SUPERENE LTD AND ANOTHER v. METRO FAIR LTD

DCCJ 3025/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3025 OF 2008

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JUDGMENT

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INTRODUCTION

1. The present case is about a portion part of the external wall of Zhongda Building (“the Building”), formerly known as Siberian Fur Building.  The Building is a multi-storey building erected in about 1973 in Tsimshatsui.  On its ground floor, there were a shop (“the Shop”) and the main entrance (“the Main Entrance”), both of them were facing Haiphong Road. 

2. The Building had been in a single ownership until 30 May 1994 when the sole owner Universal Triumph Limited (“UTL”) executed a Deed of Mutual Covenants (“DMC”) with its first purchaser.  Then in 1995, the defendant, a limited company registered in Hong Kong, purchased from UTL and has since became the owner of the Shop.  In 2006, the 1^st plaintiff (“the plaintiff”),[1] also a limited company registered in Hong Kong, by four separate transactions purchased from various vendors and has since became the owner of the 2^nd, the 3^rd and the 4^th floors of the Building and also the undivided shares in the land relating to the Building Common Areas as defined in the DMC. 

3. The dispute between the plaintiff and the defendant concerns a narrow strip of external wall (“the External Wall”) of the Building facing Haiphong Road between the Shop and the Main Entrance.  The incident which triggered the present lawsuit occurred in May 2008.  At the time, the plaintiff granted licences to two of its tenants to erect two signages, in the form of plastic laminate light boxes, on that vertical half of the External Wall which was closer to the Main Entrances (which the plaintiff calls “the P External Wall”).  That led to the defendant writing letters to the plaintiff’s tenants alleging that they had trespassed on the defendant’s property and demanding that the signages be removed. 

THE RESPECTIVE CLAIMS OF THE PARTIES

4. The plaintiff does not dispute that the other vertical half of the External Wall which was closer to the Shop (which the plaintiff calls “the D External Wall”) was the property of the defendant.  However, it is the plaintiff’s pleaded case that the plaintiff is the lawful owner of “the P External Wall”.  In this regard, the plaintiff relies on two of the 1996 assignments.  The plaintiff also seeks to argue that “the P External Wall” is part of the Building Common Area and as such is covered by Clause 17(a) of the DMC which confers on UTL as the Registered Owner (and the plaintiff as its successor in title):

“… the exclusive right to erect … or permit any person to erect … such signs, sign boards and/or advertisements whether illuminated or otherwise … at such positions on the external walls” (except specifically assigned) … as the Registered Owner shall determine in its sole discretion”.

The plaintiff seeks, among other things, (i) a declaration that it is the registered owner and entitled to the possession of “the P External Wall” and (ii) an injunction that the defendant be restrained from trespassing upon the signages or “the P External Wall”. 

5. I shall digress for a moment by noting that the first assignment by UTL as the vendor with its first purchaser West Dynamic International Limited was executed on 2 June 1994.  However, the DMC was executed by UTL and West Dynamic on 30 May 1994 which was before the assignment.  That appears to be an irregularity. Nevertheless, when the matter was raised during the hearing, neither the plaintiff nor the defendant took any issue about it and both of them were happy to proceed on the basis that the DMC is a valid legal document. 

6. Going back to the present case, the defendant’s case is that the whole of the External Wall is its property by virtue of the Assignment.  It also counterclaims by seeking, among other things, (i) a declaration that it is the registered owner and entitled to the possession of the whole of the External Wall; (ii) an order that the plaintiff remove the signages; and (iii) an injunction that the plaintiff be restrained from erecting any signage or otherwise trespassing upon the External Wall.

THE AGREEMENT AND THE ASSIGNMENT

7. The issues in the present case stemmed from the unsatisfactory use of black and white photocopies of photographs for the purpose of defining or identifying the property which was the subject matter of the conveyancing transaction between UTL and the defendant. Had more care been taken in the preparation and drafting of the Sale and Purchase Agreement dated 9 May 1995 (“the Agreement”) and the subsequent assignment dated 10 July 1995 (“the Assignment”), the present dispute could have been avoided. 

8. As regards what was assigned to the defendant, the parcel clause of the Assignment says:-

“1. The Property:-

(a) Lot number, sections, undivided shares, description and address, etc. : -

ALL THOSE 13 equal undivided 148^th parts or shares of and in [the piece of land] And of and in … [the Building] TOGETHER with the exclusive right and privilege to hold use occupy and enjoy ALL THAT:-

(a)  Ground Floor & Read Yard of the said Building as shown and coloured pink on Plan I annexed hereto;

(b)  Portion of the Exterior Part of the Canopy … erected between the Ground Floor and the 1^st Floor of the Building … facing Haiphong Road as shown on the Plan II hereto annexed and thereon coloured Pink;

(c)  the ceiling under the Canopy … outside the Premises facing Haiphong Road as shown on the Plan III hereto annexed and thereon coloured Pink;

(d)  Portion of the External Wall of the Main Entrance to the Building facing Haiphong Road as shown on the Plan IV hereto annexed and thereon coloured Pink.” 

(b)  Exceptions and reservations:-

(i)  …

(ii)  Excepting and reserving unto the Vendor its successors and assigns other than the Purchaser :-

(1)  …

(2)  all such exclusive rights and privileges as are excepted and reserved unto the Vendor under [the DMC].”

9. Although the parcel clause refers to Plan I to Plan IV, there is only a one-page document annexed to the Assignment.  The upper part of that document is a block plan showing the position of the Building on Haiphong Road.  The lower part of it is a plan of the ground floor of the Building (“the Assignment Plan”). 

10. In the circumstances, the plaintiff and the defendant agreed that the Agreement could be referred to for assistance.  First, it is noted that the Agreement contains the following warranties given by UTL as the vendor which are not contained in the assignment:

“32. It is a condition precedent to completion of the purchase herein by the Purchaser that the following warranties by the Vendor shall be true and accurate:

(a) the partition wall in the premises (as shown coloured red on the Plan V thereto annexed) is a non-structural wall and accordingly may be demolished without the need for any approval and/or consent from the Building Authority and/or any other relevant government department or authority; and

(b) such demolition will not constitute any breach of any applicable ordinance or bye-law or regulation thereunder for the time being in force; and

(c) the said partition wall may be demolished without the need for any approval and/or consent from the Manager of the Building and that such demolition will not constitute any breach of any of the covenants and provisions of the Deed of Mutual Covenant and Management Agreement Memorial No. 6053796; and

(d)  the Vendor will at its own costs and expenses procure a certificate to be given by an architect (an authorized person within the meaning of the Buildings Ordinance) certifying that the matters warranted in such-clause (a) and (b) above within one month from the 26^th day of April 1995 and production of such certificate shall be a condition precedent to completion of the purchase by the Purchaser.”

11. Second, the description of the property agreed to be sold under the Agreement is identical to that given in the Assignment.  There are five annexures, marked “Plan I” to “Plan V” respectively, to the Agreement:

(a)  Plan I is the plan of the ground floor of the Building with the areas of the Shop and the Rear Yard covered in pink.  However, the three structural columns of the Building inside the Shop on its left (represented by three rectangles) are also covered in pink; 

(b)  Plan II is not a plan but a black and white photocopy of a photograph of the Shop shot from the opposite side of the road with a portion of the Canopy coloured pink;

(c)  Plan III is a black and white photocopy of a photograph of the Shop with the ceiling under the relevant portion of the Canopy coloured pink;

(d)  Plan IV is a black and white photocopy of a photograph showing part of the Shop, the External Wall and the Main Entrance.  There is a vertical strip coloured pink in the middle of the photograph.  On the left of the pink strip is the Shop. On the right of the pink strip is another vertical strip (“the uncoloured strip”) and further to the right is the Main Entrance;

(e)  Plan V is the ground floor plan of the Building.  On that plan, there is a straight pink line representing the original partition wall (“the Old Wall”) which separated the Shop and the lift lobby.  On the right of the pink line, there is another straight line running parallel to it.  This second straight line represents of the position of the new partition wall (“the New Wall”) as it now stands.  The demolition of the Old Wall and the erection of the New Wall result in a slight enlargement of the Shop and a corresponding reduction of the lift lobby. 

12. Third, if one compares Plan I and Plan V, Plan I shows only the condition of the Shop and the lift lobby after the moving of the partition wall towards the lift lobby.

13. Fourth, if one compares Plan I, Plan V and the Assignment Plan:

(a)  Plan I and the Assignment Plan show only the New Wall but not the Old Wall;

(b)  on the Assignment Plan, at the right corner of the front opening of the Shop, there is a small rectangle representing yet another structural column of the Building (“the small column”);

(c)  the small column appears only in the Assignment Plan but not in Plan I or Plan V; and

(d)  it appears that the Old Wall had only been built up to the small column so that “the D External Wall” was not part of the Old Wall but was the façade of the small column fronting Haiphong Road.  However, whether this is in fact the case was not covered by evidence and was not the subject of any submissions during the proceedings.

The issues

14. During the hearing, Mr Lee, counsel for the plaintiff, informed that the plaintiff no longer pursued the claim for a declaration that the plaintiff is the registered owner of and entitled to the possession of “the P External Wall”.  Although at one stage, a preliminary issue was raised as to whether UTL could lawfully assign any of the common parts/Building Common Areas (including the external wall) to a purchaser, Mr Lee subsequently informed the court that the point also was not pursued and that there was no dispute that “the D External Wall” had been assigned to the defendant. 

15. In view of the above concessions, the crux of the matter in the present case is what in fact was assigned to the defendant by UTL:

(a)  The plaintiff says that Plan IV clearly shows that the External Wall consists of two vertical halves, the pink strip on the left closer to the Shop and the uncoloured strip on the right closer to the Main Entrance.  The plaintiff says that only the pink strip, ie, “the D External Wall”, was assigned to the defendant.  The uncoloured strip, ie, “the P External Wall”, was not assigned to the defendant and it forms part of the Building Common Areas covered by Clause 17(a) of the DMC.

(b)  The defendant says that only the pink vertical strip marked in Plan IV was the External Wall.  The uncoloured strip was not part of the external wall and it was at 90º to Haiphong Road facing the hallway of the Main Entrance. 

16. A related issue which affects the weight to be given to Plan IV is whether it depicts the condition of the Shop, the External Wall and the Main Entrance at the time of the Assignment.  In other words, whether the photograph re Plan IV was taken before or after the moving of the partition wall:

(a)  it is the plaintiff’s case that the Old Wall had already been demolished and the New Wall erected as early as 1994.  Therefore, Plan IV represents the condition of the Shop, the External Wall and the Main Entrance at the time of the Assignment;

(b)  the defendant’s case, however, is that Plan IV only shows the condition of the Shop before the moving of the partition wall. 

17. Therefore, the main issues for the court to decide are:-

(a)  whether the uncoloured strip in Plan IV was also facing Haiphong Road and was thus part of the External Wall;

(b)  whether the defendant owns the whole of the External Wall; and

(c)  if the answer to (b) is in the affirmative, whether the plaintiff can nevertheless rely on the exceptions and reservations provided for in the Assignment and Clause 17(a) of the DMC. 

18. If the defendant owns the whole of the External Wall, then subject to the argument on Clause 17(a) of the DMC, the plaintiff’s claim will fail.  On the other hand, if “the P External Wall” is part of the External Wall and if the defendant does not own it, then irrespective of whether the plaintiff can rely on Clause 17(a), the defendant’s counterclaim will fail.  This is because under s 16 of the Building Management Ordinance, Cap. 344,

“the rights, powers, privileges … of the owners in relation to the common parts … shall be exercised … by the [Incorporated Owners] to the exclusion of the owners …”

Accordingly, the defendant will have no locus standi to bring any action against plaintiff in relation to an act done by the plaintiff on the common parts of the Building.  Only the Incorporated Owners has the right to do so. 

THE SUBMISSIONS OF THE PARTIES

19. For the plaintiff, Mr Lee submits that:-

(a)  given its ordinary meaning, the “Portion” used in the relevant part of the parcel clause of the Assignment must mean that part of the External Wall which was coloured pink; 

(b)  it can clearly be seen from Plan IV that the External Wall consists of two vertical halves, ie, “the P External Wall” and “the D External Wall”; 

(c)  the plaintiff’s primary position is that the defendant had not been assigned with “the P External Wall” so that it forms part of the Building Common Areas for the common use and enjoyment of all owners of the Building but subject to the plaintiff’s right to erect signages under Clause 17(a) of the DMC; and 

(d)  alternatively, even if the defendant owns “the P External Wall”, the defendant’s interest is still subject to the plaintiff’s right to erect signages thereat under Clause 17(a) of the DMC (“the alternative basis”).

20. On the other hand, Mr Koo, counsel for the defendant, submits:-

(a)  the plaintiff cannot rely on the alternative basis which is a new case not having been pleaded;

(b)  the quality of Plan IV is so poor that no one would be able to tell by merely referring to it the exact structures shown thereon.  In any event, it is the defendant’s case that “the P External Wall” was in fact the side of the partition wall facing the hallway of the Main Entrance and was at 90º to Haiphong Road;

(c)  on a proper construction of the Assignment, the word “portion” used in the parcel clause must mean the external surface of the External Wall facing Haiphong Road and that “Portion of the External Wall to the Building” must mean the entire vertical strip of the external wall on the left side of the Main Entrance;

(d)  in any event, the plaintiff’s right under Clause 17(a) of the DMC should be limited to those parts of the external wall which has not been “specially assigned”. Accordingly, it shall have no application to the external wall which has already been assigned to the defendant by the Assignment.

THE RELEVANT LEGAL PRINCIPLES

21. As the present case is about a dispute with regard to what was actually conveyed to the defendant, subject to the issue about Plan IV, that is a matter of construction of the whole conveyance, including the parcel clause and the plan, in the light of to the relevant surrounding circumstances.  The object is to ascertain what UTL and the defendant intended to be passed under the Assignment and what was passed: Secretary for Justice v Wing Lung Wai Community & Ors [1999] 3 HKC 580, 588B-D.

22. That said, evidence about pre-contractual discussion between contracting parties is generally not admissible for the purpose of ascertaining their subjective intent. See Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, as per Lord Hoffmann, at 912H-913B: 

“(2) The background was famously referred to by Lord Wilberforce as the ‘matrix of fact’, but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3)  The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.”

(Emphasis supplied)

23. On the other hand, it has been said that the “parol evidence rule”, which excludes pre-contract negotiations as evidence of the subjective intention of the contracting parties, has no application until it is first determined that the terms of the parties’ agreement are wholly contained in the written document.  The rule only applies where the parties to an agreement reduce it to writing, and agree or intend that the writing shall be their agreement.  Whether the parties did so agree or intend is a matter to be decided by the court upon consideration of all the evidence relevant to this issue: see Chitty on Contracts, Vol 1, §12-098. 

24. Further guidance on construction of conveyancing documents is given by the Court of Final Appeal in the famous case of Jumbo King Ltd v Faithful Properties Ltd & Others [1999] 3 HKLRD 757, as per Lord Hoffmann, NPJ, at p773:

“The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well. Their language may sometimes be careless and they may have said things which, if taken literally, mean something different from what they obviously intended. In ordinary life people often express themselves infelicitously without leaving any doubt about what they meant. Of course in serious utterances such as legal documents, in which people may be supposed to have chosen their words with care, one does not readily accept that they have used the wrong words. If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other. The court is not privy to the negotiation of the agreement – evidence of such negotiations is inadmissible - and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession. Or one of the parties may simply have made a bad bargain.”

25. Briefly stated, regard must be had to the actual wording of the relevant clause, to the rest of the contract, and, subject to the parol evidence rule, to the surrounding circumstances or "factual matrix".  In some cases, in giving effect the parties’ intention, the court might even modify or supply words in a contract: Harvest Rise Development Ltd v Ling Yau Yung [2002] 2 HKLRD 378, per Ma J (as he then was), at p 385E-F. 

THE WITNESS

Plaintiff’s witness: Chan Tze Wing

26. The Plaintiff called Mr Chan Tze Wing whose witness statement was adopted as his evidence in chief.  Mr Chan’s role was to formally produced documents.  He had no personal knowledge about the conveyancing transaction between UTL and the defendant. There was no cross-examination by the defendant.  The plaintiff also heavily relied on a building plan submitted to the Building Authority in July 1994.  

Defendant’s witness: Lau Hok Tung

27. The defendant called two witnesses.  The first one was Mr Lau Hok Tung, a director of the defendant. Mr Lau said that in April 1995 he, through the introduction of Mr Hui and Mr Law of Landscope, a firm of surveyors, came to know that the Shop was put on sale by tender.  It is noted that the invitation to tender prepared by Landscope said that the Shop “has a frontage of approximately about 33 feet on to Haiphong Road”.  This was something of importance to Mr Lau, as he had insisted in the pre-contract negotiation that the Shop should have a frontage of 33 feet. 

28. On 25 April 1995, Mr Lau signed the Memorandum of Agreement for Sale and Purchase (“the Memorandum”) prepared by Landscope in which the vendor was stated to be UTL. It is noted that the Memorandum contained the same warranties[2] concerning to the Old Wall which were later reproduced as Clause 32 of the Agreement.  The Memorandum also had the same annexures, Plan I to Plan V, as the Agreement. 

29. As regards Plan IV, Mr Lau said the photograph should have been taken before the moving of the partition wall.  This was because the photograph showed that the Shop was at the time still occupied by the previous tenant who used it as an outlet for selling garments.  Mr Lau said he knew that tenant and he had been to the Shop before. Mr Lau also said that the uncoloured strip was not an external wall, but was at 90º to Haiphong Road facing the hallway to the Main Entrance. 

30. Mr Lau said that on 9 May 1995 he signed the Agreement on behalf of the defendant.  On 10 July 1995, the transaction was completed.  He said that before completion he had gone to inspect the Shop.  He said that he had taken measurement and confirmed that the Shop had a frontage of 33 feet which included the whole of the external wall to the left of the Main Entrance.  He did not know when the Old Wall was demolished and the New Wall erected.  He only knew that the change had already been effected at the time of the Assignment.  He said that the condition of the External Wall had not changed ever since he became the owner, except that the façade was replaced by the Management Office of the Building in 2007. 

31. In cross-examination, Mr Lau said that he was not aware at the time that his agent, Mr Law of Landscope, was a director of UTL, the vendor.  He agreed that the Agreement did not contain any terms which imposed an obligation on UTL to demolish the Old Wall or to build the New Wall.  He insisted that Plan IV be annexed to the Agreement in order to show the External Wall that was to be assigned.  It was put to him and he agreed that there were two steps from street level in front of the Main Entrance.  It was put to him that the uncoloured strip could not be at a right angle to Haiphong Road and he disagreed with it.

Defendant’s witness: Law Lai Choi, Samson

32. Mr Law adopted his witness statement as his evidence in chief and he supplemented it by his oral evidence in court.  He said that he set up Landscope with Mr Hui. Landscope was the sole agent for the sale of the Building for UTL of which Mr Law was also a shareholder.  He said that he was the one who prepared the Memorandum.  He said the photograph re Plan IV was taken by an employee of UTL.  At the time the photograph was taken, the Old Wall had not yet been demolished.  However, the partition wall had already been moved at the time of the Assignment.  He said that the uncoloured strip in Plan IV was at 90º to Haiphong Road.

33. Under cross-examination, Mr Law agreed that he did not mention in his statement as to when the photograph re Plan IV was taken.  He agreed that he was not present when it was shot.  He disagreed that he had not informed Mr Lau of his dual capacity in the transaction.  When asked whether he was also selling to the defendant the 3 structural columns inside the Shop on the left which were also coloured pink in Plan I, he said he had never thought about it.  When asked why the small column at the front opening of the Shop was not shown on Plan I, he said he did not know.  When asked why photocopies of photographs, rather than the originals, were used in the documents, he replied that it was because two copies for each of the photographs would be required.  He said he did not know whether the Old Wall was demolished first or whether the New Wall was built first.  I observed that when Mr Law was asked how he came to know that the New Wall was yet to be built when the Memorandum was signed, he paused for a long time before he repeated that it was not yet built.  When he was asked whether the New Wall was built at the time of the Agreement, he said that he did not know.  When asked if the New Wall had not yet been built when the Memorandum was signed, why there was not a word in the Memorandum about the vendor’s duty to build the New Wall, Mr Law again paused for a long while before he eventually said that the warranties about the Old Wall were given at the request of the purchaser.  When asked whether the vendor was under any obligation to build the New Wall, he said that it was not written.  When asked what the point was in using the photographs if they could not show what the subject matter would be like, he replied that the photographs were used at the request of the purchaser.  When asked whether UTL had given any notice to the other owners of the Building, in accordance with the requirement of the DMC, that the lift lobby would be reduced by the moving of the partition wall, he said that he did not know.  He agreed that the Memorandum contained no provision that the Shop had a frontage of 33 feet.

CONSIDERATION OF THE ISSUES

When were the photographs taken?

34. I do not accept the evidence of Mr Lau and Mr Law that the moving of the partition wall was not done when the photograph re Plan IV was shot.  My reasons are as follows:

(a)  Although Mr Lau said that he had been to the Shop before the purchase, the effect of his evidence was only that the alternation of the partition could not have been done whilst the previous tenant was still in occupation.  He did not in fact know when the Shop was enlarged by the moving of the partition wall towards the lift lobby.  He only knew that it was already done at the time of the Assignment.

(b)  Having observed Mr Law giving evidence, I do not find Mr Law to be a reliable witness.  I do not accept his evidence that he had informed Mr Lau that he had conflicting capacities in the conveyancing transaction.  There were long pauses when he was confronted with hard questions.  I have considered the possible reasons for the pauses including but not limited to whether Mr Law was trying to remember things or he was organizing his answers.  In my assessment, the long pauses were signs of Mr Law being unforthcoming rather than anything else.  The answers he gave after those long pauses show that he was protective of his self-interest. Despite his important role in the transaction and his evidence that it was him who prepared the Memorandum, he could not give a cogent explanation as to why there were no provisions imposing an obligation on UTL to demolish the Old Wall or to build the New Wall.  He also could not give a cogent explanation as to why photocopies of photographs, rather than originals, were used in important documents. He was not present at the time the photograph was taken.  Even though he wore two hats both as the vendor and the purchaser’s estate agent, he could not tell exactly when the partition wall was moved and how it was done.  He did not know whether notice had been given to the other owners of the Building as required by the DMC.

35. On the other hand, as to when the photographs re Plan II to Plan IV were shot, I note the following objective pointers:-

(a)  The photocopies of the photographs were annexed to the Memorandum which was signed by the defendant on 25 April 1995.  Therefore, the photographs must have been taken before that date. 

(b)  The Shop was put up for sale by tender in April 1995.  It was Lau’s evidence that he insisted that the photos be used in the documents for the transaction.  It was apparent that Mr Lau had seen those photographs during the pre-contract negotiation. 

(c)  On the other hand, the set of numbers “21 3 95” can clearly be seen at the bottom right corners of Plan II and III respectively and part of it can be vaguely seen on Plan IV. 

36. In my judgment, taken everything into account, a probable interference can be drawn that the photographs were shot for the purpose of the sale and that they were shot on or about 21 March 1995. 

When was the partition wall moved?

37. The next question is whether, at the time the photographs were taken, the partition wall had already been moved towards the lift lobby.  In this regard, I take into account the following:

(a)  It defiles common sense that photographs would be used for the purpose of defining or identifying the property to be sold, if they did not represent its features at the time it was assigned.  The shop was a valuable property sold at over $48 million.  The defendant was represented by a firm of solicitors.  It is improbable that any prudent solicitors would have been content with using the three photographs as plans if they did not represent the features of the subject matter of the sales and purchase.

(b)  In the Memorandum and the Agreement, there was not a single word to suggest that UTL was under any obligation to construct a new partition wall or to dismantle the old one for the purchaser.  The natural and more probable inference to be drawn from this is that the work had already been completed so that there was no need to provide for it.  If that was the case, then it makes perfect sense that UTL as the vendor only gave to the defendant as the purchaser the warranties that it was lawful for the Old Wall to be demolished which first appeared at Clause 16 of the Memorandum and later repeated at Clause 32 of the Agreement. 

(c)  In July 1994, UTL caused a building plan to be submitted to the Building Authority which was approved on 26 October 1994.  Under this plan, additions and alternations to the Building were proposed by the authorized person for approval.  Item 6 of the “Notes & Legend” of the plan said that “All existing floor plans to be retained except for partial floor plans as shown on this drawing”.  As such, the plan represented the existing features of the premises as at July 1994 and the proposed additions and the alternations were marked as such thereon.  As regards the Shop, the building plan said that “Ground Floor Shopfront to be Retained”.  The ground floor plan showed only the New Wall.  The Old Wall was not there.  The Building Plan is concrete evidence that the Old Wall had already been demolished by July 1994 at the latest.

38. Mr Koo’s submits that the moving of the partition wall had not been done by the time the building plan was submitted for approval.  Mr Koo conjectures that because the moving of the petition wall did not require approval from the Building Authority, the authorized person might have just drawn the building plan as if the partition wall had already been altered.  With respect, I am unable to accept this submission.  My reasons are as follows:-

(a)  as said above, I do not accept Mr Lau’s and Mr Law’s evidence as to when the partition wall was moved;

(b)  it would be unprofessional and misleading for the authorized person to have submitted for approval a building plan which purported to represent the existing condition of the property when it was not;

(c)  if Mr Koo’s conjecture, which is not supported by evidence, is correct, then it begs the question  how the authorized person could have foreseen the moving of the partition wall ten months before it happened; and

(d)  the fact that the previous tenant was still in occupation of the Shop when the photographs were taken did not present any difficulties.  It is not an uncommon situation in Hong Kong for shops to carry on business even when there were alternations being done to the premises.  Moreover, it could be the case that the alteration had been done before the previous tenant moved in.

The description in the parcel clause

39. The relevant part of the parcel clause of the Assignment says:-

“(d) Portion of the External Wall of the Main Entrance to the Building facing Haiphong Road as shown in the Plan IV hereto annexed and thereon coloured Pink.”

40. Mr Koo submits that:-

(a)  the description given above is sufficiently clear and that the marking on Plan IV was more for the purpose of identifying rather than defining what was to be assigned;

(b)  the phrase “the External Wall of the Main Entrance” was used to distinguish what was to be assigned from “the External Wall of the Shop” which was part of the shop front façade;

(c)  as a wall has two sides, the word “portion” refers to that side of the External Wall facing Haiphong Road, ie, facing outward; and

(d)  upon a proper construction of the parcel clause in question and the Assignment as a whole and having regard to the background that the parties intended the Shop with a frontage of 33 feet, it was the intention of the parties to the Assignment that the defendant be assigned the whole of the external wall between the Shop and the Main Entrance.

41. Despite the ingenuity of Mr Koo, I am unable to accept his above submissions.  My reasons are as follows:-

(a)  Although the photographs have not been annexed to the Assignment, it is patent that the omission was caused by oversight rather than by design.  First, the plans were referred to in the parcel clause as annexures to the Assignment.  Secondly, there was evidence that in October 2002 the defendant attempted to rectify the omission by submitting for registration an amended version of the Assignment seeking to incorporate the annexures of the Agreement to the Assignment. Thirdly, the photographs were used in the Memorandum and the Assignment which led to the Assignment.  Fourthly, the Agreement and the Assignment contained identical parcel clause.  Therefore, from a proper construction of the Assignment as a whole, as well the factual matrix leading to the Assignment which included the Memorandum and the Assignment, it is clear that it was the intention of the parties to use photographs in the Assignment to describe the property the subject matter of the transaction.

(b)  In the parcel clause, there is a specific provision for the assignment of portion of the Canopy erected between the Shop and the 1^st Floor of the Building. There is another specific provision for the assignment of the ceiling under the relevant portion of the Canopy.  Therefore, if the vendor and the purchaser really had the shop front façade in mind so that they wanted to distinguish it from “the External Wall of the Main Entrance”, then one would expect that there should also be a specific provision dealing with the assignment of the shop front façade.  However, there is not such a provision.  Therefore, the inference is that the parties were dealing with something else and they were not thinking about the shop front façade at paragraph 1(a)(d) of the parcel clause.

(c)  According to the Shorter Oxford English Dictionary, the word “portion” means “the part of anything allotted or belonging to a person” or “a part of any whole”.  As such, “portion” and “part” are synonymous.  Therefore, the word “portion” was also used in paragraph 1(a)(b) of the parcel clause to describe a part of the Canopy.  As clearly shown in Plan II, only part of the Canopy erected between the Ground Floor and the 1^st Floor was assigned.  On the other hand, it is not an ordinary usage to describe a side of a wall as a “portion”.  The more natural way would be to say:

“That side of the External Wall of the Main Entrance to the Building facing Haiphong Road.”

By the use of the word “portion” in the part of the parcel clause in question, the ordinary meaning is that the vendor was only assigning to the purchaser part of the external wall of the Building.  As a corollary, there were other parts of the external wall which were not assigned.  Furthermore, it was provided that the External Wall was the external wall “of the Main Entrance facing Haiphong Road”.  To distinguish between that part of the External Wall which was assigned from what was not assigned, the one assigned was the part coloured pink as shown in Plan IV. 

(d)  An issue arises as to whether the evidence of Mr Lau and Mr Law about the pre-contract negotiation that the Shop should have a frontage of 33 feet should be excluded under the parol evidence rule.  I note that the representation about the width of the frontage of the Shop appeared only in the invitation to tender prepared by Landscope under the heading of “THE PROPERTY TO SALE”.  However, it was also provided at the bottom of the same page that:-

“These particulars do not constitute, nor constitute part of, an offer or contract; interested parties should not rely on them as statements or representations of fact but must satisfy themselves by inspection or otherwise as to their accuracy and no person in the employment of the agent or the agent’s principal has any authority to make any presentations or warranties whatever in relation to these particulars.”

None of the Memorandum, the Agreement and the Assignment contains any representations about the width of the frontage of the Shop.  Besides, the Agreement contains an “entire agreement clause” which says:-

“28. This Agreement constitutes the entire agreement of the parties thereto and supersedes all prior expressions of intent, understanding, representation or agreement whether oral or in writing made with respect of the sale and purchase of the Premises and/or any matters herein provided, and without prejudice to the generality of the foregoing, neither parties hereto shall be liable for any statement, representation, misstatement or omission made during the course of negotiation.”

Therefore, on a proper construction of the Agreement and taking into account the terms of the invitation to tender and the Memorandum, I conclude that the terms as agreed between UTL and the defendant are wholly contained in the Agreement which do not include any term as to the width of the frontage of the Shop.  As such, the evidence of Mr Lau and Mr Law about their pre-contract negotiation about the width of the frontage of the Shop is not admissible to add to or subtract from, or in any manner to vary or qualify the Agreement.  At the risk of repetition, I note the following dictum of Lord Hoffmann, NPJ, in Jumbo King, supra, that:-

“If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other. The court is not privy to the negotiation of the agreement – evidence of such negotiations is inadmissible - and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession. Or one of the parties may simply have made a bad bargain.”

42. In my judgment, subject to what is in fact shown in Plan IV, a proper construction of the parcel clause in particular and the Assignment as a whole does not show that UTL had assigned to the defendant the whole of the external wall between the Shop and the Main Entrance.  To the contrary, the ordinary meaning of that part of the parcel clause in question is that the purchaser was assigned with only part of the External Wall.

What is shown in Plan IV

43. Both Mr Lau and Mr Law gave evidence that the uncoloured strip on the right of the pink strip in Plan IV was not part of the External Wall, but was at 90º to Haiphong Road facing the hallway to the Main Entrance.  In my judgment, however, there are cogent reasons not to accept their evidence on this:-

(a)  Although Plan IV is not of good quality, it can still be seen clearly, upon a careful and fair observation, that there were steps at the bottom right hand corner thereon which ran parallel to the uncoloured strip.  The fact that there were steps in front of the Main Entrance facing Haiphong Road is consistent with a former building plan approved by Building Authority in 1983 which indicated that there were two steps in front of the Main Entrance.  According to the building plan lodged in 1994, the building line of the Building remained unchanged.  In the Assignment Plan, which was prepared by the same authorized person as the 1994 building plan, the words “UP, UP” appeared at the Main Entrance indicating that there were steps.  This contradicts the defendant’s case that the uncoloured strip was at 90º to Haiphong Road and supports the Plaintiff’s case that the uncoloured strip was facing Haiphong Road. 

(b)  That the pink strip on Plan IV was only part of the External Wall is also consistent with the description given in the relevant part of the parcel clause that what was to be assigned was only “Portion of the External Wall of the Main Entrance”. 

(c)  As discussed above, Mr Law is not a reliable witness.  As regards Mr Lau, he had all along been under the impression that he was assigned the whole of the External Wall. His evidence might have therefore been affected by his impression.  In any event, in my judgment, Mr Law’s and Mr Lau’s evidence in this regard is contradicted by what an objective observer can clearly see in Plan IV which is also supported by the building plans.  Having considered all the evidence as a whole, it is in my view not safe to rely their evidence in this regard at face value.  Moreover, as regards Mr Law, I have rejected his evidence as to when the photograph re Plan IV was taken, before or after the moving of the petition wall.  I remind myself that the rejection of one part of his evidence does not mean that I have to also reject the other parts of his evidence.  However, in my assessment, the overall credibility of his evidence has been affected to the extent that I am unable to rely on this part of his evidence as well. 

RULING ON DEFENDANT’S COUNTERCLAIM

44. It would be more convenient to deal with the defendant’s counterclaim first. 

45. In my judgment, based on the above discussion, the defendant has failed to prove their case on balance of probabilities that the defendant was assigned the whole, rather than just part of the External Wall between the Shop and the Main Entrance facing Haiphong Road.  Therefore, the defendant’s counterclaim against the plaintiff must fail.

RULING ON PLAINTIFF’S CLAIM

46. The next issue is whether the plaintiff is entitled to rely on Clause 17(a) of the DMC as the basis for its claim for injunction against the defendant.  Mr Koo submits that the plaintiff is not allowed to do so, as the point about Clause 17(a) has not been properly pleaded. 

47. To deal with this contention, it is necessary to consider the plaintiff’s pleadings in some details:-

(a)  the Plaintiff’s pleaded cause of action, as stated in the Statement of Claim, is that “the P External Wall” was the Plaintiff’s property and the Defendant had wrongfully infringed upon the Plaintiff’s proprietary right.  It is put as follows:

“12. Wrongfully and infringing upon the rights of the 1^st Plaintiff as the owner of the P External Wall, the Defendant claimed to have exclusive right to the use and occupation of the P External Wall”.

(b)  In reply to the defendant’s defence and counterclaim that the defendant was the owner of the whole of the External Wall, the plaintiff, in its Re-amended Reply and Defence to Counterclaim, says that:-

“3. Further or alternatively, the P External wall had formed part of the Building Common Areas … and the 1^st Plaintiff avers as follows:

    …

3.2   under Clause 17(a) of the DMC, the Registered Owner had the exclusive right to, inter alia, install, exhibit or permit to be installed and exhibited such signs or signboards whether illuminated or otherwise of such size and design and at such positions on the external walls (except specifically assigned) as the Registered Owner so determined. 

    …”

It is in this context that Clause 17(a) of the DMC was raised for the first time in the plaintiff’s pleadings.

(c)  By a summons filed on 9 January 2013, the plaintiff sought, by way of amendment, to add a new cause of action to the Statement of Claim by adding the following:

“9A. Further or alternatively, the 1^st plaintiff avers as follows: -

(a)  At the time of the execution of the DMC, both the D External Wall and the P External Wall formed part of the Building Common Areas under the DMC. 

(b)  Under Clause 17(a) of the DMC, the Registered Owner (which should also include the 1^st Plaintiff as its successor or assign) or such other person authorized in writing by the Registered Owner shall have the exclusive right to erect, construct, install, affix, exhibit or paint or permit any person or persons to erect, construct, install, affix, exhibit or permit such signs, sign boards and/or advertisements whether illuminated or otherwise of such size and design and at such positions on the external walls (except specifically assigned) as the Registered Owner  (which should also include the 1^st Plaintiff as its successor or assign) shall determine in its sole discretion.

    …”

(d)  However, the said summons was withdrawn on the second day of the trial by the plaintiff after lengthy submissions from both sides.  Therefore, the plaintiff’s cause of action remains the same as before, namely, one of wrongful interference of its alleged proprietary right of “the P External Wall”.

(e)  In the “Revised Agreed Statement of Issues in Dispute” signed by the plaintiff and the defendant dated 27 August 2012, the issues were stated to be whether the defendant had been assigned the whole of the External Wall, and if not, whether the plaintiff was assigned “the P External Wall” through one or the other of the 2006 assignments.  However, there was nothing in that document to suggest that the plaintiff’s cause of action was based on anything other than its alleged proprietary rights of “the P External Wall”.

48. Based on the withdrawal of the summons for the amendment of the Statement of Claim, Mr Koo is on strong ground that the defendant was entitled to assume that the Plaintiff was no longer pursuing the point about Clause 17(a) of the DMC. 

49. In the circumstances, it is my judgment that the plaintiff should not be allowed to rely on Clause 17(a) of the DMC as the basis for its claim for injunction, as the point has not been pleaded: see Wing Hang Bank Ltd v Crystal Jet International Ltd & Ors [2005] 2 HKLRD 795, 799D-F; see also generally Hong Kong Civil Procedure 2013, §18/8/3. 

50. As the plaintiff has no longer pursued its pleaded case that it is the lawful owner of the P External Wall, and in view of my ruling above that the plaintiff is not allowed to rely on Clause 17(a) of the DMC, the plaintiff is left with no legal basis for its claim for injunction against the defendant.  Therefore, the plaintiff’s claim against the defendant must also be dismissed.  There is no need for the court to decide whether Clause 17(a) in fact applies to any part of the External Wall.

Costs

51. As neither of the parties is successful in its respective claim against the other and in view of the fact that their respective claims relate to substantially the same factual and legal issues, I make an order nisi that there be no order as to costs except the costs of the aforesaid summons taken out by the plaintiff dated 9 January 2013.  I had already ordered, upon the plaintiff’s withdrawal of the summons, that the plaintiff pay the defendant’s costs of the summons, to be taxed if not agreed, with counsel certificate.