WING MING GARMENT FACTORY LTD v. THE INCORPORATED OWNERS OF WING MING INDUSTRIAL CENTRE AND ANOTHER

cacv 27/2008

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 27 of 2008

(on appeal from HCA NO. 8805 of 1993)

________________________

________________________

REASONS FOR JUDGMENT

________________________

Hon Le Pichon JA:

1.  This is an application by the plaintiff and the third party for leave to appeal to the Court of Final Appeal from an order of this court dated 27 June 2008.

2.  The background is summarised in §§1 to 9 of this court’s judgment to which reference should be made.  In brief, the approved layout plan for the ground floor of the building set out and numbered certain car parking spaces.  Only car parking spaces 2, 3 and 4 are relevant to the present proceedings.  Lying between each of those car parking spaces and the driveway within the building on the ground floor are areas marked “VOID” (“the ‘VOID’ areas”).  Special condition (10) prohibited the alteration of the layout except with the prior written consent of the Director of Public Works.  Under clause 5 of the DMC, the right to construct a loft over car parking spaces 2, 3 and 4 was reserved to the plaintiff provided that those spaces had a specified minimum headroom and the construction had the relevant government approval.  In due course, certain alterations and additions were carried out involving the construction of a mezzanine floor to form a loft area, the demolition of an internal wall and the building of a new wall enclosing an area comprising the original car parking spaces 2, 3 and 4.  The plaintiff re-designated the ‘VOID’ areas as new car parking spaces 2, 3 and 4.  The mezzanine encompassed not only the area immediately above the original car parking spaces 2, 3 and 4 but also above the ‘VOID’ areas.  The entire mezzanine as well as the original car parking spaces 2, 3 and 4 enclosed by the new wall were rented out by the plaintiff as workshops.

3.  The notice of motion of 24 July 2008 relied solely on the ‘as of right limb’, stating that “the matters in dispute on the appeal” (in relation to each of the plaintiff and third party) are within section 22(1)(a) of the Hong Kong Court of Final Appeal Ordinance.  There is an amended summons dated 4 June 2009 seeking, inter alia, to amend the notice of motion to invoke section 22(1)(b) in respect of two of the matters in dispute.  At the conclusion of the hearing, save for leave which was granted under section 22(1)(a) in respect of what is defined below as “the issues concerning management fees”, the application was refused with reasons to be handed down which we now do.

4.  The proceedings concerned four quite distinct matters or issues:

(1)  a claim by the plaintiff in trespass against the first and second defendants in respect of the installation of a section of a fire services pipe in the airspace above the ‘VOID’ areas (“the pipe issue”);

(2)  a counterclaim by the first defendant against the plaintiff for arrears of management fees and contributions since 1994 of approximately $5.5 million;

(3)  a counterclaim by the first defendant against the plaintiff for a mandatory injunction requiring the plaintiff to restore the original parking spaces 2, 3 and 4 by demolishing the enclosing wall (“the injunction issue”); and

(4)  the third party’s counterclaim against the first defendant for management fees of approximately $1.39 million.

For convenience, issues (2) and (4) are collectively referred to as “the issues relating to management fees”.

5.  The defendants accept that the plaintiff and the third party are entitled to leave as of right under section 22(1)(a) but only as regards the issues relating to management fees.  Therefore the question remaining was whether the pipe issue and the injunction issue fell within section 22(1)(a) and if not, whether leave to amend the notice of motion should be granted.

Section 22(1)(a)

6.  Mr Ho SC who appeared for the plaintiff submitted that the direct effect of the judgment below and of this court is that the plaintiff would have no right to construct that part of the loft that is situated immediately above the ‘VOID’ areas (“the extended loft”) and no right to rent out the extended loft or the original car parking spaces 2, 3 and 4 as workshops.  The plaintiff relied on a valuation of $2 million for the extended loft and the workshops made up of car parking spaces 2, 3 and 4 in contending that the ‘as of right’ limb applies.

7.  The first matter to note is that the mandatory injunction did not require the demolition of any part of the extended loft.  Accordingly, the capital value of the extended loft of $500,000 is of no relevance.  So far as the value of the original car parking spaces 2, 3 and 4 is concerned, whether valued as workshops or car parks, I fail to see its relevance.  Neither the injunction issue nor the pipe issue has the effect of affecting the ownership of those spaces: the plaintiff remains the owner.

8.  Mr Ho SC further submitted that the effect of this court’s judgment is that the plaintiff would lose the value of two of the three redesignated new car parks 2, 3 and 4 that formerly constituted the ‘VOID’ areas, namely, new car parks 3 and 4, new car park 2 having been sold by the plaintiff sometime ago.  The plaintiff has produced a valuation which values each of those car parks at $620,000, their aggregate value thus exceeding $1 million.  So it was said that the injunction issue fell within section 22(1)(a).

9.  Ownership of the ‘VOID’ areas was not the subject matter of the plaintiff’s action as such.  It simply did not feature in the prayer for relief.  The pipe issue became a claim for damages for trespass.  Such a claim is plainly not within the ‘as of right’ limb.  The injunction issue concerns the demolition of the enclosing wall so as to accord with the approved layout plan.  It is difficult to see how section 22(1)(a) is engaged at all.  China Field Limited v Appeal Tribunal (Buildings) and Another [2009] 2 HKLRD 135 does not assist the plaintiff because on no view could it be said the court’s order made upon disposing of the proposed appeal would take effect by immediately conferring or imposing on the relevant parties a financial benefit or detriment exceeding $1 million.

Questions of great general or public importance

10.  Of the three questions said to be of great general or public importance in the notice of motion, Mr Ho wisely did not pursue the first two questions posed which concern the issues relating to management fees.  In any event, the fact that it is common ground that the plaintiff and the third party are entitled to leave as of right under section 22(1)(a) would render it unnecessary to consider whether or not the first two questions raise issues of great general or public importance.

11.  As regards the third question, it reads:

“ (iii)     whether an approval given by the Building Authority/Director of Buildings and Lands in respect of an application for alterations and additions to a building shall amount to a written consent of the Director of Public Works for such works when the office of the Director of Public Works has ceased and his duties assumed by the Director of Buildings and Lands”

12.  I do not agree that it raises a question of great general or public importance.  It is a concurrent finding of fact that the plaintiff had not in fact made any application for the alteration of the approved layout plan for the car parks.  The question is thus purely hypothetical and does not arise for determination.  In any event, the question cannot be determined divorced from its context: it is fact sensitive and, as such, it cannot be said to be a question of great general or public importance.

“Or otherwise”

13.  The justification proffered was that this court’s finding that the ‘VOID’ areas are common areas was not a pure finding of fact but also involved a question of construction and, accordingly, no concurrent findings of fact arise.  It was also submitted that in reaching that conclusion, this court was obviously wrong.  It has not been suggested that the wrong legal test was applied and while, as a matter of construction, a different view could not be ruled out altogether, it would not follow that in reaching our conclusion, this court was obviously wrong.

14.  In the present case, I do not consider that special circumstances have been shown to exist that would justify the exceptional course of granting leave under the “or otherwise” limb.  Moreover, I maintain the view I expressed in Centre Rise Trading Limited (unrep., CACV 250/2008, 30 April 2009), that it would normally be a matter for decision by the Court of Final Appeal itself and not this court.

Conclusion

15.  Accordingly, other than the issues relating to management fees which fall within section 22(1)(a), leave to appeal to of the Court of Final Appeal is refused and I would also refuse leave to amend the notice of motion.

Costs

16.  Mr Wong SC who appeared for the first defendant applied for indemnity costs.  The background to the application is as follows.  On 21 October 2008, the plaintiff and the third party applied for a stay of execution of the mandatory injunction until the determination of its appeal by the Court of Final Appeal.  I refused the application for a stay and reasons were handed down on 28 October 2008.

17.  At the hearing of the stay application, senior counsel then appearing for the plaintiff invited the court to accept the plaintiff’s expert evidence contained in a report of Frank Wu dated 29 January 2008, which stated that the wall required to be demolished was made of “reinforced concrete”.  In other words, that it was a structural wall.  The first defendant’s counsel disputed this and maintained that it was made of brick.  As the court was not in a position to resolve the conflict, the plaintiff was given leave to renew its stay application to be heard as the same time as the leave application and that any evidence to be filed in support should be filed in good time so that the defendants would have adequate time to respond and to instruct experts, if necessary.

18.  On 3 December 2008, the plaintiff and the third party took out a summons which, inter alia, renewed the application for a stay and relied specifically on the expert report in which Mr Wu claimed to “have inspected” the wall on site and “carried out the necessary examinations, measurements and investigations …and reviewed all relevant approved building plans”.  The second affirmation of Luk Siu Kai dated 15 January 2009 conclusively demonstrated the falsity of the plaintiff’s assertions and ultimately culminated in an order of 4 June 2009, by consent, allowing the withdrawal of the stay application with costs to the defendants on an indemnity basis in any event.  It transpired that all the plaintiff’s expert had done was to inspect the wall at the cockloft and made assumptions regarding the enclosing wall.

19.  Mr Wong submitted that the plaintiff and the third party must have known all along that the enclosing wall was but a brick wall and not built of reinforced concrete: it was built by the plaintiff, the third party being the main contractor engaged to carry out the construction.  Further, apart from the sixth affirmation dated 17 February 2009, Mr Yuen’s earlier affirmations had been filed not only in support of the stay application but also the leave application.  In those circumstances, it was submitted that the court should show its disapproval of the plaintiff and the third party’s conduct by ordering indemnity costs.

20.  While, as the court stated quite clearly at the hearing, the conduct of the plaintiff and the third party is little short of disgraceful and deserves the strongest deprecation, the award of indemnity costs for the leave application could have the effect of penalising the parties at fault twice since the defendants already have indemnity costs in respect of the stay application.  In the circumstances, it was considered appropriate to order that the costs of the hearing be to the defendants on a party and party basis and the costs of the application (other than the hearing) be in the cause.

Hon Suffiad J:

21.  I agree.

Hon Sakhrani J:

22.  I agree.