黎偉雄 v. SINO ESTATES MANAGEMENT LTD AND ANOTHER

LDBM 61/2020

[2022] HKLdT 68

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO.61 OF 2020

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JUDGMENT

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Contents

A.  Issue 1 – Commercial Common Areas or not?

B.  Parties

C.  Background to Issue 1

D.  Rival contentions on Issue 1

E.  Other Issues upon Issue 1 ruled in Applicant’s favour

F.  PPW Proceedings & Appeal

G.  Witnesses

(G1)  Applicant’s sole witness – the Applicant

(G2)  R1’s sole witness - Samuel Leung

(G3)  R2’s two witnesses - Kenneth Chau & Hung Mei Mei

H.  Factual Findings on Issue I

(H1)  New Grant

(H2)  Approved Building Plans of the Estate

(H3)  Architect’s Certificates & Statutory Declaration

(H4)  Occupation Permit & Certificate of Compliance

(H5)  The DMC

(H6)  CA Assignment

I.  Analysis of Issue 1

(I1)  A question of construction of the DMC

(I2)  Applicable principles for construing the DMC

(I3)  Legal background in general

(I4)  Markings on 2009 plans disregarded.

(I5)  Alleged pointers in support of A’s Contentions

(I6)  Alleged pointers in support of Rs’ Contentions

(I7)  Result of unitary exercise of construing the DMC

(I8)  Answer to Issue 1

J.  Issue 2 – Right of Applicant over the Subject Areas under the DMC or not?

K.  Issue 3 – Applicant’s standing/authority to sue R2

L.  Issues 4 & 5 – R1 in breach of duties or not?  If so, protected by the DMC or not?

M.  Issue 6 - Remedies & Quantum

(M1)  Mesne profits for the Encroachment

(M2)  Account of profit for the Encroachment

(M3)  Misrepresentation for deprivation of access to “Commercial Common Areas”

(M4)  Quantum

(M5)  Conclusion on Issue 6

N.  Disposition

O.  Costs Order Nisi

P.  Interpretation of this Judgment

A.   Issue 1 – Commercial Common Areas or not?

1.  This application involves a composite development known as Maritime Bay (the Estate) consisting of residential units, commercial development and car parking spaces. The crucial issue (Issue 1) is whether, since the subject deed of mutual covenant was made on 24 March 1999 (the DMC), “Commercial Common Areas” have existed at (i) portion of ground floor (G/F) grand entrance (G/F Entrance) and (ii) certain former G/F corridors (Former G/F Corridors) (collectively the Subject Areas)[1] of the Estate.

2.  The Applicant says yes to Issue 1 while both the 1^st and 2^nd Respondents (R1 and R2) say no.

B.   Parties

3.  The Applicant is an owner of a residential flat at Tower 1 of the Estate (A’s Flat) and also the chairman of Owners’ Committee of the Estate formed under the DMC (OC) [2]. He and another person entered into an agreement on 17 December 1997 to purchase A’s Flat from R2 when it was uncompleted and he became owner of A’s Flat when the said purchase was completed on 7 April 1999.

4.  R1 was designated by the DMC as “Managers” of the Estate. It has been managing the Estate until today.

5.  R2 is the developer of the Estate and the grantee of the land over which it was built (the Land)[3]. It has been operating a commercial mall (the Mall) situated at (i) portion of G/F and (ii) portion of upper ground floors (UGF) of the Estate until today.

6.  R1 and R2 used to belong to the same group of companies. Link Real Estate Investment Trust (LINK) later purchased the entire share capital of R2 and became R2’s holding company. Hence, since January 2012, R2 and R1 no longer belonged to the same group of companies.

7.  At this trial, the Applicant appeared in person.  R1 was represented at this trial by Mr Justin Ismail of counsel (Mr Ismail).  Mr C.Y. Li SC (Mr Li SC) leading Mr Li Pak-hei of counsel appeared for R2 at this trial.

C.   Background to Issue 1

8.  On 24 March 1999, before the DMC was executed, R2 had assigned a residential unit in Tower 1 of the Estate (the First Assigned Premises) to two persons[4] defined as the “Second Owner” in the DMC (the Second Owner).

9.  Afterwards, the DMC was executed by R2 as the “First Owner” therein, the Second Owner and R1 as the “Manager” thereof.  The DMC recited that they had entered into it to (1) define and regulate their respective rights, interests and obligations and those of subsequent owners, (2) make provisions for management of the Land and the Estate, and (3) appoint R1 as the manager to exercise its powers and perform its duties on the terms contained therein.

10.  For “the purpose of distribution and sale”, the Land and the Estate was notionally divided in the DMC into 5,411 equal undivided shares.

11.  Thereafter, on the same day, pursuant to the DMC[5], R2 assigned to R1 733 shares of the Land and the Estate with the exclusive right to hold use occupy and enjoy “the Common Areas (including Club House) (as defined in the DMC) (bold supplied)” for R1 to hold them on trust for the benefit of all the owners of undivided shares of the Land and the Estate (CA Assignment).

12.  “Common Areas” are defined by the DMC to mean, and divided in section B thereof into 4 types: (i) “Estate Common Areas”; (ii) “Residential Common Areas”; (iii) “Commercial Common Areas”; and (iv) “Garage Common Areas”.

13.  Issue 1 is concerned with “Commercial Common Areas”, which was defined to mean:

“those parts of the Commercial Development

the exclusive use and enjoyment of which has not been assigned to any owner

including, but not limited to, ramps, entrances, lobbies, corridors, air conditioning plant rooms, lavatories

but excluding anything contained within the Estate Common Areas, Residential Common Areas and the Garage Common Areas

(bold and italics supplied)”.

14.  No “Common Areas Plans” was, however, annexed to the DMC (or to CA Assignment) to specify or designate the respective location(s), if any, of the above 4 categories of “Common Areas” within the Estate (prevailing guidelines of the Land Office for approving deeds of mutual covenant in giving consent for pre-sale of uncompleted residential properties did not so require[6]).

15.  Under Clause 8 at Section L, R2 was only required to prepare “Common Areas Plans” and cause them to be kept at R1’s office within the Estate for owners’ inspection.  As shall be seen below, if such plans were prepared by R2 pursuant to the DMC at all, they were not available until a decade later in 2009.

D.   Rival contentions on Issue 1

16.  On Issue 1, the Applicant contended that the Subject Areas had existed at G/F of the Estate at the making of the DMC. They fall within the definition of “Commercial Common Areas” of the DMC. Since the making of the DMC, “Commercial Common Areas” and the remaining 3 kinds of “Common Areas” have all existed within the Estate.  All 4 kinds of “Common Areas” have, since the making of CA Assignment on the same day, been held by R1 on trust for all the owners of the Estate (collectively A’s Contentions).

17.  Both R2 and R1, however, contended that “Commercial Common Areas” have never existed at G/F of the Estate.  The Subject Areas have always formed part of G/F “Commercial Accommodation” privately-owned by R2.  Despite CA Assignment, R1 has never held “Commercial Common Areas” or the Subject Areas on trust for all the owners of the Estate (collectively Rs’ Contentions).

E.   Other Issues upon Issue 1 ruled in Applicant’s favour

18.  If Issue 1 is answered yes as the Applicant says, he further alleged that R2 had, since 1999, encroached upon the Subject Areas by (i) putting up kiosks at portion of G/F Entrance and (ii) having shop extensions over Former G/F Corridors (collectively the Encroachment) for its own profit at the expenses of the other owners of the Estate.

19.  R1, in alleged breach of its manager’s duties under the DMC, the Applicant said, had condoned the Encroachment and misrepresented to OC about non-existence of “Commercial Common Areas” within the Estate in the past.

20.  R1, the Applicant says, is thus liable to pay mesne profit, or account for profit, for the Encroachment totaling $27,919,510 to “Estate Capital Fund” of the Estate.

21.  Moreover, the Applicant seeks against R1 damages in sum of $30,598 for alleged misrepresentation which deprived him access to the Subject Areas as owner of A’s Flat.

22.  The Applicant finally seeks against R1 and R2 a declaration of “Commercial Common Areas” at G/F of the Estate^[7].

23.  For their part, both R1 and R2 disagreed with the Applicant having any right over the Subject Areas (Issue 2) and took issue with remedies claimed by him, including their quantum (Issue 6).

24.  R2 further challenged authority/standing of the Applicant to bring these proceedings against it i.e. R2 in his personal or representative capacity (Issue 3).

25.  R1 denied alleged misrepresentations and alleged breach of manager’s duties (Issue 4) and sought protection in exemption clause of the DMC (Issue 5).

F.   PPW Proceedings & Appeal

26.  This application is, however, not the only litigation over the Estate between the Applicant and R1 so far.

27.  As early as on 28 July 2017, the Applicant had taken out in person another building management application at Lands Tribunal against R1 as the only respondent[8] over a 24-hour Public Pedestrian Way (PPW) at UGF of the Estate.  He lost at first instance after trial on 3 August 2018(PPW Case)[9].

28.  The Applicant was later given leave to appeal on 14 May 2019[10]. The rival contentions before the Court of Appeal (CA), set out at paragraph 11 of its judgment, are these: the “Applicant contended that the PPW is “an Estate Common Area” as defined in the DMC.  [R1] denied and contended that the PPW is part of the Commercial Accommodation reserved by [R2] under the DMC”.

29.  On 11 June 2020, CA allowed the appeal (PPW Appeal)[11] and granted the Applicant a declaration as he claimed.  At [23] of its judgment of PPW Appeal (CA Judgment), the Court said:

“The Judge also erred in holding that there is no Commercial Common Area because [R2] retained ownership of all the shop units. Such holding failed to give proper effect to the DMC. It also failed to give effect to the assignment of the Common Areas to [R1]. It appears the Judge disregarded the provisions for Commercial Common Areas and Commercial Common Services and Facilities as if they were otiose notwithstanding that the evidence clearly shows that such facilities and areas were physically in existence at the time of the DMC. The scheme of the DMC (underpinned by Special Condition 24 of the Grant) provides for the communal ownership of the Commercial Common Areas. As Commercial Common Areas are part of the Common Areas, the shares pertaining to the same were assigned to [R1]as trustee under the assignment of the Common Areas of 24 March 1999. It matters not that [R2] has retained the ownership of the shop units (bold supplied)”.

30.  No doubt CA said the above to deal with the different issue before it in the different context of the PPW Appeal (and on the different evidence adduced at trial of PPW Case). They were not said to deal with Issue 1 nor were CA then supplied with additional material evidence adduced at this trial and to be discussed below. Given that R2 was not a party to the PPW Case or the PPW Appeal, CA Judgment is also not binding on R2 as a matter of law.

31.  Nevertheless, 4 days after PPW Appeal was allowed i.e. on 15 June 2020, the Applicant launched this application again in person against R1 alone, placing heavy reliance on, among others, CA Judgment (which shall be carefully considered and discussed below).

32.  On 24 February 2021, on R1’s application, the Lands Tribunal ordered R2 to be joined as a party to this application.

G.   Witnesses

(G1)   Applicant’s sole witness – the Applicant

33.  The Applicant elected to give evidence at trial.  He gave wide-ranging evidence, including on irrelevant matters unrelated to the Subject Areas[12]. He cited many authorities, most of them also irrelevant, and wrongly quoted some authorities in his evidence, which should consist of facts alone.  He wrongly raised arguments in his witness statement when they should appear in his closing submissions.  As a layman unfamiliar with court procedure, it is, one may think, not surprising for him to have so prepared his case.

34.  On Issue 1, the Applicant relied on the followings in support of A’s Contentions: -

(1) various provisions of the DMC, in particular the definition of “Commercial Common Areas”;

(2) CA Assignment;

(3) various special conditions (SC) of government’s New Grant No.8530 of the Land to R2 (the New Grant);

(4) the approved building plans of the Estate;

(5) CA Judgment; and

(6) professional opinion given by Messrs. Chung & Kwan (C&K) in its letter of advice dated 10 May 2017 to OC on “Commercial Common Areas” of the Estate (C&K Opinion).

35.  The Applicant testified to the effect below as was summarized in paragraphs [18] to [22] above.

(1)  R2 had, he said, rented out, and allowed to be set up at portion of G/F Entrance, kiosks, whose presence had wrongfully obstructed and hindered owners’ use of G/F Entrance[13].

(2)  R2 had also varied approved G/F layouts of the Estate such that its tenants of shop G02, G03-5 and G07 had wrongfully occupied Former G/F Corridors as part of their shop spaces[14].

(3)  Ignoring its manager’s duties, R1 had, he said, sided with R2 (R1’s related company) in allowing the Encroachment and not taking up legal action against R2 despite R1 knew full well that it held the Subject Areas as “Commercial Common Areas” on trust for all owners.

36.  Both Mr Li SC and Mr Ismail have at trial embarked on lengthy cross-examination of the Applicant.

37.  In his closing submissions, Mr Li SC submitted that the Applicant has an ulterior motive in taking out this application as a personal vendetta against R1.

(1)  The Applicant, he observed, eschewed from answering his questions concerning his past employment with R1[15].

(2)  On being repeatedly asked if he was “dismissed” by R1, the Applicant eventually came back with the answer that he “did not like” R1 and R1 “did not like him either” and he “left the job”.

(3)  And the very fact that the Applicant is seeking all his relief (save one) against R1 alone manifests, he submitted, his private agenda of taking revenge against R1 for his own financial benefit.

38.  For reasons below, I do not agree with the above submissions.

(1)  The Applicant had never admitted having been “dismissed” by R1 (whose counsel had never pursued such cross-examination raised by R2 with details of R1’s alleged dismissal).

(2)  Had the Applicant been interested to take personal revenge on R1 as alleged, he had, one thinks, already succeeded by winning PPW Appeal.  R2’s submissions do not explain why he saw fit to take out another so-called personal vendetta, including its associated risks, against R1 over “Commercial Common Areas” of the Estate.  Lest it be forgotten, he lost PPW Case to R1 at first instance after trial, with costs ordered against him.

(3)  Given his defeat in PPW Case at first instance and looking at Reply he filed against R1’s Notice of Opposition[16], the Applicant plainly recognized risk of great financial loss to himself in terms of legal costs if he were to lose a second court case against R1.

(4)  All $27 million odd mesne profit that the Applicant sought against R1 in this application, if awarded at all, does not, one observes, go into his personal pocket but to “Estate Capital Fund” of the Estate to the benefit of all owners of the Estate.  The Applicant only sought for himself a small sum of $30,000 odd against R1.

39.  All in all, the impression of this Tribunal regarding the Applicant is that he likely took out this application to correct (he perceived) alleged injustice and alleged breach of duty made by R1 at the expenses of other owners.  Indeed, he had pursued within OC the Encroachment with R1 since 2005[17]. He apparently found all his past efforts in vain before he took out this application against R1.

40.  Nevertheless, on top of procedural mistakes, the Applicant has many misconceptions about the substantive law[18] and the law of evidence.  As an example of the latter, he wrongly said more than once that, if R1 disagrees with his figures of mesne profit, R1 could advance its own different calculations, failing which R1 shall be taken to have agreed with his figures.

41.  The correct legal position is that as the Applicant took out this application to make claims against R1 and R2, he bears “burden of proof” to prove his claims both on its factual and legal basis[19].  R1 and R2 can simply sit back and put him to “strict proof” of his claims, though on some factual and legal matters, they may elect to advance contrary factual versions[20] and different legal analysis.

42.  In terms of facts, the Applicant must prove all elements, including quantum, of his claims to the civil standard of “balance of probabilities”[21] in order to succeed.  If he fails at the end of the day to prove his claims on both facts and law, his claims will be dismissed or that, if he manages to prove liability but not quantum, he may be awarded only “nominal” damages or compensation.

43.  Overall speaking, besides the shortcomings identified above, this Tribunal finds Applicant’s evidence in many respects illogical, implausible, self-contradictory and inconsistent with other undisputed evidence.

44.  Hence, this Tribunal exercises great caution before accepting or acting on any of the disputed evidence of the Applicant and those parts of his evidence not corroborated by other evidence.

(G2)   R1’s sole witness - Samuel Leung

45.  R1 called at trial Mr Leung Kok Cheung, Samuel (Leung), its current District General Manager, as its sole witness.

46.  Leung gave evidence that R1 acted as agent for all the owners of the Estate, and independently from others, including from other companies within its group of companies, at all times.  R1, Leung said, arrived at its own independent judgment at all times.  In all the circumstances, it was, he said, reasonable for R1 to take the view, as R2 did, that there is no “Commercial Common Areas” within the Estate and that the Subject Areas are owned by R2 (and Leung gave various arguments for that as if he was an advocate for R1).

47.  Pursuant to the DMC, said Leung, a set of “Common Areas” plans were deposited with R1’s office at the Estate by R2 “at the latest in 2000s after the DMC had been entered into (italics supplied)” and its G/F plan thereof showed no “Commercial Common Areas”.

48.  Leung stressed that R1 has been acting properly in meeting the challenge, and in striking the proper balance, arising from such stark differences in opinion between the Applicant and R2 over the Subject Areas.  It was, he said, imprudent for R1 to infringe the proprietary rights of R2 over the Subject Areas.  In any event, R1 was, he said, not guilty of any wilful act, neglect or dishonesty and should be entitled to exemption under the DMC.

49.  The Applicant lacked the ability to effectively cross-examine Leung, who took the chance to read out in the stand his well-rehearsed and long answers on Issue 1.  I do not find such opportunistic behavior of Leung entirely satisfactory.

50.  Two other features of Leung’s evidence also call for, I think, special attention:

(1)  I find it inherently implausible and improbable that R1 had, as Leung claimed in the box, provided C&K with “Common Areas” plans when C&K were instructed by OC in 2017 to provide C&K Opinion.  Had C&K been provided with “Common Areas” plans as he claimed, one ought to find references to such material document in C&K Opinion but there was no mention of them at all[22]. I disbelieve Leung’s evidence on this point.

(2)  I also find it unreliable for Leung to claim, without R1 producing alleged past “records” Leung sought to rely upon, that the layout of shops G02 to G08 on G/F of the Estate has remained largely the same as it is today since the opening of the Mall in 1999 when Leung had admittedly no personal knowledge of the same (he joined R1 in 2005 and he got involved with the Estate only as from 2014).

51.  Hence, this Tribunal also watches out for such unreliable parts of Leung’s evidence and look out for corroboration, if any, of them from documents and/or other oral evidence before accepting or acting upon them.

(G3)   R2’s two witnesses - Kenneth Chau & Hung Mei Mei

52.  R2 called (i) Mr Kenneth T.H. Chau (Chau), an architect and the Authorized Person (AP) engaged by R2 for the development of the Estate (the Project), and (ii) Ms Hung Mei Mei (Hung), senior portfolio manager of Link Property Management Services Limited, as its 2 witnesses.

(i)  Chau

53.  Chau mainly gave evidence on behalf of R2 of his allocation of 322 shares of the Land and the Estate to “Common Areas” on G/F level of the Estate in draft DMC submitted for approval by District Lands Office, Sai Kung (DLO), by reference to total gross floor areas (GFA) shown on various approved building plans he prepared for the Estate.  Importantly, he addressed the question whether or not GFA of the Subject Areas have been included in the calculations and allocation of the said 322 shares.

54.  In spite of my initial reservation, I agree with Mr Li SC that Chau gave evidence as a factual witness (and he did not give expert opinion as an expert witness).  As a factual witness, Chau has first-hand personal knowledge of the factual matters he testified.

55.  In spite of the long lapse of time involved, material parts of Chau’s evidence were corroborated by (and I think he had well refreshed his memory thereof by) contents of contemporaneous documents produced before this Tribunal, including building plans of the Estate, and architect certificates, prepared by Chau himself long time ago.

56.  The Applicant had tried his best to cross-examine Chau but Chau was unshaken.  Chau could remember most of the time and managed to answer most questions, including questions of this tribunal, from his memory and/or documents before him.

57.  All things considered, I find Chau an honest and credible witness.  I find most of his evidence reliable. Unless otherwise stated, I accept his evidence referred to in this Judgment.

(ii)  Hung

58.  Hung gave evidence that R2 had never disposed of any “Commercial Unit” of the Mall to others and that it was at all times owner of “Commercial Accommodation” of the Estate, including being owner of the Subject Areas.

59.  Hung also gave much evidence on Issue 1 by way of arguments in support of Rs’ Contentions.  Among others, she referred to G/F “Common Areas” plan (of a whole set of “Common Areas” plans purportedly prepared by R2 pursuant to the DMC) showing no “Commercial Common Areas” at all.

60.  Hung gave more detailed evidence than Leung did on the layout, usage and occupation at G/F of the Mall since it opened for business in 1999.  G/F layout of the Mall in the approved building plans can, she stressed, be lawfully changed afterwards, and had indeed been changed by R2 afterwards by way of addition & alteration works (A&A Works)[23]. The DMC allows for such changes and also making of sub-deed of mutual covenants.

61.  Residential owners of the Estate had at all times, Hung also said, separate entrances, exits and lobbies at G/F to enter and leave the Estate, and separate lifts for them to go to car-parking spaces at UGF, G/F and basement to pick up, and to return from, their cars, without entering the Mall.

62.  Like Leung, Hung also purported to claim without personal knowledge and disclosed document that R2 had adopted a different layout for G/F of the Estate when the Mall opened in 1999 which is not the same as that shown in G/F Approved Building Plan and that, save for A&A works, the said layout (including the present configuration of shops G02, G03-5 and G07) has not changed ever since.  However, she had been assigned to supervise the affairs of the Mall since 2014 and not earlier.

63.  Hung was also unshaken after cross-examination by the Applicant.  Save as otherwise indicated below, such as on G/F shop configuration of the Estate, I find Hung credible and reliable, and I accept her evidence referred to in this Judgment.

H.   Factual Findings on Issue I

64.  I find, and set out in this section, chronologically if practicable, facts relevant to Issue 1 based on common and undisputed reliable evidence adduced at this trial.  In so far I need to resolve any conflict of evidence, I give reasons for my preference when I mention such findings below.

65.  Most facts in this section happened on or before the making of the DMC.  They provide, I think, admissible factual and legal background (or context) for the proper resolution of Issue I.

(H1)  New Grant

66.  The government made the New Grant of the Land to R2 by way of Agreement and Conditions of Sale dated 27 March 1995.  The Land is about 5,970m² in area.  According to plan of the Land annexed thereto, it is more or less rectangular in shape.  One of its 4 sides runs from north-east to south-west and borders on Pui Shing Road.  Another side of it runs from north-west to south-east and borders on Ngan O Road.

67.  Users of the Land as provided by SC(4) shall be “non- industrial”, with 2 storeys immediately above mean formation level to be used for “non-industrial” purpose and the remaining storeys above mean formation level to be used for “private residential” purposes.

68.  SC(9)(b)&(c) requires that that the total GFA of any building to be erected on the Land shall not be less than 29,164m².  The total GFAs of any building constructed and designed respectively for “non-industrial” and “private residential” purposes shall not exceed 5,325m² and 43,282m² respectively.

69.  SC(9)(e) requires that the design, disposition and height of any building(s) to be erected on the Land shall be subject to the approval in writing of the Director and no building works (other than site formation works) shall be commenced until such approval shall have been obtained.

70.  SC(12) provides for a “segregated pedestrian way or path” as follows: -

“(a) The Purchaser shall at his own expense and in all respects to the satisfaction of the Director lay, form, provide, construct and surface such segregated pedestrian way or path (together with such stairs, ramps and escalators as the Director in his absolute discretion may require) at such positions within the lot and any building or buildings erected thereon and at such levels as the Director may require, in such manner, with such materials and to such standards, levels, alignments and designs as the Director shall approve. The pedestrian way or path shall follow the shortest possible routes and shall be so constructed and designed as to:-

(i) link up each and every building erected or to be erected on the lot; and

(ii)     link up all the major facilities within the lot including the residential blocks, open space and other facilities provided therein.”

71.  SC(13) regarding PPW, the subject matter of CA Judgment, is as follows:-

“(a) The Purchaser shall at his expense and in all respects to the satisfaction of the Director provide adequate structural support and landing space at the perimeters of the building or buildings erected or to be erected on the lot between the points R and S through T as shown and marked on the plan annexed hereto and at such level as shall be approved by the Director to receive the future footbridge (if any).

(b) When demanded to do so by the Director, the Purchaser shall within 12 months of such demand provide at his own expense and in all respects to the satisfaction of the Director provide at such levels of and with such alignment in the building or buildings erected or to be erected on the lot as the Director may approve and keep open 24 hours a day a free public pedestrian way.  The public pedestrian way shall have a width of 6 metres and follow the shortest possible routes as to link up the footbridge referred to in sub-clause (a) of this Special Condition and the adjacent lot or premise at the location as marked and shown as UVW or at such other location to be approved by the Director.”

72.  SC(17) regarding “Refuse collection system” requires R2 to provide and maintain a “comprehensive and nuisance-free system of refuse collection and disposal” to serve the Land and the building to be erected thereon.

73.  SC(24)(a), whose sub-paragraph (v) was heavily relied upon by the Applicant to reinforce A’s Contentions on Issue 1, reads as follows:-

“(a) Notwithstanding that the General and Special Conditions herein shall have been observed and complied with …, the Purchaser shall not assign, mortgage, charge or part with the possession of or otherwise dispose of the lot or any part thereof or any interest therein or enter into any agreement so to do except by way of an assignment or other disposal of undivided shares in the whole of the lot together with the right to the exclusive use and occupation of individual shares in the whole of the lot together with the right to the exclusive use and occupation of individual floors and units in any building or buildings erected thereon and even then such assignment or other disposal shall be subject to the following conditions:-

(i) the Purchaser shall first submit to and obtain the approval in writing of the Director to a Deed of Mutual Covenant … to be entered into between the Purchaser and the assignees from him of undivided shares in the whole of the lot;

(v) in the said Deed of Mutual Covenant the Purchaser shall allocate to those parts of the lot which comprise the common areas of the lot including footpaths, pedestrian bridges, walkways, roads, gardens, open spaces, non-building area, loading and unloading spaces for refuse collection vehicles, and any recreational facilities and all other common parts, amenities and facilities, toilets, air-conditioning plant and equipment, refuse collection equipment and facilities, treatment and disposal plant, lobbies, stairways, escalators, arcades, common entrances, halls, passageways, and lifts contained in the lot, a number of undivided shares in the lot which in the opinion of the Director shall be appropriate to such common areas;

(vi)   the Purchaser shall assign free of costs the undivided shares referred to in sub-clause (a)(v) of this Special Condition to the Owners’ Corporation at its request when it is formed pursuant to the Building Management Ordinance (Cap.344) (bold supplied)”

(H2)  Approved Building Plans of the Estate

74.  Chau and his teams had prepared a whole set of more than 20 building plans of the Estate[24]. Among them, the 2 drawing of G/F and of UGF bear the respective earliest dates of 17 August 1995 and 31 July 1995.  The Building Authority (BA) apparently made amendments to these building plans on, inter alia, 15 September 1998 and finally approved them on 13 October 1998 (the Approved Building Plans).

75.  Having considered, inter alia, the contents of the Approved Building Plans and the DMC, at the making of the DMC on 24 March 1999 (i.e. 5 months odd after the Approved Building Plans were finally approved) the Estate consisted of, I find, the followings: -

(1)  two towers of 47-storey residential buildings, one at the west end of the Estate (Tower 1) and the other at the east end of the Estate (Tower 2), housing a total of 736 residential units;

(2)  a covered walkway connecting Tower 1 and Tower 2 at 1/F podium level i.e. the “segregated pedestrian way” referred to in SC(12) of the New Grant[25];

(3)  club house, swimming pool and other recreational facilities at 1/F podium level;

(4)  all 3 levels of UGF, G/F and basement in similar rectangular shape to that of the Land, except that their western corner had been cut to provide for a “MTR reserve zone”;

(5)  among many other provisions and facilities at UGF level, (i) the PPW (to be connected at one end to a future footbridge over Pui Shing Road leading to MTR station with the other end leading to another nearby estate), (ii) upper part of Grand Entrance at its north-most end, (iii) commercial accommodation, (iv) 61 car parking spaces and (v) a driveway leading to and from G/F and 1/F podium;

(6)  among many other provisions and facilities at G/F level, (i) lower part of Grand Entrance at its north-most end, (ii) commercial accommodation, (iii) 8 loading and unloading spaces, (iv) 14 car parking spaces, (v) an elongated G/F entrance lobby of Tower 1 opening to Pui Shing Road (Tower 1 G/F Lobby), (vi) another elongated G/F entrance lobby of Tower 2 opening to Ngan O Road (Tower 2 G/F Lobby), (vii) 2 transformer rooms, (viii) 2 customers’ switch room, (ix) air-conditioning plant room, (x) one management control room, (xi) one refuse storage chamber and (xii) a driveway leading to and from basement and UGF; and

(7)  150 car parking spaces and a driveway (leading to and from G/F level) at basement level.

76.  Considering both G/F and UGF Approved Building Plans and oral evidence of the Applicant, the upper and lower parts of G/F Entrance at these 2 levels were, I find, connected to one another by escalators at the time of the making of the DMC.  A shopper can therefore enter the Mall from outside the Estate through lower part of G/F Entrance (portion thereof is one of the Subject Areas in issue) and take the escalators to go shopping at UGF portion of the Mall or stay shopping at other G/F portion of the Mall.

77.  And, looking at G/F Approved Building Plans of the Estate, a total of 7 shops were found marked thereon using the words UFA) put down. They are located at the following approximate locations, namely: -

(1)  Two small shops both abut on Pui Shing Road bordering on two opposite sides of Tower 1 G/F Lobby;

(2)  Another two bigger shops both abut on Ngan O Road bordering on two opposite sides of Tower 2 G/F Lobby; and

(3)  Three bigger shops are situated in between the above 2 groups to the south of G/F Entrance (one of them abuts on Pui Shing Road) with their “indicative” or “notional”[26] boundaries marked with dotted lines, leaving Former G/F Corridors (the other Subject Areas in issue) in between them(and with one such former corridor marked with the two words of “Shopping Arcade”).

78.  Comparing G/F Approved Building Plan with G/F plan of the Mall dated April 2019 produced by the Applicant[27], the respective size and locations, and the total number, of G/F shops at locations (1) and (3) above have materially changed by 2019.

(1)  One small shop to the right of Tower 1 G/F Lobby in (1) above and the three bigger shops in (3) above had “merged” to become one very big rectangular shop G02 plus 5 very small rectangular shops G03-5[28], G06, G07 and G08 all set in a vertical column to the right side of Shop G02 (causing the total G/F shop number to increase to 10).

(2)  The former boundaries in (3) above has disappeared. The Former G/F Corridors in between them have also disappeared and became shop space within shops G02, G03-5 and G07[29].

79.  As I said above, I am not satisfied with bare assertion of Leung and Hung both made without personal knowledge or document that the shop configuration of G/F Shops G02, G03-5 and G07 has been, since the Mall opened for business in 1999, the same as it is today.

(1)  Hung in the box had to fall back to rely on G/F plans (and layout thereon) found in agreements produced by the “Applicant” of tenancies of shops G02[30] and G09[31] commencing back in 2008 and 2009.

(2)  Hung had also to change her claim of same shop configuration from “since 1999” to “since about 2000” in line with, she claimed, the earliest tenancy plan of shop G02 she allegedly saw but never produced by R2.

80.  Though the Applicant’s claim of change in shop configuration as from 2005 was also unsatisfactory for lack of supportive document when the above claim of Leung and Hung was put to him by Mr Li SC, in view of contents of G/F Approved Building Plan (which was finally approved on 13 October 1998), I am satisfied that, as at the making of the DMC on 24 March 1999[32], the shop configuration of G/F shops of the Mall was likely the same, and the Former G/F Corridors did likely then exist, as they were then shown on the said plan.  In this respect, G/F plan annexed to sales brochure (the Brochure) [33] read by the Applicant before he entered into agreement to purchase A’s Flat on 17 December 1997 also bears similar G/F shop configuration and same Former G/F Corridors, though it was marked with 4 words of “SHOP”.

81.  Judging from letter of reply dated 15 August 2017 from BA to the Applicant, the shop boundaries then separating G/F shops in line with G/F Approved Building Plans were, I find, “non-structural”, such that their subsequent alteration made after the opening of the Mall did not require any prior approval of BA (and was not made in breach of the Buildings Ordinance, Cap.123).

82.  At the time of the making of the DMC, as a matter of design, the “Residential Development” comprising Tower 1 and Tower 2 as defined in the DMC was, according to Hung’s undisputed evidence[34] which I accept, “self-contained” i.e. their residents having, in terms of human traffic and goods delivery to and from the outside world, their own entrances, exits and passageways unconnected with, and not dependant on, the Mall.

(1)  There are 3 lifts each serving Tower 1 and Tower 2, called lifts Nos.1 to 6 (with Nos.1-3 serving Tower 1 and lifts Nos.4 to 6 serving Tower 2).  All 6 of them reach G/F, 1/F to 47/F. Residents of the 2 towers can thus exit and enter the Estate through Tower 1 G/F Lobby and Tower 2 G/F Lobby at G/F without going through the Mall.  Residents of the 2 towers can also go to and from the other tower, club house and other recreational facilities using covered walkway at 1/F podium level without going through the Mall below.

(2)  In addition, lift No.3 serving Tower 1, and lift No.4 serving Tower 2, also allow the residents of the 2 towers to reach basement level.  Hence, residents of the 2 towers can access car parking spaces at basement level by taking these 2 lifts.  There is an additional lift “serving the 3 garage levels” called lift No.7[35], which provides access to car parking spaces at basement, G/F and UGF levels.  There is thus no need for any resident of the 2 towers who drive to go through the Mall for accessing his/her car at car parking space at basement, G/F and UGF levels.

(3)  Residents of the 2 towers taking delivery of goods to be unloaded at unloading spaces at G/F level can also, and should, use lift No.7 to deliver them to basement level first, before using either lift No.3 or No.4 at basement level to send them upwards directly to their units in Tower 1 or Tower 2 without going through Tower 1 G/F Lobby, Tower 2 G/F Lobby or the Mall (and residents of the 2 towers sending goods away can, and should, equally access loading spaces at G/F level for that purpose in the reverse sequence and direction).

83.  While door 1^[36] at inner most part of Tower 1 G/F Lobby (Door 1) and door 2^[37] at inner most part of Tower 2 G/F Lobby (Door 2) (collectively the 2 Doors) allow “residents”^[38] of Tower 1 and of Tower 2 to enter “Estate Common Areas” at G/F and a very small area of the Mall situated at G/F^[39] respectively to reach G/F loading and unloading spaces as well as G/F car parking spaces, the 2 Doors are, I find, designed for the limited purpose of arranging delivery of refuse collected from Tower 1 and Tower 2 to designated refuse collection point at G/F level at the time of the making of the DMC.

84.  Dotted lines plus arrows were, one observes, expressly inserted into Approved Building Plan of G/F level to mark out 2 routes of refuse delivery commencing at the 2 Doors and ending at the same said “refuse collection point” at G/F level.

85.  As shall be seen below, such “right to pass” enjoyed by the Applicant under the DMC as an owner of a “residential unit” does not extend to “Commercial Common Areas”.  I do not accept Applicant’s claim in his witness statement that he enjoyed “legal right” as such “owner” to go up to UGF of the Mall (and make use of the PPW) by taking escalator at lower part of G/F Entrance through Door 1 and G/F corridors of the Mall, had these corridors been “Commercial Common Areas” at all[40].

86.  The 2 Doors and 2 routes above are, I think, an exception justified by “refuse collection system” required by SC(17) of New Grant at [72] above.  Their design and provision does not, I think, undermine my finding at [82] above that Tower 1 and Tower 2 were “self-contained” from the Mall at the time of the making of the DMC.

(H3)  Architect’s Certificates & Statutory Declaration

87.  On 12 November 1997, DLO wrote to Chau giving its approval to over 20 building plans of the Land submitted by him on 27 October 1997 pursuant to SC(9)(e) of the New Grant. Among them are drawing No.A26 (diagrams for domestic GFA calculations, showing, inter alia, Tower 1 G/F Lobby and Tower 2 G/F Lobby)[41] and drawing No.A27 (diagrams for non-domestic (commercial)GFA calculations, showing, inter alia, the Subject Areas)[42].

88.  On 13 November 1997, Chau gave his first architect’s certificate (AC) as AP, certifying, among others, progress of the Project[43]  and that the total GFA of “Common Areas” and the total GFA of the Project is listed as per attached Appendix II[44], which gave a “summary of GFA” as follows:

Residential Units		Area (m2)
Saleable areas	Tower 1 (2/F-47/F) Tower 2 (2/F-47F)	18,871.676 18,303.318
	Total:	37,174.994
Common area	Tower 1 (2/F-47/F) Tower 2 (2/F-47F) G/F UG/F 1/F	2,844.364 2,834.980 282.126 98.714 46.819
	Total:	6,107.003
Total Residential GFA		43,281.997
Commercial Units
GFA	G/F U/F	2,994.754 2,330.220
	Total:	5,324.970
Total GFA of [the Project] (bold supplied)		48,606.967

89.  It should, I think, be noted from the above summary, in contrast to having GFA for “Common Area” below “Residential Units” at Tower 1, Tower 2, G/F (i.e. 282.126 m²), UGF and 1/F totaling 6,107.003 m², making up total residential GFA of 43,281.997 m² after adding up total saleable areas of 37,174.994m² for Tower 1 and Tower 2, there was noticeably no GFA for “Common Area” provided for below “Commercial Units” (only 2,994.754 m² was provided for G/F and 2,330.220 m² provided for UGF, making a total GFA of 5,324.970 m² for “Commercial Units”).  And the 2 total GFA of 5,324.970 m² and 43,281.997 m² for “Commercial Units” and “Residential Units” respectively above are very close to the 2 maximum of 5,325 m² and 43,282 m² allowed for “non-industrial” and “private residential” purposes under SC(9)(c) of New Grant at [68] above.

90.  On 14 November 1997, Chau gave his second AC as AP to solicitors acting for R2, certifying, among others, that undivided shares of “Common Areas” are equal to saleable areas (in sq ft) of the “Common Areas” divided by 100 and enclosing schedules showing calculation and allocation of undivided shares.

91.  Importantly, one finds in one of those schedules Chau enclosed to his second AC the following in terms of allocation of undivided shares[45]:

COMMERCIAL ACCOMMODATION:
G/F	322 SHARES
UG/F	251 SHARES
	573 SHARES
CAR PARKING SPACES:
(225 NOS. @1 SHARE EACH)	225 SHARES
Common Areas & Building Facilities	652 SHARES
ADD: Club House	81 SHARES
	733 SHARES
SUMMARY :
RESIDENTIAL ACCOMMODATION :
BLOCK 1	1,986 SHARES
BLOCK 2	1,894 SHARES
COMMERCIAL ACCOMMODATION	573 SHARES
CARPARK SPACES	225 SHARES
(225 NOS. @1 SHARE EACH)
COMMON AREAS & BUILDING FACILITIES	733 SHARES
	5,411 SHARES
Calculation of Undivided Shares
[omitted]
Common Areas & Building Facilities [omitted] (bold supplied)	= Total Common Areas in Saleable Area (sq. ft) ÷ 100

92.  Chau made it clear in his evidence (and I believe him) that only 282.126 m² of GFA on G/F level at [88] above was used as G/F “Common Areas” base figure and the locations of such residential GFA on G/F are all found within Tower 1 G/F Lobby and Tower 2 G/F Lobby.  The said GFA of 282.126 m² for G/F, Chau said, is the sum total of the GFA of 144.384 m² for Tower 1 G/F Lobby and that of 137.742 m² for Tower 2 G/F Lobby both shown in drawing No.A26 at [87] above.

93.  Further, according to Chau, none of the 733 shares allocated to “Common Areas” in his schedule was attributable to the Subject Areas. GFA of the Subject Areas had not been used by him for setting the base figure for calculation of undivided shares for “Common Areas” on G/F level. On cross-examination by Mr Ismail, he confirmed, and I agree, that GFA of the Subject Areas shown in drawing No.A27 at [87] above had all been counted towards the total GFA of 2,994.754 m² at [88] above for “Commercial Units” on G/F level[46].

94.  On 15 December 1997, a solicitor from Deacons Graham & James (Deacons) and another solicitor from Johnson Stokes & Master both acting for R2 in pre-sale of uncompleted units in the Estate together made a statutory declaration (SD), which was registered with the Land Registry on 16 December 1997, in order to obtain government consent for such pre-sale pursuant to provisions of New Grant.  Among others, the two of them declared in SD that: -

(1)they had been instructed to prepare deed of mutual covenant for the Estate (produced and marked as Exhibit-A2 to SD) in line with prevailing Land Office guidelines and conditions of New Grant (in order to comply, I think, with SC(24)(a)(i) of New Grant at [73] above); and

(2)Chau as AP for the Project had issued his first and second ACs (produced and marked as Exhibits-A3 & A4 to SD)[47] certifying the matters therein.  Among others, Chau specifically confirmed that the number of undivided shares to be allocated in the proposed deed of mutual covenant to the common areas and amenities under SC(24)(a)(v) of the New Grant shall “bear the same proportion to the total number of undivided shares of the Project as the total GFA of the common areas bears to the total GFA of [the Project]”.

95.  In this connection, it is, I think, no use for the Applicant making in his opening submissions his own calculations of 322 shares for 6 G/F “Commercial Units” allegedly owned by R2 based on UFA found on G/F Approved Building Plans[48]. As the grantee of the Land and the developer of the Project, subject to complying with the conditions of New Grant, R2 was entitled at law to instruct AP i.e. Chau to decide on how to arrive at R2’s own calculation, and distribution, of undivided shares of the Land and the Estate upon execution of the DMC.

96.  Pursuant to New Grant, R2 must have later, I find, obtained consent from the government for pre-sale of uncompleted units of the Estate, obtained approval for draft deed of mutual covenant prepared for the Land and the Estate, including having allocated “appropriate number” of undivided shares to common areas thereof in line with SC(24)(a)(v) of New Grant at [73] above, as R2 had “very soon later” entered into an agreement with the Applicant on 17 December 1997 to sell to him A’s Flat as an uncompleted unit of the Estate.

(H4)  Occupation Permit & Certificate of Compliance

97.  On 13 October 1998, BA finally approved the Approved Building Plans of the Estate and, on 29 December 1998, issued occupation Permit for the Estate.  On 26 February 1999, DLO further issued certificate of compliance for the New Grant.

(H5)  The DMC

98.  On 24 March 1999, after the First Assigned Premises was assigned by R2 to the Second Owner, the DMC were executed by R2, the Second Owner and R1.  The DMC was apparently drafted for R2 by Deacons, whose name was found on it.

99.  According to Part I of First Schedule, 5,411 equal undivided shares of the Land and the Estate were allocated as follows (bold supplied).

	COMMERCIAL ACCOMODATION:
	G/F	322
	UG/F	251
		__________
		573
	CAR PARKING SPACES :	225
	(225 NOS. @1 SHARE EACH)
	Common Areas (including Club House)	733
		__________
	SUMMARY :
	RESIDENTIAL ACCOMODATION :
	BLOCK 1	1,986
	BLOCK 2	1,894
	COMMERCIAL ACCOMODATION	573
	CAR PARKING SPACES	225
	(225 NOS. @1 SHARE EACH)
	COMMON AREAS (INCLUDING CLUB HOUSE)	733
		__________
	TOTAL	5,411
		__________

100.  The above allocation of undivided shares is, one observes, identical to those found in 2^nd AC prepared by Chau at [91] above, save that Chau had allocated therein 652 shares to “Common Areas & Building Facilities (bold supplied)” and 81 shares to “Club House” separately instead of allocating a total of 733 shares to “Common Areas (including Club House)” found in the DMC.

101.  In the remaining part of the said Part I of First Schedule, the total 1,986 shares allocated to “Block 1” of “Residential Accommodation”[49] above were, like that was done in 2^nd AC prepared by Chau, distributed to each of “Residential Units” in Tower 1 from 2/F to the roof.  As was also done in the 2^nd AC, the total 1,894 shares allocated to “Block 2” above were also distributed to each of “Residential Units” in Tower 2.

102.  “Except where the context otherwise requires (italics supplied)”, section B sets out, among others, the following relevant “definitions”: -

“Approved Plans”	means the building plans for the development for the Estate approved by [BA] under reference No.BD2/9170/95 as from time to time amended, modified or substituted;
“Carpark”	means a Unit situate in the Garage;
“Commercial Common Services and Facilities”	means those facilities in on or under the Estate and which serve the Commercial Development as a whole including, but not limited to, ducting, pipes, cables, wiring, plant and machinery, electrical installations, fittings, equipment and apparatus, air conditioning plant and equipment but excluding anything contained in the Estate Common Services and Facilities, the Residential Common Services and Facilities and the Garage Common Services and Facilities;
“Commercial Development”	means those areas on the ground floor, upper ground and external walls thereof within the Estate indicated on the Approved Plans for commercial use;
“Commercial Unit”	means a Unit situate in the Commercial Development;
“Common Services and Facilities”	means the Estate Common Services and Facilities, the Residential Common Services and Facilities, the Commercial Common Services and Facilities and the Garage Common Services and Facilities;
“Estate”	means the entire development on the Land known as Maritime Bay and comprising:- (i)  the Residential Development; (ii)   the Commercial Development; (iii)  the Garage; (iv)  the Common Areas; and (v)   the Common Services and Facilities.
“Estate Common   Areas”	means those parts of the Estate the exclusive use and enjoyment of which has not been assigned to any owner including, but not limited to the roads, driveways, lanes and footpaths; landscaped open areas, loading and unloading spaces and areas; entrances, lobbies, staircases, ramps, landings, corridors and passages; refuse storage chambers; sewage treatment rooms, machine rooms, pump rooms, transformer and switch rooms, plant and equipment rooms and store rooms, on or in the Land and the Estate; the foundations, structure and external walls (other than those parts of the external walls forming part of the Commercial Development) of the buildings erected on the Estate; the management office and any other space on or in the Land and the Estate used for office or other accommodation of watchmen or caretakers or other staff employed on or in or for the Land and the Estate and all other communal areas within the Land and the Estate not used for the sole benefit of any owner or group of owners;
“Garage”	means those areas on the basement, ground and upper ground floors within the Estate indicated on the Approved Plans for the loading, unloading and parking of motor vehicles;
“Garage Common Areas”	means those parts of the Garage the exclusive use and enjoyment of which has not been assigned to any owner including, but not limited to, entrances, ramps, driveways, access areas, circulation passages, void spaces but excluding anything contained in the Estate Common Areas, Commercial Common Areas and the Residential Common Areas;
“Garage Common Services and Facilities”	means those facilities in on or under the Estate and which serve the Garage as a whole including but not limited to, plant and machinery, electrical installation filling and equipment, barriers, guard houses, collection booths and water supply apparatus but excluding anything contained in the Estate Common Services and Facilities, the Commercial Services and Commercial Facilities and the Residential Services and Common Facilities;
“owner”	means the owner of any undivided shares in the Land and the Estate and registered as such under the Land Registration Ordinance and his mortgagee/chargee in possession or one who has foreclosed and every joint owner or tenant in common of a share, collectively “the owners”;
“Recreational Areas and Facilities”	means the swimming pools and changing rooms, saunas, tennis court, children’s play area, gymnasium, aerobics room, billiard room, reading room, reception, covered landscape areas, the gardens and grounds and any other recreational facilities which now are or may at any time during the term be provided for the benefit of the owners and occupiers of the Residential Development;
“Residential Common Areas”	means those parts of the Residential Development the exclusive use and enjoyment of which has not been assigned to any owner including, but not limited to, entrances, lobbies, staircases, landings, corridors and passages, lift wells, plant and equipment rooms, roofs, the Recreational Areas and Facilities but excluding anything contained within the Estate Common Areas, Commercial Common Areas and the Garage Common Areas;
“Residential Common Services and Facilities”	means those facilities in on or under the Estate and which serve the Residential Development as a whole including but not limited to, ducting, pipes, cables, wiring, plant and machinery, electrical installation, fittings, equipment and apparatus and lifts but excluding anything contained in the Estate Common Services and Facilities, the Commercial Services and Common Facilities and the Garage Common Services and Facilities;
“Residential      Development”	means the two residential tower blocks erected on the Estate as indicated on the Approved Plans for residential use;
“Residential Unit”	means a Unit situate in the Residential Development;
“Unit”	means a part of the Estate the exclusive use and enjoyment of which has been or is intended to be assigned to an owner;
	(bold and underline supplied)”

103.  Section C sets out the rights of “owners”, including those of R2 as the “First Owner” thereof:-

“Rights attaching to each share	1.	Each share shall during the residue of the term… subject to the covenants and terms contained in the Government Grant and in this Deed be held by the person or persons from time to time entitled thereto together with: (a)   the full and exclusive right and privilege to hold, use and occupy the Unit designated opposite to it in the First Schedule hereto; and (b)   subject to the House Rules, the benefit, insofar as applicable, of the easements, rights and privileges set out in Part I of the Second Schedule; but subject to the exceptions and reservations set out in Part II of the Second Schedule.
Rights of First Owner	2.	The First Owner shall during the residue of the term… subject to the covenants and terms contained in the Government Grant and in this Deed have the full and exclusive right and privilege to hold, use, occupy and enjoy the whole of the Land and the Estate Together with the appurtenances thereto save only the First Assigned Premises and the Common Areas.
Rights of Second Owner	3.	The Second Owner shall during the residue of the term … subject to the covenants and terms contained in the Government Grant and in this Deed have the full and exclusive right and privilege to hold, use, occupy and enjoy the First Assigned Premises Together with the appurtenances thereto.
Right to make additions etc.	4.	Each owner of a Residential Unit or Commercial Unit shall have the right subject to the House Rules to make or install in his own Unit at his own expense any additions, improvements, lights, fittings, fixtures or decorations which can be installed, fixed and removed without structural alteration or damage and without affecting the existing design or external appearance of the façade or elevations of any building and each such owner shall have the right to remove the same at his own expense.
Disposal Restrictions	6.	(a) The right to the exclusive use, occupation and enjoyment of any Unit or any part thereof shall not be sold, assigned, mortgaged, charged, leased.., licensed or otherwise disposed of separately from the share with which the same is held….          (c) No Carpark may at any time be occupied other than by an occupant of a Residential Unit or Commercial Unit or his bona fide guests or visitors.
		(bold supplied)”

104.  Section E sets out obligations of “owners” in respect of his unit(s):

“Owners to comply	1.	The Owners shall… comply with and shall observe and perform the covenants, provisions, restrictions and prohibitions contained in (a)  the Government Grant; (b) this Deed …
Owners to observe restrictive covenants	2.	The Owners shall be … bound by and shall observe and perform the covenants, restrictions and prohibitions set out in the Third Schedule hereto.
Rates and taxes	4.	All existing and future taxes, rates, assessments, property tax and outgoings of every description for the time being payable (Government Rent excepted) in respect of any Unit or of any other part of the Estate the exclusive use, occupation and enjoyment of which has been assigned to any owner shall be borne by the owner thereof …
Utilities	5.	Charges for the supply and consumption of water, electricity, gas and other utilities in connection with any Unit shall be paid directly to the appropriate utility company or authority by the owner of such Unit.
Management charges	6.	Each owner shall upon demand pay to the Managers the Management Charges in respect of any Unit owned by him, calculated in accordance with the provisions of Section J of this Deed.
Repairs	7.	Each owner, at his own expenses, shall keep : (a)  the interior of each Residential Unit or Commercial Unit of which he is for the time being the owner and of any other part of the Estate the exclusive use, occupation and enjoyment of which has been assigned to him…; and (b)   any Carpark of which he is for the time being    the owner;
		in good and substantial repair and conditions…. (bold supplied)”

105.  The powers and duties of “the Managers” in Section I should also be noted. Paragraph 2 thereof reads “The Common Areas and the Common Services and Facilities shall be under the exclusive control of the Managers (bold and italics supplied)”

106.  Section J dealing with “Management Charges” has the following provisions.

“Costs to be borne by all the owners”	1.	The costs, charges and expenses, in respect of the management of the Land and the Estate, shall include but shall not be limited to those next following, and shall be paid by all the owners in the manner herein provided: - (a)   to (d) [omitted] (e)  the costs of maintaining and keeping in good repair and condition the Common Areas; (f)  the costs of cleaning and lighting the Common Areas; (g)  the costs of maintaining and keeping in good repair and condition the Common Services and Facilities; (h)  the costs of running and operating the Common Services and Facilities; (i) to (k) [omitted] (l) all fees costs and expenses incurred by the Managers in complying with the provisions of SC(13) of [the New Grant] so as to permit the connection of the Estate of the future public footbridge and the provision of a 24 hour free public access way through the Estate referred to in that Special Condition; (m) to (v) [all omitted] (w) any other costs, charges, and expenses properly incurred by the Managers in the performance of any duty or in the exercise of any power hereunder; but such costs, charges and expenses shall exclude costs, charges and expenses of a capital nature relating to the Estate and for the replacement of installations, systems, equipment and apparatus within the Common Areas and the Common Services and Facilities which shall be payable out of the Capital Funds hereinafter mentioned.
“Capital Funds”	2.	(a) There shall be established and maintained by the Manager: (i)    an Estate Capital Fund for the purposes of meeting major works of a capital nature in respect of the Estate Common Areas and the Estate Common Services and Facilities; (ii)   a Commercial Development Capital Fund for the purposes of meeting major works of a capital nature in respect of the Commercial Common Areas and Commercial Common Services and Facilities; (iii)  a Residential Development Fund for the purposes of meeting major works of a capital nature in respect of the Residential Common Areas and the Residential Common Services and Facilities; (iv)  a Garage Capital Fund for the purposes of meeting major works of a capital nature in respect of the Garage Common Areas and Garage Common Services and Facilities. (b) Each owner (including the First Owner) of a share or shares shall…in respect of those shares remaining unsold pay to the Managers from time to time upon demand such sum as shall in the first instance be determined by the Managers and thereafter decided at the owners Annual General Meeting to establish or maintain the said Capital Funds at such levels…
“Determination of of Management Charges”	4.	(a)   …the total amount of Management Charges payable by the owners during any financial year in respect of the management of the Estate shall be the total proposed expenditure during that year as specified by the Managers in accordance with paragraph (b) of this clause. (b) In respect of each financial year, the Managers shall: (i) prepare a draft budget … (c)-(h) [omitted] (i)    The budgets prepared by the Managers pursuant to this Clause shall contain the following parts: (i)    an Estate Management Budget which shall show the estimated expenditure for the management and maintenance of the Estate as a whole (excluding expenditure attributable to the Residential Development or the Commercial Development or the Garage); (ii)   a Residential Management Budget which shall show the estimated expenditure for the management and maintenance of the Residential Development (excluding expenditure attributable to the Estate as a whole or the Commercial Development or the Garage); (iii)  a Commercial Management Budget which shall show the estimated expenditure for the management and maintenance of the Commercial Development (excluding expenditure attributable to the Estate as a whole or the Residential Development or Garage); and (iv)  a Garage Management Budget which shall show the estimated expenditure for the management and maintenance of the Garage (excluding expenditure attributable to the Estate as a whole or the Residential Development or the Commercial Development).
“Payment of Management Charges”	5.	The owners shall contribute towards the Management Charges in the following manner: (a) all owners shall contribute to the expenses of the Estate Management Budget in the proportion that the Management Units attributable to the Units owned by them bears to the total Management Units for the Estate; (b) the owners of the Residential Units shall contribute to the expenses of the Residential Management Budget in the proportion that the Management Units attributable to the Residential Units owned by them bears to the total Management Units attributable to the Residential Development; (c) The owners of the Commercial Units shall contribute to the expenses of the Commercial Management Budget in the proportion that the Management Units attributable to the Commercial Units owned by them bears to the total Management Units attributable to the Commercial Development; (d)   the owners of the Garage shall contribute to the expenses of the Garage Management Budget in the proportion that the Management Units attributable to the Carparks owned by them bears to the total Management Units attributable to the Garage; (e) [omitted]
		… the First Owner’s liability to make the aforesaid payments shall in no way be reduced by reason of the fact that any of the Units remains unsold. (bold supplied)”

107.  Clause 9 of section L further provides that “nothing in this Deed shall prejudice the operation of the Building Management Ordinance” (BMO)[50].

108.  For our purpose, Part I of Second Schedule sets out following “easements” granted to owners: -

“Right to pass	1.	Full right and liberty for the owner for the time being, his servants, agents and licensees (in common with all other persons having the like right): (i)   of a Residential Unit to go, pass and repass over and along and upon the Estate Common Areas and Residential Common Areas; (ii)   of a Commercial Unit to go, pass and repass over and along and upon the Estate Common Areas and Commercial Common Areas; (iii)  of a Carpark to go, pass and repass over and along and upon the Estate Common Areas and Garage Common Areas, for all purposes connected with the proper use and enjoyment of his Unit.
		(bold supplied)”

109.  Part II of Second Schedule also sets out “exceptions and reservations” in favour of R2 as First Owner: -

“Rights of the First Owner	3.	(a)   Upon execution of this Deed the First Owner shall assign the whole of the shares allocated to the Common Areas and Common Services and Facilities[51] to the Managers, without consideration, for the general benefit of the owners Provided that upon such assignment such areas and facilities shall be held by the Managers as trustee for all the owners and if the Managers shall resign or be wound up or is removed in accordance with the provisions of Clause 2 of Section H of this Deed and another manager appointed in its place, or the Owners shall at any time incorporate themselves into an Owners Corporation under the Building Management Ordinance (Cap. 344), then the Managers or its liquidator shall assign such Common Areas and Common Services and Facilities together with the Shares relating thereto (if any) without consideration to the new manager or Owners Corporation upon the same trusts. (b)  The First Owner shall have the exclusive and unrestricted right and privilege to alter, amend, vary or add to the Approved Plans in respect of those parts of the Estate the exclusive use and occupation of which is enjoyed by the First Owner and without the concurrence or approval of any owner or other person having an interest in the Estate but nothing herein contained shall absolve the First Owner from the requirements of obtaining the prior written consent of the Director of Lands. No such alteration, amendment, variation or additional shall interfere with the Owners’ rights to the exclusive use, occupation and enjoyment of their units and shall give to the owners any right of action against the First Owner Provided that the interests of the owners shall not be materially affected thereby; … (e)  The First Owner shall have the exclusive and unrestricted right and privilege, without the necessity of making every owner a party thereto to enter into a Sub-Deed of Mutual Covenant in respect of any part of the Estate for the purpose of making further provisions for the management, maintenance and servicing of that part of the Estate for which it is made and its equipments, services and apparatus and for the purpose of further defining and regulating the rights, interests and obligations of the owners thereof Provided Always that their rights and interests shall not be adversely affected and Provided further that any Sub-Deed of Mutual Covenant shall be previously approved in writing by the Director of Lands.
		(bold and italics supplied)”

110.  On 10 April 1999, the DMC was registered with the Land Registry.  On two land search records both made in September 2020 produced at trial, R2 was registered at the Land Registry as the owner of: -

(1)  322 shares of the Land with an address of “Commercial Accommodation on G/F of [the Estate] (bold supplied)”; and

(2) 251 shares of the Land with an address of “Commercial Accommodation on UGF of [the Estate] (bold supplied)”.

The same registration record should, one believes, have appeared at the Land Registry back in April 1999 when the DMC came to be registered at the Land Registry.

(H6)  CA Assignment

111.  This was made by R2 and R1 pursuant to the DMC on the same day, but after the making, of the DMC.  It was apparently also drafted by Deacons, whose name was found on its face.  It was registered with the Land Registry on 20 April 1999.

112.  By CA Assignment, 733 shares of the Land and the Estate, together with “sole and exclusive right to hold use occupy and enjoy the Common Areas (including Club House[52]) (as defined in the DMC) (bold & italics supplied)” (the Property) was assigned from R2 to R1, excepting and reserving to R2 the rights set out in paragraph “1B of the Schedule hereto (bold supplied)”, and “subject also to and with the benefits of the DMC”.

113.  Paragraph “1B” of the Schedule is not found within CA Assignment.  It is likely a mistake.  Instead, paragraph “1(b)(B)” is found in the Schedule.  If this is the correct paragraph intended to be referred to, R2 had reserved to itself (I) “the right to the exclusive use occupation and enjoyment of the whole of [the Project] (save and except the Property)”; and (II) “the right excepted and reserved to [R2] pursuant to Part II of the Second Schedule to the DMC” (these include R2’s exclusive and unrestricted right to amend the Approved Building Plans and to enter into a sub-deed of mutual covenant).

I.   Analysis of Issue 1

(I1)   A question of construction of the DMC

114.  Though the focus before CA in PPW Appeal[53] is different from ours, this Tribunal should, I think, approach Issue 1 using the same approach therein.  As was explained by Lam V-P (as he then was) in CA Judgment, Issue 1 is “ultimately a question of construction” of the DMC[54].

115.  Hence, it does not matter much what C&K might have opined in the C&K Opinion (though it would still be considered below for what it is worth).  Like any legal opinion offered by any law firm, it is not, I think, determinative or conclusive of Issue 1, which is now to be resolved by a court of law after careful consideration of the evidence adduced at trial and in light of parties’ submissions advanced at trial.

116.  For reasons at [27] to [30] above, while this Tribunal pays the greatest respect to the views expressed in CA Judgment on “Commercial Common Areas” of the Estate (which will be carefully considered below), they are not, I think, determinative or conclusive of Issue 1, whose resolution requires this Tribunal to construe the DMC in light of evidence adduced at this trial and the rival contentions of the parties advanced before me.  The same also applies to grounds of appeal for the Applicant to argue in PPW Appeal when leave (or permission) to appeal was given to him by CA on 14 May 2019[55]. They are not, I think, determinative or conclusive of Issue 1 either.

(I2)   Applicable principles for construing the DMC

117.  And one should approach this construction process in the following manner.  The then Vice-President said at [26] of CA Judgment: -

“…In a nutshell, the DMC must be construed in the context of the document as a whole and in light of the factual and legal background (which also provides the context) to its execution, and having regard to the practical objects which it was intended to achieve. The overriding objective in construction is to give effect to what a reasonable person would have understood the parties to mean. Instead of focusing on the ordinary and natural meanings of a few words in a clause, very often the broader context provides surer guide. But textual analysis and contextualism are both tools in the exercise of construction and the utility of each tool will vary according to the circumstances of each instrument. Thus, construction is a unitary exercise involving an iterative process”.

118.  It is worthy, I think, also remembering what Lord Hoffman NPJ said earlier in Jumbo King v Faithful Properties Ltd & Others (1999) 2 HKCFAR 279, 296D-I:

“…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. (bold supplied)”

119.  As Kwan V-P had explained at [16] of Achieve Goal Holdings Limited v Zhong Xin Ore-Material Holdings Company Limited [2020] HKCA 51, the said “unitary exercise” of construction is as follows.

“Interpretation is a unitary exercise. Where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But in striking a balance between the indications given by the language and the implications of the competing constructions, the court must consider the quality of drafting of the clause (the poorer the quality of the drafting, the less willing the court should be to be driven by semantic niceties to attribute to the parties an improbable and unbusinesslike intention), and it must be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest…

Where the disputed provision is open to two possible interpretations, the unitary exercise involves an iterative process, by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated.  Once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each… (bold supplied)”

Through the above iterative process, “all relevant pointers should be taken into account”: [24] of CA Judgment.  And “each DMC has to be construed against its own scheme and factual matrix”: [49] of CA Judgment.

(I3)   Legal background in general

120.  As to general legal context against which I have to perform the above iterative process for construing the DMC, I can do no better than quoting again what Lam V-P (as he then was) said at [27] to [31] of CA Judgment below.

“We shall start with a consideration of the legal context and the purpose of the DMC. A DMC is the conveyancing techniques adopted in Hong Kong for dealing with ownership of units in a multi-storey building… In a multi-storey development with blocks consisting of many units, those who acquired ownership in a unit would, as a matter of common law, become co-owners with the owners of other units. As co-owner, because of the principle of unity in possession, each of them is entitled to possession of every part of the Land, including the units sold to other owners. One of the purposes of a DMC is to restrict the exercise of such right of possession by mutual covenants so that the owner of one unit would effectively have exclusive use and occupation of his unit. Unless a restriction over the use and occupation of a particular area is specifically set out in the DMC (which would operate as a covenant running with the interest in land), the default position is that each owner has the right to enter and use such area by virtue of his co-ownership of the land. As we shall see, the same concept is reflected in the statutory regime under the Building Management Ordinance Cap 344.

Further, an estate development has many communal facilities and common areas. The management and expenses concerning such management have to be agreed upon between the co-owners of the land. The obligations and rights of the owners concerning communal facilities and common areas have to be regulated. Thus, another purpose of a DMC is to set out the agreed arrangement in these respects which would be binding on the owners (and every successor in title) and the manager. Though it is common to find in a DMC references to easements in describing the right of an owner to use the common areas, as a matter of law there cannot be any real easement over one’s own land and legally they operate as contractual quasi-easements.

Apart from the common law rule on co-ownership and the conveyancing techniques to provide for ownership and rights in multi-storey buildings, the legal context also include the statutory provisions in the Building Management Ordinance Cap 344 (“BMO”) which… was first enacted in 1970. It is therefore a piece of legislation well-known to conveyancers in Hong Kong and every draftsman of a DMC must have regards to in the preparation of a DMC….

There are statutory provisions in the BMO which regulate the use of common parts and the management of multi-storey building. Section 2 of the BMO has a definition for common parts. It reads:

“ 2. Interpretation

In this Ordinance, unless the context otherwise requires—

…

common parts(公用部分) means—

(a) the whole of a building, except such parts as have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner; and …

(b)   unless so specified or designated, those parts specified in Schedule 1; …”

In the First Schedule of the BMO, passageways, corridors, staircases, landings are included under paragraph 8. 

In other words, unless a particular passageway or corridor in the Estate is specified or designated in the DMC as being for the exclusive use, occupation or enjoyment of an owner, it is deemed to be a common part. (bold supplied)”

(I4)   Markings on 2009 plans disregarded

121.  Before I embark on the above iterative process, I would dispose of purported “Common Areas” plans produced by R2 first.  They consist of 10 plans, all bearing Chau’s signature and a small date of “Aug 09”[56] (2009 CA Plans)

122.  None of these 2009 CA Plans was marked with “Commercial Common Areas” (the Subject Areas were not marked as common areas at all).  Only “Estate Common Areas”, “Residential Common Areas” and “Garage Common Areas” were marked on them with the respective colors of green, blue and yellow.

123.  The G/F plan within 2009 CA Plans, though it is dated Aug 2009, contains the same shop configuration shown in the Approved Building Plan for G/F level, including Former G/F Corridors.  Its markings included the followings: -

(1)  Both Tower 1 G/F Lobby and Tower 2 G/F Lobby, and 2 out of 8 loading and unloading spaces, were marked in blue as “Residential Common Areas”.

(2)  Lift No.7 and related staircase were marked in yellow as “Garage Common Areas”.

(3)  The 2 transformer rooms, 2 customers’ switch room, air-conditioning plant room, management control room, and refuse storage chamber referred above were all marked in green as “Estate Common Areas”.

124.  Chau, Leung and Hung all gave no explanation in their witness statements why 2009 CA Plans came to be prepared a decade after the DMC was made (by which time existence or otherwise of “Commercial Common Areas” has become topic for discussion within OC) and, on enquiry of this Tribunal, they gave no clue in the box either.  Though he was maker of 2009 CA Plans, Chau in fact made no mention of them in his witness statement.  Upon enquiry of this Tribunal, Chau said in the box that he was instructed by, I find, R2[57] to prepare them in about 2009.  He only gave some general criteria explaining his marking of the 3 kinds of “Common Areas” on the same.

125.  CA had, I note, at [18] of CA Judgment already pointed out the aforesaid evidential discrepancy and omissions.  Unfortunately, most of them remain unresolved before me at this trial.  Given further that 2009 CA Plans were prepared long after the making of the DMC, even had they been made pursuant to the DMC (on which I do not decide), they are not, I think, admissible factual context for determining Issue 1 (Mr Li SC made it clear that R2 did not rely on them) and they do not conclusively determine Issue 1, which remains to be decided by proper construction of the DMC against the relevant factual and legal context: [17] of CA Judgment.  I therefore decide to disregard markings on 2009 CA Plan in my resolution of Issue 1 below.

(I5)   Alleged pointers in support of A’s Contentions

(i)   BMO definition of “common parts” & presence of the Subject Areas at G/F

126.  To start with, the Applicant can, I think, pray in aid definition of “common parts” at s.2 of BMO and reference of “passageways” and “corridors” at paragraph 8 of Schedule 1 of BMO referred to at CA Judgment reproduced at [120] above.

127.  The Applicant can point to physical presence of G/F Entrance and Former G/F Corridors, forming the Subject Areas, at G/F level of the Estate at the making of the DMC and argue that they fall within paragraph 8 of Schedule 1 of BMO as “passageways” and “corridors”.

128.  Hence, the Applicant could argue, unless the Subject Areas are specified or designated in the DMC as being for the exclusive use, occupation or enjoyment of an owner, they are deemed to be common parts under BMO.

(ii)   Construction against reservation

129.  The Applicant further sought to reinforce A’s Contentions by referring to legal principles for construing reservation i.e. a grantor who desires to reserve something out of his “grant” must be clear about what he is keeping and that, if the grant is ambiguous, the doubts will be resolved against him.  Applying such principles, he submitted that R2 had not, in the DMC, unambiguously “reserved” the Subject Areas under its exclusive use, occupation and enjoyment.

130.  In reply, both R1 and R2 had pointed out that Lord Hoffman NPJ had at 296C of Jumbo King, supra, thrown doubt about application of the above principles to deeds of mutual covenant, which, as its name suggests, is “mutual”.  The parties to such a deed contract as covenantor as well as covenantee (i.e. they give mutual promises to each other).  They do not reserve anything, unlike a “grant” by way of assignment of undivided share.  Hence, these principles, I agree with the Respondents, cannot assist the Applicant in this case.

(iii)  Definition of “Commercial Common Areas” in the DMC

131.  The Applicant further pointed to presence of the definition of “Commercial Common Areas” in section B in support of A’s Contentions.  Had “Commercial Common Areas” not existed at the Estate at the making of the DMC, the said definition would not, he argued, have appeared in the DMC.  This factor must, I agree, be taken into serious consideration in our construction process.

132.  The said definition of “Commercial Common Areas” can, one thinks, be broken down into the following 4 components i.e.

(1)    “those parts of the Commercial Development (italics supplied)”;

(2)    “the exclusive use and enjoyment of which has not been assigned to any owner (bold and underline supplied)”;

(3)    “including, but not limited to, ramps, entrances, lobbies, corridors, air conditioning plant rooms, lavatories (bold and italics supplied)”;

(4)    “but excluding anything contained within the Estate Common Areas, Residential Common areas and the Garage Common Areas (italics supplied)”.

133.  The Subject Areas fall, I agree, within “Commercial Development” in component (1) above i.e. within an area on G/F of the Estate indicated on the Approved Buildings Plans for commercial use.

134.  G/F Entrance and Former G/F Corridors fall, I also agree, within the 2 words of “entrance” and “corridors” stressed by the Applicant and found in component (3) above.

135.  And it was, I note, never suggested by R1 or R2 that the Subject Areas fall within “Estate Common Areas”, “Residential Common areas” or “Garage Common Areas”.  So component (4) above is also met.

136.  But, for component (2) above, it is also Applicant’s case that “733 shares of the Land and the Estate, together with sole and exclusive right to hold use occupy and enjoy the Common Areas (including the Club House) (as defined in the DMC) (bold and italics supplied)” had been assigned under CA Assignment from R2 to R1 for R1 to hold them on trust for all owners of undivided shares of the Land and the Estate.

137.  “Common Areas” as defined in the DMC, as the Applicant repeatedly stressed, include “Commercial Common Areas”.  Hence, the Applicant argued and we should, I think, never lose sight of the argument that the Subject Areas as part of the Property could have been assigned to R1 under CA Assignment.

138.  As such, unless the context otherwise requires, exclusive use and enjoyment of the Subject Areas had been assigned to R1 as an “owner”[58] by way of CA Assignment.  It follows that component (2) above, and the entire definition of “Commercial Common Areas”, cannot be satisfied for the Subject Areas as alleged.

139.  At the same time, it may be open to the Applicant to argue that component (2) above, and the entire definition of “Commercial Common Areas”, was still met as the said 733 shares together with exclusive use of “Common Areas” (as defined in the DMC) (i.e. inclusive of “Commercial Common Areas”) were assigned to R1 as “trustee” for R1 to hold them for all owners of the Estate.  The said context requires one to read otherwise that the Subject Areas had not been assigned by way of CA Assignment to R1 as beneficial “owner” thereof.

140.  It should be noted that the same component (2) above was also used as component in the other 3 definitions of “Estate Common Areas”, “Garage Common Areas” and “Residential Common Areas”.  Had the same argument at [136] to [138] above be run for them, the said 3 definitions cannot be satisfied either.  But I think no party before this Tribunal ventured to suggest the absurd proposition that the Estate lacked “Estate Common Areas” since the making of the DMC.

(iv)  CA Assignment to R1 on trust

141.  The next submissions of the Applicant would no doubt be that “Commercial Common Areas”, forming part of “Common Areas” defined in the DMC, were by CA Assignment assigned from R2 to R1 after the making of the DMC.

142.  The said 733 shares of the Land and the Estate referred to in CA Assignment, the Applicant could emphasize, had not been allocated in Part 1 of First Schedule to “Estate Common Areas”, “Residential Common areas”, “Garage Common Areas” or any combination of them.  Nor had R2 assigned in CA Assignment to R1 “Estate Common Areas”, “Residential Common areas”, “Garage Common Areas” or any combination of them.

143.  Had the Subject Areas as “Commercial Common Areas” been previously assigned to R1 under CA Assignment, the views of CA at [23] and [51] of CA Judgment cannot, I think, be doubted.  That is, R2 cannot thereafter unilaterally avail its reserved rights as “First Owner” in the DMC to amend the Approved Building Plans, or make sub-deed of mutual covenant, regarding the Subject Areas as exclusive right to occupy the same as “Commercial Common Areas” had already been assigned to R1.

(v)  C&K Opinion of two “Commercial Units”

144.  The Applicant also relied on C&K Opinion in purported support of A’s Contentions.  C&K had offered an analysis therein of “G/F Commercial Accommodation” being one “Commercial Unit” having 322 shares and of “UGF Commercial Accommodation” being another “Commercial Unit” having 251 shares.

145.  For definitions of “Unit” and “Commercial Unit” in Section B, the format of Part I of First Schedule, and clause 1(a) in Section C to be discussed below, one can well understand why C&K opined that there were 2 “Commercial Units” at the making of the DMC.  After all, 322 and 251 shares were respectively allocated to “G/F Commercial Accommodation” and “UGF Commercial Accommodation” and not 573 shares allocated to all “Commercial Accommodation” for both floors.

146.  However, C&K’s analysis above is, in my view, problematic and, in any event, does not fully support A’s Contentions.

(1)  On such analysis, Former G/F Corridors (one of the Subject Areas in dispute) located entirely within one single “Commercial Unit” of R2 do not qualify as “Commercial Common Areas”[59]. Only limited areas connecting or serving both floors (such as G/F Entrance with escalators connecting the two) and facilities serving both floors alone qualify as “Commercial Common Areas”[60].

(2)   Further, on Applicant’s case, G/F Former Corridors could only have existed had 7 shops existed at G/F level of the Estate as they were marked and demarcated as shown on the Approved Building Plans.  The said analysis of 2 “Commercial Units” offered by C&K is, I think, inconsistent with the total number of 7 shops found on G/F portion of the Mall (and marked on the Approved Building Plans).

(3)   In line with Applicant’s case, it would, one thinks, make more sense for each G/F shop demarcated on the Approved Building Plans to be allocated undivided share as one “Commercial Unit”, in identical treatment to each of the Residential Units, and each of the Carpark, having its own undivided shares.

(4)   As shall be discussed when R2’s submissions are considered below, it defies, one thinks, commercial necessity to have “Commercial Common Areas” for “communal use” by owners of “Commercial Unit” when both G/F “Commercial Unit” and UGF “Commercial Unit” are owned by the same person i.e. R2 (and C&K’s analogy of treating them as “two separate residential units” owned by two owners does not, as R2 argued, hold water as they are owned by one person i.e. R2 alone).

(vi)  Special Conditions of the New Grant

147.  The Applicant further drew support for A’s Contentions from the New Grant.

148.  He pointed to SC(13) of New Grant at [71] above. That deals with PPW located at UGF of the Estate.  It was held to be “Estate Common Areas” by CA Judgment.  The Subject Areas were, however, said to be “Commercial Common Areas” situated at G/F of the Estate.  The two are totally different subject matters.  This special condition is, I think, irrelevant to this application and does not assist the Applicant.

149.  The same applies to SC(12) of New Grant at [70] above. On my findings at [75] above, that deals with covered pedestrian walkway connecting the 2 residential towers at 1/F podium level of the Estate.  It is also a different subject matter at a different level. It does not assist the Applicant in advancing A’s Contentions either.

150.  The Applicant finally pointed to SC24(a)(v) of New Grant at [73] above.  He seized upon words such as “arcades”[61], “common entrances” and “passageways” found therein as “Common Areas” (or “Commercial Common Areas”) and submitted that they must be provided for at the Estate by R2.

151.  I do not agree.

152.  SC24(a)(v) of New Grant deals solely, I think, with “allocation” of “appropriate number” of undivided shares to “Common Areas” in draft deed of mutual covenant submitted for obtaining approval for presale of uncompleted units of the Project.  That is to prevent unfair allocation of undivided shares to “Common Areas” in the DMC by R2, so as to provide some level playing ground to prospective purchasers of uncompleted residential units therein.

153.  The above special condition does not, I think, impose any obligation on R2 to set up any particular kind(s) of “Common Areas” (or “Commercial Common Areas”) within the Project (those given in the condition are, I think, possible candidates only).  The New Grant was dated 27 March 1995.  The earliest G/F drawing of the Approved Building Plans was dated 17 August 1995.  At the time of the former, the government could, I think, hardly have any idea of what G/F building plan would in future be put forward for the Estate and therefore could not have imposed the alleged obligation above on R2.

(I6)   Alleged pointers in support of Rs’ Contentions

(i)  R2 sole owner of entirety of the Land at first

154.  R1 and R2 both started off by emphasizing that, prior to the assignment of First Assigned Premises to Second Owner, R2 as the “First Owner” was the sole owner of the Land entitled to possession of each and every corner of the Land and the Estate.  Until R2 has parted away any part of the Land, it remains owner of its entirety.  Hence, there was, they say, no need as alleged by the Applicant for R2 to reserve the Subject Areas to itself.

155.  R1 and R2 sought to seek support from clause 2 in Section C, whereby R2 as “First Owner” shall have “the full and exclusive right… to hold, use, occupy and enjoy the whole of the Land and the Estate… save only the First Assigned Premises and the Common Areas (bold and italics supplied)”.

156.  Their approach to construction above, R2 argued, is consistent with definition of “common parts” in BMO.  In any event, the said definition is also “subject to context”^[62].  There is also, it was added, no requirement in BMO that designation or specification of exclusive use areas need to be done “expressly”[63].

157.  The Applicant’s contrary argument that it is necessary for R2 to “reserve” the Subject Areas “expressly” or otherwise, or else the Subject Areas would fall within “Commercial Common Areas” is therefore, R1 and R2 submitted, erroneous.

158.  That R2 was at first the grantee of the Land i.e. the owner of the entirety of the Land cannot, I think, be doubted.  That is, I cannot but agree, an important context in our case that needs to be considered in applying the definition of “common parts” in BMO.  I also agree that BMO does not require “express” designation or specification of exclusive use areas in the DMC.

159.  Subject to definition of “Commercial Common Areas” in the DMC and CA Assignment executed after the making of the DMC, both of which will be addressed separately below, the above starting point argued for by R1 and R2 cannot, I think, be faulted.

(ii)  R2 owner of entire “G/F Commercial Accommodation”

160.  Starting from the above starting point, after parties’ execution of the DMC, putting aside DMC definition of “Commercial Common Areas” and CA Assignment to be addressed below, R2 remained, R1 and R2 submitted, owner of the entire “Commercial Accommodation (bold supplied)” of the Estate, to which R2 was allocated 322 undivided shares for G/F (and 251 shares for UGF) in Part I of First Schedule (and the same likewise appears in R2’s land search records at [110] above).

161.  I agree with the above submissions.

162.  Under clause 1 in Section C, each share shall be held by the person entitled thereto together with “(a) the full and exclusive right … to hold, use and occupy the Unit designated opposite to it in the First Schedule…” and “(b) subject to … the benefit, insofar as applicable, of the easements, rights… in Part I of the Second Schedule; but subject to the exceptions and reservations … in Part II of the Second Schedule (bold and italics supplied)”.

163.  One finds in Part I of the First Schedule to the opposite of “322 shares” (owned by R2) only the words “G/F” below the words of “Commercial Accommodation” and no other words.

164.  Admittedly, there is, R2 agreed, no definition of “Commercial Accommodation” in the DMC.  However, Mr Li SC submitted, and I agree, that it should mean “Commercial Development” without “external wall thereof”, as the latter is defined to mean “those areas on the ground floor, upper ground and external walls thereof within the Estate indicated on the Approved Plans for commercial use (bold supplied)”.

165.  Looking at G/F level of the Estate as at the date of the DMC, “G/F Commercial Accommodation” would, I think, unlikely be as large as entire G/F of the Estate.  It is because G/F level of the Estate apparently also includes, for example, car parking spaces with one share allocated to each space, “Residential Common Areas” like Tower 1 G/F Lobby and Tower 2 G/F Lobby, and facilities like “transformer room”, “management control room” and “refuse storage chamber” specifically provided for in definition of “Estate Common Areas” (and “Common Areas” was allocated 733 shares in the DMC).

166.  “Commercial Accommodation”, I further agree with Mr Li SC, is likely more than a “Commercial Unit”, which is defined in the DMC to mean “a Unit situate in the Commercial Development (bold supplied)”.  “Unit” is defined as “a part of the Estate the exclusive use and enjoyment of which has been or is intended to be assigned to an owner (bold and italics supplied)”.  Mr Li SC placed great emphasis in his submissions that R2 is owner of G/F “Commercial Accommodation” and not owner of “Commercial Units” or “shop units”^[64].

(iii)  Alleged test for creating “Commercial Common Areas”

167.  Mr Li SC submitted that, on the definition of “Commercial Common Areas” in the DMC and consistent with Respondents’ approach above, the test of whether there comes into existence any “Commercial Common Areas” is whether R2, as owner of entire “Commercial Accommodation”, has alienated any part thereof to others[65].

168.  Mr Li SC reasoned that, unless and until R2 assigns any part from “Commercial Accommodation” solely owned by it to another or others so as to create a situation of “co-owners” of “Commercial Accommodation”, there would not be any necessity to create “Commercial Common Areas” out of “Commercial Accommodation” to serve all these co-owners of “Commercial Accommodation”.

(iv)  Communal use of “Commercial Common Areas” by co-owners of “Commercial Unit”

169.  Looking at the last few lines of the long definition of “Estate Common Areas” starting with the words “communal areas”, one can, I think, reasonably infer that all 4 kinds of “Common Areas” defined in the DMC are all reasonably intended for “communal” use by one or more specific “group(s)” of “owners” i.e. “Residential Common Areas” by owners of “Residential Units”, “Garage Common Areas” by owners of “Carpark”, and “Commercial Common Areas” by owners of “Commercial Units”, whereas “Estate Common Areas” are to be shared by all 3 groups of the above owners.  And these 4 groups of “Common Areas” are mutually exclusive of each other when one reads their respective definitions in the DMC.

170.  Mr Li SC reinforced the above “Common Areas” arrangement by referring to the fact that the Residential Development is, by its design, “self-contained” i.e. the residential owners can connect with the outside world without going through the Mall.

171.  Mr Li SC further submitted by reference to clause 1 in Part I of Second Schedule that the scheme of the DMC is that owners of “Residential Unit”, owners of “Commercial Unit” and owners of “Carpark” could only enjoy the right to go over their respective “Common Areas” that serve their respective portion of the Estate[66] and that all 3 groups of owners enjoy the same additional right of going over “Estate Common Areas”.  Reading the said clause 1, I agree with his submissions on the said “right to pass” and reject the contrary submissions of the Applicant[67].

172.  The scheme of the DMC in having different budgets to be prepared for, and different capital funds to be collected for, the above 3 groups of owners, Mr Li SC argued and I agree, serves further to reinforce the above arrangement.

173.  Accordingly, Mr Li SC submitted that any assignment of part of entire “Commercial Accommodation” owned by R2 to other(s) would, in line with the scheme of the DMC and the above arrangement, create one of the 3 groups of owners intended above (i.e. co-owners of “Commercial Unit” above) to necessitate and require “communal” use of “Commercial Common Areas” to be created, also, out of “Commercial Accommodation” owned by R2.

174.  I find the above coherent submissions of Mr Li SC very persuasive and weighty.  These submissions are all in line with the scheme of the DMC read as a whole.

175.  Had the Subject Areas been “entrance” and “corridors” within definition of “Commercial Common Areas”, the ordinary function of G/F Entrance (one of the Subject Areas) is, one thinks, to allow would-be shoppers to access different shops at G/F portion of the Mall and/or its UGF portion through escalators linking the two.  And that of Former G/F Corridors (the other of the Subject Areas) is to allow would-be shoppers to get around different shops, and other facilities, of the Mall, in their vicinity for shopping purpose.

176.  The Subject Areas are therefore, one thinks, not reasonably intended to be set up, or required, by one single owner like R2 as the sole owner of the entire “Commercial Accommodation” at both G/F and UGF levels.

177.  That said, Mr Li SC’s aforesaid test at [167] above is a positive requirement requiring part(s) of “Commercial Accommodation” having been assigned away to other owner(s) (to create co-owners of “Commercial Unit”) whereas component (2) of the definition of “Commercial Common Areas” at [132] above is, I would point out, a different negative requirement requiring that the intended common areas in the Commercial Development (e.g. entrances, corridors etc.) “has not been assigned to any owner” (bold and italics supplied)”, though the latter may imply that the positive requirement suggested by Mr Li SC has earlier been complied with.

178.  Component (2) of the said definition of “Commercial Common Areas” (and, as noted at [140] above, similar component in definitions of other three kinds of “Common Areas”) would, I think, be “badly” drafted had the test suggested by Mr Li SC above been what the drafter of the DMC had in mind in drafting it.

(v)  No assignment to other(s) of “Commercial Accommodation” intended at time of the DMC

179.  Mr Li SC continued to submit that R2 plainly had no intention at the execution of the DMC in alienating any part of entire “Commercial Accommodation” owned by it to others.

(1)  By clause 6(a) in Section C, the right of exclusive use, occupation and enjoyment of any Unit cannot, he stressed and I agree, be assigned separately from the share with which the same is held.

(2)  Unlike “Residential Unit” and “Carpark” having undivided share allocated to each of them, indicative of R2’s intention at the time of the DMC of making future assignment, or sale, of individual residential unit or carpark to prospective purchasers, no separate undivided shares were allocated in the DMC to each of the said 7 G/F shops marked on the G/F Approved Building Plans.

180.  For the above 2 reasons he gave, I agree with the above submissions of Mr Li SC.  If I may add a third reason to support them, the shop boundaries on the G/F Approved Building Plans prepared by Chau are merely “notional” or “indicative” and R2 may decide to change them subsequently.

181.  For the sake of completeness, I should make it clear that I accept Hung’s evidence supported by land search records before me that R2 has not alienated to others any part of G/F and UGF “Commercial Accommodation” until today.

(vi)  Empty definition of “Commercial Common Areas” reserved for future use

182.  In reply to Applicant’s reliance of this definition, Mr Li SC countered that it was inserted to cater for future scenario when D2 decides to sell part of “Commercial Accommodation”.  He referred to R2’s reserved rights as “First Owner” to amend Approved Building Plans and to enter into sub-deed of mutual covenant and suggested that provisions like the said definition are needed at the making of the DMC as and when the occasion arises in future[68].

183.  In other words, at the making of the DMC, the said definition of “Commercial Common Areas” is, to quote R1’s submissions, an empty one with nothing to fall into it.

184.  Empty definition is, I agree, possible and unobjectionable in principle[69]. That said, nothing in the wordings of the definition of “Commercial Common Areas” itself[70], or in the recital of the DMC, suggests that it is an empty one.

(vii)  Unattractive to have common areas within one’s private property

185.  To reinforce the above submissions, Mr Li SC submitted that the idea of having common areas within one’s private property is an unattractive one on the case law[71] such that the Subject Areas should not be considered “Commercial Common Areas” within R2’s private property of “G/F Commercial Accommodation”.

186.  I agree with R2 that this is also a factor to be considered in the round.  It serves no purpose to have “Commercial Common Areas” when the entire “Commercial Accommodation” remained solely owned by R2 (and all the ancillary deposit and expenses would in the meantime be paid by R2 alone, whether or not separate capital funds, or separate budgets, are collected or prepared by R1).

(viii)  Chau’s evidence of allocation of undivided shares

187.  R1 and R2 further relied on Chau’s evidence (inclusive of ACs and SD) at [87] to [93] above to make good their submissions that there was no “Commercial Common Areas” at the making of the DMC.

188.  The above material evidence of Chau (who was significantly not called by R1 at trial of PPW Case) is, I agree, wholly consistent with, and strongly supports, Rs’ Contentions.  I think they point to: 1) no GFA being provided for “Commercial Common Areas” i.e. “Common Area” below “Commercial Units” at that stage; 2) all “Common Area” on G/F at that stage attributable to “Residential Common Areas” i.e. Tower 1 G/F Lobby and Tower 2 G/F Lobby; and 3) the Subject Areas being part of “Commercial Units”.

189.  In reply, the Applicant pointed to 3 cases where “saleable areas” were held unreliable guide for determining common parts[72]. However, the facts of these cases are, I think, distinguishable from this case.

190.  Instead, as AP of the Project, Chau had in our case performed the indispensable process of allocating and distributing undivided shares which ultimately found their way into the DMC.  Such background information provided by him is, I think, weighty pointer in our construction exercise of the DMC. 

(ix)  CA Assignment not assigning away “Commercial Common Areas”

191.  It must, of course, not be forgotten that after the making of the DMC, R2 had seen fit to enter into CA Assignment whereby “Common Areas (including Club House) (as defined in the DMC) (bold supplied)” was assigned to R1 and “Common Areas” is defined in the DMC executed earlier by R2 to include “Commercial Common Areas”.  The obvious problem posed by CA Assignment against Rs’ Contentions has been set out at [143] above.

192.  Mr LI SC countered to submit that, were there no “Commercial Common Areas” at the making of the DMC on its proper construction, any subsequent assignment of “Common Areas” in CA Assignment to R1 would not have carried any “Commercial Common Areas” (or the Subject Areas) in its favour.

193.  As between the DMC and CA Assignment, I agree that one must construe the former (and not the latter) to ascertain if “Commercial Common Areas” exist or not.  The subject matters of the Property to be assigned to R1 by way of CA Assignment depend on the subject matters forming “Common Areas” as defined by the DMC.

(I7)   Result of unitary exercise of construing the DMC

194.  All things considered, having regard to proper context of the DMC, considering its entirety, its practical objects and its language, including the “poor” quality of its “professional” drafting, a reasonable person would, I think, have understood the parties to mean what R1 and R2 had contended by way of Rs’ Contentions.

195.  Notwithstanding the contrary views expressed by CA in the CA Judgment at [29] above, having undertaken the said iterative process of construing the DMC on the basis of such findings of fact I have made after considering the different evidence adduced at this trial, I conclude that there was no “Commercial Common Areas” at G/F of the Estate when the DMC was made.  The Subject Areas have always been and remained R2’s private property forming part of G/F “Commercial Accommodation”.  And R2 has never assigned them away to R1 by way of CA Assignment thereafter.

(I8)   Answer to Issue 1

196.  I therefore answer no to Issue 1 as R1 and R2 suggested.  That, I believe, is fatal to all claims made by the Applicant against R1 and R2 in this application, which shall stand all dismissed.  In the event I have wrongly decided Issue 1, I also briefly give my views below on the rest of the issues in dispute.

J.   Issue 2 – Right of Applicant over the Subject Areas under the DMC or not?

197.  Were the Subject Areas “Commercial Common Areas” as alleged by the Applicant, for reasons given at [171] above, I agree with R1 and R2 that the Applicant, as owner of a residential unit, enjoys no right over the Subject Areas under the DMC.

198.  As owner of a residential unit[73], the Applicant, I think, enjoys the right to pass over “Residential Common Areas” and “Estate Common Areas” only, and also enjoys the right to use the “Recreational Areas and Facilities” for the purpose of recreation[74].

199.  Were I wrong on Issue I, I would have ruled that the Applicant has no right over the Subject Areas under the DMC.

K.   Issue 3 – Applicant’s standing/authority to sue R2

200.  For this challenge on standing/authority of the Applicant, R2 relied on clause 6 in Section L, which reads as follows:

“Notwithstanding the powers conferred on the Managers by this Deed, any one or more owners shall be entitled to take action to enforce the provisions of this Deed and, if at any time no Managers are appointed or acting hereunder or any Managers so appointed or acting refuse or fail to enforce any of the provisions of this Deed, any one or more owners appointed by resolution passed pursuant to Section F of this Deed shall be entitled to sue any defaulting owner on behalf of himself or themselves and all other owners and the provisions of this Clause shall apply mutatis mutandis to any action or proceeding brought by such owner or owners and to the recovering of any cost, damages or other moneys awarded therein (bold and italics supplied).”

201.  No resolution has, R2 pointed out and I agree, ever been passed pursuant to Section F to authorize the Applicant to sue any alleged “defaulting owner” like R2 on behalf of himself and other owners.

202.  After commencement of this application and shortly before annual meeting of owners to be held on 29 October 2021, the Applicant had, I find, by his letter dated 23 October 2021 suggested to other owners to authorize one owner pursuant to the said clause 6 of Section L to correct such legal wrongs allegedly committed by R1 as manager, including that over the Subject Areas.  No such authorization was, however, given to the Applicant in the end.

203.  On the above factual basis, the Applicant, R2 argued, lacks authority or standing to sue R2 in his personal capacity or representative capacity for other owners.

204.  For reasons below, clause 6 of Section L[75] does not, I think, assist R2.

(1)  The said clause does not, I note, by its words “bar” or “prohibit” the Applicant from taking legal action in his personal, or representative, capacity.

(2)  On its proper construction, the said clause is more likely, I think, an “enabling” clause that “empowers” one or more owner(s) to represent other owners of the Estate to sue “defaulting owner(s)” in the event that the manager does not so act.

(3)  Under the DMC, the manager is authorized agent or attorney of all owners in respect of any matters concerning Common Areas and has power to take legal action in the name of owners to enforce observance and performance of the DMC by owner(s)[76]. The above clause allows, I think, an owner to act as representative of himself and other owners should the manager fail to take legal action.

(4)  As an owner of undivided share of the Land, as against other owners like R2, the Applicant himself, I think, enjoys the benefit of covenants in the DMC as they run with the Land[77]. As such, the Applicant should, I think, be able to take action on his own to enforce covenants in the DMC against other owners like R2.

205.  Were I wrong on Issue 1, I would have therefore ruled that the Applicant is entitled to sue R2 in his personal capacity to enforce covenants in the DMC.

L.    Issues 4 & 5 – R1 in breach of duties or not?  If so, protected by the DMC or not?

206.  Were I wrong on Issue 1, I would have agreed with Mr Ismail that the duty owed by R1 as manager under the DMC to owners of the Estate (including the Applicant) is not “absolute or strict”.  The overall duty imposed on R1 by the DMC is one of “proper” management.  It entails doing all that is “reasonably” required of a manager in the circumstances: Lo Yuk Chu v Hang Yick Properties Management Limited [1996] 4 HKC 278, 281D-282E.

207.  Put it another way, R1 is not, I think, expected to think and act in a mistake-proof and perfect manner.  R1 cannot be an insurer for the owners of the Estate whenever problem arises.  R1 is only expected to think and act in the same way what a reasonable manager could have thought and done in the circumstances R1 found itself in at all material times.

208.  This Tribunal refers to the following provision in Section I by way of illustrations of such a “reasonable” standard of duty imposed by the DMC on R1: -

(1)   Clause 1(a): “The Managers shall… have full and unrestricted authority to do all such reasonable acts and things as may be necessary or requisite for the management of the Land and the Estate and anything reasonably incidental thereto”;

(2)   Clause 3 : “All reasonable acts and decisions of the Managers arrived at in accordance with the provisions of this Deed in respect of any of the matters aforesaid shall be binding in all respects on all the owners”;

(3)   Clause 6 : “The Managers acting reasonably shall have the discretion to :- (a) exercise any of their rights and powers and discretions hereunder (including instituting legal proceedings) under their own name or … in the name of the owners; (b) … ; (c) refrain from doing anything which would or might be in the reasonable opinion of the Managers contrary to any law … and to do anything which in their reasonable opinion the Managers may consider necessary to comply with any law…”; and

(4)   Clause 7: “Neither the Managers… shall be liable to… any owner… except in the event of any wilful act, neglect, misconduct or dishonesty by or on the part of the Managers or their employees, agents or sub-contractors:- (a) for or in respect of any act, matter or thing done or omitted in pursuance or in purported pursuance of the provisions of this Deed … (bold supplied)”.

209.  In order to be guilty of “wilful act, neglect, misconduct” in clause 7 above, I agree with Mr Ismail that R1 “must know what it is doing and intends to do what it is doing”. If R1 is merely in breach of his duty, and therefore negligent, R1 is not guilty of “wilful negligence”, unless R1 “knows that he is committing, and intends to commit, a breach of his duty, or is recklessly careless in the sense of not caring whether his act or omission is or is not a breach of duty”: Hoi Kong Container Services Co Ltd v Bewise Motors Co Ltd [1997] 2 HKC 615, 626F-627A

210.  In all the circumstances of the case, it was, I think, reasonably open for R1 to have taken the view at all material times that there is no “Commercial Common Areas” of the Estate and that the Subject Areas are not within the same and I find that R1 had honestly taken such view upon independent judgment of its own.  My reasons are as follows.

(1)  Contrary to the belief of the Applicant, the DMC and CA Assignment do not, I think, give simple and straightforward “black and white” answer to R1 on the above.  While definition of “Commercial Common Areas” is found in the DMC, R2 at the same time remains at all times the sole owner of the entirety of G/F “Commercial Accommodation”.  And no “Common Areas” plans were annexed to the DMC or CA Assignment.

(2)  As was shown by the history of the PPW litigation from first instance to appeal level, the construction of the DMC is not an easy task but a painstaking iterative process which is open to different interpretation by different person(s) (and tribunals). As my analysis of Issue 1 shows, on top of the DMC to be construed, the factual and legal context must also be taken into account in the process.

(3)  On my analysis of Issue 1 from [147] to [153] above, the New Grant gives, I think, no clue to R1 whether or not “Commercial Common Areas” existed at the Estate.

(4)  The 2009 CA Plans when made available to R1 showed no “Commercial Common Areas” at all.

(5)  In contrast with stance taken by individual residential owners like the Applicant, R2 has throughout maintained the conflicting stance that there is no “Commercial Common Areas”.

(6)  While C&K had opined in C&K Opinion that “Commercial Common Areas” have existed within the Estate, they at the same time opined, among others, that any income derived therefrom should, in contrast with the stance taken by the Applicant, be paid over to the account of the Commercial Development.

(7)  While CA opined in CA Judgment that the trial judge in PPW Case had erred in holding that there is no “Commercial Common Areas” within the Estate, such views were expressed within the different context of PPW dispute between R1 and the Applicant (and R1 had only 4 days to consider them before the Applicant took out this application).

(8)  As this trial and the above discussion amply showed, weighty contrary argument and substantial contrary evidence (such as Chau’s evidence and SD) could well be prepared and collected by R2 in opposing Applicant’s claim of “Commercial Common Areas” within the Estate.

(9)  While it is true that R1 and R2 belonged to the same group of companies prior to 2012, they were no longer so afterwards.  Nonetheless, R1 saw fit to maintain thereafter the same view it held earlier despite losing its group connection with R2.

211.  For the same reasons above, I am also not satisfied that R1 had, as alleged by the Applicant, misrepresented, let alone “fraudulently” misrepresented, to OC about non-existence of “Commercial Common Areas” within the Estate.

212.  Given that R1 has at all material times “reasonably” and “honestly” opined that there is no “Commercial Common Areas” within the Estate, R1 had not, I think, acted “unreasonably” or in breach of its DMC duties in not taking out legal proceedings against R2 for the Encroachment as alleged by the Applicant.

213.  In so far as may be necessary, I further agree with Mr Ismail, and would have further held, that R1 is entitled to protection under clause 7 of Section I as, for same reasons given above, R1 has not, I find, been guilty of any “wilful act, neglect, misconduct or dishonesty” on this subject matter of “Commercial Common Areas”.

214.  Therefore, were I wrong to have decided Issue 1 as I did, I would have held that R1 had not been in breach of its DMC duties or guilty of alleged misrepresentation to OC as alleged and that, in any event, it was protected by exemption clause in the DMC.

M.   Issue 6 - Remedies & Quantum

215.  Were I wrong on Issue 1, for reasons in this section, I would have ruled that the remedies sought by the Applicant against R1 are not open to him and that the quantum sought by him against R1 unreliable, unreasonable and excessive.

(M1)   Mesne profits for the Encroachment

216.  In making a claim of “mesne profits” against R1, the Applicant seeks to rely on clause 7 in Section J, which reads:

“Any miscellaneous income or payment received by the Managers from or in respect of the Land and the Estate, not being for the defrayment of any specific expenses, including without prejudice to the generality of the foregoing:

(a) any interest on owners’ deposits …

(b) all interests and collection charges …

(c) any damages for the breach, non-observance or non-performance of the terms and conditions of this Deed recovered by the Managers in any legal proceedings brought by them ..; and

(d) any surplus of income over expenditure shown in audited accounts for any financial year;

shall at the joint discretion of the Managers and the [OC], either be applied towards the payment of future costs, charges and expenses in respect of the management of the Land and the Estate thereafter to become due, or be transferred to the Estate Capital Fund …

(bold supplied)”.

217.  The Applicant submitted that all mesne profit payable by R1 for its alleged breach of duty should go to “Estate Capital Fund” by reason of the aforesaid provision.

218.  I agree with R1 that the above claim (and reliance of the aforesaid clause) by the Applicant is misplaced.

(1)  Mesne profit is damages or compensation payable by “user” or “occupant” of others’ property[78]. The Subject Areas were not used/occupied by R1 but by R2 (or by R2’s tenants or licensees) at the material times.  Mesne profit, if payable at all, should therefore, I agree, be paid by R2 and not R1.

(2)   Mesne profit, if payable at all, I also agree with R1, is not “miscellaneous income” or “payment” “received by R1” as Manager of the Estate within the aforesaid clause, whether by way of proceedings brought by it or otherwise.  If payable, they are payable by R2 at law as damages or compensation for wrongs committed by R2 over “Commercial Common Areas” i.e. the Encroachment.

(3)  And no joint discretion of R1 as Manager of the Estate and OC had, I find, been exercised as required by the aforesaid provision to effect transfer to “Estate Capital Fund” as alleged by the Applicant.

(4)  There is also, I think, no good reason for benefit “derived” by R2 from use/occupation of “Commercial Common Areas” to go to “Estate Capital Fund” as alleged.  The said fund is designed to pay for works of a capital nature in respect of completely different “Common Areas” i.e. “Estate Common Areas”.

(5)   “Commercial Common Areas” is, as was explained above, designed and created out of “Commercial Accommodation” for “communal” use by co-owners of “Commercial Units”.  Expenses to maintain them and benefit generated therefrom are naturally, one thinks, also to be shared by these co-owners.  The Applicant, he agrees, does not own any “Commercial Unit”.

(6)  As explained above, the Applicant, as mere owner of a residential unit, has no rights under the DMC over the Subject Areas as “Commercial Common Areas”.

(7)  Indeed, contrary to Applicant’s submissions, C&K also opined in C&K Opinion that any benefit generated from “Commercial Common Areas” should go to account of “Commercial Accommodation” owner or benefit of “Commercial Accommodation” owner(s)[79].

(M2)  Account of profit for the Encroachment

219.  The Applicant alleges that, by reason of the Encroachment, he is also entitled to make a claim against R1 for “account of profit” on the basis of unjust enrichment.

220.  This claim, I also agree with R1, is plainly misconceived at law for the following reasons: -

(1) According to [37] of The Incorporated Owners of Gough Plaza v Wong Ching Kong & Another [2020] HKDC 799 cited by the Applicant: “A useful framework for approaching such [common law claim for money had and received for total failure of consideration] involves asking four questions: (a) was the defendant enriched? (b) was the enrichment at the plaintiff’s expense? (c) was the enrichment unjust? (d) are any of the defense applicable?[80]”.

(2) On Applicant’s case of the Encroachment of the Subject Areas, it was R2 (not R1) that was enriched by receiving fee from kiosks renters of G/F Entrance and rentals (or increased rentals) for Former G/F Corridors from shop owners concerned.

(3) And, the Applicant, as mere owner of a residential unit, has no rights under the DMC over the Subject Areas as “Commercial Common Areas”.  As such, any enrichment by R1 (if at all) could not have been made at the expense of the Applicant but at the expense of others.

(M3)   Misrepresentation for deprivation of access to “Commercial Common Areas”

221.  Had the Subject Areas been “Commercial Common Areas”, the Applicant complained of being deprived of access to these areas for about 22 years by reason of R1’s alleged misrepresentation.

222.  This alleged misrepresentation claim against R1 is, I agree with Mr Ismail, also misconceived.

(1)The Applicant entered, I find, into agreement to purchase A’s Flat in December 1997 with R2 and not R1.  Whatever alleged misrepresentation made and relied upon by him to cause him to enter into the said agreement must, I think, come from R2 (by way of, for example, the Brochure as alleged by the Applicant) and not from R1.  R1 first came into the picture on 24 March 1999 when it was appointed “Managers” of the Estate under the DMC.

(2)  In so far the Applicant relied on alleged misrepresentation made by R1 to him or OC after it was appointed as manager, such misrepresentation could not, I think, have caused him to enter into the above earlier agreement to become owner of A’s Flat.

(3)  As ss.2 & 3 of Misrepresentation Ordinance[81] cited by the Applicant reveal, an essential element of this claim at law is that “a person has entered into a contract after a misrepresentation has been made to him (bold supplied)”

(4)  In the case of Santani Ltd v Shum Shuk Fong[82] relied upon by the Applicant, the plaintiff purchaser also sued the defendant vendor and no others for misrepresentation causing her to enter into a provisional agreement to purchase a flat.

(5)  Finally, as the Applicant as mere residential owner enjoys no legal right over “Commercial Common Areas” under the DMC, he could not have suffered any alleged loss for being deprived of any alleged legal right he never enjoyed at law to make use of, or access, “Commercial Common Areas” over the last 2 decades.

(M4)  Quantum

(i)  The Encroachment

223.  For the Encroachment, the Applicant calculated, and put forward, his total claim of $27,919,510 against R1 by way of the following heads and periods[83]: -

(1)  portion of G/F Entrance occupied by kiosk renters from 2009 to 2020: $1,800 daily rental x 2 kiosks x 18 times per month x 12 months x 12 years = 9,331,200;

(2)  portion of Former G/F Corridors occupied by tenant of G/F Shop G02[84] from 2000 to 2008: 184.6m² x $250/month per m² x 12 months x 9 years = $4,984,200;

(3)  portion of Former G/F Corridors occupied by tenants of G/F Shops G03-5[85]and G07[86] from 2000 to 2008: $9,873 (i.e. 39.49m² x $250/month per m² ) x 12 months x 9 years = $1,066,284;

(4)  portion of Former G/F Corridors occupied by tenant of G/F Shop G02 from 2009 to 2020: $71,724 (or $333,600 x 21.5%) x 12 months x 12 years = 10,328,256; and

(5)  portion of Former G/F Corridors occupied by tenants of G/F Shops G03-5 and G07 from 2009 to 2020: 39.49m² x $388.56/month per m² x 12 months x 12 years = 2,209,570.

224.  There are, I agree with R1 and R2, the following evidential problems with the various heads above.

225.  For head (1), the Applicant produced i) photos capturing kiosks erected at G/F Entrance on a total of mere 76 days from March to June 2017, ii) extract of minutes of one meeting of owners of the Estate held in July 2017, whereby it was recorded that R1 had “recently” received complaints from owners and residents of alleged obstructions of G/F Entrance caused by kiosks, iii) minutes of OC meeting dated 18 December 2018 recording such complaints, and iv) emails of similar complaints received by R1 in June 2021.

226.  The above documents are, I think, insufficient to allow the Applicant to prove head (1), whose claim went back as early as 2009.

227.  For head (2), the Applicant produced a lease offer dated 30 June 2008 to let G/F Shop G02 to The Dairy Farm Co. Ltd. for 5 years from 1 May 2008 to 30 April 2013 (the 2008 Offer) at different monthly rentals varying over each of the 5 years (increasing from $290,000 in year 1 to $380,000 at year 5) registered at the Lands Registry.

228.  The Applicant apparently deduced the total areas of (1) G/F Shop G02 (at 858.56m²), (2) Former GF Corridors occupied by G/F Shop G02 (at 184.6m²) and (3) Former GF Corridors occupied by G/F Shops G03-5 and G07 (at 39.49m²) by taking measurements from the Approved Building Plans of G/F of the Estate and making his own calculations thereafter using such measurements[87].

229.  Using the rents in the 2008 Offer, the Applicant arrived at a mean monthly rental of $333,600.  Applying total area of 858.56m² he obtained for G/F Shop G02 from his measurements and calculations, he arrived at unit rate of $388/month per m² for G/F Shop G02.  He then applied a “discounted” monthly rental of $250/month per m² to the total area of 184.6m² he obtained from his measurements and calculations to arrive at mesne profit for such portion of Former G/F Corridors occupied by tenant of G/F Shop G02 over the 9 years from 2000 to 2008.

230.  Assuming the Applicant could have taken his measurements from the Approved Building Plans of G/F of the Estate and made his subsequent calculations correctly, it is, I think, “arbitrary” for him to “discount” as he did and using the “reduced” monthly rent of $250/month per m² over a 9-year-long period dating back to 2000.

231.  On land search record of “G/F Commercial Accommodation” of the Estate before me, a lease of G/F Shop No.2 to The Dairy Farm Co. Ltd. was registered as encumbrance on 26 November 2002[88]. According to the entry, the lease was for 3 years from 1 May 2002 to 30 April 2005 at monthly rental of mere $101,700.  Applying total area of 858.56m² obtained by the Applicant, the unit rate was mere $118 per sq m and not as high as $250 per m² adopted by him.

232.  The above suffices, I think, to show that Applicant’s figures for head (2) are arbitrary, unreliable and excessive.

233.  For head (3), the Applicant used the same “discounted” unit rate of $250 per m² for head (2) over the same 9-year-period to arrive at mesne profit for such total area of 39.49m² occupied by tenants of G/F Shops G03-5 and G07.

234.  Again, this exercise of the Applicant is, I think, entirely arbitrary and unreliable.  Due to their different businesses and different shop sizes, the tenant of G/F Shop No.2 could well, one thinks, have paid different amount of rentals than tenants of G/F Shops G03-5 and G07 did for this long period of 9 years.  The Applicant has not produced a single document to prove the real rentals paid by tenants of G/F Shops G03-5 and G07 to R2.

235.  Save for the 2008 Offer, the Applicant produced no other tenancy document regarding G/F Shop No.2. For head (4), he “arbitrarily”, I think, applied the said mean monthly rental of $333,600 he obtained from the 2008 Offer to the 12 subsequent years from 2009 to 2020 by using the percentage of 21.5% to represent the total area of 184.6m² of Former G/F Corridors occupied by G/F Shop No.2 as compared with total size of 858.56m² for the said shop.

236.  One seriously wonders whether the mean unit rate obtained by the Applicant from the 2008 Offer remained applicable to G/F Shop No.2 during the 12 subsequent years from 2009 to 2020.  The business of its tenant could well fluctuate, as did the economy of Hong Kong.

237.  After expiry of the 5-year term in the 2008 Offer, renewal could well be made on different terms.  On land search record of “G/F Commercial Accommodation” before me, a tenancy agreement of G/F Shop No.2 to The Dairy Farm Co. Ltd. for 6 years from 1 May 2016 to 30 April 2022 was registered on 4 August 2017[89]. The rental thereof cannot be seen from the encumbrance entry.

238.  For the above reasons, the quantum of Applicant’s head (4) is also, I think, doubtful.

239.  Again, for head (5), the Applicant, I think, “arbitrarily” applied unit rate of $388.56 he obtained from G/F Shop No.2 using the 2008 Offer to the following 12 years to arrive at mesne profit of total area of 39.49m² occupied by tenants of G/F Shops G03-5 and G07.

240.  For similar reasons given for other heads above, the quantum of Applicant’s head (5) cannot, I think, be reliable either.

(ii)   Damages for misrepresentation for depriving access to “Commercial Common Areas”

241.  Moving to Applicant’s misrepresentation claim against R1 for deprivation of access to “Commercial Common Areas”, he calculated, and put forward, his total claim of $30,598 by asking for $3.8 per day for 22 years (366 days per year)[90].

242.  Looking at the above calculations, one cannot but conclude that there is another arbitrary claim put forward by the Applicant without any reasonable basis.

(M5)   Conclusion on Issue 6

243.  Hence, were I wrong on Issue 1, I would have held that:

(1)  the Applicant’s claims against R1 in mesne profit and account of profit for the Encroachment and in misrepresentation for deprivation of access to “Commercial Common Areas” are all bad at law; and

(2)  the Applicant had failed to adduce sufficient and reliable evidence to discharge his burden of proof to prove the quantum of his claims for the Encroachment and for misrepresentation for deprivation of access to “Commercial Common Areas”.

N.   Disposition

244.  As I accept Rs’ Contentions on Issue 1 at [195] above, I dismiss Applicant’s entire application as against both the 1^st and 2^nd Respondents.  Solicitors for the 2^nd Respondent do draft, file and serve all orders in this Judgment.

245.  Were I wrong to have decided Issue 1 as I did above (i.e. were A’s Contentions the right answer to Issue 1), I would have:

(1)  granted the Applicant as against the 1^st and 2^nd Respondents a declaration that the Subject Areas are “Commercial Common Areas” under the DMC; and

(2)  dismissed the rest of Applicant’s claims against the 1^st Respondent for reasons at [199], [214] and [243] above.

O.   Costs Order Nisi

246.  Costs of this application are at the discretion of the Land Tribunal[91]. The ordinary rule after trial is that costs follow the event (i.e. the losing party is liable to compensate the winning party the costs incurred by the latter), except where it appears in the circumstances that some other order ought to be made[92]. This Tribunal in exercising its discretion as to costs shall take into account, among others, conducts of the parties before the proceedings[93].

247.  Prima facie, the Applicant being the losing party, he ought to pay the winning parties i.e. R1 and R2 the costs of this application.

248.  Nevertheless, I think I can, and should, take into account the following conducts of R1 and/or R2 in making the appropriate costs order of this application.

(1)  Had R2 caused the DMC (and CA Assignment) to have been drafted in a better way to convey parties’ intention clearly, this application may likely, I think, not be taken out by the Applicant.

(2)  Had R2, and had R1 caused R2 to have, prepared “Common Areas” plans and deposited them at R1’s office at the Estate pursuant to the DMC, this application may also likely, I think, not be taken out by the Applicant.

(3)  Had R1 supplied “Common Areas” plans prepared pursuant to the DMC, and/or had R2[94] supplied material evidence of Chau, to C&K for their giving of their opinion to OC on “Commercial Common Areas”, if any, at the Estate, C&K may likely have given different opinion than that in C&K Opinion (or could likely have changed C&K Opinion after giving the same) and this application may likely, I think, also not be taken out by the Applicant.

249.  At all material times, the Applicant was, I think, genuinely misled by the DMC and CA Assignment (and supported by, he thought, C&K Opinion) about existence of “Commercial Common Areas” (and so was C&K).  His commencement of this application against R1 cannot reasonably, I think, be faulted, especially in view of what CA said at [23] of CA Judgment.

250.  However, the Applicant ought, I think, to have aborted this application after he was supplied by R2 in these proceedings with the material evidence of Chau[95].

251.  For the reasons in this section, I make orders nisi as to costs of this application as follows:

(1)  save as otherwise ordered by any previous costs orders, the Applicant do pay the 1^st Respondent the costs of this application as from, and inclusive of, 15 November 2021 (including all reserved costs and the costs of this trial with certificate of one counsel) at District Court scale to be taxed if not agreed; and

(2)  save as otherwise ordered by any previous costs orders, the Applicant do pay the 2^nd Respondent the costs of this application as from, and inclusive of, 15 November 2021 (including all reserved costs and the costs of this trial with certificate of one counsel) at District Court scale to be taxed if not agreed.

252.  The above cost orders nisi shall become absolute if no party applies to vary them within 14 days of this Judgment.

P.   Interpretation of this Judgment

253.  Should the Applicant require interpretation of this judgment by court interpreter, he should approach my clerk to arrange appointment for the same and he should attend such appointment bringing with him Chinese translation of the DMC and CA Assignment.

254.  Finally, I thank all parties for their industry and submissions