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

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Press Summary (Chinese)

FACV No. 13 of 2016

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 13 OF 2016 (CIVIL)

(ON APPEAL FROM CACV NO. 22 OF 2014)

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(by original action)

AND BETWEEN

(by counterclaim)

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REASONS FOR JUDGMENT

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Mr Justice Fok PJ :

1.  After hearing counsel for the appellants, the Court did not call on counsel for the respondent and dismissed the appeal with costs, indicating that it would hand down its reasons for doing so in due course.  These are the Court’s reasons.

2.  The sole issue in this appeal relates to the ownership of 13 parking spaces in an industrial building in Tsuen Wan called Gold King Industrial Building (“the building”).[1] The appellants are the first owners of the building (“the First Owners”) and their agent, Tai Fat Development (Holding) Co Ltd (“Tai Fat”), and the respondent is the Incorporated Owners of the building (“IOs”).  The appellants claimed that the 13 parking spaces are reserved for the separate use and ownership of the First Owners and their successors-in-title whereas the IOs contended that the car parking spaces are common parts of the building.

3.  This was one of a number of issues, albeit the main issue, between the parties at trial.[2] The issue relating to the 13 parking spaces turned on the construction of a number of documents but principally the Deed of Mutual Covenant dated 16 April 1987 in respect of the building (“the DMC”).  The other documents included the First Assignment, also dated 16 April 1987, relating to a unit in the building[3] (“the First Assignment”) and also the Government Grant in relation to the land on which the building was constructed (and in particular Special Conditions 12 and 13 thereof) and the Approved Building Plans of the building dated 18 March 1987.

4.  Suffiad J decided the issue in favour of the IOs.[4] He concluded that, on a construction of the DMC, it was clear that the intention of the parties to it was 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”.  He also rejected the First Owners’ argument based on tenancy by estoppel.[5]  That argument was premised on the fact that the IOs had entered into various tenancy agreements in respect of the 13 parking spaces.  The last of those tenancy agreements related to 12 of the 13 spaces and was for the period from 1 December 2004 to 30 November 2006.  That agreement was, however, only entered into between the IOs and Tai Fat after the IOs’ solicitors had written to assert that the 13 parking spaces in issue were part of the common areas of the building.

5.  The First Owners appealed against Suffiad J’s judgment and essentially advanced the same arguments in support of their case as to ownership of the 13 parking spaces.  The Court of Appeal dismissed the appeal at the conclusion of the hearing with the reasons for its decision being given subsequently by Barma JA.[6]

6.  In the CA Reasons, Barma JA carefully set out the contentions of the First Owners as to why Suffiad J’s construction of the DMC was erroneous[7] but rejected them and concluded[8] that the judge was “clearly right to conclude that the 13 Car Parking Spaces formed part of the common areas of the building”.  The First Owners’ arguments were then each separately addressed by Barma JA in the CA Reasons.[9]

7.  With one exception, relating to the way he dealt with the First Owners’ case based on estoppel by convention (addressed below), we agree with the reasons given by Barma JA for rejecting the First Owners’ arguments which in turn were consistent with the reasons given by Suffiad J at first instance.  It is unnecessary to rehearse all the reasons leading to the conclusion that the 13 parking spaces in question form part of the common areas of the building. The principal reasons, however, are that:

(1) The definition of “common areas” in the DMC includes at sub-paragraph (b) “loading and unloading areas” and the 13 parking spaces were listed in the DMC under the heading “Loading and Unloading Areas” in the First Schedule to the DMC;

(2) Only ownership shares were issued in respect of the 13 parking spaces but not management shares, thus suggesting they were intended for common ownership rather than private ownership (since, if the latter, management fees on the basis of management shares would be expected to be payable);

(3) The reservation of the 13 parking spaces would be necessary to ensure compliance with Special Conditions 12 and 13 of the Government Grant imposing requirements as to the minimum space for the parking, loading and unloading of vehicles;

(4) As shown by the approved building plans, there would be considerable practical difficulties if the 13 parking spaces were not common areas and this fact militates in favour of the IOs’ construction of the DMC.

8.  The First Owners’ arguments advanced in its printed case on appeal before this Court, being in substance a repetition of its arguments below, do not affect the conclusion reached by the Court of Appeal affirming that of the judge below.  The First Owners’ argument that the reservation of the car parking spaces by the vendors in the First Assignment means that it was intended that the 13 parking spaces would not form common areas but would be reserved for private ownership does not overcome the above points.  On the terms of the First Assignment, it is to the DMC that one looks in order to ascertain what parts of the building form its common areas.  We are satisfied that the Court of Appeal correctly construed the DMC and did not err by ignoring terms in it as contended by the First Owners.  We are also satisfied that, as part of the factual matrix in which to construe the DMC, the Court of Appeal was entitled to have regard to the issue of practical difficulty[10] that would be caused to occupants of the building if the car parking spaces were not common areas.

9.  The exception referred to above relates to the First Owners’ reliance on the principle of estoppel by convention.  Barma JA said that the estoppel by convention argument was not open to the First Owners because it had not been pleaded or investigated at the trial.[11] This is not correct since the defence was pleaded[12] and it was not dealt with separately by Suffiad J.

10.  At trial, as noted above, Suffiad J considered a related but separate pleaded defence of tenancy by estoppel and concluded[13] that this argument did not provide the First Owners with a defence to the IOs’ claim that the 13 parking spaces are common areas.  His conclusion was based on the provisional conclusion of the Court of Appeal in an earlier summary judgment appeal in these proceedings (reported at [2007] 4 HKLRD 440) and it is not necessary to consider that particular argument further since it was not pursued by the First Owners on appeal.

11.  What the First Owners do maintain is that the principle of estoppel by convention avails them in asserting their title to the 13 parking spaces. However, reliance on this principle does not assist the First Owners.  Estoppel by convention is concerned with a common assumption relied upon as a basis upon which the persons sharing such common assumption enter into a transaction or legal relationship: First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd (2012) 15 HKCFAR 569 at [79(6)], citing Unruh v Seeberger (2007) 10 HKCFAR 31 at [142].  It is also necessary for the party relying on the principle to show that it would be unjust for the other party to attempt to depart from the common assumption and that he would suffer detriment arising from his having entered into the relevant transaction on the basis of the common assumption if the other party were permitted to set up rights inconsistent with that assumption: First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd (2012) 15 HKCFAR 569 at [79(7)], citing Unruh v Seeberger (2007) 10 HKCFAR 31 at [150].

12.  Here, the First Owners’ pleaded case relates to (a) the letting of the 13 parking spaces from 1987 to the manager of the building and then from 1998 to the IOs, and (b) the further letting of 12 of those spaces after the IOs had, through their solicitors, disputed the ownership of those spaces.  However, although the IOs had claimed the repayment of the rent paid in respect of the 13 parking spaces, Suffiad J dismissed that part of the IOs’ claim and accordingly, the First Owners are unable to show any detriment arising from the transaction or transactions which it is said were entered into on the basis of the common assumption.  For this reason alone, the plea of estoppel by convention must fail.

13.  On behalf of the First Owners, Mr KM Chong[14] sought to advance an additional argument in his oral submissions, namely that the Court of Appeal should not have given weight to the matter of practical convenience in relation to the layout of the 3^rd floor of the building because the designation of the one parking space on the 2^nd floor of the building for private ownership gave rise to the same or similar difficulties.  This argument is lacking in logic since the 2^nd floor layout simply highlights the practical inconvenience of the 3^rd floor layout on the First Owners’ case.  In any event, being a new point not raised below it also faced the insuperable difficulty that it could not satisfy the conditions in Flywin Co Ltd v Strong & Associates Ltd (2002) 5 HKCFAR 356.

14.  For these reasons, we dismissed the appeal with costs to the respondent.

Postscript

15.  The Court understands that this appeal is the last appeal for which leave to appeal was granted “as of right”,[15] the Court of Appeal’s judgment under appeal being dated 27 August 2014 and so before the coming into effect of the Administration of Justice (Miscellaneous Provisions) Ordinance 2014 on 24 December 2014.  If this is indeed the last of the “as of right” appeals, this category of case can now be consigned to the footnotes of legal history since the arguments in favour of the abolition of appeals to this Court “as of right”,[16] fully applicable to the present appeal for which leave to appeal would not otherwise have been granted, have happily now led to the repeal of s.22(1)(a) of the Hong Kong Court of Final Appeal Ordinance.[17]