TAI FAT DEVELOPMENT (HOLDING) CO. LTD v. THE INCORPORATED OWNERS OF GOLD KING INDUSTRIAL BUILDING

HCA 104/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 104 OF 2006

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J U D G M E N T

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1.  In the Main Action, the plaintiff, Tai Fat Development (Holding) Co. Ltd. (“Tai Fat”) claims against the defendant, the Incorporated Owners of Gold King Industrial Building (“the IO”) for :-

Arrears of rent in the amount of $275,000;

Delivery of vacant possession of :

(i) Parking spaces nos. 1, 2, 4, 5, 11, 12, 13, 14, 20, 37, 38 and 39 (“the 12 Parking Spaces”) of Gold King Industrial Building (“the Building”); and

(ii) A store room between parking spaces nos. 32 and 33 on the 3^rd floor of the Building (“the Store Room”);

(c) Mesne profit and/or damages.

2.  By way of counterclaim, the IO counterclaims against Tai Fat (being the 1^st defendant by Counterclaim) as well as the 2^nd to 4^th defendants by Counterclaim (collectively referred to as “the First Owner”) for :-

(a) A declaration that the 12 Parking Spaces and parking space No. 36 also of the Building (collectively referred to as “the 13 Parking Spaces”) are common areas;

(b) A declaration that all tenancies previously entered into between the First Owner and the IO be void ab initio;

(c) Return of all the rent previously paid to the First Owner by the IO under the said tenancies in the aggregate sum of $10,437,800; and

(d) An account of all rent and profit in respect of the 13 Parking Spaces.

Background

3.  As a result of a joint development agreement between the First Owner, being the owners of the land on which the Building stands, and Great Eagle Company Ltd. as developer dated 16 July 1979, the Building was erected on Lot 702A of DD 445 and KCTL Lot No. 111RP in Tsuen Wan. The Occupation Permit of the Building was issued on 1 April 1987.

4.  The rights and obligations of the co-owners of the Building was regulated by a Deed of Mutual Covenant (“the DMC”) dated 16 April 1987 executed between the First Owner, the First Purchaser and Selex Properties Management Company Limited (“Selex”) being the management company appointed to manage the Building prior to the incorporation of the IO.

5.  In October 1992, Selex acting on behalf of all the owners of the Building entered into a tenancy agreement with the First Owner and Tai Fat to rent the 13 Parking Spaces from the First Owner and Tai Fat as landlord for one year. Such tenancy to rent the 13 Parking Spaces were renewed yearly until 30 September 1996.

6.  From 1 October 1996 to 30 September 1997 there was a further tenancy agreement between the First Owner and Tai Fat as landlord made with Selex on behalf of all the owners of the Building to rent the 12 Parking Spaces (ie without parking space no. 36) and also the Store Room for one year.

7.  For the period 1 October 1997 to 30 September 1998 there was yet a further tenancy agreement between the same parties to rent the 13 Parking Spaces and also parking space no. 35 as well as the Store Room.

8.  The IO was incorporated in 1998.  After it came into existence, the IO entered into a tenancy agreement with Tai Fat to rent the 13 Parking Spaces and also parking space no. 35 as well as the Store Room from 1 October 1998 to 30 September 2000. Thereafter, such tenancy had been renewed each time it expired until 30 November 2004.

9.  By letter dated 6 September 2004, the solicitors for the IO wrote to Tai Fat in which the issue of the 13 Parking Spaces being ‘common areas’ was raised. However, upon the agreement of Tai Fat to reduce the monthly rental from the existing $100,000 per month to $55,000 per month, the IO agreed to renew the tenancy with Tai Fat and a tenancy was entered into between the IO and Tai Fat for the 12 Parking Spaces and the Store Room for a term of 2 years commencing 1 December 2004 until 30 November 2006 (“the 2004 Tenancy”).

10.  Pursuant to the 2004 Tenancy, rent was paid by the IO to Tai Fat up to 31 August 2005.

11.  The present dispute between the parties came about when the IO through its solicitors, Messrs. Lau, Kwong & Hung, asserted in their letter to Tai Fat dated 16 September 2005 that:

“1. The Subject Parking Spaces are part of the Common Areas of Gold King Industrial Building;

2. Each of the leasing agreements referred to in this letter is null and void to the extent of the purported leasing of the Subject Parking Spaces thereunder;

3. You will account to the Incorporated Owners for the rent received under the said leasing agreement in respect of the Subject Parking Spaces; and

4. You will repay the said rent with interests to the Incorporated Owners upon demand.”

12.  In reply thereto, Tai Fat, through its solicitors, replied to the IO by letter dated 14 December 2005 stating:

1. The IO’s breach of the express condition of the 2004 Tenancy and the election of Tai Fat to treat itself discharged from further performance of the 2004 Tenancy;

2. Tai Fat’s acceptance of the repudiation of the 2004 Tenancy;

13.  The Writ herein was issued by Tai Fat on 16 January 2006.

14.  The IO filed a defence to the claim by Tai Fat and also issued a counterclaim against Tai Fat as well as bringing in the First Owner into the counterclaim.

15.  The counterclaim by the IO is for a declaration that the 13 Parking Spaces are common areas in the Building and not separately or individually owned by the First Owner. The IO also counterclaims for the return of all rental previously paid to Tai Fat for the rental of the 12 Parking Spaces and other related reliefs.

16.  It should be noted that while Tai Fat’s claim relate to the 12 Parking Spaces, the counterclaim by the IO relate to the 13 Parking Spaces. In fact the 12 Parking Spaces are all included in the 13 Parking Spaces, the outstanding one being parking space no. 36. The reason for the difference in number is due to the fact that the subject matter of the 2004 Tenancy comprised the 12 Parking Spaces and the Store Room (parking space no. 36 not having been rented under the 2004 Tenancy) and the claim by Tai Fat is based on the 2004 Tenancy (or its repudiation by the IO) whereas, the IO’s counterclaim for declaration as to common area is based on the 13 Parking Spaces listed in the First Schedule of the DMC under the heading ‘Loading and Unloading Areas’ which includes parking space no. 36. In so far as the dispute between the parties on the issue of whether or not the disputed parking spaces are common area is concerned, nothing turns on the difference in numbers (whether the 12 Parking Spaces or the 13 Parking Spaces).

Procedural History and outstanding issues

17.  Tai Fat applied by summons dated 26 June 2006 for summary judgment.

18.  That application for summary judgment was dismissed by the master.

19.  On appeal by Tai Fat from the master’s dismissal, Deputy Judge L Chan (as he then was) gave judgment to the plaintiff as claimed.

20.  This led to a further appeal by the IO to the Court of Appeal.

21.  The Court of Appeal allowed the appeal of the IO but entered judgment in favour of Tai Fat for possession of the Store Room on the basis that there was no defence to that claim in respect of the Store Room and also gave judgment to Tai Fat in respect of Tai Fat’s claim for rent, but only up to and inclusive of December 2005 in the sum of $220,000 on the basis that Tai Fat accepted the IO’s repudiation of the 2004 Tenancy by the letter of 14 December 2005.

22.  As a result of the judgment by the Court of Appeal, the only outstanding matters in so far as the main claim of Tai Fat is concerned is the claim for possession of the 12 Parking Spaces and the claim for mesne profits relating thereto.

23.  As for the counterclaim by the IO the entirety of that counterclaim is still in issue.

24.  These are therefore the matters which this judgment has to deal with.

Tai Fat’s claim for possession of the 12 Parking Spaces

25.  There is no dispute that at the outset, when the Building was first erected, that the First Owner were the registered owners of the land on which the Building now stands.

26.  Tai Fat brings this claim as the landlord under the 2004 Tenancy. It is Tai Fat’s claim that the 2004 Tenancy had been repudiated by the IO which repudiation was accepted by Tai Fat as landlord and therefore Tai Fat was entitled to bring this action against the IO to recover possession of the 12 Parking Spaces under the 2004 Tenancy which had been thus terminated by the IO’s repudiation.

27.  Accordingly, in so far as the disputed ownership of the 12 Parking Spaces are concerned, it is Tai Fat’s case that at all times, the First Owner were the owners of the 12 Parking Spaces having exclusive right to possession of them and that the 12 Parking Spaces were never ‘common area’ nor ‘for common use’ of all the co-owners of the Building.

28.  In this respect, Tai Fat relies on the reservation contained in the Third Schedule to an Assignment dated 16 April 1987 (“the First Assignment”) entered into between the First Owner (as vendors) and Wong Mei Kuen (“the First Purchaser”) as the purchaser of one of the units in the Building. That Third Schedule reads as follows:

“EXCEPTING AND RESERVING unto the Vendors and each of them and their respective successors and assigns other than the Purchaser:-

1. The exclusive right to hold use occupy and enjoy each and every part of the Land and the Building other than the Property save and except such areas (if any) as may be designated as common areas in the Deed of Mutual Covenant relating to the Land and the Building or are intended for common use including (but without prejudice to the generality of the foregoing) :-

(a) the external walls, main roof and flat roofs of the Building (unless otherwise specifically included in the Property);

(b) all areas within the Land not covered by any building and all open areas under any building which are not included in the specific reservations contained in the following sub-clauses of this Clause;

(c) all those areas as shown coloured green on the plan annexed to the said Deed of Mutual Covenant;

(d) all the/other units in the Building; and

(e) all the/other parking spaces in the Building;”

29.  It should at once be noted that when this matter came before Deputy Judge L Chan on appeal from the decision of the Master in the summary judgment application, the judge had, in paragraph 14 of his judgment, referred to the apparent ambiguity arising in the above clause as it stood because the word ‘including’ in clause 1 can refer either to what has been reserved or to the exception thereto. The judge then dealt with that anomaly by saying that “If the words from ‘save and except’ to ‘common use’ are kept in parenthesis, there would be no ambiguity.” For the reasons given by the deputy judge, that must be the right way of looking at this clause and I agree with those reasons of his. Indeed, none of the parties have sought to argue otherwise. Therefore this judgment would proceed on the basis that those parenthesis referred to by the deputy judge do exist so as to remove any ambiguity there may be created by their absence.

30.  ‘Parking spaces’ was not defined in the First Assignment and it is the contention of Tai Fat that given its natural meaning, all the 39 parking spaces in the Building would thereby have been reserved by the First Owner to themselves upon the sale of the first unit in the Building to the First Purchaser.

31.  Evidence was also adduced by Tai Fat from its director, Chan Yee Shun, that prior to the Building having been completed and therefore before the Occupation Permit was issued, the First Owner had already set up a sales office in Tsuen Wan to sell off the various units together with the parking spaces in the Building. All 39 parking spaces in the Building had been put up for sale by the First Owner including the 12 Parking Spaces, the subject matter of Tai Fat’s present claim. In this respect, the sales brochure relating to the sale of the units in the  Building was produced to show that all 39 parking spaces in the Building were put up for sale by the First Owner.

32.  Tai Fat also sought to rely on the subsequent conduct of the First Owner in dealing with the 13 Parking Spaces as follows:

(a) paying to Great Eagle (as developer under the joint agreement to develop) 52% of the total proceeds generated from the total saleable area of the Building including the 13 Parking Spaces;

(b) instructing Selex as manager to reply to the District Land Office about converting parking space no. 20 (being one of the 13 Parking Spaces) for use as an office, as well as paying the rates of that parking space;

(c) entering into various tenancy agreements with Selex/the IO for renting out the 13 Parking Spaces;

(d) mortgaging the 13 Parking Spaces.

33.  It was further contended by counsel for Tai Fat that there is no conveyancing document which could show that the First Owner have in any way divested their 62 undivided shares of the 13 Parking Spaces with the exclusive right to possess same to the IO or to the other co-owners and that there is certainly nothing to that effect in the DMC.

34.  It was argued by Tai Fat that from the wording of the Third Schedule in the First Assignment it could be inferred that “all the parking spaces in the Building” and “the common areas” are mutually exclusive and on that basis, there can be no doubt that the only conclusion that can be reached is that all 39 of the car parking spaces in the Building had been reserved by the First Owner for themselves and therefore cannot be common area.

35.  It was further contended by Tai Fat that the 1st Schedule of the DMC, not being a substantive part of the DMC (being only a schedule) and not being that part of the DMC containing the definitions, but its purpose being only to set out the undivided shares in the Building, it would be wrong to infer or construe from the wording or the form of the 1st Schedule that the 13 Parking Spaces were intended to be common area or for common use by all the co-owners which is what is being suggested by the IO.

36.  The claim for mesne profit by Tai Fat would stand or fall with the main claim that the First Owner are the owners with the right to exclusive possession of the 12 Parking Spaces.

The IO’s case that the 13 Parking Spaces are common areas or intended for common use

37.  It is the case of the IO that on a proper construction of the DMC, the 13 Parking Spaces were intended by the parties to be the common area or to be for common use by all the co-owners of the Building.

38.  In this respect, the IO sought to rely on:

(a) Clause 12 and 13 of the Special conditions of grant relating to the Government Grant and the approved building plans (“the Approved Building Plans”) prepared in compliance with Special Condition 13 the Special conditions of grant;

(b) the DMC.

39.  Clause 12 and 13 of the Special conditions of grant states:

“12. Spaces shall be provided within the lot to the satisfaction of the District Commissioner, New Territories for the parking, loading and unloading of motor vehicles at the rate of not less than one vehicle for each 10,000 or part of 10,000 square feet of floor area but in any event not less than one vehicle for each 5,000 or part of 5,000 square feet of site area. The space so provided shall not be used for any other purposes.

13. A layout plan of the parking, loading and unloading spaces to be provided within the lot in accordance with Special Condition 12 shall be submitted to the District Commissioner, New Territories for approval, and after approval shall be registered by guarantee in the District Land Office. No transaction affecting the lot or any part thereof shall be entered into prior to such registration. The parking, loading and unloading spaces indicated on the said approved plan shall not be used for any purpose other than the purposes set out in the Special Condition 12.”

40.  The Approved Building Plans for the 1^st, 2^nd and 3^rd floors (where the parking, loading and unloading areas were located) of the Building were produced into evidence.

41.  From those plans it showed that certain areas on the 1^st to the 3^rd floors were designated to be for “loading and unloading”.

42.  Of the 39 parking spaces in the Building, 7 of them (being parking space nos. 4, 5, 11,12,13,14 and 39 all on the 3^rd floor) were expressly designated in the Approved Building Plans to be for ‘loading and unloading’ while most of the rest of the parking spaces were designated to be for ‘parking’.

43.  As for the DMC, the definition clause gave the following definitions:

“ ‘Common Area’ shall, subject as hereinafter provided, mean and include:

(a) the entrances, staircases, landings, lift lobbies, passages and other spaces of the Building which are intended for common use and not for the exclusive use, occupation and enjoyment by an Owner as hereinafter specified,

(b)loading and unloading areas, hoisting platforms, common roadways and driveways.

‘Management Shares’ shall mean the shares or units allocated to the Units and Parking Spaces as set out in the First Schedule hereto for the purpose of sharing and contributing towards the Management Expenses and Managers’ Remuneration by the Owners.

‘Parking spaces’ shall mean all of the spaces in the Building for the parking of lorries or private cars as the case may be as defined in the first Assignments of such Parking Spaces, and “Parking Space” shall mean each of those spaces intended for separate use and ownership

‘Share’ shall mean an equal, undivided 4,989^th share of and in the Land and the Building, and ‘his Share’ in relation to any Owner or ‘the Shares of an Owner’ means the Share or Shares held by that Owner together with the exclusive right and privilege to hold use occupy and enjoy his Unit or Parking Space.

‘Unit’ shall mean a part of the Building (each including where applicable the flat roof, roof or storeroom held therewith) intended for the exclusive use occupation and enjoyment by an Owner, and ‘his Unit’ in relation to an Owner means the Unit or Units in respect of which that Owner has the exclusive right and privilege to hold use occupy and enjoy and shall not include a Parking Space (unless the context otherwise requires).”

44.  The First Schedule of the DMC set out the number of shares of the lot and the building against the individual units, storerooms and parking spaces. After dealing with the allotment of various numbers of shares to different parts of the Building, the relevant part of the First Schedule went on to provide as follows:

“Floor	Unit	No. of shares	No. of Management shares
……
Parking Space No.3 on 2nd Floor		4	1
Parking Spaces Nos. 7,8,9,10,15, 16,17,18 and 21 on 3rd Floor		45 (9x5 shares each)	18 (9x2 shares each)
Parking Spaces Nos. 6,9,22,23,24,25,26,27,28,29,30,31,32,33,34 and 35 on 3rd Floor		64 (16x4shares each)	16 (16x1 shareeach)
Loading and Unloading Areas:
Parking Spaces Nos. 1 and 2on 1st Floor		10 (2x5 shares each)	--
Parking Spaces Nos. 4,5,11,12, 13,14,20 and 39 on 3rd Floor		40 (8x5 shares each)	--
Parking Spaces Nos. 36, 37and 38 on 3rd Floor		12 (3x4 shares each)	--
Common Areas		1	--
External Walls		1	-- ”

45.  It was therefore the primary case of the IO that given the fact that the 13 Parking Spaces were designated under “Loading and Unloading Areas” in the First Schedule of the DMC, and that the DMC defines “Common Areas” to include ‘loading and unloading areas’, it must necessarily follows that under the DMC, when properly construed, the 13 Parking Spaces were intended by the parties thereto to be common areas in the Building.

The remaining issues in the Counterclaim of the IO

46.  The remaining issues in the counterclaim of the IO is premised on the IO succeeding in its primary claim for a declaration that the 13 Parking Spaces are common areas. However, even if the IO succeeds on its primary claim for a declaration that the 13 Parking Spaces are common areas, there are other defences raised by Tai Fat and the First Owner which will have to be dealt with in this judgment.

47.  If the IO succeeds in its counterclaim for a declaration that the 13 Parking Spaces are common areas in the Building, then the IO also  claim for a declaration that all the previous tenancy agreements are void ab initio as well as for the return of all the rent previously paid by the IO to the First Owner in respect of the previous tenancy agreements and for an account of all rent and profit in respect of the 13 Parking Spaces.

48.  The IO’s counterclaim has its basis on mutual mistake. The IO says that there was mutual mistake on both parties in the honest but erroneous belief that the First Owner were in fact the owners entitled to the right to exclusive possession of the 12 Parking Spaces, being the subject matter of the 2004 Tenancy and also the subject matter of the previous tenancy agreements when in actual fact the 12 Parking Spaces were agreed to be common areas by the DMC.  But for such mistake, the IO would never have entered into any of the previous tenancy agreements with Tai Fat and/or the First Owner.

49.  It was also submitted by the IO that because of such mistake, it would follow that there was total failure of consideration for all the previous tenancy agreements since the 12 Parking Spaces were common area for use by all the co-owners of the Building.

50.  Accordingly, the court should find that all the previous tenancy agreements were void ab initio and should be set aside and all the rent previously paid be returned.

51.  By way of defence to the counterclaim, Tai Fat and the First Owner pleads a number of defences.

52.  Firstly, it was contended that there was no evidence as to the mental state of Selex when it entered into those tenancy agreements on behalf of all the owners of the Building prior to the incorporation of the IO therefore mistake cannot be proved in respect of the pre-1998 tenancy agreements.

53.  Secondly, it was contended that all the previous tenancy agreements were for rental of the 12 Parking Spaces (occasionally including parking space 35 and/or 36) as well as the Store Room for one lump sum. As such all the tenancy agreements were indivisible contracts    and since the Court of Appeal has already ruled that there is no defence for the rental of the Store Room, therefore it cannot be said that there was total failure of consideration.

54.  The Court of Appeal has also ruled the 2004 Tenancy to be an indivisible agreement, a matter to which the IO is bound and cannot be heard to say otherwise.

55.  Thirdly, it was submitted that there is indisputable evidence that the negotiations which led to the 2004 Tenancy being entered into clearly showed from the letter of the IO’s solicitors dated 6 September 2004 that they had already considered the point of the 12 Parking Spaces to be common areas of the Building but nevertheless entered into the 2004 Tenancy as a result of Tai Fat agreeing to reduce the rent from $100,000 per month to $55,000 per month. As such it is not possible for the IO to say that the 2004 Tenancy was entered into due to any mistake since the matter of the 12 Parking Spaces being common area had been raised and discarded by the IO when it entered into the 2004 Tenancy.

56.  Fourthly, it was submitted that it was not possible to restore the parties back to their status quo. The argument put forward by Mr Chong, counsel for Tai Fat and the First Owner was that the IO had enjoyed quiet enjoyment in respect of the 12 Parking Spaces as from October 1993 continuously to August 2005 but that restitution is not possible since the quiet enjoyment which the IO had enjoyed cannot be returned to Tai Fat and the First Owner.

57.  Fifthly, it was submitted that the 6 year limitation period would prevent the IO from making a claim for the return of rental paid prior to 6 March 2000 since the Counterclaim of the IO was filed herein on 7 March 2006.

58.  Sixthly, it was also submitted that the IO had no locus standii to make any claim in respect of matters prior to its incorporation in 1998.

59.  Lastly, it was pleaded in paragraphs 23 and 24 of the Amended Reply of Tai Fat that the counterclaim, which included the averment that the 2004 Tenancy were void ab initio, had been struck out by the Order of Deputy Judge L Chan in his Decision given on 26 July 2006 and which had not been re-instated by the Court of Appeal in its Judgment given on 17 September 2007.  As such the IO is bound by that order of Deputy Judge L Chan.

Decision

60.  I shall deal first with the main issue in dispute between the parties, namely, whether the First Owner were the owners of the 12 Parking Spaces having exclusive right to possession of them as contended for by Tai Fat or whether the 13 Parking Spaces (which include the 12 Parking Spaces) were common areas of the Building under the DMC as contended for by the IO.

61.  The resolution of this dispute is largely a question of construction of the DMC and possibly the effect that the First Assignment may have on it. It should be noted at once that the DMC and the First Assignment were dated the same date ie 16 April 1987 (but presumably with the First Assignment marginally ahead of the DMC in point of time) and both documents were prepared by the same firm of solicitors. The First Assignment would have to be executed by the First Purchaser such that the First Purchaser can acquire the status for her to execute the DMC as the First Purchaser.

62.  It was submitted by Mr Chong, counsel for Tai Fat, that in so far as reservation of ownership goes, one looks only to the conveyancing documents and not to the DMC, which is only there to regulate the rights and obligations as between co-owners.

63.  However, in the present case, what has to be determined is whether the parties to the DMC (being the First Owner, the First Purchaser and Selex as the manager) have agreed under the DMC that the 13 Parking Spaces are to be common areas or to be intended for common use by all the co-owners of the Building. Such intention of the parties are to be gauged primarily by the words and the language used in the DMC.

64.  As was said by Barma JA in Chow Sai Ping v Chan Yam King [2013] 2 HKLRD 280 at para. 9 of his judgment thereof:

“The designation of parts of the Building as common parts, to which all owners of units in the Building had right of access (and thus not in the exclusive possession of any owner), was effected by the DMC.”

65.  It is therefore clear that it is the DMC one looks to and construe in order to determine what parts of the Building are common areas or intended for common use.

66.  Admittedly, it is the case of Tai Fat that the First Owner have reserved unto themselves all the parking spaces under the First Assignment.

67.  Before going into the DMC, it must be noted that Special conditions 12 and 13 of the Government Grant stipulate that space shall be provided within the lot to the satisfaction of the District Commissioner, New Territories for the parking, loading and unloading of motor vehicles and specifying the minimum rate thereof and that the space so provided shall not be used for any other purpose.

68.  Those conditions so stipulated are not only understandable but also necessary in that the Building being an industrial building with 26 storeys with 10 units to each storey, it must follow that there would need to be provisions made to accommodate certain busy times of the day when numerous vehicles would be involved in loading and unloading and some would have to wait their turn in parking spaces reserved for that purpose.

69.  Therefore, although Special conditions 12 and 13 of the Government Grant make no stipulation or provision as to the ownership of such parking spaces which necessarily need to be reserved for such loading and unloading, it would be quite inconceivable that such parking spaces reserved for such loading and unloading purpose (and stipulated by those conditions  not to be used for any other purpose) can be owned or in the exclusive possession of any one particular owner or individual as that would necessarily defeat its intended purpose.

70.  The Approved Building Plans for the 1^st, 2^nd and 3^rd floors show that 7 out of the 13 Parking Spaces had been designated for loading and unloading purpose.

71.  From the evidence of Eric Wong, the architect who prepared and submitted the Approved Building Plans for approval, those plans showed the minimum requirements. That being so, there is nothing to prevent the parties agreeing in the DMC for more than the minimum parking spaces being reserved for loading and unloading purpose.

72.  In respect of the Approved Building Plans, one argument put forward by Mr Chong, counsel for Tai Fat, was that the Approved Building Plans were only registered in the Land Registry by Memorial No. 471317 on 28 October 1987, thus after the DMC came into existence. As such, it is not possible for the Approved Building plans to be part of the factual matrix since it would not have been available to the First Purchaser as being a party to the DMC. I am not, however, attracted by this argument. It was expressly stated on the Approved Building Plans that the latest date of approval was 18 March 1987 which is just two weeks before the issuing of the Occupation Permit for the Building. Once approved, the Approved Building Plans and its contents must be treated to be within the knowledge of the First Owner as they were instrumented in putting up the Building. In that sense, it precedes the DMC.

73.  Coming now to the First Assignment, this is the document relied on by Tai Fat and the First Owner in so far as they claim that ‘all the parking spaces’ in the Building, namely all 39 of the parking spaces, have been reserved by the First Owner for themselves with the exclusive right to possession upon the sale of the first unit in the Building to the First Purchaser.

74.  If that was the intention of the First Owner and the intention of that reservation clause in the First Assignment, then it would appear to go against the grain, at least in spirit if not in letter, of the provisions of Special conditions 12 and 13 of the Government Grant.

75.  But even if the First Owner did so intend to reserve all the 39 parking spaces for their own exclusive possession as they had claimed and furthermore, such intention had been achieved by the reservation clause in the First Assignment as between them and the First Purchaser, there is nothing to prevent the First Owner thereafter coming to an agreement with the First Purchaser in the DMC to have the 13 Parking Spaces to be common areas of the Building or for the common use by all the co-owners. Ultimately therefore, it is the DMC that has to be looked at to see if there was any such agreement therein between the First Owner and the First Purchaser for the 13 Parking Spaces to be the common areas of the Building or for common use by all the co-owners.

76.  Turning now to the DMC it must be noted at once, that although there is no specific or express statement in the DMC that the 13 Parking Spaces are to be common areas or for common use, the definition of “Common Areas” in the DMC includes ‘loading and unloading areas’.

77.  The main argument of the IO is that given that definition of “Common Areas” to include ‘loading and unloading areas’, in the First Schedule of the DMC, the fact that the 13 Parking Spaces are categorized under ‘Loading and Unloading Areas’ must mean that the 13 Parking Spaces come within the definition of “Common Areas”.

78.  A second argument of the IO is that there are no management shares allotted to the 13 Parking Spaces, just as there are no management shares allotted to the other common areas of the Building, the reason being that such common areas would not attract any management fees. This, in my view, is a very valid argument for if each of the 13 Parking Spaces are to be individually and separately owned by some individual, one would have thought that management shares for same ought to have been provided so that each of the owner of the 13 Parking Spaces would have to pay management fees pro-rata thereto. Indeed, for all the other parking spaces not listed under the heading of ‘Loading and Unloading Areas’ in the First Schedule of the DMC, they were all allocated management shares.

79.  Thirdly, “Parking Space” in the DMC is defined as ‘each of those spaces intended for separate use and ownership’. That definition suggests therefore that there are other parking spaces NOT intended for separate use and ownership but for common use. This is therefore in line with the categorization of the 13 Parking Spaces in the First Schedule of the DMC under the heading ‘Loading and Unloading Areas’ and thus intended to be for common use or to be common area.

80.  To my mind, the combined effect of the above three arguments of the IO makes a powerful and strong case and which clearly shows that under the DMC, the 13 Parking Spaces were intended to be used for loading and unloading and thus part of the loading and unloading areas of the Building. As such they fall within the common areas or are intended for common use by all the co-owners.

81.  This way of looking at the DMC answers the point made by Mr Chong that one should not construe the DMC by looking at what is contained in the First Schedule of the DMC since the purpose of the First Schedule was only to allocate the undivided shares of the Building and the land and also to allocate the management shares. The answer to this point made by Mr Chong is that one looks to the entirety of the DMC in construing it. It is not just what is contained in the First Schedule of the DMC but that coupled also with the definition of “Common Areas” which included loading and unloading areas that led to this construction.

82.  It was also argued by counsel for Tai Fat that if the 13 Parking Spaces were intended to be common area of the Building, it would not have been necessary to make provision of 62 undivided shares in respect of the 13 Parking Spaces. The provision of the 62 shares for the 13 Parking Spaces are to be contrasted with the provision of only 1 share for the ‘Common areas’. In its judgment, the Court of Appeal has already commented on this point by saying that the 62 shares so allocated to the 13 Parking Spaces could have been allocated to the common areas but this cannot override the fact that the 13 Parking Spaces came under the description or sub-heading of “Loading and Unloading Area”. Quite apart from what has been said by the Court of Appeal on this point, I would venture to suggest a further and possibly more valid reason for the difference in the allocation of 1 share because the common areas (such as entrances, staircases, landings, lift lobbies, passages) are such areas which are for common use and not profit generating whereas the 13 Parking Spaces being categorized under ‘Loading and Unloading areas’ are quite definitely profit generating since vehicles which need to use these parking spaces to await loading and unloading will have to pay the management for the use of same.

83.  It was also argued by Mr Chong that ‘Parking spaces’ and ‘Common Areas’ as used in the Third Schedule of the First Assignment are mutually exclusive. In fact, this appears to form the basis of much of Mr Chong’s submissions on the proper construction of the DMC. In so submitting, I believe Mr Chong was doing no more than pointing out that it is the words which are in parenthesis (as was suggested by Deputy Judge L Chan to remove any ambiguity) which contain the phrase ‘common areas’ being the saving part to what had been reserved, and that the phrase ‘all parking spaces’ as contained in clause 1 (e) to be one of the items which had been reserved by the First Owner to themselves. However, the reference to ‘common areas’ in clause 1 of the Third Schedule of the First Assignment is a reference to the phrase ‘as may be designated as common areas in the Deed of Mutual Covenant relating to the Land and the Building or are intended for common use’. This phrase therefore encompass (i) those areas designated as common areas in the DMC or (ii) those areas intended for common use. Once again one must go back to construction of the DMC. If therefore, the construction proffered by the IO is the correct construction, it may well be that ‘all the parking spaces’ referred to in clause 1 (e) thereof may have to be read with the qualifying words ‘intended for separate use and ownership’. Support for such a view is to be found in the definition of ‘Parking Space’ in the DMC, bearing in mind that both the First Assignment and the DMC were prepared by the same firm of solicitors.   

84.  I therefore reject the arguments put forward by Mr Chong in relation to the proper construction to be placed upon whether or not the 13 Parking Spaces were intended by the parties to be the common areas of the Building or for common use by all the co-owners thereof.

85.  For the reasons given above, I have no difficulty in coming to the conclusion that upon the wording of the DMC, it is clear that the intention of the parties must be that the 13 Parking Spaces were meant to be part of the loading and unloading areas of the Building and as such would be part of the common areas of it.

86.  This interpretation of the DMC is consistent with the fact that parking space nos.1 and 2 on the ground floor are the only two out of the 39 parking spaces which are large enough to accommodate container lorries. Both these parking spaces are included in the 13 Parking Spaces and it stands to reason that these two parking spaces are the only ones which can be used for the loading and unloading of container lorries. It is therefore inconceivable that they are not common areas for that purpose of loading and unloading albeit that in the Approved Building Plans, these two parking spaces have not been so designated.

87.  In arriving at this interpretation of the DMC, I have not overlooked the reliance of Tai Fat and the First Owner upon the sale brochure and the fact that all 39 parking spaces in the Building were put up for sale by the First Owner. However, that conduct on the part of the First Owner as well as the other conducts of the First Owner relied upon can in no way assist in the proper interpretation to be placed upon the DMC in that such conduct on the part of the First Owner is but unilateral conduct on its part but more importantly, at best it can only show honest but erroneous belief on the part of the First Owner in thinking that they had reserved for themselves the exclusive right to possession of all of the 39 parking spaces in the Building under the First Assignment. However, that cannot detract from the fact that under the DMC, not only was that not the case but in fact the 13 Parking Spaces had been agreed in the DMC upon its proper construction to be part of the common area or intended for common use by all the co-owners.

88.  There are two matters which I must mention in passing which are ancillary to my finding above.

89.  The first is that Mr Mak, counsel for the IO, has gone to extreme lengths in putting before this court a long and complex conveyancing history relating to the land on which the Building stands as well as the adjacent lot with the ultimate aim to showing the intention of the parties when it came to the construction to be put on the DMC in relation to the 13 Parking Spaces. In that respect, I have come to the conclusion that the conveyancing history of the land on which the Building stands and that of the adjacent lot is wholly irrelevant to the intention of the parties when it comes to the construction of the DMC as it is only by looking at the wording of the DMC that one determines the intention of the parties and have therefore refrained from repeating such conveyancing history in this judgment.

90.  The second matter is that Tai Fat in its pleadings has pleaded Tenancy by Estoppel as a defence to the IO’s claim that the 13 Parking Spaces are common areas. Not surprisingly, this point of Tenancy by Estoppel has not been pursued at this hearing as it had already been dealt with by the Court of Appeal when the matter went before that court on the summary judgment appeal. It suffice to say that I am in full agreement with the decision of the Court of Appeal that a tenant is not estopped from asserting that he himself has a better title than the landlord (as opposed to asserting that a third party has a better title) upon the authorities cited in the judgment of the Court of Appeal. It is therefore unnecessary for me to dwell into that area of the law in any great detail apart from what has been stated above.

91.  Having dealt with and determined the main issue in dispute above, I now turn to deal with the remaining issues in the counterclaim of the IO basically claiming for the return of all the rent previously paid in all the previous tenancy agreements.

92.  I start off with the 2004 Tenancy. There can be no doubt in my mind that the 2004 Tenancy was not tainted with any mistake, whether mutual or unilateral for the simple reason that prior to the 2004 Tenancy being entered into, the question of the 12 Parking Spaces being common areas of the Building had already been raised by the  solicitors for the IO in their letter dated 6 September 2004.  Despite that point having been raised, the IO nevertheless entered into the 2004 Tenancy with Tai Fat upon Tai Fat agreeing to reduce the rental from $100,000 per month to $55,000 per month. Therefore there can be no mistake on the part of the IO erroneously believing that Tai Fat or the First Owner had the right to exclusive possession of the 12 Parking Spaces when it entered into the 2004 Tenancy.

93.  Quite apart from the absence of mistake on the part of the IO in the 2004 Tenancy, in all the tenancy agreements entered into between the IO and Tai Fat as from 1998 (when the IO was incorporated) up to and including the 2004 Tenancy, the Store Room was included as a subject matter of each of those tenancy agreement. Moerover, in all these tenancy agreements, the agreed rental was a lump sum to cover the 12 Parking Spaces and the Store Room. As such they were in divisible contracts. Since there is no dispute that the First Owner did have the right to exclusive possession of the Store Room there can be no total failure of consideration for all these tenancy agreements, even if there may have been some mistake on the part of the IO which mistake can only relate to the 12 Parking Spaces, but not to the Store Room.

94.  In the circumstances, there can be no question of setting aside any of the tenancy agreements which had been entered into by the IO including the 2004 Tenancy for the reasons given above.

95.  As for the tenancy agreements entered into by Selex on behalf of all the co-owners of the Building before the IO was incorporated, quite apart from the question as to whether the IO has locus to make any claim for return of such rental, the impasse which cannot be overcome by the IO must be the limitation period of 6 years. Those tenancy agreements were all entered into prior to 1998 when the IO was incorporated and would be clearly out of time in so far as the limitation period goes.

96.  For the reasons given above, apart from the declaration sought by the IO that the 13 Parking Spaces are common areas of the Building under the DMC, the rest of the counterclaim must be dismissed.

Conclusion

97.  The main claim brought by Tai Fat is dismissed in its entirety.

98.  As for the counterclaim of the IO, there will be a declaration that the 13 Parking Spaces listed under the heading ‘Loading and Unloading Areas’ in the First Schedule to the DMC are part of the common areas of the Building.

99.  The rest of the reliefs claimed in the counterclaim of the IO are dismissed.

Costs

100.  There will be a costs order nisi as follows.

101.  Tai Fat do pay the costs of the IO in defending the claim by Tai Fat on party and party basis to be taxed if not agreed.

102.  In so far as the counterclaim of the IO is concerned, the IO has succeeded in obtaining a declaration that the 13 Parking Spaces are the common areas of the Building. That constituted the main dispute between the parties.  However, the IO did not succeed in its counterclaim for the return of all the previous rentals paid. That claim amounted to over $10 million and cannot be considered to be an insignificant part of the counterclaim.

103.  There will therefore be a costs order nisi that Tai Fat and the First Owner pay to the IO two thirds of the costs of the counterclaim of the IO on party and party basis to be taxed if not agreed.