THE INCORPORATED OWNERS OF SUMMIT COURT v. FULL SURPLUS INVESTMENT LTD AND ANOTHER

CACV 198/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 198 OF 2005

(ON APPEAL FROM HCA NO. 2280 OF 2001)

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J U D G M E N T

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Hon Tang VP (giving the judgment of the Court):

Introduction

1.  The plaintiff is the Incorporated Owners of the Summit Court, a residential development consisting of four blocks, Blocks A to D.

2.  Block D is sub-divided into Blocks D1 and D2, Block D2 is the mirror image of Block D1.  Each sub-block has 20 residential flats, one on each floor.

3.  Summit Court was built in 1966, and by the Deed of Mutual Covenant dated 17 August 1966 (“the DMC”), it was notionally divided into 163 equal and undivided shares, basically allotting one share to each flat. 

4.  The appeal concerned what has been described in the DMC as portion D1 of the main roof  (“Portion D1 Roof”) which together with Flat D1 on the 20^th Floor (D1/20F), was allotted one equal undivided 163^rd share.

5.  By a Deed Poll dated 16 August 1997, the one equal undivided 163^rd share in respect of D1/20F and Portion D1 Roof, was subdivided into 5 equal undivided 5^th part, of which 4 equal undivided 5^th part was allotted to D1/20F, and one equal undivided 5^th part was allotted to Portion D1 Roof.

6.  The 1^st defendant is the owner of Portion D1 Roof.  The 2^nd defendant is a director of the 1^st defendant.

7.  Chung J, after trial, declared that, “the water tanks, mains, pipes and pumps for the supply of water to units of Block D1 … is common parts or common facilities”; and that the plaintiff and persons authorised by the plaintiff have a right of way over Portion D1 Roof … for the purpose of inspecting, repairing, maintaining, replacing or carrying out necessary works on the Block D1 water supply system.  The learned judge also granted an injunction, inter alia, to restrain the defendants from “turning off the mains of the Block D1 water supply system …”

8.  The dispute between the parties primarily concerned 20 separate water meters, which were installed at the parapet wall on Portion D1 Roof between 1994 and 1996.

Block D1 water supply system

9.  On the roof of Block D1, there are three water tanks.  One for potable water, one for salt water for fire services purpose, which also feeds into a separate tank for flushing purposes.

10.  It is accepted that the three water tanks are situated outside Portion D1 Roof.  However, the full extent of Portion D1 Roof was in dispute and will be considered later in this judgment.

11.  It goes without saying that there are pipes which convey the potable water or flush water, as the case may be, to the individual flats.  Such pipes must be considered an integral part of the water supply system.

12.  Prior to 1994, there were only four water meters for potable water, one for each of the floor blocks in Summit Court.  The water charges were then shared equally by all the units of the particular block.  So in the case of Block D, the water charges were shared by the owners or the occupiers of the 40 flats equally.

13.  Between 1994 and 1996, individual meters were installed for each flat in the sub-blocks.  20 water meters for each of the flats on Block D1 were installed at or against the parapet wall on the roof.  Similar installations were made in relation to the other sub-blocks, however, we are only concerned with Block D1.

14.  The evidence of the pre 1994 – 1996 position could be taken from the evidence of Ting Sie-huong, a long time resident and member of the Management Committee of the plaintiff, first from his witness statement:

“10.   The routing of fresh water pipes at Block D1 before 1994 was as follow: descending from the elevated water tank, going towards the parapet wall along the floor, splitting into 2 branches when reaching the parapet wall with one running left before going up over the parapet wall and down the outer walls to supply the kitchen; the other branch would run towards the guest bathroom and master bedroom along the bottom of the parapet wall before going up over the parapet wall and going down the outer walls at 2 places – one down the pipe-duct to supply the guest bathroom while the other down the light well to supply the bathroom of the master bedroom.  A main tap on the Main Roof controlled each of these down pipes.”

15.  Mr Ting elaborated in his oral evidence that, after 1994 – 1996, the piping for portage water was: “… about one-third the original length.”, because “they’re all now all concentrated along this stretch of the parapet wall”, and that “the new system was in fact less intrusive to the roof” and “the new system was confined to a smaller area”.  He then indicated by a red line on Exhibit D2 how the potable water pipe used to run along the floor for the roof.

16.  He also said: “There is another pipe running along the same direction for the supply of flushing water.”  He then indicated by a blue line on Exhibit D1 how the flush water pipe used to run along the floor of Portion D1 Roof.

17.  It is important to note that the present situation as shown by photographs is that the two water pipes run across the floor of the roof.  One was for potable water which runs from the water tank.  The other is for flush water which comes from the flush water tank.  These pipes are shown clearly on the photograph at page 769a.  The potable water pipe runs up the inside of the parapet wall and then branches out on either side into 20 pipes with meters serving the 20 flats.  These pipes then run over the top of the parapet wall and down the height of the building.  However, the evidence is not so clear in respect of the flush water pipe, although it is also shown in the photographs, probably because the thrust of the defendants’ complaint had been directed at the separate potable water meters.  See e.g. paras. 14-26 of the Re-Re-Amended Defence and Counterclaim.  Probably also, because the defendants’ case was that the potable water system ceased to be the common water system after the installation of the separate meters.  In the case of flush water system, no separate meter had been installed so the point did not arise.

Background to the Dispute

18.  At all material times D1/20F and Portion D1 Roof were owned by Mono Graphic Engineering Co. Ltd. (“Mono Graphic”).

19.  However, from about 1990, Portion D1 Roof had been occupied by a Mr Ip Hoi-kwai and his family for residential purposes, as Mono Graphic’s tenant at a rent of $5,000 per month.  At that time Portion D1 Roof was supplied with water and electricity from D1/20F.

20.  In 1997, following the Deed Poll, Mr Ip was assigned Portion D1 Roof.

21.  After the installation of the separate water meters, the Incorporated Owners objected to the supply of water or electricity to Portion D1 Roof, and Portion D1 Roof was left with no water or electricity.  By a letter dated 6 February 1998 from the plaintiff to Mr Ip Hoi-kwai, the plaintiff objected to the connection of electricity or water for Portion D1 Roof and requested Mr Ip to demolish any unauthorized structure on the Roof.  At that time, the 2^nd defendant was the chairman of the Incorporate Owners.

22.  Eventually, on 30 January 1999, Mr Ip sold Portion D1 Roof to the 2^nd defendant and one Ng Chan Sze Mui Simone (“Simone Chan”).  Following that, the 2^nd defendant caused electricity and water to be supplied to Portion D1 Roof from Block D2, 16/F (D2/16F).  At that time the 2^nd defendant was residing at D2/16F.  Such supply was discontinued as a result of the plaintiff’s objection.

23.  The defendants then complained that without water and electricity they were unable to let Portion D1 Roof for $20,000 a month.  That led to the defendants’ complaint about the separate water meters.  The 2^nd defendant shut down the water supply to some of the flats in Block D1, in particular, the flats occupied by some of the office bearers of the Incorporated Owners.  The 1^st defendant by a letter probably written by the 2^nd defendant also threatened to cut off water supply to a different flat each day.  That led to the Incorporated Owners applying for and obtaining an injunction in the present action which was replaced by an undertaking.

24.  On 22 March 2000, Portion D1 Roof was assigned by the 2^nd defendant and Simone Chan to the 1^st defendant.  The 2^nd defendant wrote to the plaintiff by letter dated 15 May 2001 saying that, if the plaintiff wished to litigate, the 1^st defendant was prepared to do so, since「因D1天台現屬有限公司，責任有限」(“Portion D1 Roof now belonged to a limited company, the liability is limited”).

25.  At trial, as the learned judge said, no distinction was made between the 1^st and 2^nd defendants “in the pleadings or closing submissions”.

Are the water pipes common parts?

26.  The main argument which was advanced at the trial and before us, was that after the installation of the individual meters between 1994 and 1996, the water pipes could no longer be regarded as communal or common parts, so that the water pipes serving each of the flats should be regarded as the individual property of the flat to which it supplied water.

27.  It is important to note that according to the evidence and as described, there is only one potable water pipe which runs along the floor from the potable water tank before it branches out into the separate meters on the parapet wall.

28.  Mr Kenneth Chan, who appeared for the 1^st and 2^nd defendants submitted that, because of the separate meters the potable water pipes at or after the water meters could not be regarded as part of the water system or common parts of the building.

29.  However, common parts in section 2 of the Building Management Ordinance, Cap. 344 (“BMO”) is defined as:

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

 (b)  unless so specified or designated, those parts specified in the First Schedule;”

30.  Para. 6 of the First Schedule of BMO included water tanks, reservoirs, pumps, water-courses, ducts, downpipes.

31.  For as long as the water pipes served the entire Block D1, we believe the position is clear.  So the fresh water pipe before it branches out at the parapet wall, must be considered as common parts.  So too, the flush water pipes.

32.  The potable water pipes even after they have branched out at or after the separate meters would not fall outside the definition of common parts because they had not been specified or designated in an instrument registered in the Land Registry for the exclusive use, occupation or enjoyment of an owner.

33.  In other words, even after the pipes had been subdivided into 20 small pipes, they would still fall within the definition of common parts because although they were for the exclusive use of the individual owners, they had not been designated as such by reason of any instrument registered in the Land Registry.

34.  Mr Chan submitted that John So and Anor v Lau Hon Man and Ors [1993] 2 HKC 356, is an authority to the contrary.  John So arose out of a dispute between two owners.  The fresh water pipe laid in the concrete slab which served as ceiling for the appellants’ flat and floor for the respondents’ flat burst, causing considerable damage to parts of the ceiling and wall of the lower flat.  The pipe which burst was used exclusively for the supply of fresh water to the respondents’ flat.  In that case too there were separate water meters for each flat.

35.  The pipe had in fact been leaking and causing some damage to the appellants’ flat since the end of February 1992.  It burst on the night of the 7 or 8 April 1992 and it continued to drip into the appellants’ flat until 17 April 1992.  The appellants brought proceedings against the respondents for damages for breach of clause 10(c) of the DMC by which each party covenanted with the other:

“Not to use his part of the said building … nor do or permit anything therein or thereupon which … may be a nuisance or annoyance to or may cause damage or inconvenience to the other occupiers of the said building.”

36.  It was said in that case that as the sole purpose of the water pipe was to serve the respondents’ flat, it came within the respondents’ “part” of the building.  And the escape of water from one person’s premises to another was a classic instance of nuisance and that by allowing the pipe to fall into despair with the result that the water escaped to the plaintiff’s flat, the respondents were in clear breach of clause 10(c) of the DMC.  The respondents in their cross-appeal denied that they were in breach of clause 10(c) because they alleged that the burst pipe did not occur in / on their part of the said building, but on the common parts.

37.  It is clear from the judgment of the court delivered by the Rhind J that they thought the learned trial judge:

“…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.”

38.  But Rhind J went on to say:

“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 Corp (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(c) of the DMC and the definition of ‘common parts’ in s2 of 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.

As the respondents are the ones to get the exclusive benefit from the use of their fresh water pipe, it is not unreasonable they should bear the exclusive burden of the cost of repairing it if it becomes defective. Such was the common intent of those entering into the DMC, in our view.”

39.  We do not believe John So has any direct bearing on the present case.  It is not an authority that water pipes serving a flat exclusively could not be part of the common parts.  It is common sense that even without separate water meters, pipes would branch out into individual flats and that such branch pipes would serve each individual flat exclusively.  We see no reason in such circumstances why such branch pipes, which is part of the common water system, should not be regarded as common parts.  In the case of flush water, we see no reason why the pipes conveying flush water to an individual flat cannot be common parts.  Nor do we believe, separate meters, which enable separate payment for the potage water exclusively consumed, should affect the common nature of the water supply system.

40.  In John So, it happened that the burst water pipe was embedded in a concrete slab.  The replacement pipe installed by the respondents ran within the respondents’ flat.  In that case, it was obvious that the new pipe was physically in the respondents’ part of the building.  The burst pipe was embedded in the floor / roof.  Even so, having regard to the fact that the pipe served the respondents’ flat exclusively, the construction placed on clause 10(c) of the DMC was, with respect, correct.  But we do not regard John So as deciding that the installation of separate water meters was determinative.  Indeed, the reference to separate meter at 361A was part of the narration of facts and did not form part of the ratio.

41.  Also, Wheeldon v Burrows [1879] 12 Ch D 31, is authority that by the grant of part of a tenement there will pass to the grantee all those continuous and apparent easements over other parts of the tenement which are necessary to the enjoyment of the part granted and have been hitherto used therewith.

42.  Here we are concerned with quasi-easements: see Jumbo King Ltd v Faithful Properties Ltd and Others [1999] 2 HKCFAR 297.  However, the principles are the same.  The effect of the DMC is that such quasi-easements would pass to each of the individual owners.  In other words, there was a quasi-easement in favour of the other owners (hence enforceable by the Incorporated Owners) for the water pipes to run from the fresh and flush water tanks across the floors of Portion D1 Roof, as well as rising up at the parapet wall.  Thus, it does not matter, whether the water pipes were installed on the parapet walls or as alleged by the defendants that they “were stabilized along” them.  See para. 25 Re-Re-Amended Defence and Counterclaim.

43.  However, in 1994-1996, the potable and flushing water pipes were altered.  In particular, in the case of the potable water pipes, 20 separate meters have been installed.  The fact that prior to 1994 – 1996, there were common water supply system for potable water and flushing water and that they subsisted as quasi-easement may not be a sufficient answer to the defendants’ complaint that the 20 meters trespassed on Portion D1 Roof.

Extent of Portion D1 Roof

44.  We turn to consider whether the parapet wall on which the 20 meters were installed is part of Portion D1 Roof.

45.  The note to the First Schedule to the DMC reads:

“1. the above premises are as shown on the Plans annexed hereto.”

46.  The above premises included Portion D1 Roof and there was a roof plan.  However, there was no indication on the roof plan how extensive Portion D1 Roof was.  The roof plan showed a shelter which is substantially smaller than the shelter now on Portion D1 Roof.  It may be that everything was included in the description “Portion D1 Roof” except such areas which were intended for common use.  Thus, and this is accepted, the areas occupied by the water tanks would be excluded from Portion D1 Roof.  So, possibly too, the pipes leading from them.  However, at trial, the plaintiff accepted that the water pipes ran along the floor of Portion D1 Roof, and contended that the parapet walls were common parts.

47.  In the 1^st assignment of D1/20F and Portion D1 Roof, dated 5 October 1967, the parcels clause read as follow:

“…ALL THAT the right to the exclusive use occupation and enjoyment of ALL THAT FLAT D-1 on the TWENTIETH FLOOR and PORTION D-1 of the MAIN ROOF and the ROOF thereof of the said SUMMIT COURT … which flat was shown and coloured Pink on the Floor Plan hereto and thereto annexed and ALL THAT the parking space on the LOWER DECK GARAGE of the said building as shown coloured Pink and marked ‘No. 6’ on the Garage Plan hereto … ”

48.  Unfortunately, the title deeds have been lost.  However, the copy of the first assignment registered at the Land Office, had annexed to it 3 plans: (i) the typical floor plan from which one could see that D1/20F has presumably been coloured pink.  (ii) the lower deck garage plan where the car parking space No. 6 was apparently coloured and (iii) the Roof Plan on which it appeared that much of the roof had been coloured (presumably pink).

49.  Mr C Y Li, who appeared for the plaintiff, submitted that in any event, the parcels clause is ambiguous because the parcels clause itself referred to the flat being shown and coloured pink on the Floor Plan hereto, but not that Portion D1 Roof had been coloured pink on the Roof plan.  Even so, we believe a reasonable reading of the first assignment shows that the assignment was intended to cover the area which was coloured on the Roof Plan annexed to the assignment

50.  As the learned author of Contract and Conveyance, (4^th Ed), J T Farrand, said in page 281, a plan can be looked at even where there is no reference to it in the Parcels Clause, provided, (1) the verbal description in the conveyance is not clear, and (2) the plan physically forms parts of the conveyance, as by being bound up with it or drawn on it citing Leachman v L & K Richardson Ltd [1969] 1 WLR 1129.

51.  However, we are of the view that the parapet walls are not part of Portion D1 Roof.  There is nothing in the parcels clause or in the plan annexed to the 1^st assignment which requires a different conclusion.  The roof plan is small and not drawn to scale.  It is not possible to tell from the roof plan that the parapet walls had been coloured pink.  Moreover, the definition of common parts in the BMO include parapet walls unless they:

“…have been specified or designated in an instrument in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner;”

52.  The defendants’ case, however, is that the meters were not installed on the parapet wall but merely stabilized at the parapet wall.

53.  We believe it is unnecessary for us to resolve this difference.  That is because we respectfully agree with the learned judge that the 1^st defendant is estopped from complaining about the location or re-location of the water pipes in 1994-1996, especially the potable water pipes, such that for all intents and purposes, they should not only be regarded as part of the common water system, they should also be regarded as if they had always been there.

54.  As the learned judge held and the evidence shows, all the owners including the owner of D1/20F, must have agreed to the installation of the individual meters.

55.  The installation of the individual meters took place in conjunction with the substantial overhaul of Summit Court, and there was no evidence that Mono Graphic was unaware that the installations would take place on the roof.  There was an application form by Mono Graphic to the Water Department for the installation of a separate meter.

56.  Having regard to the fact that Mono Graphic, the owner of D1/20F and Portion D1 Roof, agreed to the scheme, as a result of which individual meters were installed to replace the one communal meter, Mono Graphic was estopped from asserting to the contrary.  The 1^st defendant as successor-in-title would equally be estopped.

57.  The judge said in para. 90 of his judgment:

“90.   In addition, by signing the documents to apply for separate water meters and by using the Block water supply system since its installation in 1996, the defendants have obtained the benefit of being able to enjoy water supply exclusive to their respective units (and to pay for water only used by them).  In the circumstances set out above, it is proper to infer that the above benefit is conditional upon their consent to the way in which the Block D1 water supply system was installed.  Insofar as it may be necessary to rely on the rule that ‘where it is a condition of enjoying the benefit that a burden is assumed, the assignee cannot enjoy the benefit without discharging the burden’: Snell, para. 5-26 (citing Halsall v. Brizell [1957] Ch 169 as interpreted in Rhone v. Stephens [1994] 2 AC 310, 322), I find that this rule is applicable to the facts of this action. “

58.  It is true, as Mr Kenneth Chan submitted, the learned judge made a factual error.  Mono Graphic’s application for a separate meter was signed by a Ms Maisy Chan and not the 2^nd defendant.  But this mistake would not vitiate the learned judge’s conclusion.

59.  Mr Kenneth Chan submitted that at the material time, Mono Graphic might have agreed or acquiesced because it was thought at the time that the water system was common parts or that they would be located in common parts of the building.  But the learned judge did not accept that and with respect, we agree.

60.  Nor is necessary to enquire whether the estoppel is proprietary or just an equitable estoppel.  The evidence required to establish an estoppel must depend on all the circumstances including the nature and extent of the “right” allegedly arising out of the estoppel.  As we have said, here we are concerned with the installation of a new system, which resulted in shorter pipes on the floor of Portion D1 Roof.  Admittedly there were 20 meters at the parapet wall.  But the parapet walls were common parts and the only “inconvenience” to the owner of Portion D1 Roof is that these pipes overhung the floor, at the parapet wall.

Right of Access

61.  Mr Kenneth Chan argued that under section 40 of BMO, notice had to be given to the owner of Portion D1 Roof before any repair work could be done to any of the water pipes or water tanks.  We believe section 40 is meant to cover situations where the Incorporated Owners do not otherwise have the right of access.

62.  We turn to the DMC, in particular, clause 10(k):

“(k)   The Agent and all persons authorised by it shall at any time have the right of access to the water tanks and lift motor room on the main roof of the said building for the purpose of repairing maintaining and replacing the said water tanks and lift motors and shall have the right to pass and repass over the said main roof for such purpose.”

63.  The learned judge restricted access under clause 10(k) to the water tanks, because:

“… the communal water supply system (and therefore the Block D1 water supply system) did not exist when the DMC was drafted and entered into by the first owners.”

64.  With respect, there was a communal water supply system when Summit Court was built.  Pipes were required to convey fresh water from the fresh water tanks to the individual flat.  The occupation permit was issued on 14 April 1966.  Even if, which is not the case, the DMC predated the occupation permit, the only acceptable reading of clause 10(k) of the DMC is that the reference to water tank also included the water pipes.  As Chan PJ said in The Grande Properties Management Ltd v Sun Wah Ornament Manufactory Ltd [2006] 9 HKCFAR 462, one should resolve disputes “by a purposive construction and common sense application of the relevant provisions” of the DMC and BMO.

65.  Mr Chan conceded in argument that insofar as clause 10(k) of the DMC provided that the Incorporated Owners could have access at any time and since section 40 does not expressly override the provisions of the DMC, he could not argue that so far as repairs or maintenance etc. of the water tanks are concerned, prior notice had to be given.  The concession is rightly made, no notice is required under clause 10(k).  Having regard to our view that the water pipes leading from the water tanks must be regarded as an integral part of the water tanks and the water supply system, we believe the Incorporated Owners have the right of access at any time for the purpose of repairing, maintaining etc. the water pipes as well.

66.  Since the pipes are on the uncovered part of the roof, and since for fire services reasons, the access to the open part of the roof must be kept open at all times, that should cause no inconvenience.

67.  The result of the estoppel is that clause 10(k) now covers the present water system so that the plaintiff is entitled to access “at any time” for the purposes stated therein.

Storeroom

68.  There was also a dispute over what has been called the storeroom on the roof.  This is actually the space below the machine room.  The machine room straddled both Blocks D1 and D2.

69.  It appeared that the machines were installed on the upper level, presumably because of engineering requirement.  The original design was that access to the upper level was to be by stairs from the lower level.  As built, the upper level of the machine room has its independent access.

70.  However, there was access to the space below, under the machine room from the roof on Block D2.  But none from D1.

71.  The learned judge held that there was insufficient evidence to show that the storeroom was conveyed to the defendants.  The plaintiff’s stance is that as long as the defendants are able to satisfy the court that the storeroom has been conveyed to them, the plaintiff would not oppose the counterclaim.

72.  Mr Li’s submission is essentially based on the language of the parcels clause, and the absence of any express reference to the roof plan annexed to the first assignment.  We have already dealt with that.  It is sufficiently clear from that roof plan that the space covered by the storeroom had been coloured.

73.  We note Mr C Y Li’s submission that the storeroom’s space had not been used by the owner of D1 roof until at least 1999, this is evidence which we could rely on to help resolve the ambiguity in the parcels clause.

74.  However, having regard to the evidence in this case, we are satisfied that the defendants have shown that the storeroom have been assigned to it.

75.  So to that extent, we would allow the counterclaim.

Conclusion

76.  The defendants’ appeal on the common part is dismissed.  Their appeal on the storeroom is allowed.

Costs Nisi

77.  Having regard to the defendants’ limited success in the appeal, we would make an order nisi that the plaintiff is to have 85% of its costs of the appeal as well as below.