SILVER CARNIVAL LTD v. LONGBASE INVESTMENTS LTD

cacv 339/2004

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 339 of 2004

(on appeal from HCA NO. 1121 of 2004)

____________________

____________________

____________________

J U D G M E N T

____________________

Hon Rogers VP:

1.  This is an appeal from a judgment of Recorder Leong SC given on 28 October 2004.  The matter before the Recorder was an application under Order 14 for summary judgment against the defendant.  The relief sought included a declaration that the plaintiff was entitled to the exclusive right and privilege to hold, use, occupy and enjoy the external wall of Nos. 50 and 52 Russell Street (“the Building”) and an injunction to order the defendant to remove the advertising sign for which it was responsible on the external wall.  The defendant for its part had applied under Order 14A for determination of a number of questions of law the effect of which, if answered in the defendant’s favour, would be that the defendant’s landlord would have the right to use the external wall.

2.  The Recorder came to the conclusion that the defendant’s landlord did have the right to use the external wall under the relevant DMC but that the advertising sign which had been affixed to the external wall by the defendant was in breach of the DMC and therefore had to be removed.  Conditional upon the defendant abiding by an injunction to remove that advertising sign it was given leave to defend the action.  At the conclusion of the hearing of this appeal, judgment was reserved which we now give.

Background

3.  Apparently, in June 1979 the parties who were referred to in the subsequent DMC as the First and Second Owners entered a building agreement with a contractor, who was referred to in the DMC as the Third Owner, to develop the site at Nos. 50 and 52 Russell Street.  The agreement of June 1979 includes provisions as to how the various floors of the building were to be allotted once the building was completed.  The Third Owner was to own some of the floors.  Nothing seems to have been said in the building agreement as to the external walls.  However, in the DMC, which was entered into by the First, Second and Third Owners, there is reference to the external wall in at least two of the relevant clauses.  The first is clause 11 which provides in 11(c) that none of the parties would cut or damage any of the main walls of the Building.  The other provision is clause 19 which reads as follows:

“

19.

There is reserved and to the First Owner and Second Owner their successors and assigns (other than that the Third Owner) at all times hereafter the exclusive right and privilege to hold use occupy and enjoy the external wall of the Building.”

4.  For completeness, mention can also be made to Clause 27 of the DMC which reads as follows:

“The grants and covenants herein contained shall be binding on the parties hereto and their respective executors administrators successors in title and assigns and the covenants herein contained and intended shall run with the land or the interest therein both as to the benefit and burden of such covenants and the Law of Property (Enforcement of Covenants) Ordinance Cap. 297.  Together with any statutory amendment or modification thereof for the time being in force shall apply to these presents Provided That no part(y) shall be bound thereby after ceasing to own any part or share of and in the said Land and the said Building or any interest therein save and except in respect of any matter arising previously to his ceasing to own such part or share or interest therein.”

5.  The DMC sets out the various flats which the Owners would have.  There were altogether 204 undivided shares in respect of the Building.  It may be noted that the 11^th floor included two flats, a flat A and a flat B and the main roof immediately above each flat.  There were six shares allotted in respect of each of those floors and the corresponding part of the main roof.  It should also be mentioned is that there was no allocation of any shares to the external walls of the Building.

6.  Over the years there were a number of assignments of the different flats in the building.  The judgment below sets out a chart showing those assignments.  The result has been that neither the First Owner nor the Second Owner owns any part of the Building.  The only assignment from either the First or Second Owner which specifically identified the external wall was that from the First Owner dated 30 April 1997 by which the First Owner assigned 2 equal undivided shares in the land together with the exclusive right and privilege to hold, use, occupy and enjoy the main roof A of No. 50 Russell Street together with the right to use the external wall and all other rights easements enjoyed by the Vendors in the Building. 

7.  In short, it is the plaintiff’s case that because the Second Owner never purported to assign the right to use the external wall of the Building, the rights which the Second Owner had under clause 19 of the DMC have ceased to exist.  In those circumstances it is the plaintiff’s case that the sign which has been put up by the defendant on the wall of the Building is in contravention of the plaintiff’s rights.  Thus, the plaintiff commenced these proceedings seeking a declaration that it was entitled to the exclusive right to the external wall and an injunction to require the defendant to remove the sign.

The judgment below

8.  The Recorder reached the conclusion that the sign of which complaint was made by the plaintiff was wrongly affixed to the external wall, not for the reasons advanced by the plaintiff, but on the basis that it was clear that by fixing the sign the party responsible had cut or damaged the main walls and thus that there had been a breach of clause 11 of the DMC.  On that basis the orders referred to above were made.

9.  In respect of the plaintiff’s claim that it alone was entitled to the rights in respect of the external wall, the Recorder held that the rights in clause 19 of the DMC were in the nature of a quasi-easement and therefore had to be treated as an easement.  She held that since there were no shares allotted to the external wall it was a reasonable inference to hold that the benefit was intended to extend to all the owners of shares allotted to the First and Second Owners and their successors and assigns in proportion to such shares.  Since all shares were sold by the Second Owner subject to and with the benefit of the vendor’s rights and benefits under the Deed of Mutual Grant and the DMC they were sold with the benefit of the quasi-easement of the right to the use and enjoyment of the external wall.

This appeal and cross appeal

10.  The defendant appealed against the orders made by the judge on the basis that it had not been the plaintiff’s pleaded case that there had been a breach of clause 11 of the DMC and that, even if there had been a contravention of clause 11, the defendant had a number of defences which could be raised against any allegation of a breach of that clause.

11.  Mr Chan SC, who appeared on behalf of the plaintiff, did not seek to support the judgment on the basis of a breach of clause 11 but was content that if he did not succeed on the cross appeal, the matter should be remitted for trial, since the plaintiff intended to amend its claim to claim a breach of clause 11 and the action could proceed in the normal way.

12.  On the cross appeal Mr Chan sought to argue that the plaintiff was the only person entitled to the benefit of the external wall on the basis set out in paragraphs 6 and 7 above.

13.  In my view the judge’s approach must be correct.  Implicit in the holding in paragraph 12 of the judgment was the finding that all conveyances by the Second Owner carried with them the consequence that there was an assignment of the benefit of the interest held by the Second Owner in the external wall.  That, it seems to me, must be correct since, if for no other reason, section 16(1) of the Conveyancing and Property Ordinance, Cap. 219 provides as follows:

“

(1)

Unless the contrary intention is expressed in the assignment, an assignment shall operate to assign, with the land, all rights, interests, privileges, easements or appurtenances in, over, belonging or appertaining to that land or at the time of the assignment used, held, occupied or enjoyed with that land and things attached to the land or permanently fastened to anything attached to the land.”

14.  The wording of this section follows the wording of the corresponding provisions in the Conveyancing Acts commencing with the Conveyancing Act 1881.  As explained in, for example, Williams on Vendor and Purchaser, Third Edition, p. 599-600, prior to 1882 it was the practice in drawing up conveyances of land to add to the description of the property a number of general words comprehending all easements, rights, privileges or advantages appertaining or reputed to appertain to the land or therewith used and enjoyed.  Since the coming into force of the Conveyancing Act 1881 it had been the practice to omit the general words from conveyances.  The equivalent sections in the Conveyancing Acts have been held to apply to “rights” which were entirely permissive and precarious at the date of the grant: see, for example, International Tea Stores Co. v Hobbs [1903] 2 Ch 165.  As Neville J pointed out in Lewis v Meredith [1913] 1 Ch 571 at page 579, even though an easement or right might not be an easement or right in the strict sense because, for example, there was common ownership which might preclude the acquisition of any right or easement by the occupier, it could still be a quasi right which was enjoyed.

15.  In those circumstances I do not consider that the plaintiff has established that the legal owners of the shop of which the defendant is the tenant did not have a right to use of the external wall.  I do not consider that there can be any contrary intention shown, in the sense used in the opening words of section 16, for similar reasons to that expressed by Russell J in Hansford v Jago [1921] 1 Ch 322 at page 332.  The fact that there may be one or two matters which are expressly included in the conveyance does not operate as an indication of an intention that the remainder of the matters referred to in section 16 were not included.

16.  Although the notice of appeal in this case sought an order that the plaintiff’s claim be dismissed, for the reasons set out above I do not consider that this court is in a position to make such an order in view of the indication on the part of the plaintiff that it intended to amend its claim to include a claim in respect of the breach of clause 11.  Whilst I have expressed strong views as to the effect of the assignments on behalf of the Second Owner I do not consider that it is appropriate to grant any of the relief which the defendant had sought under the summons under order 14A.  In the first place this was not specifically asked for in the notice of appeal and in the second place since the defendant is, in my opinion, entitled to leave to defend the correct course would be to permit that the case to proceed on that basis.

17.  I would therefore make an order allowing the appeal and dismissing the cross-appeal and granting the defendant unconditional leave to defend.  I would make an order nisi of costs of the appeal in favour of the defendant and the costs below to be varied to costs in the cause.

Hon Tang JA:

18.  I agree that the appeal should be allowed and the cross appeal dismissed.  I also agree with the costs order proposed by the Vice President.

19.  The second owner has assigned all its interests in the Building.  The last assignment by the second owner was dated 30 August 1990 (the Assignment) when it assigned to Tune Fine Development Ltd (the landlord of the respondents) its remaining 42 equal undivided 204 parts or shares of the Building together with the exclusive right to use occupation and enjoyment of shop B on the ground floor including the yard of No. 52 Russell St, Hong Kong.

20.  Mr Edward Chan SC, appearing for the Respondent, accepted in argument that the right to the exclusive use of the external wall would have been assigned to the landlord under the Assignment unless a contrary intention had been expressed in the Assignment.  I agree with the Vice President that it is at least arguable that no such contrary intention had been expressed in the Assignment.  Hence, the matter must go to trial.

21.  However I do not wish to decide, and it is not necessary to do so, that the rights to the exclusive use of the external wall had devolved onto the other assignees of the first and second owners because there had not been any expressed contrary intention in those assignments.

Hon Barma J:

22.  I also agree that it is at least arguable that the right to the exclusive use of the external wall of the Building had been assigned to the Respondent’s landlord by the Second Owner by the assignment dated 30 August 1990.

23.  Like Tang JA, I wish to express no views as to whether or not rights to the exclusive use of the external wall were assigned to other assignees of the First and Second Owners.

24.  I therefore agree that the appeal should be allowed and the cross-appeal dismissed with a costs order in the terms proposed by the Vice President.

Hon Rogers VP:

25.  There will therefore be an order as per paragraph 17 above.