COGI ENTERPRISES LTD v. THE INCORPORATED OWNERS OF MALAHON APARTMENTS

HCA816/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.816 OF 2004

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J U D G M E N T

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The plaintiff’s connections

1. Mr Chang Ping Kay (“Mr Chang”) was the general manager of one Tai Hing Hong (泰興行) which was the sole and exclusive agent for one Malahon Investment Company Limited which in turn was the developer of the Malahon Apartments (“the Property”) at Jaffe Road.

2. The Property was completed in 1967.  The first assignment was made in respect of Flat A, 11^th Floor thereof on 12 September 1967 and the Deed of Mutual Covenant (“the DMC”) of the Property was dated the same date.

3. On 6 April 1971, Shop No. 1 on the ground floor and the entire 1^st floor including four pipeducts on the 1^st floor of the Property was assigned by the developer to Ng Cheung and Wong Sheung Kam.  As the general manager of the sole and exclusive agent for the developer, Mr Chang could be assumed that he was quite familiar with the Property.  In particular, he should have been to the ground floor, the basement and the 1^st floor and knew how the sewage pipes of the Property were there and then constructed or laid out.

4. By 16 March 1972 Mr Chang became a minority shareholder of one Chin Kam Development Company Limited (“Chin Kam”) with about 8% shareholding and he was also a director of the company.

5. Shortly afterwards on 24 April 1972 the entire ground floor except Shop No. 1 and Shop No. 6 of the Property was assigned by the developer to Chin Kam.

6. On 15 December 1972, Shop No. 6 on the ground floor and the entire basement (including the relevant four pipeducts at the basement) was assigned by the developer to one Malayan Enterprises Company Limited.

7. In 1978, Mr Chang was the chairman of the Management Committee of the Property.

8. Some years later, on 11 February 1988, Shop No. 2A on the ground floor of the Property was assigned by Chin Kam to Cogi Enterprises Limited (“Cogi”).  Cogi is the plaintiff of the present action.  Mr Chang is also a director of Cogi.

9. By 26 July 1988, Mr Chang was holding 10% shareholding of Chin Kam and was a director of the company.

10. On 29 May 2003, there was a Deed of Rectification between Chin Kam and Cogi as to assignment of certain relevant toilets on the ground floor of the Property.

11. On 25 March 2004, the incorporated owners of the Property commenced Land Tribunal Action No. LDBM81/2004 against Cogi seeking, amongst other things, order for reinstatement of the relevant pipeducts and a declaration in respect of the door opening to the relevant toilets on the ground floor of the Property.

12. On 7 April 2004, Cogi commenced the present action against the incorporated owners seeking, inter alia, orders for :

(1)	Reinstatement of the relevant pipeworks on the ground floor of the Property;
(2)	Injunctive relief as to the relevant passage to the switch room on the ground floor of the Property;
(3)	Declaratory relief as the door opening to the relevant toilets on the ground floor of the Property; and
(4)	Relief as to allege defamatory remarks made by the incorporated owners against Cogi as to the relevant pipeducts on the ground floor of the Property.

13. In short there are four areas of dispute between the parties.  They are all related to the ground floor of the Property in respect of :

(1)	pipeworks,
(2)	passage,
(3)	door opening, and
(4)	defamatory remarks in respect of the pipeducts.

(1) Pipeworks

14. The plaintiff alleged that the defendant has been in breach of its duties imposed by section 18(1) of Cap. 344 by failing or refusing to enforce the obligations under the DMC by removing the same.  This is because of their obligation under section 2 of the Buildings Ordinance, which provided that building works has to be approved by the Building Authority.  Alteration to drainage works is a kind of building works which required the approval of the Building Authority these pipeworks comprise sewage pipes.  The plaintiff contended that the initial installation must have constituted building works as well as their alteration by displacement to another location.

15. The pipeworks pass through Shop 2A on the ground floor without the plaintiff’s consent or the approval of the Building Authority which was prohibited by section 14 of the Building Ordinance.

(2) Passage to the switch room

16. The plaintiff alleged that under the 1988 assignment the plaintiff became the owner of the passage to the switch room and the defendant was previously given a bare licence to use the passage to gain access to the switch room.  By the letter of 14 August 2003 the plaintiff has revoked that licence by giving reasonable notice.

(3) Door opening

17. Plaintiff contended that it was and still is the owner of the toilet on the ground floor.  In or about 1967 the developer caused the door opening to be made facing the lobby on the ground floor of the Property leading to the toilet.  However, the plaintiff also submitted that the making of a door opening did not constitute building works under section 2(2) of Cap. 123 and therefore no approval was necessary for such an opening.

18. Even if section 2(2) does and did apply, section 14(1) did not apply as the works were exempted under section 41(3), which provides that :

“	Building works other than drainage works, … not involving the structure of any building may be carried out in any building without application to or approval from the Building Authority: …”

19. The plaintiff is praying for a declaration to that effect.

(4) Defamatory remarks about the pipeducts

20. The plaintiff contended that by the assignment dated 24 April 1972 Chin Kam became the owner of Shop 2A and the toilet on the ground floor.  It was the common intention between the parties that Chin Kam would thereby became the owner of the pipeducts as contended by Mr Tan Pek Lee alias Chen Shun Lee, a former director of the developer, and the one who has executed for and on behalf of the developer in the relevant assignments for the sale of the pipeducts both on the 1^st floor and the basement of the Property.

21. It was only by a common mistake between the parties that the pipeducts shown in the plan annexed to the 1972 assignment were mistakenly not coloured to show they had been so assigned.

22. This common mistake was rectified by the respective parties by the registration of a Deed of Rectification dated 3 May 2004 and registered on 7 May 2004.  Further another Deed of Rectification dated the same date and registered on the same date, the pipeducts were assigned by Chin Kam to the plaintiff.  Accordingly the plaintiff alleged that the defendant had libellously issued a letter to Wellcome Company Limited dated 6 September 2003 and the same contained defamatory Chinese words relating to the pipeducts (light wells).  They were defamatory of the plaintiff as they were understood to mean :

(1)	the plaintiff deliberately or recklessly neglected the provisions of the DMC; and
(2)	the plaintiff as landlord rented to Wellcome Company Limited premises containing unauthorised structures and/or illegal structures and/or unlawful occupation of a common part of the building.

23. Thereafter on 15 May 2004, the Lands Tribunal transferred the aforesaid Lands Tribunal Action to the Court of First Instance of the High Court and became HCA1309/2004.  On 14 October 2004 an order was made for the joinder of the present action and HCA1309/2004 to be heard together in the CFI.  The plaintiff now applies for summary judgment of all its claims.

SHOULD THE PLAINTIFF OBTAIN SUMMARY JUDGMENT OF ITS CLAIMS?

(1) The pipeworks

24. The main disputes between the plaintiff and the defendant concerned with four large pipeducts running along the ceiling of the ground floor, which is now let out to Wellcome Supermarket.  The plaintiff’s present application is for summary judgment against the defendant on the ground that the pipeducts were common parts used by all the owners of the upper floor and they trespassed into the property of the plaintiff.

25. As previously outlined in the background to this action, the approved revised drainage layout plan for the ground floor of the Property dated 22 November 1974 does not show the existence of the pipeworks in dispute.  No one from the defendant side knows when and how these gigantic pipeworks were installed.  The secretary of the management committee of the defendant, one Mr Tang Ping only became the secretary on 13 June 2003.  All office bearers, being honorary office bearers for the incorporated owners, became owners of various units of the upper floors after all these drainage pipeworks have already been installed.

26. It will be fair to say that up till now the most likely person who would know when and how this sewage pipes became installed on the ground floor would be Mr Chang himself.  But he did not reveal his knowledge.  Instead he put forward the case that Cogi being the owner of the ground floor premises has every right to demand the incorporated owners to remove the same since they were unauthorised building works installed not according to the aforesaid approved revised drainage layout plan in 1974.

27. If the relevant pipeworks in dispute are unauthorised building works as confirmed by the Building Authority by their letter dated 19 October 2004, it is only a matter between the Building Authority and the Incorporated Owners as to the follow-up of the action.  Whether the plaintiff could, by summary judgment, compel the defendant to remove the same is another matter.  The pipeworks were done presumably in the 1970s and they would have very low priority in the enforcement of removal by the Building Authority.

28. In a summary judgment application, the court will not give summary judgment unless it is satisfied that there is no issue to be tried.  It is reasonable in my view to assume and infer that these gigantic pipeducts could not be installed without the knowledge, acquiescence, and/or consent of the then owner of the ground floor.  The defendant has a good arguable case that they should be entitled to make further investigation.

29. The rest of the case only concerned with three other minor issues.

(2) The passage

30. On 14 August 2003, the plaintiff informed the defendant that the bare license granted to them for use of the relevant passage to the switch room on the ground floor of the Property is revoked.  However, it is agreed between the parties that the defendant is entitled to access to the switch room and the court was told that the parties could, by agreement, decide a method of access to the switch room at any time of the day.  This will have to be resolved and the plaintiff is not entitled to summary judgment.

(3) Declaration in respect of the door opening

31. On 11 February 2004, the Building Authority issued Building Order No.C/TB/008561/03/HK as to certain toilets on the ground floor of the Property.  However on 4 June 2004, the Building Authority by a letter to Cogi confirmed the withdrawal of this Building Order as to the door opening to the relevant toilets on the ground floor.  Is the plaintiff entitled to a declaration as sought?  It would depend on the consideration as to whether the door opening was a structural alternation.  This point is arguable.

(4) The defamatory remarks

32. There was also an allegation from the plaintiff that the defendant, by their letter dated 6 September 2003, had written to Wellcome Company Limited and contained certain alleged defamatory words against Cogi.  The rectification only came afterwards in May 2004.  This is admittedly a very minor issue.

Conclusion

33. In a summary judgment application, it is also provided by the rules that there may be certain reasons why there should be a trial of the action.  This exception is quite limited.  However, to my mind, this is a case where the court should exercise its discretion to allow the defendant to make further investigations than to compel them to remove the relevant pipeworks right away.  The defendant has an arguable case on knowledge, consents and estoppel.  For those reasons, I consider that the defendant is entitled to an unconditional leave to defend.  In respect of costs, I propose that the order should be the defendant’s costs in the cause and an order nisi to that effect is hereby made.