THE INCORPORATED OWNERS OF ODEON BUILDING v. SUNFIELD TECHNOLOGY LTD

HCA 329/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 329 OF 2005 

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J UD GM EN T

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1. The plaintiff was incorporated on 2 February 2001 pursuant to the Building Management Ordinance Cap 344 as the Incorporated Owners of Odeon Building, 28 Shu Kuk Street, Hong Kong (“the building”).

2. These proceedings relate to the podium on the 4^th floor of the building.

3. The background facts are that Jolica Ltd (“Jolica”) was the developer of the building.  The property on which the building was erected is described as all those pieces or parcels of ground respectively registered in the Land Office as Section B of Inland Lot No. 3540 and Section C of Inland Lot 3540 (“the property”).

4. The building was and is a multi-storeyed building consisting of commercial and residential units.  The residential units are from the 5^th to 23^rd floors.  The commercial units are on the 1^st and 2^nd basements, the ground, 1^st, 2^nd and 3^rd floors.  There is a podium on the 4^th floor (“the podium”).

5. On 1 August 1985 Jolica entered into a Deed of Mutual Covenant (“the DMC”) with the first purchaser of a unit in the building Cheung Mee Chun.  By the assignment also dated 1 August 1985 Jolica assigned 30/10,000^th part or shares in the property together with Flat C on the 14^th floor of the building.

6. By the First Schedule of the DMC Jolica allotted equal undivided shares of the property to the individual units as set out in the First Schedule.  No equal undivided share of the property was allotted to the podium.

7. In respect of Flat C on the 14^th floor of the building, the first purchaser Cheung Mee Chun was allotted 30/10,000^th parts or shares in the property.

8. As is set out in the Second Schedule of the DMC the property was vested in Cheung Mee Chun and Jolica as tenants in common as to 30/10000^th shares in Cheung Mee Chun and as to the remaining 9,970/10,000^th shares in Jolica and in United Chinese Bank Ltd and Standard Chartered Bank Asia Ltd as the first chargee and second chargee respectively.

9. As at 1 August 1985 save for Flat C on the 14^th floor, all the other units in the building were owned by Jolica.

The subsequent assignments

10. By an assignment made on 17 September 1999 Jolica assigned to Expressland Ltd (“Espressland”) “the property described in the Schedule hereto together with all the rights of the Vendor as are more particularly set out in clauses 11 and 12 of the Third Schedule of the [Deed of Mutual Covenant]”.  The property described in the Schedule to the assignment was 4,411 equal undivided 10,000^th parts or shares in the property together with the sole and exclusive right and privilege to hold use occupy and enjoy the whole of the 1^st basement, 2^nd basement, 1^st floor, 2^nd floor and 3^rd floor of the building.

11. According to a land registry search in the trial bundle, Expressland assigned 956/10,000^th share of the property together with the 1^st floor of the building to Hong Kong Grace Baptist Church on 22 February 2001.

12. By an assignment made on 30 April 2002 Expressland assigned 1,912 equal undivided 10,000^th parts or shares in the property together with the 2^nd and 3^rd floors of the building to Falcome Company Ltd.

13. By an assignment made on 10 November 2003 Expressland assigned 647 equal undivided 10,000^th parts or shares in the property together with the 1^st basement of the building to Sky Field Development Ltd.

14. By an assignment made of 14 November 2003 Expressland assigned 896 equal undivided 10,000^th parts or shares in the property together with the 2^nd basement of the building to Tomate Development Ltd.

15. By an assignment made on 17 November 2003 Expressland assigned to the defendant in consideration of the sum of $1,000 “the Rights which are set out in Clauses 11 and 12 of the Third Schedule of the [Deed of Mutual Covenant]”.  No unit in the building and no equal undivided part or share in the property was assigned to the defendant.

The DMC

16. By clause 4 of the DMC it was provided that :

“Each owner shall be bound by and shall observe and perform the covenants provisions and restrictions set out in the Third Schedule hereto.”

17. The covenants, provisions and restrictions referred to in clause 4 of the DMC are set out in the Third Schedule.

18. By clause 1 of the Third Schedule Funing Services Ltd (“Funing”) was appointed as the agent of the owners to manage and to provide services in respect of the building.

19. By clause 16(b) of the DMC it was provided that the word “owner” shall include each person or persons in whom for the time being the legal estate in any undivided share in the property and the building is vested.

20. The rights assigned to the defendant by Expressland are those as set out in clauses 11 and 12 of the Third Schedule of the DMC.

21. This action concerns the rights in clause 12, in particular clause 12(iv) of the Third Schedule of the DMC (“clause 12(iv)”).

The licence agreements

22. It is undisputed that since 17 September 1999 Expressland entered into licence agreements as licensor granting licences to various telecommunications operators to erect, install and to maintain mobile telephone transmitting stations, aerials and cables on the podium.  One such licence agreement is at page 202 of the trial bundle which is dated 3 January 2003 between Expressland as licensor and Peoples Telephone Company Limited as licensee granting such a licence at the monthly licence fee of $13,680.  In the recital 1. to that agreement Expressland made the representation that it was the owner of the podium.

23. After the assignment made on 17 November 2003 from Expressland to the defendant of the rights set out in clauses 11 and 12 of the Third Schedule of the DMC the defendant has, without the consent of the plaintiff, granted similar licences to various telecommunications operators to erect, install and to maintain mobile telephone transmitting stations, aerials and cables on the podium.  This is also undisputed.  One such licence agreement is the one dated 21 January 2008 at page 231 of the trial bundle between the defendant as licensor and PCCW Mobile HK Ltd as licensee at the monthly licence fee of $18,500.  By clause 5 of that agreement the defendant warranted that “it is the legal and beneficial owner of the Designated Area”.  The designated area is the area in the podium as shown in the plan attached to the agreement.

The proceedings

24. By an order made by Master Lung on 18 October 2005, this action was consolidated with HCA 362/2001 between the plaintiff against Expressland as defendant.

25. By a consent order made on 3 December 2007 the claims of the plaintiff in HCA 362/2001 were dismissed with no order as to costs.

26. By a consent order made on 16 January 2009 Chu J deconsolidated the two actions and ordered that this action do proceed as from that date as a separate action.

27. At trial, it was agreed between the parties that the defendant has received licence fees from 17 November 2003 to the first day of trial 16 February 2009 in the total sum of $2,462,208.60.  Subject to the question of liability, the quantum of damages was agreed at $2,462,208.60 up to 16 February 2009 and continuing at the monthly rate of $33,198 as from 17 February 2009.

The Issue

28. The issue is whether the defendant was entitled to grant the licences to the telecommunications operators.

Discussion and Findings

29. I heard evidence from Chan Yick Kwok the Chairman of the plaintiff.  I believe him and accept his evidence.  His evidence was not really disputed.

30. Mr Yip, for the plaintiff, submitted, correctly in my view, that there was no issue arising on the pleadings that the podium was a common part of the building.  Paragraph 6 of the statement of claim pleaded, inter alia, that the podium was a common part of the building.  By O.18; r.13(1) of the RHC this was deemed to be admitted as this was not traversed or denied in the defence.

31. The defendant relies only on clause 12(iv) as entitling it to grant the licences to the telecommunications operators.  Whether or not it was and is entitled to do so depends on the proper construction of clause 12(iv).

32. It is important to bear in mind that when the DMC was executed on 1 August 1985 Jolica as the developer owned the vast majority of the undivided shares in the property together with all of the commercial units and save for one residential unit, all the other residential units in the building.

33. By clauses 11 and 12 of the Third Schedule of the DMC Jolica were given certain rights.

34. By clause 11 it was provided that the owners for the time being shall allow Jolica and/or Funing or any person or persons authorized by them to : 

(a) pass and repass over and upon the main roof of the building for the purpose of affixing, installing, replacing, serving, inspecting or repairing signboard or sign and the machine rooms, water tanks and other common facilities erected on the main roof (clause 11(a)); and

(b)    pass and repass the 1^st basement and the 2^nd basement for the purpose of inspecting and servicing the switch room, lift machine room and other common facilities on the 1^st basement and 2^nd basement (clause 11(b)).

35. By clause 12, 4 separate exclusive rights were given to Jolica and its successors and assigns and all persons authorised by it or them as follows :

(a) the right to construct, install and use one or more of the chimneys, exhausts, air ducts and water pipes against the exterior of the building and leading from the basement of ground floor up to any height; (clause 12(i));

(b)    the right to erect, affix or install (with all necessary or convenient electric wiring) any signboard or sign on or over the main roof and exterior walls of the building with the right of access thereto for the purposes of affixing, installing, replacing and servicing the same; (clause 12(ii));

(c) the right to install and maintain on any part of the water tank or staircase-head wireless or television aerials serving the building as a whole or any part or parts thereof (clause 12(iii)); and

(d)    the right to install “air-conditioning plants and other fittings or equipment” on any part of the podium roof with the right of access thereto for affixing, installing, replacing or servicing “such air-conditioning plants, fittings or equipment”.

36. There can be no doubt, and I so find, that the licensees of the defendant have installed and used aerials and transmitting stations which have been mounted on the parapet wall and floor of the podium.  It is clear on the evidence that, as submitted by Mr Yip, these have not been installed in any part of the water tank or staircase-head.  However, the defendant does not in this action rely on any right under clause 12(iii) as Mr Cheung, for the defendant, made clear.  The defendant seeks to defend its actions by granting the licences and collecting the licence fees from the various telecommunications operators in the agreed sum by relying solely on its right under clause 12(iv).

37. As the photographs as well as the sketch which is at page 173a-1 of the trial bundle show, the transmitting stations and aerials are mounted on the parapet wall and floor of the podium.

38. The question to consider is whether the words “other fittings or equipment” in clause 12(iv) refer only to fittings or equipment for air-conditioning plants but do not include aerials and transmitting stations as have been installed and mounted at the podium.

39. Mr Cheung submitted that the words “other fittings or equipment” should be read disjunctively with the words “air-conditioning plants” in clause 12(iv).  He relied on section 15 of the Conveyancing and Property Ordinance Cap 219 where it is provided that in any instrument affecting land the word, inter alia, “other” “shall be construed disjunctively and not as implying similarity, unless the word ‘similar’ or some other word of like meaning is added.”  It was in effect submitted that the fittings and equipment that the defendant or persons authorized by it were entitled to install were any fittings and any equipment whatsoever whether it had anything to do with air-conditioning plants or not.

40. However, as is specifically provided in the opening words of section 15 of the Conveyancing and Property Ordinance the word “other” should be construed disjunctively “unless the contrary intention appears” in the instrument.  I am of the view that a contrary intention does indeed appear in the DMC.

41. It seems to me that if the defendant’s construction is the correct one it means that the defendant can install whatever fitting and whatever equipment it wants to (whether related to air-conditioning plants or not) on the podium to the exclusion of every owner in the building.  The defendant is not even an “owner” as defined in clause 16(b) of the DMC and it is also not required to pay any maintenance fee to the plaintiff or the manager of the building for the use of the podium.  In my view the construction contended for by the defendant leads to an absurd result.  On the defendant’s construction the result is that for the nominal sum of $1,000 the defendant has in effect acquired exclusive possession of the podium without even acquiring any equal undivided share in the property. 

42. The defendant’s construction should not be adopted if an alternative construction not leading to an absurd result were available.  As I have said, the construction contended for by the defendant is absurd and is also contrary to common sense. 

43. It is useful to bear in mind what Lord Hoffman NPJ said in Jumbo King Ltd v Faithful Properties Ltd & others (1999) 2 HKCFAR 279 at 296 :

“ 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.  The only escape from the language is an action for rectification, in which the previous negotiations can be examined.  But the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean.  Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail.”

44. As Lord Hoffman succinctly said, the construction of a document is not a game with words.  Endeavouring to discover what a reasonable person would have understood the parties to mean involves having regard, not only to the individual words 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.

45. It seems to me applying those principles the agreement as a whole has to be considered.  The factual background at the time of the agreement on 1 August 1985 must also be considered.

46. It should also be borne in mind that when the DMC was executed on 1 August 1985 the developer Jolica owned all the commercial units in the building on the floors below the 4^th floor where the podium was.  The commercial units no doubt would need to have air-conditioning provided by air-conditioning plants and it seems that the developer was granted the exclusive right to install the same at the podium by clause 12(iv).

47. I have no doubt that any reasonable person would have understood the parties to mean when using the words “other fittings or equipment” in clause 12(iv) to mean fittings and equipment for air-conditioning plants.  Such fittings and equipment would necessarily include pipes connecting the air-conditioning plants to units and fittings to mount the air-conditioning plants.  Air-conditioning plants do not stand on their own.  They have to be fixed, fitted or mounted on the floor or wall or on platforms.

48. I would construe the words “other fittings and equipment” to mean fittings and equipment for air-conditioning plants.  This is what, in my view, a reasonable person looking at the DMC as a whole and the relevant factual background would have understood the parties to mean.  I reject the defendant’s submission that the words should be read disjunctively with the words “air-conditioning plants” in clause 12(iv). 

49. In my judgment the words “other fittings and equipment” in clause 12(iv) refer to fittings and equipment for air-conditioning plants.  I so find.

Conclusion

50. In view of my findings it follows that the use by the defendant of the podium by granting licences to the licensees to install and use antenna, masts, cables and transmitting stations on the podium constitute a trespass.  It is a trespass to place anything on or in land in possession of another (Clerk & Lindsell on Torts 19th Edn (2006) para. 19-02.)

51. The plaintiff is entitled to the agreed damages. 

52. I give judgment to the plaintiff against the defendant for :

(a) an order that the defendant do remove the antenna, masts, cable and transmitting stations installed on the podium and the external walls thereof;

(b)    an injunction restraining the defendant whether by itself, its servants or agents or licensees or otherwise howsoever from installing, erecting, or maintaining antenna, masts, cables and transmitting stations on the podium and external wall thereof;

(c) damages in the sum of $2,462,208.60 up to 16 February 2009;

(d)    damages at the rate of $33,198 per month from 17 February 2009 until removal of the antenna, masts, cable and transmitting stations installed on the podium and the external walls thereof.

53. I also make an order nisi that the costs of the action are to be costs to the plaintiff to be paid by the defendant.