LEUNG NAI HANG AND ANOTHER v. and THE INCORPORATED OWNERS OF SUCCESS INDUSTRIAL BUILDING (SHEUNG HEI STREET

HCA 1570/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1570 OF 2010

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J U D G M E N T

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Introduction

1.  The plaintiffs purchased a unit in an industrial building which did not have gas connected to it.  They operated a processing and cooking meat business at the unit pursuant to a food factory licence and wished to have gas connected to the unit for this purpose.  In the meantime, they had been using gas cylinders to cook the meat.  Plans for the installation of gas pipes on and over common areas of the building to the unit had been approved by a representative of the management company and accordingly the plaintiffs commissioned the relevant works for the installation to be done.  The management committee of the incorporated owners of the building refused permission for the installation of gas pipes after carrying out a survey amongst other owners who in the main objected to the installation.  

The issue

2.  The dispute between the parties centres on whether the plaintiffs are entitled to connect gas to the unit and to the passage and running of gas to the unit through gas pipes laid on or over common areas of the building.  This requires determining whether the gas installation to the unit is permitted and if it is, whether it is permitted as of right or with consent and approval of the defendant.

3.  It is common ground between the parties that a resolution of this dispute requires an examination and interpretation of the terms and conditions of the Deed of Mutual Agreement (DMC) of the building to determine whether the plaintiffs had a right to, and the defendant had a duty to facilitate the supply of gas to their unit.

4.  During the course of the trial, the plaintiffs amended their claim by abandoning their claims for misrepresentation and estoppel.  The claim therefore rested solely on the construction of the DMC as pleaded[1].

5.  I cannot but feel that the dispute between the parties stems more from an objection by other owners of units in the building to the use of the unit by the plaintiffs for processing and cooking meat than from a genuine objection to the installation of pipes for the supply of gas.  Whatever the reason for this dispute, it is now for the court to resolve the stated issues between the parties.

Background facts

6.  The plaintiffs are the registered owners of Unit C, third floor of Success Industrial Building, 17 Sheung Hei Street, San Po Kong, Kowloon (the Building).  The defendant is the Incorporated Owners of the Building and at the material time it engaged a professional management company, Hong Yip Services Co Ltd (Hong Yip) which took up appointment on 1 December 2009.

7.  The plaintiffs entered into a preliminary sale and purchase agreement for the purchase of the unit in September 2009.  The completion of the purchase occurred on 31 December 2009.  They purchased the unit with the intention of using it to operate their business of processing and cooking meat.  There was no gas supply to the Building or the unit and they arranged to connect gas to the unit from the Hong Kong and China Gas Co Ltd (Towngas).  They applied to the defendant for permission to install Towngas pipes through the common areas of the building to the unit.  As the Towngas piping for the supply of gas was required to run along the external walls and the light well, which were common areas of the Building, the plaintiffs in September 2009 submitted an application for approval to run the pipes as required to the then management company, Chevalier Property Management Ltd.  This application was lost due to a change of the management company.  A second application was submitted to Hong Yip on 3 December 2009 together with a proposed route for the piping from Towngas.

8.  Site inspections were carried out in order to ascertain and fix the route of the gas pipes for supplying Towngas to the unit.  The inspections took place on 7, 9 and 13 January 2010.  The Chief Maintenance Engineer of Hong Yip was Mr Cho Hin Sze (Mr Cho) and he attended all three site inspections.  On 13 January 2010, he sent an email to Mr Cheung Chi Ho (Mr Cheung) of Towngas.  The subject of the email was “Approved Gas Pipe Route”.  The message that followed stated: “Attached please find the approved gas pipe route for Room 3C of Success Ind. Building[2]”.

9.  Mr Cho acknowledged that he had approved the route as set out in the attached plans. He was the Chief Maintenance Engineer of Hong Yip and it was in that capacity he approved and submitted the route for the gas pipes.  He testified, however, that the installation still had to have the approval of the Incorporated Owners.  He said that whilst he had approved the route, he had not received approval as to the route from Towngas.  There had been prior communications with Towngas’ representative, and after amendment to the initial plans, Mr Cho submitted them as the approved plans.  I have no doubt that Mr Cho submitted the plans for the route which he understood to be the final approved plans with Towngas.  I do not accept it was an initial draft as suggested by Mr Cho.  Mr Cheung, on receipt of this email, stated that instructions could be given to the contractor to carry out installation work[3].

10.  The plaintiffs treated the email as approval from the defendant and proceeded with the works for the gas supply.  On 15 January 2010, the plaintiffs paid a deposit of $5,000 to the defendant for commencement of building works at the unit.  With the belief that the gas pipe route had been approved by the defendant, Towngas undertook to install the piping, and on 15 January 2010, the plaintiffs paid a deposit of $45,000 pursuant to a sales memo.[4]

11.  On 21 January 2010, the plaintiffs entered into a formal agreement with Towngas to install gas piping to the unit[5].  The next day, on 22 January 2010, a further payment of $238,500 was made to Towngas[6].  It should be noted at this juncture that the plaintiffs received a full refund of the moneys paid to Towngas and it appears that no actual work was carried out by Towngas.

12.  During this time, the defendant held meetings on 29 January and 9 February 2010[7] at which the installation of gas supply to the unit was discussed.  A notice was issued on 8 February 2010 for the meeting on 9 February 2010[8].  A survey of unit owners was conducted by way of a questionnaire about the gas installation to the unit[9].  The deadline for the return of the questionnaire was 3 March 2010[10].  Out of a total of 122 units, 72 responded to the questionnaire of which 64 disagreed with the installation, three agreed with it and five expressed another opinion.  That represented 88.9% disapproval of the installation of the unit owners that had responded and 52.5% of the total number of unit owners of the Building. 

13.  On 10 February 2010, Mr Cho notified Towngas to stop the gas pipes work on the external wall and the common areas of the Building[11].  On the same day, the plaintiffs wrote an open letter to all co‑owners of the building that they had learnt that the defendant had objected to the installation of gas pipes because of safety concerns and they sought to assure that on the advice from Towngas was that it was safe[12].  A further open letter was sent to co‑owners explaining that the installation works was in compliance with the DMC.[13]

Construction of contractual documents

14.  The principles by which contractual documents should be construed have changed.  The literal interpretation of contractual documents[14] has given way to a contextual and commercial common sense interpretation with the aim of determining what the parties meant by the language used[15].  This is ascertained by what a reasonable person would have understood the parties to have meant.  A reasonable person is someone having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

15.  The principles were comprehensively articulated by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Society[16] which provides a useful guide when interpreting documents.  I do not see the necessity of setting out the principles as stated by Lord Hoffmann as they are well known.  A further useful update of the principles was provided by Neuberger MR (as he then was) in Pink Floyd Music Ltd v EMI Records Ltd[17], which I have also borne in mind. 

16.  I should note that in Skanska Rashleigh Weatherfoil Ltd v Somerfield Shares Ltd, Neuberger LJ (as he then was), whilst stressing that words in a contract have to be construed in their overall context, also pointed out the importance of the fact that the parties have chosen the words they have used[18].

17.  It is finally worthwhile noting that the interpretation of an agreement is not a game with words.  As Lord Hoffmann NPJinJumbo King Ltd v FaithfulProperties Ltd &Ors[19] put it:

“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.”

Construction of the DMC

18.  InconstruingtheDMC,it is important to look at the purpose of the document and what it seeks to achieve.  This was specifically commented on by Chan PJ in Garden Properties Management Ltd v Sun Wah Ornament Manufactory Ltd[20] when he said:

“The provisions of the mutual covenant of the Building Management Ordinance are aimed at facilitating the management of the buildingbyreducingconflictsamongstco-ownersononehandandpreventing abusebythemanager andthemajority owner ontheother. Itisfairtosay mostdisputesareresolvedbya purposiveconstructionandcommonsense applicationoftherelevantprovisionsofthedeedandtheOrdinance.”

19.  Kwan JAinSilverTriumph Holdings LtdvGuardian Property Management Ltd[21]noted that:

“...itistrite, inabuilding management context, theright ofaparty undera deedofmutualcovenantarenotabsoluteandmustbeamatterof construction subject toanelement ofreasonableness and alsomust coexist withotherprovisionsintheDMCunlessspecificallyexcluded ... ”

20.  It issubmitted by the plaintiffs that theapproach advocated byChan PJ and Kwan JA setouttheguiding principles inconstruing DMC provisions.  They are applicable in the present caseand will be adopted when consideringandconstruing theprovisions oftheDMC[22].

21.  The DMC of the building is dated 18 November 1991.  As is usually the case, the agreement is between the first owner, the second owner and the Manager.  It provides that all subsequent owners and other relevant parties are bound by the terms and conditions of the DMC.  Briefly, the DMC defines relevant expressions and sets out a preamble to the agreed terms and conditions which are contained in eight sections.  Section I states the right and privileges of the parties.  Section II is entitled “Easements, rights and privileges the benefit of which is held with each undivided share of and in the Land and the Building”. There are two subsections entitled “A. Rights” and “B. Exclusion of certain rights”. Section III is entitled “Easements, rights and privileges subject to which each undivided share of and in the Land and the Building is held”.  Section IV is entitled “Covenants, provisions and restrictions to be observed and performed by the owners”.  Section V is entitled “Management of the Building”.  There are nine subsections entitled “A. Appointment of Managers”, “B. Powers and Duties of Manager”, “C. Manager’s Remuneration”, “D. Management Expenses”, “E. Security for the recovery of moneys due by Manager”, “F. Application of moneys received by Manager”, “G. Owners’ Interest in Management Funds”, “H. Management Records and Accounts” and “I. Manager’s Statements”. Section VI is entitled “Extinguishment of rights under this Deed”.  Section VII is entitled “Management of owners of the Building”.  Section VIII is entitled “Miscellaneous”.

22.  So far as material the following expressions are defined under the DMC:

“ ‘Common Areas’ shall mean the include:

(i) lift lobbies, watchman counter, staircases, landings, passages, platforms or canopies, ramps, corridors, (save and except those parts of the same which have been specifically reserved by the First Owner);

(ii) loading and unloading areas and six lorry car parks on the ground floor;

(iii) transformer room, fire services control room, MDF room, pump rooms, fire service pump room, store room, switch room, lift wells, machine room, generator room, meter rooms, water meter rooms;

(iv) underground tanks for fire service and sprinkler, water tank for city water, water tank for flushing water;

(v) any toilet intended for common use and not exclusively owned by the First Owner or the Second Owner;

(vi) any other part or parts of the Building which are not specifically reserved to the First Owner or exclusively owned by the First Owner or the Second Owner.”

“ ‘Common Facilities’

(a) Such of the sewers, drains, water courses, pipes, gutters, wells (if any) wires and cables water tanks and other service facilities whether ducted or otherwise which are or at any time may be in, under or over or passing through the Land or the Building, through which water, sewage, gas, electricity and any other services are supplied to the Building or any part or parts thereof:

(b) The fire prevention and fighting system and water storage tanks;

(c) The security system (if any) installed in the Building;

(d) The lifts and all associated installations in the Building;

(e) The lighting for Common Areas;

(f) Any other facilities installed in the Common Areas or otherwise installed for the use and benefit of the Building and not for the use and benefit of a particular unit.”

“ ‘The Owner’ or ‘Owners’ shall mean the First Owner, the Second Owner and any person who may hereafter become the registered owner or mortgagee of any undivided shares in the Land and the Building including joint tenants or tenants in common and its or his or their executors, successors and assigns and references to the Owner or Owners of any part of the Building shall mean the Owner or Owners for the time being whose undivided shares in the Land and the Building entitle him or them to the exclusive right to use occupy and enjoy that part of the Building.”

“ ‘Unit’ or ‘Units’   shall mean workshop(s) or Car Parking Spaces and/or any other part or parts of the Building which the full and exclusive right and privilege to hold use occupy and enjoy has been or intended to be assigned to an Owner and “his Unit” in relation to an Owner means the unit which the Owner has the full and exclusive right and privilege to hold use occupy and enjoy.”

23.  So far as material the preamble provides:

“(5) The parties hereto have agreed to enter into this Deed for the purpose of making provisions for the management, maintenance, insuring and servicing of the Land and the Building, and the equipment, services and apparatus therein and for the purpose of defining and regulating the rights, interests and obligations of the Owners in respect of the Land and the Building and to provide for a due proportion of the common expenses of the Land and the Building to be borne by the Owners.”

24.  So far as material Section I provides:

“3. Each Share and the full and exclusive right and privilege to hold use, occupy and enjoy any part of the Building shall be held by the person or persons from time to time entitled thereto subject to and with the benefit of the easements, rights, privileges and obligations herein contained.

4. The Owners shall at all times hereafter be bound by and shall observe and perform the covenants, provisions and restrictions herein contained and the benefit and burden thereof shall be annexed to every part of the Land the Building and the Share or Shares held therewith. The Conveyancing and Property Ordinance (Cap. 219) and any statutory amendments, modifications or re-enactments thereof for the time being in force shall apply.

5. Every Owner shall have the full right and liberty without reference to the other Owners or other persons who may interested in any other equal undivided share or shares in any way whatsoever and without the necessity of making such other Owners or other persons a party to the transaction to sell, assign, mortgage, lease, licence or otherwise dispose of or deal with his Share or interest in the Land and the Building together with the exclusive right and privilege to hold, use, occupy and enjoy such part or parts of the Building which may be held therewith but any such sale, assignment, mortgage, lease or licence shall be expressly subject to and with the benefit of this Deed.”

25.  So far as material Section II provides:

“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) to go, pass and repass over and along and use the Common Areas and Common Facilities of the Building of which the Unit owned by him forms a part for all purposes connected with the proper use and enjoyment of the Unit owned by him.

2. The right to subjacent and lateral support from other parts of the Building in which the Unit owned by the Owner is situated and the right to subjacent and lateral support from the foundations and all other parts of the Building.

3. The free and uninterrupted passage and running of water, sewage, gas, electricity and any other services from and to the Unit owned by the Owner through the sewers, drains, watercourses, cables, pipes and wires which now are or may at any time hereafter be in under or passing through the Land and Building for the proper use and enjoyment of the Unit owned by the Owner.”

26.  So far as Section IV provides:

“4. No Owner shall make any structural alterations or additions to any part of the Building owned by him which may damage or affect or interfere with the use and enjoyment of any other part or parts of the Building whether in separate or common occupation nor will any Owner use, cut, injure, damage, alter or interfere with any part or parts of the Common Areas or any of the Common Facilities or any equipment or apparatus on in or upon the said Land or the Building not being equipment or apparatus for the exclusive use and benefit of any one Owner.

5. No Owner will permit or suffer to be done any act or thing in contravention of the covenants and conditions in the Crown Grant or whereby any insurance on the Building or any part thereof may become void or voidable or whereby the premium for any such insurable may be increased and in the event of any breach of this Clause by an Owner in addition to any other liability incurred thereby such Owner shall pay the amount of any increase in premium caused by or on account of such breach.”

 …

13. No part of the Common Areas shall be obstructed or incumbered nor shall any articles boxes material refuse or any other matter or things be placed or left thereon nor shall any part of such Common Areas be used for any business or private purpose and no Owner will do or suffer or permit to be done anything in such Common Areas as may be or become a nuisance or cause annoyance to any other Owners or occupiers of the Building.”

 …

15. No Owner shall have the right to enter into, alter, repair, connect to or in any other way interfere with or affect the working of the Common Facilities without the previous written consent of the Manager.

 …

17. No Owner shall erect install or affix any signs, signboards, advertisements, flags, banners, brackets, flower shelves, chimneys, flues, cables or piles on the exterior of the Building without the prior approval in writing of the Manager.

  …

21. Each Owner may subject to the prior approval of the Manager at his own expense install in the part of the Building owned by him such additions, improvements, fixtures, fittings and decoration and remove the same Provided that no such installation or removal shall cause any structural damage or interfere with the enjoyment of any other part of the Building.

 …

28. No Owner shall cause any damage to or interfere in any way with the usage of the Common Areas or the functioning of the Common Facilities.

 …

32. No Owner shall use or cause or suffer or permit to be used the Unit or Units of the said Building of which he is entitled to the exclusive use and enjoyment or any part thereof or any other part of the said Building for any illegal, unlawful, or immoral purpose nor shall do or cause or suffer or permit to be done anything therein or thereupon which may create unnecessary noise vibration or which may be or become a nuisance annoyance or inconvenience or cause damage to the occupiers or the other parts of the said Building or of properties in the neighbourhood.”

27.  Section 34I of the Building Management Ordinance, Cap 344 (BMO) deals with common parts and reads:

“(1) No person may –

a. Convert any part of the common parts of a building to his own use unless such conversion is approved by a resolution of the owners’ committee (if any);

b. Use of permit to be used the common parts of a building in such a manner as –

i. Unreasonably to interfere with the use and enjoyment of those parts by any owner or occupier of the building; or

ii. To cause a nuisance or hazard to any person lawfully in the building

(2) Any person who contravenes subsection (1) shall be deemed to be in breach of an obligation imposed on him by the deed of mutual covenant in respect of the building.”

Interpretation of Clause 3

28.  A key clause in the DMC relevant to the present case is Clause 3inSection IIA[23] which provides that each ownerisentitledtocertaineasements, rights andprivileges, including the freeanduninterrupted passageandrunningof water, sewage, gas, electricityandanyother servicesfromandtotheunit through conduits whichareexisting orsubsequently installed.  

29.  The plaintiff submitted that a plain reading as well as a purposive interpretation of Clause 3 provides that each and every owner of the building for the proper use and enjoyment of the unit owned by him is entitled to, amongstother things, uninterrupted supply of gas to the unit through gas pipes either existing at the time of or installed subsequent to the execution of the DMC.

30.  A case involving similar factual circumstances to the present case is The Incorporated Owners of Yee Fung Garden v Basic Tech Limited and Tin Shing Company Limited[24].  The plaintiff in that case was the incorporated owners of a mixed residential and commercial development known as Yee Fung Garden.  In the action, the incorporated owners claimed against the defendants that their works at Yee Fung Garden were in breach of the DMC.  The works complained of included the installation of gas pipes.  A mandatory injunction to have the works removed was sought.  In deciding whether the gas pipes installed by the defendants was in breach of the DMC and hence liable to be removed, the court was asked to consider a provision of the DMC which was identical to Clause 3.  The judge stated:

“It is clear that Clause 3 merely gives the owner the enjoyment of uninterrupted passage of, inter alia, gas through the pipes which are now or may at any time hereafter be in under or passing through the Lot and the Building.  There is no mention of the right to construct additional gas pipe by the owner.  Neither Clause 1(a) nor the words “the proper use and enjoyment” takes the matter further. …”

31.  The judge held that there had been a conversion of the common parts[25].  He found that the installation of the gas pipes was in breach of section 34I(l)(a) of the BMO and that it amounted to a conversion of common areas.  He granted an injunction for the removal of the gas pipes installed by the defendants.

32.  The case went on to appeal to the Court of Appeal which allowed the appeal by the defendants and set aside the mandatory injunction granted for the removal of the gas pipes.  In the judgment of Yuen JA, with whom the other judges agreed, she explained:

“The issue is whether there was an exemption where the occupation is for a gas pipe providing gas to private premises. The onus of showing that there was such an exemption was on the defendants as the party seeking to assert the defence. In considering that the defendants had failed to discharge the onus, the judge was influenced by the lack of evidence that the gas pipe had been approved by the utility company (paragraph 93 of the judgment). However he seems to have failed to take into account the fact that the pipe had been installed and certified by a qualified contractor[26].”

33.  Yuen JA concluded that:

“In my view, if he had taken that into account, together with the defendants’ rights to have the free and uninterrupted passage of gas through pipes (whether at the time of the DMC or thereafter) passing through the Lot and the Building, for the proper use and enjoyment of the Restaurant premises, a mandatory injunction would not have been granted”.[27]

34.  In Cogi Enterprises Limited and Others v The Incorporated Owners of Malahon Apartments the court at trial[28] and on appeal[29] were asked to consider the meaning as well as the legal effect of Clause 3, in particular, the words “or may at any time hereafter”.  In giving judgment for the Court of Appeal, Tang Ag CJHC (as he then was) approved the ruling by the judge at first instance that:

“The words ‘or may at any time hereafter’ is explained by reference to clause I(b) of the DMC. It contemplates that the developer might subsequent to the execution of the DMC install e.g. pipes in the building for the benefit of the owners of the building. However, on a proper construction of the DMC as a whole it seems to me that there was no right in the developer to install new pipes not in existence at the time of the DMC in the premises the exclusive use and occupation of which have been assigned”.[30]

35.  It is submitted by the plaintiffs that the decision in Cogi on the meaning and effect of Clause 3 unequivocally confirmed that new common facilities including pipes for the supply of water and/or gas which were not in existence at the time of the DMC could be installed by an owner for the proper use and enjoyment of his unit provided that the installation in question does not affect or interfere with the right of exclusive use and occupation of other co‑owners.  It is argued by the plaintiffs that the proposed installation of the pipes by them only impacts on the common areas of the Building.  It is further argued that the ruling in Cogi supports the plaintiffs’ right to request the proposed gas pipes installation on or over common areas.  This argument seems to suggest that an individual owner can do whatever he likes as long as it does not affect or interfere with the right of exclusive use and occupation of other co‑owners.  That is not right.  Even when what the individual owner does only impacts on the common areas of the Building , it is still a matter that is subject to the DMC and the collective concern of the co‑owners.

36.  The plaintiffs also rely on the case of Full Surplus Investment Limited v The Incorporated Ownersof Summit Court[31](Summit Court).  The applicant in that case was an owner of a residential development known as Summit Court which applied to the respondent, the Incorporated Owners of the Summit Court, for the supply of electricity and installation of a separate electricity meter at the roof top.  The application was rejected by the respondent on the basis that electricity was not required for proper use and enjoyment and maintenance of the roof.  The respondent’s basis for rejecting the application was not accepted by the Lands Tribunal which went on to rule that the applicant’s request was not in breach of the DMC and was reasonable, even though the respondent under the DMC did not have duty to provide electricity to the roof top, it nevertheless should have made available electricity to the roof top so long it did not cause damage to the building and inconvenience to other owners[32].

37.  It is submitted by the plaintiffs that the ruling of the Lands Tribunal supports the principle that any owner has the right together with all other owners to use common areas or facilities for all lawful purposes and for the proper enjoyment of their respective units.

38.  It was noted by the plaintiffs that unlike the DMC in present which carries an express provision that each and every owner of the building has the right to enjoy, amongst other things, uninterrupted supply of water, electricity and gas, the DMC of Summit Court had no provision to the effect that electricity ought to be made available for use at the roof top but nevertheless the Lands Tribunal still found that the Incorporated Owners had a duty to facilitate the supply of electricity.  In line with this authority the plaintiffs’ submit that their request made pursuant to Clause 3 to connect Towngas to the unit was not in breach of the DMC and was made pursuant to the basic right that the plaintiffs and all other owners of the building were entitled to and for which the defendant had an obligation and duty under the DMC and/or the BMO to assist the plaintiffs to achieve.

39.  It is submitted by the plaintiffs that they have the right under Clause 3 to have the gas pipes installed and passed on or over the common areas for their proper use and enjoyment of uninterrupted gas supply at the premises and that the defendant should allow the plaintiffs to install the proposed gas pipes so long as the same is performed by a competent contractor and in accordance with the route approved by the defendant.

40.  It is argued by the defendant that the proposed installation of the gas pipes would be in breach of Clauses 4, 5, 13, 15, 17, 21, 28 and 32 of Section IV of the DMC[33] and/or s34I of the BMO.  In response, the plaintiffs argued that these clauses should not be viewed in isolation but with due regard to Clause 3.  In this respect, the plaintiffs argued that the DMC and the BMO have to be construed and understood in their entirety as well as by way of a purposive construction and common sense application and subject to an element of reasonableness and that the clauses must coexist with other provisions of the DMC[34].  The plaintiffs argued that the clauses and s34I were intended to cover situations where a co‑owner does not have a right under the DMC and yet converts the common areas for his own use.

41.  The plaintiffs argued that the approach that the Court of Appeal adopted for resolving the issue of the installation of gas pipes in YeeFung rejected the argument raised by the defendant that the proposed installation of gas pipes at the common areas would be in breach of the DMC and BMO.  It is submitted that essentially the approach of the Court of Appeal in Yee Fung was consistent with the views expressed by Chan PJ in Garden Properties Management Ltd and Kwan JA in Silver Triumph Holdings Ltd.

42.  It is also argued by the defendant that as the majority of the owners of the building voted against the proposed gas pipes installation, the objection taken to approving the installation would not be in breach of Clause 3.  I am not so convinced by the point as the purpose of the DMC is for the better management of the Building and at the same time serves to prevent abuse by the manager and the majority of owners of the Building against an individual co‑owner.

43.  The defendant relied on So John as authority for the proposition that pipes connected even through common areas are part of the owner’s building and not common property. This is determined, it was submitted, as to whether it was for exclusive or common use[35].

44.  It was argued that from an examination of the clauses of the DMC, the rights under Section II are not individual rights and are more appropriately classified as common rights. 

45.  The defendant further argued that Clause 28 prohibits an owner from causing damage to or interference with the usage of the common areas or the functioning of the common facilities which would include the installation of the gas pipes sought by the plaintiffs. 

46.  The defendant argued that by virtue of s18(1) of the BMO the defendant is under a statutory duty to maintain the common areas and enforce the DMC.  The principles regarding the duties of incorporated owners were summarised as follows[36]:

(1) Under the BMO, incorporated owners have a statutory duty to do all things reasonably necessary enforce the DMC.

(2) When the incorporated owners find that there is a breach of covenant by one of the owners, it is not only their right but their duty to seek to enforce the covenant[37].

(3) Incorporated owners cannot grant expressly to any owner of any unit in the building the right to act in contravention of the DMC.

(4) What cannot be done expressly cannot be done impliedly.

(5) Although equity will sometimes restrain a plaintiff in the exercise of his legal rights because it would be inequitable and unjust in all the circumstances to allow him so to exercise those legal rights, equity will not hold him bound by acquiescence to allow something which he could not have allowed by express grant.

47.  The argument of the defendant is simple.  If the plaintiffs are not entitled under the DMC to install and connect the gas pipes through the common areas to their units, then the defendant has no power to grant them permission to do so.

Discussion

48.  The Hong Kong system of the ownership of units in multi‑storey buildings has been succinctly explained by Li CJ in KungMing Tak Tong Co Ltd v Park Solid Enterprises Ltd[38] where he said that:

“18. … individual owners acquire their interest by taking an assignment of undivided shares, making them tenants in common with other owners who do likewise.

19. As Lord Hoffmann NPJ pointed out in Jumbo King Ltd v Faithful Properties Ltd, merely taking an assignment of undivided shares without more, would entitle each to the use and possession of the whole building by virtue of their co‑ownership of the property as tenants in common. But naturally purchasers want to have exclusive use and occupation of their own unit, whether it be a flat or a shop, to the exclusion of their fellow co‑owners. This gives rise to the second principal feature of the Hong Kong system whereby individual owners execute a deed of mutual covenant (DMC) regulating by contract their rights inter se regarding the exclusive use and occupation of the units allotted to their respective parcels of undivided shares, their use of the common parts of the building, as well as their mutual obligations on such matters as management charges. The operation of such covenants is underpinned by statutory provisions which ensure, among other things, that the burden of positive covenants may operate notwithstanding the absence of dominant and servient tenements…

…

34. It is accordingly our view that the apparent grant by the DMC to the occupier of a unit of the exclusive use occupation and enjoyment of his unit is properly regarded as a separate contractual undertaking by every other co‑owner not to exercise the rights of occupation and enjoyment which he would otherwise be able to do as co‑owner over units other than his own.  It does not result in the creation of separate tenements capable of sustaining a legal easement.”

49.  The rights and obligations under the DMC which regulate the use of the common parts of the building as well as the mutual obligations of the co‑owners are contractual in nature.

50.  The plaintiffs in mounting their claim relied on Clause 3 and the definition of common facilities which they argued entitled them to install and connect the gas pipes through the common areas to their unit.  The clause provides that a unit owner shall have the free and uninterrupted passage and running of water, sewage, gas, electricity and any other services from and to the unit through the sewers, drains, watercourses, cables, pipes and wires “which now are or may at any time hereafter be” in under or passing through the Land and Building for the proper use and enjoyment of the unit.

51.  The defendant argued that the clause does not contain any provision allowing the individual owners to install or connect any pipe or drain through the common areas to the individual units.  What it provides, as argued by the defendant, is merely to ensure that the passage and running of the existing public utilities through the common facilities to the individual units should not be interrupted and the reference to the public utilities in the DMC is all embracing and includes “gas…and any other services”.  The defendant argued that this did not perse mean that the plaintiffs have an entitlement to the use of gas.

52.  The defendant also argued that the words “which now are” in the clause is referring to the pipes and drains existing at the time of the execution of the DMC and that the words “ormay at any time hereafter be” cater for the situation that the pipes and drains might be replaced or amended by way of maintenance and repairs subsequent to the execution of the DMC as provided under the DMC.  I do not agree.  This phrase in my view clearly caters for the contingency that in the future the specified services may be provided for the proper use and enjoyment of the unit.

53.  The plaintiffs have also argued that the definition of common facilities which lists gas as a facilitating supports their contention.  But as pointed out by the defendant this argument fails to take into account what is provided in subclause (f) in the definition of common facilities which states: “any other facilities installed in the common areas or otherwise installed for the use and benefit of the Building and not for the use and benefit of a particular unit[39]”.  The defendant argued that according to subclause (f) that the common facilities should be construed to refer to those facilities installed in the common areas or otherwise installed for the use and benefit of the Building and not for the use and benefit of a particular unit.

54.   In the present case, the plaintiffs claim that they should be entitled to install and connect the gas pipes through the common areas for the use and benefit of their unit exclusively.  In other words, it is not a decision concerning the collective use and function of the Building.  This in my view is a strong argument in the defendant’s favour for a building that has multiple owners can only operate by taking into account and considering the views of co‑owners.  This is normally done by majority vote. 

55.  It is worthwhile noting the case of So John v Lau Hon Man[40]. It concerned a residential building where a fresh water pipe laid in the concrete slab which served as the ceiling to the appellants’ flat and floor for the respondents’ flat, burst, causing considerable damage to parts of the ceiling and wall of the lower flat.  It was argued by the respondents that the burst pipe did not occur in or on their “part of the said buildings”, but on the common parts.  In rejecting this argument, Rhind J in giving the judgment of the Court of Appeal held[41]:

“Clearly, for many purposes, the floor slab is a common part that by itself need not necessarily be fatal to the appellants’ claim ..... We agree entirely with the approach adopted by the learned judge in that paragraph. He was right, in our view, to treat the circumstance that the sole purpose of the pipe was to serve the respondents' flat as the determining factor as to whether the pipe was in the respondents' part of the building.

Although we are not aware of any direct authority on the rights and obligations between tenants in common of adjoining flats in relation to a pipe exclusively serving one of their flats in a block in multiple ownership held under a DMC, we think useful guidance can be found in the law on easements in relation to land generally where there can be the benefit of property rights to the three-dimensional space through which a water pipe runs, together with ownership of the pipe itself. See Taylor v St Helen’s Carp 1877 6 Ch D 264, and Simmons v Midford 1969 2 Ch 415. In Wheeldon v Burrows 1879 12 Ch D 31, James LJ suggested that where water is brought to a house by a pipe laid under the land of another the pipe can be regarded as a corporeal part of the house if used exclusively to serve that house.  With that sort of analogy with land-use in mind, we see no conceptual difficulty in construing cl 10(e) of the DMC and the definition of 'common parts' in s 2of the Ordinance in such a way as to hold that the water pipe in the floor slab came within the respondents' part' of the building.”

56.  In the present case, the proposed installation which would be used exclusively to serve plaintiffs’ unit and for the use and benefit of their unit only cannot fall within the meaning of common facilities for this very reason.

57.  At the close of the trial, the plaintiffs confirmed that they no longer relied on the grounds of misrepresentation and estoppel in their claim against the defendant for the loss and damage they claimed to have suffered. The plaintiffs’ claim turned on an interpretation of the DMC that gave them the right to install pipes for the supply of gas to their unit.  The plaintiffs argued that as a co‑owner, they had a right under Clauses 1 and 3 to have the uninterrupted passage and running of gas through pipes to be laid on or over the common areas of the Building for the proper use and enjoyment of their unit.

58.  The defendant on the other hand argued that Clause 3 did not provide the plaintiffs with the right to install the proposed gas pipes and that the clause when considered together with the relevant clauses only gave an individual owner the right to enjoy uninterrupted passage of utilities through the common facilities which were in existence at the time of execution of the DMC and that common facilities could only be maintained but not added.

59.  The plaintiffs submitted that Clause 1 deals with easement, rights and privileges of a co‑owner in and/or in connection with using and enjoying the common areas and common facilities of the building either in existence or to be installed.  It was submitted that the definition of “common facilities” clearly envisaged that new common utilities pipe/ducts could be installed at any time after the execution of the DMC for the use and enjoyment of the owners.

60.  The plaintiffs also submitted that Clause 3 conferred rights on an individual owner of the building for his uninterrupted use and enjoyment of utilities (water, sewage, gas, electricity and any other services) which might not be able to or could not be provided by the common facilities. The utilities would then be provided by pipes, ducts etc (which were in existence at the time of the DMC or may be at any time hereafter) in under or passing through the Land and Building and these pipes and/or other devices were not necessarily common pipes and ducts.  They argued that otherwise Clause 1 on its own would suffice.  They also argued that there may be pipes/ducts laid for the specific purpose of supply utilities to the unit owned by the individual owner and in such case would be treated as for the exclusive use of that co‑owner.

61.  The plaintiffs argued that by virtue of Clause 1, new common facilities could be installed if so required for the enjoyment of an individual co‑owner.  They submitted that it did not follow that installation of new common facilities or upgrading the existing common facilities was necessarily preferred by a majority of the owners of the building, and a common service interpretation of Clause 3 would give each and every owner an individual right for connecting the required utility to his unit in the event that the majority owners did not consider that installation of new common facilities or upgrading the common facilities in existence is desirable either at this stage or for whatever reason.  I do not agree.  Common sense dictates that that the converse would be case.  People who live together must decide together what is appropriate and in their collective best interest.  

62.  The defendant contended that the owners’ free and uninterrupted enjoyment of utilities is confined to those supplied through the existing common facilities and since there was no gas supply when the DMC was executed.  

63.  I agreed with the plaintiffs that if it is suggested by the defendant that no new common facility could be added to the Building, such a proposition is wrong and contrary to the provisions of the DMC.  It clearly contemplated additions and improvements to the Building or on the Land as long as there is compliance with the procedures and requirements for this to be done under the provisions of the DMC[42].

64.  I also agree to some extent with the plaintiffs, that the defendant’s contention that the installation of the proposed gas pipes by the plaintiffs on or over common areas would be in breach of a number of clauses of the DMC which prohibited the owners from entering and encroaching the common areas of and cause injury to the structure of the Building would not necessarily be the case, but it is subject, in my view, to the necessary procedures and approval being followed as provided under the DMC.

65.  The plaintiffs argued that the manager is entitled to do such things as are reasonably incidental to the management of the building[43] and that there was no need for a duly passed resolution by the management committee to give effect to actor decision of the something done by the manager, for such act or decision must be done in accordance with the provisions of the DMC to be binding on the owners[44]. The plaintiffs relied on the fact that Mr  Cho on 13 January 2010 had approved the proposed route of the gas pipes and therefore the decision was binding on the owners and even though it had not been formally approved by the management committee.  On this matter, I find that Mr Cho was approving the route of the laying of the gas pipes but subject to formal approval of the management committee under the provisions of the DMC.  The defendant submitted that the proposed installations of the gas pipes would be in breach of section 34I of the BMO and contrary to the objections of the majority of the owners.  In any event, the management committee stopped any installation works being done and took responsibility for the matter on behalf of the owners and in accordance with the provisions of the DMC.

66.  The plaintiffs urged me to reject the evidence of Mr Kwan Wai Hong, the chairman of the management committee, and Mr Cho, the representative of the manager, on the issue as to whether the defendant had approved the installation.  The plaintiffs relied on the documents where Mr Cho approved the routing of the gas pipes and submitted that the defendant approved the installation through the manager.  I find that was not the case.  The manager approved a route for the laying of gas pipes but it was, and could be, the subject of formal approval by the management committee.  I find Mr Cho was not giving approval for the installation but for the routing of gas pipes and therefore did not bind the defendant.  Nor was he giving approval on behalf of the defendant for the installations.

67.  There is no doubt that Mr Cho was considering the plans for the routing of the gas pipes and involved in meetings and discussions about it.  I do take it further as suggested by the plaintiffs that he was giving formal approval for the installation or doing so on behalf of the defendant.  I can understand why the plaintiffs were of the belief that approval had been given or that it was a foregone conclusion that it would be given.  There had been a change of membership of the management committee when Mr Kwan was elected chairman and this coincided with the decision to notify Towngas to stop all works at the Building.  However, there were consultative meetings, which in my assessment of the evidence was part of the process of deciding whether or not to approve the installation.  I do accept that there was either a change of heart about the installation by the management committee before making a final decision or the new committee had a different view on the matter.  In that respect I found Mr Kwan’s evidence unsatisfactory.   

68.  It is not a matter for this court to consider the viability or appropriateness of the plans for the installation as suggested in the plaintiffs’ submission.  The issue for the court is whether the plaintiffs in the circumstances of this case have a right to connect gas to their unit.  Nor is it a matter for the court to consider the grounds of objection raised by other owners to the proposed installation.

69.  Returning back to Clause 3.  It provides that owners of units are to have for the proper use and enjoyment of the unit, the free and uninterrupted passage and running of services from and to the unit, which specifically includes water, sewage, gas and electricity, such services are to be provided “through the sewers, drains, watercourses, cables, pipes and wires which are now or may at any time hereafter be in, under or passing through the land and building”.  As I interpret this clause an owner of a unit is entitled to have from and to the unit certain essential services.  The phrase “water, sewage, gas, electricity and any other services” describes, in my view, services necessary and essential for the proper use and enjoyment of the unit. 

70.  The key issue in this dispute is the construction of the meaning and effect of Clause 3.  This requires considering the language of the clause in the context of the purpose and provisions of the DMC.  In the context of the present case, gas is specifically mentioned as an essential service that an owner is entitled to have connected to his unit.  However, connection of gas to the unit which is to be free and uninterrupted, is to be provided through the existing pipes or pipes which are subsequently installed on the Land or Building. I interpret this provision to mean that an owner will be guaranteed the free and uninterrupted passage of essential services through the existing or subsequent system in place for the supply or passage of the service.  It is required, therefore, that the system in place should provide the owner free and uninterrupted supply or passage of the service whether existing or subsequently installed.  Where there is no system in place, it still requires the incorporated owners to decide on a system to be installed in accordance with the decision making process as provided under the DMC.  Once a system of pipes for the supply of gas has been decided to be and is installed, the plaintiffs are entitled to the free and uninterrupted connection of gas under the system in place whether now or in the future, but this still requires the incorporated owners to agree a system for the connection of gas to the units of the Building. It does not entitle an individual unit owner to connect gas to his unit, unless a decision of the incorporated owners has been made for that to happen in accordance with the provisions of the DMC.  It entitles an individual unit owner the guarantee of free and uninterrupted passage of gas through the system put in place whether now or in the future.  It does not in my view guarantee as of right an individual unit owner the supply of gas through his own and exclusive system of pipes on or over common areas of the Building, unless it is in accordance with the provisions of the DMC.

71.  It comes to this.  The plaintiffs wish to have gas connected to their unit.  There is no system in place for the free and uninterrupted passage and supply of gas.  A system needs to be put in place which requires to be decided through the decision making process as provided under the DMC.  It is fundamental that the collective ownership of the units involves collective responsibility and decision making.  Without this collective responsibility and decision making, it would mean that each owner could install his own system to supply gas to the individual unit on or over common areas which would undermine the very purpose of the DMC and its provisions.  As the present case illustrates, the farcical  situation would arise where each of the 122 unit owners could install their own system for the supply of gas.

Conclusion

72.  Accordingly, I refuse the plaintiff’s claim for the foregoing reasons and will not make the declaration sought that the defendant has a duty under the DMC to install and connect, or permit the plaintiffs to install and connect, the gas pipes to the unit.

73.  I am not totally unsympathetic to the plight of the plaintiffs who have endeavoured to arrange the connection of what would be considered to be an essential service and the supply of which would be more likely to benefit of all unit owners. The incorporated owners, or in particular the management committee, have by their handling and conduct of the matter lead to the dispute between the parties.

74.  Although I note that the plaintiffs abandoned the grounds of misrepresentation and estoppel at the close of the trial, I wish to be addressed on the issue of costs and direct that the parties file and serve written submissions within 14 days.