and keeping in good repair and condition the Common Services and Facilities; (h)  the costs of running and operating the Common Services and Facilities; … (l)  all fees costs and expenses incurred by the Managers in complying with the provisions of Special Condition (13) of the Government Grant so as to permit the connection to the Estate of the future public footbridge and the provision of a 24 hour free public access way through the Estate referred to in that Special Condition; … (w)  any other costs, charges, and expenses properly incurred by the Managers in the performance of any duty or in the exercise of any power hereunder; but such costs, charges and expenses shall exclude costs, charges and expenses of a capital nature relating to the Estate and for the replacement of installations, systems, equipment and apparatus within the Common Areas and the Common Services and Facilities which shall be payable out of the Capital Funds hereinafter mentioned.”

(e)  The following clauses in Section L are also relevant:

“Common Areas Plan	8.  The First Owner shall prepare plans showing the Common Areas and shall cause the same to be kept at the office of the Managers within the Estate available for inspection by the owners free of charge.
Building Management Ordinance	9.  Nothing in this Deed shall prejudice the operation of the Building Management Ordinance.”

(f)  Part I of the Second Schedule set out easements (more accurately in legal terms, quasi-easements) granted to owners. Clause 1 is relevant:

“Right to pass

1.  Full right and liberty for the owner for the time being, his servants, agents and licensees (in common with all other persons having the like right): (i)  of a Residential Unit to go, pass and repass over and along and upon the Estate Common Areas and Residential Common Areas; (ii)  of a Commercial Unit to go, pass and repass over and along and upon the Estate Common Areas and Commercial Common Areas; (iii)  of a Carpark to go, pass and repass over and along and upon the Estate Common Areas and Garage Common Areas, for all purposes connected with the proper use and enjoyment of his Unit.”

(g)  Pursuant to Clause 3(a) of the Second Schedule, the shares allocated to the Common Areas and Common Services and Facilities were assigned to the Manager to hold on trust for general benefit of all owners on the same date as the DMC, viz 24 March 1999.  

8.  The physical layout of the Upper Ground Floor at the time of the DMC is set out in an approved building plan of 13 October 1998.  There is also a simplified version of the layout plan which, we were told, was attached to sale brochure of the Estate. These are the plans which Mr Lee, counsel for the Manager, accepted as admissible evidence for the layout.  Counsel also agreed that the layout forms part of the factual matrix which the Court should take into account in the construction of the DMC.

9.  There is another plan of the Upper Ground Floor of the Estate in the evidence.  It is the plan (“the L8 Plan”) which was said to have been kept at the office of the Manager under Clause 8 of Section L of the DMC.  It was a plan bearing a date of August 2009.  Mr Lee properly accepted that the L8 Plan was made after the date of the DMC and the identifications of Common Areas on this plan could not be determinative of the question which this Court has to resolve.  We shall come back to the significance of the L8 Plan later.  

10.  Based on the information contained in these plans, the following features and facilities can be found on the Upper Ground Floor at the time of the making of the DMC (and there is no dispute between the parties on the same):

(a)  There were seven shop units on that floor;

(b)  The PPW was situated between the shop units running across the floor from northwest to southeast leading to exits, on the northwest side through a footbridge to Hang Hau MTR Station and on the southeast side to the shopping mall of another estate;

(c)  Apart from the PPW, there were other passageways or corridors on that floor;

(d)  There were lifts serving the Residential Units (which are at the 2^nd to 47^th floors) and a lift lobby at the Upper Ground Floor.  Residents of the Residential Units could alight from the lifts at this floor and use the PPW to gain access to the footbridge linking the MTR station;

(e)  There were other common facilities like lavatories, plants room, escalator, staircases, pump room, switch room.  Some of these were identified on the L8 Plan as Residential Common Areas whilst other were identified as Estate Common Areas;

(f)  There were 61 car parking spaces on that floor with driveways, a section of the driveway also served as Emergency Vehicular Access.

11.  The Applicant contended that the PPW is “an Estate Common Area” as defined in the DMC.  The Respondent denied and contended that the PPW is part of the Commercial Accommodation reserved by Great Land under the DMC.

12.  The case was tried before the Judge in the Lands Tribunal.  On 3 August 2018, he rejected the Applicant’s contention and dismissed his claim.  The Applicant sought leave to appeal, which was refused by the Judge on 19 December 2018. 

13.  On 14 May 2019, the Court of Appeal granted leave to appeal after hearing the parties.

14.  We heard the appeal on 20 May 2020 and indicated we would hand down our judgment in English.  If the Applicant wishes to have oral interpretation of the judgment, he can make an appointment with the court interpreter through the clerk of Lam VP.

Errors in the judgment below

15.  In the judgment of 3 August 2018 (“the Judgment”), the Judge’s reasons for determining that the PPW is not Estate Common Areas are as follows:

(a)  He accepted the L8 Plan produced by the Manager was the one kept pursuant to Clause 8 of Section L.  As the PPW was not identified as Common Area in that plan, the Judge held on this reason alone the Applicant’s claim must fail[1];

(b)  He held that the PPW could not be regarded as coming within the expression “corridors and passages”.  Had it been the intention of the draftsman to include PPW within the definition of Estate Common Area, the Judge thought, there would be specific reference to the PPW as similar reference was found in the definition of Estate Common Services and Facilities in respect of street lighting and other street furniture with the PPW[2];

(c)  As there was no evidence to show that an owner of a resident unit had to go or pass through the PPW to reach their residential units, there was no need to provide for a right for such owner to do so by identifying it as Estate Common Area[3];

(d)  He agreed with the Manager that as the ownership of the shop units were all retained by Great Land, there was no Commercial Common Area.  If Great Land were to dispose of the shop units in future, a sub-deed of mutual covenants has to be executed[4];

(e)  Though the expenses relating to the PPW should be borne by all owners under Clause 1(l) of Section J, it does not follow that PPW is Common Area[5];

(f)  He rejected the argument of the Applicant that by virtue of the identification of the PPW as “pedestrian thoroughfare” on the approved building plan, it must be Common Area[6].

16.  With respect, the Judge’s reasoning is seriously flawed and we cannot uphold the same.

17.  First, it is plainly wrong for the Judge to hold that the L8 Plan was determinative of the issue. Whilst Clause 8 does impose an obligation on the part of Great Land to prepare a plan of the Common Areas to be kept at the Manager’s office, it does not even purport to provide that such a plan would have the legal effect of conclusively determining whether a specific part of the Estate is Common Area.  That issue has to be decided by reference to the proper construction of the DMC against the relevant factual and legal context.  Since the L8 Plan only came into existence after the execution of the DMC, it could not per se be part of such context.  The Judge erred in law in believing that the L8 Plan is conclusive. As we said, Mr Lee very fairly and properly accepted this position. 

18.  Further, there was no explanation as to the lapse of time between the date of the L8 Plan (in August 2009) and the date of the DMC (24 March 1999).  Clause 8 envisaged a plan to be prepared and kept at the office shortly after the execution of the DMC.  The Judge failed to address this discrepancy before he accepted the L8 Plan to be the plan prepared pursuant to Clause 8.  There was also no consideration of the criteria adopted and the bases for which the maker of the L8 Plan formed the requisite opinions in identifying some parts as Common Areas and not identifying any Commercial Common Areas on the plan. 

19.  Whilst the marking of the PPW as pedestrian thoroughfare on the approved building plan cannot be determinative, the significance of that plan, as we shall explain further below, is that the physical state and layout of the Upper Ground Floor at the time of the execution of the DMC were depicted in the approved building plan. The Judge failed to have regard to the physical state and layout of the building and the commonly contemplated function of the PPW to the owners which is a relevant factual matrix in the construction of the DMC.

20.  The same comment can be made in respect of the commonly contemplated use of the PPW as a means of access by the owners of the Residential Units.  Whilst there were other means of access, the fact that there was a lift lobby at the Upper Ground Floor which connected by a passageway to the PPW is a very telling indicia of the common contemplation on the use of the PPW by such owners.  This is particularly so when the PPW connected to the footbridge which linked the Estate to a MTR station.

21.  Insofar as the Judge regarded that one can only pay heed to such commonly contemplated use if it provided the only means of access, it is an error of law.  The definition for Estate Common Areas in the DMC does not set such criterion.  It applies to all communal areas (including corridors and passages) within the Land and the Estate not used for the sole benefit of any owner or any group of owners.  The PPW is clearly not for the sole benefit of the owners of the Commercial Units.

22.  We also cannot accept that the PPW could not be regarded as “corridors and passages” within the definition of Estate Common Areas.  There is no rule of law prescribing that the wide meaning of this expression should not be given its full effect when a particular part of the passageway can be more specifically described.  Due to the different nature of the subject matters, the comparison with the description of the street lighting and other street furniture in the definition for Estate Common Services and Facilities is of limited assistance.  The latter was clearly inserted to cover the obligation under Special Condition 20 of the Grant.  Other than that, the Judge did not explain why the PPW could not come within the wide general meaning of this expression in the definition for Estate Common Areas.

23.  The Judge also erred in holding that there is no Commercial Common Area because Great Land retained ownership of all the shop units.  Such holding failed to give proper effect to the DMC.  It also failed to give effect to the assignment of the Common Areas to the Manager.  It appears the Judge disregarded the provisions for Commercial Common Areas and Commercial Common Services and Facilities as if they were otiose notwithstanding that the evidence clearly shows that such facilities and areas were physically in existence at the time of the DMC.  The scheme of the DMC (underpinned by Special Condition 24 of the Grant) provides for the communal ownership of the Commercial Common Areas.  As Commercial Common Areas are part of the Common Areas, the shares pertaining to the same were assigned to the Manager as trustee under the assignment of the Common Areas of 24 March 1999.  It matters not that Great Land has retained the ownership of the shop units.

24.  Though we accept that it does not follow necessarily from the obligation of all owners to pay for the expenses relating to the PPW under Clause 1(l) of Section J of the DMC that it is Common Areas, it can be a relevant pointer when other clauses in the DMC are ambiguous.  As discussed below, the construction exercise is an iterative process and all relevant pointers should be taken into account.

25.  In our judgment, the Judge did not correctly analyse the terms of the DMC as a whole against the relevant context.  Therefore, we have to construe it afresh in resolving this appeal.  

The proper construction of the DMC

26.  This Court (differently constituted) recently examined the relevant case law on the construction of a deed of mutual covenants in Sino Channel Holdings Ltd v Vast Faith Investment Ltd [2020] HKCA 311 at [19] to [21] and there is no need for us to repeat the citation of the authorities here.  In a nutshell, the DMC must be construed in the context of the document as a whole and in light of the factual and legal background (which also provides the context) to its execution, and having regard to the practical objects which it was intended to achieve.  The overriding objective in construction is to give effect to what a reasonable person would have understood the parties to mean[7].  Instead of focusing on the ordinary and natural meanings of a few words in a clause, very often the broader context provides surer guide[8].  But textual analysis and contextualism are both tools in the exercise of construction and the utility of each tool will vary according to the circumstances of each instrument[9]. Thus, construction is a unitary exercise involving an iterative process[10].

27.  We shall start with a consideration of the legal context and the purpose of the DMC.  A DMC is the conveyancing techniques adopted in Hong Kong for dealing with ownership of units in a multi-storey building.  The system has been explained in Jumbo King Ltd v Faithful Properties Ltd & Others (1999) 2 HKCFAR 279 and Kung Ming Tak Tong Co Ltd v Park Solid Enterprises Ltd (2008) 11 HKCFAR 403.  In a multi-storey development with blocks consisting of many units, those who acquired ownership in a unit would, as a matter of common law, become co-owners with the owners of other units.  As co-owner, because of the principle of unity in possession, each of them is entitled to possession of every part of the Land, including the units sold to other owners.  One of the purposes of a DMC is to restrict the exercise of such right of possession by mutual covenants so that the owner of one unit would effectively have exclusive use and occupation of his unit.  Unless a restriction over the use and occupation of a particular area is specifically set out in the DMC (which would operate as a covenant running with the interest in land[11]), the default position is that each owner has the right to enter and use such area by virtue of his co-ownership of the land.  As we shall see, the same concept is reflected in the statutory regime under the Building Management Ordinance Cap 344.    

28.  Further, an estate development has many communal facilities and common areas.  The management and expenses concerning such management have to be agreed upon between the co-owners of the land.  The obligations and rights of the owners concerning communal facilities and common areas have to be regulated.  Thus, another purpose of a DMC is to set out the agreed arrangement in these respects which would be binding on the owners (and every successor in title) and the manager. Though it is common to find in a DMC references to easements in describing the right of an owner to use the common areas, as a matter of law there cannot be any real easement over one’s own land and legally they operate as contractual quasi-easements[12].  

29.  Apart from the common law rule on co-ownership and the conveyancing techniques to provide for ownership and rights in multi-storey buildings, the legal context also include the statutory provisions in the Building Management Ordinance Cap 344 (“BMO”)which governs the management of multi-storey buildings in Hong Kong.  Prior to 1993, the statute was intituled as the Multi-Storey Buildings (Owners Incorporation) Ordinance which was first enacted in 1970.  It is therefore a piece of legislation well-known to conveyancers in Hong Kong and every draftsman of a DMC must have regards to in the preparation of a DMC.  The DMC with which we are concerned in this appeal is dated 24 March 1999. 

30.  There are statutory provisions in the BMO which regulate the use of common parts and the management of multi-storey building.  Section 2 of the BMO has a definition for common parts.  It reads:

“ 2. Interpretation

In this Ordinance, unless the context otherwise requires—

…

common parts (公用部分) means—

(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 (Amended 8 of 1993 s. 2)

(b)  unless so specified or designated, those parts specified in Schedule 1; (Amended 5 of 2007 s. 40)”

31.  In the First Schedule of the BMO, passageways, corridors, staircases, landings are included under paragraph 8.  In other words, unless a particular passageway or corridor in the Estate is specified or designated in the DMC as being for the exclusive use, occupation or enjoyment of an owner, it is deemed to be a common part.

32.  The present appeal concerns the Estate which is a composite development with Commercial Units on the Upper Ground and Ground Floors and two blocks of Residential Units starting from the Second Floor.  However, the PPW at the Upper Ground Floor serves as a means of access for both the Commercial and the Residential Units.  We have described the PPW in the context of the layout of the Upper Ground Floor and its commonly contemplated function[13].  As we said, the PPW does not serve the Commercial Development exclusively.  Instead, given that there was (and still is) a lift lobby for the Residential Units at the Upper Ground Floor and the likelihood of the owners of the Residential Units using the PPW as a means of access, it should be regarded it as a common passageway for both Commercial Units and Residential Units owners.

33.  Against the above factual and legal context, the crucial question is whether the DMC specified or designated the PPW as a part for the exclusive use, occupation or enjoyment of an owner. In this connection, the purposes of the instrument discussed at [27] and [28] above have to be considered together in the iterative process. In many cases, by the very nature of the function and use of communal areas and facilities, they are unlikely to be specified as areas for the exclusive use and occupation of one owner. Conversely, an area specified as under the exclusive right to use and occupation of one owner is unlikely to be subject to communal uses on a regular basis though there could be rare exceptions like a side of an external wall. Thus, the commonly contemplated use of an area a relevant pointer in the construction process.

34.  In the present instance, Mr Lee submitted the DMC had specified the PPW as a part for the exclusive use, occupation or enjoyment of Great Land by the allocation of shares in Part I of the First Schedule (set out at [6] above) and the operation of Clause 1(a) of Section C of the DMC.

35.  With respect, we cannot accept that the allocation of shares in First Schedule, read together with Clause 1(a), against the relevant context discussed above has such effect.

36.  Under the First Schedule, 251 shares were allocated for the Commercial Accommodation at the Upper Ground Floor.  At the same time, 733 shares were allocated for Common Areas (which, as provided in the definitions at Section B of the DMC, includes Estate Common Areas, Commercial Common Areas and Residential Common Areas). Hence, by the mere reference to the allocation of shares in the First Schedule, one cannot tell if the PPW is part of the Commercial Accommodation or part of the Common Areas. 

37.  Though the 251 shares were allocated in respect of the Upper Ground Floor, it is clearly not the intention of the parties to the DMC that the whole of the Upper Ground Floor was to be regarded as Commercial Units for which exclusive right to use and occupy was to be held by the First Owner.  As mentioned above, various parts of the Upper Ground Floor were identified as Estate Common Areas, Residential Common Areas and Garage Common Areas in the L8 Plan.  Though the L8 Plan had not been in existence when the DMC was executed, there is nothing to suggest that the actual use of these parts at that time were not as depicted in the L8 Plan.  It must be accepted (and we do not understand Mr Lee to contend otherwise) that at the very least these Common Areas on the Upper Ground Floor could not have been included in Great Land’s exclusive right to use and occupy under Clause 1(a) of Section C.

38.  Further, the car-parking spaces on the Upper Ground Floor were also allocated separate shares and could not therefore be included in the Commercial Accommodation. 

39.  The exclusive right under Clause 1(a) of Section C is subject explicitly in Clause 1 itself to the covenants and terms contained in the Grant.  As mentioned above, Special Condition 13 provided for the free public use of the PPW.  Such public use must include the use of the PPW by owners of the Residential Units.  Thus, it could not fall within the exclusive right to use and occupy provided for under Clause 1(a).  

40.  Moreover, Special Condition 24(a)(v) of the Grant stipulated that the DMC must allocate shares in respect the parts of the lot which comprise the common areas including, amongst other things, lobbies, stairways, escalators, arcades, common entrances, halls, passageways.  Pursuant to Special Condition 24(a)(vi) those shares were to be assigned to the Owners’ Corporation at its request.  In fact, the shares allocated to the Common Areas were assigned to the Manager to hold on trust for the owners.  In the Assignment of 24 March 1999, the property which were assigned as described in its Schedule included “the exclusive right and privilege to hold use occupy and enjoy … the Common Areas … as defined in the DMC”.  Thus, all Estate Common Areas, Residential Common Areas, the Commercial Common Areas and the Garage Common Areas provided under the DMC (collectively defined as the Common Areas) were assigned to the Manager as trustee for all owners.  Therefore, those Common Areas could not be included in Great Land’s exclusive right to use and occupy under Clause 1(a) in respect of the Commercial Units. 

41.  Hence, the reference to the Upper Ground Floor in the First Schedule under Commercial Accommodation could not have meant the whole of the Upper Ground Floor.  One must have regard to the actual layout and commonly contemplated use of the different parts of the floor at the time of the DMC to see if the area in question can constitute a Commercial Unit within the meaning of Clause 1(a). 

42.  The definition section in the DMC also indicates that even within the Commercial Development there were parts on the Upper Ground Floor which could not fall within the scope of Commercial Accommodation.  The Commercial Development is made up of Commercial Units and Commercial Common Areas.  Whilst Great Land has acquired the exclusive right to use and occupy the Commercial Units under Clause 1(a) of Section C, it has not acquired similar right with regard to the Commercial Common Areas since the rights pertaining to such areas fall within the shares allocated for Common Areas.  Those shares had been assigned to the Manager.

43.  In light of Special Condition 24, it is not correct to proceed on the basis that Great Land as developer and First Owner was at liberty to disregard the provisions for Commercial Common Areas since the Commercial Units are all retained by Great Land in single ownership.

44.  In any event, in light of the commonly contemplated use of the PPW by owners of the Residential Units, the PPW should not be regarded as situated within the Commercial Development. The scheme of the DMC is that there are some common areas and facilities which serve both the Commercial Units and Residential Units.  Such common areas and facilities are defined in the DMC as Estate Common Areas and Estate Common Services and Facilities.  Pursuant to Clause 1(i) of Second Schedule Part I, an owner of a Residential Unit can go, pass and repass over and along the Estate Common Areas.  

45.  Mr Lee did not dispute the rights of the owners of the Residential Units to use the PPW for access purposes.  However, he submitted that such rights stemmed from Special Condition 13 of the Grant instead of the rights under the DMC to go, pass and repass the Estate Common Areas. 

46.  With respect, we cannot accept this submission.  The fact that the PPW is required to be open to the public under Special Condition 13 does not negate the acquisition of the right to go, pass and repass it by an owner of a Residential Unit under the DMC if the PPW is Estate Common Areas.  Whether it is so depended upon if the relevant criteria laid down in the definition for Estate Common Areas are met, viz a corridor or passage not used for the sole benefit of any owner or group of owners and that the exclusive use and enjoyment of which had not been assigned to any owner.  For reasons already canvassed, we are of the view that these criteria have been met.  

47.  Moreover, in light of Special Condition 24 of the Grant, the DMC had to incorporate the rights and obligations under Special Conditions 13, 20 and 24(v) and (vi) before it was approved by the Director of Lands.  Against such background, as the PPW is a passageway within the scope of common areas under Special Condition 24(v), there is no basis for adopting a construction of “Common Areas” in the DMC contrary to that provision.  

48.  Mr Lee also relied on several authorities[14] in contending that as the Commercial Units had been retained by Great Land in single ownership, there was no need to have Commercial Common Areas and those features identified as Commercial Common Areas in the DMC should be regarded as falling within the single ownership of the Great Land with exclusive right to use and occupy as it deemed fit. 

49.  We do not find those authorities germane to the resolution of this appeal.  As held by Kwan V-P[15], the construction of a DMC is a unitary exercise.  Each DMC has to be construed against its own scheme and factual matrix.  The cases cited by Mr Lee related to a wall over a roof and internal partition walls between units.  The relevant considerations as to the sole and exclusive use of such walls are obviously different from the PPW.  We cannot find any statement of principle in those cases to support the proposition advanced by Mr Lee.

50.  Furthermore, under the DMC, the shares for the Common Areas (which included the Commercial Common Areas) were assigned, no doubt as substantial fulfilment of the obligation under Clause 3(a) of Part II of the Second Schedule in the DMC and Special Condition 24 of the Grant, to the Manager to hold on trust for all the owners on the same date when the DMC was executed.  Thus, the status of a part of the Upper Ground Floor as the Commercial Common Areas had to be determined by reference to the actual layout and functions of the part as at the date of the DMC as opposed to the subjective intention of Great Land on retaining the Commercial Units in single ownership.  Irrespective of that intention, provided there were areas falling within the definition of Commercial Common Areas, they would fall within the scope of the allocation of shares for Common Areas and the Assignment of the exclusive right to use and occupy of the same to the Manager.

51.  Though Clause 3(b) of Part II of the Second Schedule of the DMC permits Great Land to alter, amend, vary or add to the Approved Plans, that right is confined to those parts of the Estate the exclusive use and occupation of which is enjoyed by it.  Since the shares allocated for Common Areas (and the related exclusive right to use and occupation) had already been assigned to the Manager, Great Land could not unilaterally alter, amend or vary those parts which were covered by that assignment.

52.  Mr Lee submitted that as the PPW situated in between the shop units, it should be regarded as part of the Commercial Development and Commercial Accommodation.

53.  We accept that the PPW could be regarded as situated within the Commercial Development.  But as we have seen, according to the scheme of the DMC, there are Commercial Common Areas and Estate Common Areas within the Commercial Development.

54.  As regards Commercial Accommodation, there is no definition for the expression in the DMC.  Since the expression was only used in Part I of the First Schedule for allocation of shares, and different shares were allocated for Common Areas, the proper construction is that Commercial Accommodation does not include Estate Common Areas and Commercial Common Areas on the Upper Ground Floor.

55.  In the present case, in view of the other pointers discussed above, it is not necessary for the Court to rely on the sharing of costs and expenses in keeping the PPW under Section J Clause 1(l) to come to the conclusion that it is an Estate Common Area.  As a general proposition, we would accept that the responsibility to pay for the costs of maintenance and upkeep can be a relevant pointer in the iterative process of construction.

56.  In our judgment, Great Land did not have exclusive right to use and occupy the PPW and it is an Estate Common Area under the DMC.

57.  We shall therefore set aside the judgment below and grant a declaration to reflect our conclusion at [56] above.

58.  Mr Lee informed this Court on behalf of the Manager that it would abide by the determination in our judgment and manage the Estate accordingly.

59.  In light of that, the Applicant sensibly agreed that he would not pursue further the claim for breach of duties in these proceedings.  As mentioned in the course of the appeal, there are other considerations, apart from the correct construction of the DMC in the assessment of such claim.  An important matter in that regard is the alleged decision of the 4^th Owners’ Committee and the resolution of the general meeting of the owners and subsequent developments pleaded at paragraphs 7.7 to 7.11 of the Notice of Opposition.  This Court has not heard submissions and will not express any view in those regards. 

60.  The Applicant indicated he would reserve the right to take action if the Manager does not act in accordance with the findings in this judgment in the future.

61.  We shall therefore allow the appeal and grant the declaration as set out above.  We will also order the Manager to pay the costs of the Applicant in this appeal and below, such costs are to be taxed if not agreed.