CHIU SHU-CHOI v. MERRILONG DYEING WORKS LTD

Headnote

                Owners of undivided shares in multi-storeyed buildings, having exclusive rights of occupation over particular parts thereof, cannot have easements of way as such over other parts of the building; but similar rights may be granted by or implied from the terms of a Deed of Mutual Covenant entered into with the remainder of the owners.

                Quaere whether the rule in Wheeldon v. Burrows (1879) 12 Ch.D. 31 as been relaxed by the decision in Pwllbach Colliery Co. Ltd. v. Woodman [1915] A.C. 634.

IN THE COURT OF APPEAL

BETWEEN

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JUDGMENT

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Cons, J.A. delivered the judgment of the Court:

1. This appeal relates to premises known as the William Chandler Factory Building which stands at the junction of Castle Peak Road and Kom Tsun Street, Kowloon. It is, as its name implies, a flatted factory, comprised of ten storeys, that is to say a ground floor and nine further floors above.

2. The building plans show the first to the eighth floors inclusive to be identical, with access by two staircases and a large goods lift. One of the staircases is adjacent to the lift and protected by two pairs of wooden doors forming a smoke lobby. There is no lobby to the lift itself which opens instead directly onto the appropriate floor.

3. The ninth floor is shown to be different, consisting of an enclosed area, smaller than the floors below, together with an open roof top. It is served by the same two staircases but the lift does not go that high, reaching only to the eighth floor. The space occupied by the lift on the lower floors is taken up by a machine room.

4. That was presumably the position when the Occupation Permit was issued in 1964. By the time however that the Defendant Company came to purchase the eighth floor in 1980 considerable alterations had been made to the area around the lift and the adjacent staircase. Comparative illustrations will make this more readily apparent than will words.

8th floor original

8th floor as altered

5. The effect, as can easily be seen, was to provide the ninth floor with an enclosed passageway from the lift to the staircase while giving the eighth floor a degree of privacy and security, albeit at the expense of that encroachment, which would to some extent however be discounted by the movement of the original staircase wall.

6. There was no direct evidence as to when all this had been done but the Judge below readily inferred from the circumstances that the changes had taken place well before the Defendant Company took over and there is no appeal upon this point.

7. The lady who sold the eighth floor to the Defendant Company, one Esther Leung, was also at the time the owner of the ninth floor. She wished to dispose of that floor as well and managed to do so some six weeks later. She did not sell directly to the Plaintiff, but to an intervening third party who later sold on. But for the purposes of this appeal that makes no difference. It has been conceded all along that the Plaintiff can have no better rights than had Esther Leung herself after she had sold to the Defendant Company.

8. The Plaintiff came to inspect with a view to purchase in the middle of 1981. He found the premises as we have illustrated. He was able to go up in the lift to the eighth floor and then by the staircase to the ninth. He was content with that arrangement, he liked what he saw and decided to purchase. What he did not know, when he paid his deposit on the 31st January, was that the alterations which had been made to the eighth floor were not acceptable to the Fire Services Department and that some ten days earlier the director thereof had already served a Fire Hazard Abatement Notice on the Defendant Company requiring it, within 28 days thereafter,

"to reinstate the smoke lobby and smoke lobby doors to their originally approved position and state, or alternatively protect the exit (of the staircase) with a door having the same fire resistance period as the original door".

9. The Defendant Company complied with the Notice. It reinstated the smoke lobby doors, which were now of course behind the roller shutter, and it blocked up the door in the staircase wall. It did not however touch the roller shutter, so that effectively there was now no way from the lift to the staircase, unless the roller shutter happened to be open, and even then it was necessary to go to some extent through the working part of the eighth floor. Thus when the Plaintiff later completed his purchase he found that he, his workers and his goods could only get to his factory by climbing nine flights of stairs. When negotiations failed to reach any amicable solution, litigation ensued.

10. The argument below, and to some extent before us, proceeded largely on the principles involved where an owner alienates one of two adjoining pieces of land. The leading case in that respect is Wheeldon v. Burrows⁽¹⁾ in which Thesiger L.J. enunciated two general principles, the second of which is that, subject to certain exceptions, "if the grantor intends to reserve any right over the tenement granted, it is his duty to reserve it expressly in the grant".

11. It is suggested that the principle has now been relaxed, or perhaps the exceptions amplified, by the decision in Pwllbach Colliery Co. Ltd. v. Woodman⁽²⁾ and in particular by the words of Lord Parker, at 646:-

"        The second class of cases in which easements may impliedly be created depends not upon the terms of the grant itself, but upon the circumstances under which the grant was made. The law will readily imply the grant or reservation of such easements as may be necessary to give effect to the common intention of the parties to a grant of real property, with reference to the manner or purposes in and for which the land granted or some land retained by the grantor is to be used. See Jones v. Pritchard⁽³⁾ and Lyttelton Times Co. v. Warners⁽⁴⁾. "

12. It was on this basis that the Judge made his decision below although he relied more expressly upon a dictum of Lord Evershed in In re Webbs Lease⁽⁵⁾ at 816:

"If the court were satisfied that in order to make the transaction between landlord and tenant sensible and effective according to its terms, they must have intended some particular right to be reserved to the landlord, it might be possible to imply an appropriate reservation. "

13. In the result the Judge granted a declaration, not as wide as had been originally requested, but in terms that "the Plaintiff and his successors in title, the owners or the occupiers for the time being of the ninth floor .........., or any part thereof and his or their respective servants and licensees and other persons are entitled to the full right and liberty to pass and repass from the lift to the door of the smoke lobby on the 8th Floor for the purpose connected with the proper use and enjoyment of the 9th Floor as a factory".

14. It is to be observed that Wheeldon v. Burrows⁽¹⁾ was not referred to in Pwllbach⁽²⁾, which was an action laid in nuisance, and that the authorities relied upon to support the passage we have set out were themselves also actions in nuisance. In Aldridge v. Wright⁽⁶⁾ Scrutton L.J. observed that the decision was of "little relation to the reservation of easements of rights of way on severance of the title to real property" and in Webb(5) Jenkins L.J. commented that –

"The illustrations given by Lord Parker in support of this general proposition seem however to show that it is of less comprehensive import than would at first sight appear. "

On the other hand it was applied by Lord Denning in Wong v. Beaumont Property Trust Ltd. ⁽⁷⁾

15. We have so far freely used the general language of ownership and purchase and sale with respect to the two floors. That is a convenience of language, more readily to set out the history behind this appeal. It does not however accurately reflect the situation. The Plaintiff and the Defendant Company do not have ownership of the eighth and the ninth floors as such; they have each an equal undivided tenth part or share in the land and the building as a whole, the result of conveyanoing practice which has long been adopted with regard to multi-storeyed buildings in Hong Kong. It is well established that an owner cannot have an easement over his own land, so that any rights which the Plaintiff may now have in this instance must be put upon some other basis. The most likely choice is contract, in a right derived from a Deed of Mutual Covenants, executed when the interest in the land was first divided. The Deed does not confer any such right expressly. It is submitted that the right is included by necessary implication. This point was not taken below nor had it been included in the Statement of Claim. At a late stage in the appeal however we gave leave for the appropriate amendmen ts. To see whether it can be made good it is necessary to go back to the early documents.

16. When the building was completed in 1964 the developer William Chandler & Co. Ltd. retained all the floors for its own benefit. Five years later, in 1969, it disposed of the top four floors to a Madam Hung Sou Wen. This was done partly by way of four assignments, each of one equal undivided tenth part or share in the land and buildings thereon, and each expressly granting, or purporting to grant, "the exclusive right to the use occupation and enjoyment of ALL THAT the whole of the (appropriate) FLOOR of the said Building as more particularly shown and delineated on the plan hereto annexed and thereon coloured Pink and all rights rights of way (if any) privileges easements and appurtenances thereto belonging or appertaining. " At the same time the Company and Madam Hung signed a Deed of Mutual Covenants in similar terms. Clauses 1, 3 and 4 are relevant:-

"1.         Each of the parties hereto for himself and his executors administrators and assigns hereby grants unto each of the other parties hereto their or his respective executors administrators and assigns the full right and privilege to the exclusive use occupation and enjoyment and the rents and profits of the part of the said building ............ TO THE INTENT that each of the parties hereto shall be entitled to the exclusive use occupation and enjoyment and the rents and profits of the part of the said building .....

3.        Each undivided part or share of and in the said premises and building and the right to the exclusive use, occupation or enjoyment of any part of the said building shall be held by the person from time to time entitled thereto with the benefit of the provisions set out in Part I of the Third Schedule hereto and subject to the provisions set out in Part II of the Third Schedule hereto.

 

4.        The owner for the time being of each undivided part or share of and in the said premises and building shall hold it subject to the covenants or provisions set out in the Fourth Schedule hereto and shall at all times be bound by and shall observe and perform the said covenants or provisions. "

 

17. Paragraph 1 of Part I of the Third Schedule gives to the owner of each share:-

"Full right and liberty for the owner or occupier for the time being of it and all persons authorised by him (in common with all other persons having the like right) to go pass and repass over and along the entrance, staircases, landings and passages and lifts in the said building for the purposes connected with the proper use and enjoyment thereof. "

18. The Fourth Schedule imposes on the owner of each share charges for the care and maintenance of the whole building and in particular at Clause 1(vi):

"The cost and expenses of operating, maintaining, repairing, servicing, replacing and renewing all the lifts in the said building provided that the owner of the Factory Unit on the Ground Floor of the said building shall not be liable for such costs and expenses and, shall not be entitled to use any of the lifts notwithstanding anything herein contained. "

There is no specific provision relating to the ninth floor.

19. Two arguments are raised against the implication sought, although both are perhaps merely different facets of the same contention. It is said that the Deed of Mutual Covenants, when read as a whole, is clearly intended to deal only with matters of mutual concern, that is mutual in a sense of concerning every owner in the building, and their respective successors in title, not with matters that might arise between particular owners and which would not affect the owners of the land in the building as a whole. Put the other way, it is said that the problem which has now arisen, or its solution, is not one that could possibly have been envisaged at the time that the Deed was executed, for Madam Hung took the four top floors together while the Company retained all the remainder. The Deed is to be considered in that context, and not with regard to what might have been the prospective intention of the parties should the floors eventually end up in the hands of separate owners.

20. There might have been more force in this argument had it not been for the individual assignments which clearly indicate that the parties had such a possibility in mind. We find nothing in the Deed of Mutual Covenants which inclines us away from the contention urged. The ninth floor was constructed to be used as a factory. Indeed the Crown Lease precludes its use for any other purpose. The Judge below found that it would be "virtually unusable as such without recourse to the lift". We respectfully agree with him. The Plaintiff has an express right to use that lift, given to him by that part of the Third Schedule we have earlier set out. It is suggested that the use of the plural "lifts" in that paragraph indicates that the clause was probably included as a matter of standard form without any proper consideration of the individual circumstances. Be that as it may the word is there and effect if reasonably possible must be given to it. The argument of the Defendant Company would deprive it of all meaning whatsoever. Finally, and we find this important as did the Judge below, the ninth floor is required to bear an equal share of the operating and other costs attendant upon the provision of the lift in contradistinction to the ground floor, which is expressly excepted. For these reasons we have come to the conclusion that on a true construction of the Deed of Mutual Covenants there is to be implied a right of passage as suggested and that the plaintiff is entitled to an appropriate declaration.

21. It was argued, in an attempt to discredit that approach, that it must be extended logically then to cover all the floors below, that is, that it would entitle the Plaintiff to take the lift as far as say the sixth floor and there demand immediate access to the adjacent staircase. We do not accept that to be so. It would fly in the face of reality and common sense. It follows from these conclusions that the appeal must be dismissed. We would be pleased to hear Counsel as to costs.

22. [The following declaration was subsequently agreed by Counsel and approved by the Court:-

"       A declaration that on the true construction of the Deed of Mutual Covenants there is to be implied in favour of the owner of the 9th floor, a right of way over the 8th floor from the lift doors to the nearest staircase (as shown in the diagram annexed to this judgment) for the proper use and enjoyment of the 9th floor as a factory. "]

(1)    [1879] 12 Ch. D. 31

(2)    [1915] A.C. 634

(3)    [1908] 1 Ch. 630

(4)    [1907] A.C. 476

(5)    [1951] 1 Ch. 808

(6)    [1929] 2 K.B. 117

(7)    [1965] 1 Q.B. 173