SUPREME HONOUR DEVELOPMENT LTD. v. LAMAYA LTD. AND ANOTHER

1989 No. A2477

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HEADNOTE

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Property law - whether right to name and change name of a building an easement or right appurtenant to ownership of minority or undivided shares in the building - whether covenant in DMC acknowledging that right "relates" to land - s.41(2) Conveyancing and Property Ordinance (Cap. 297) - whether DMC represents personal contract between, & binding on, owners of undivided shares from time to time in the building.

Held:

The right to name a building was not an easement or appurtenant right so that the benefit and burden thereof would not run with the land and bind successors in title. The covenant int the DMC was personal and binding only on the original parties thereto. Judgment accordingly for the plaintiff.

IN SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The facts of, and the historical background to, this action emerge from the pleadings and the facts which have been admitted, for the purposes of this action, by the Plaintiff and the Defendant. There have been no admissions between the Defendant and the Third Party but it was clear from the conduct of the proceedings that the Third Party accepted the admissions between the Plaintiff and the Defendant as being the factual background to this action.

2. The Plaintiff is a limited company incorporated in Hong Kong and is the registered owner of all those 2,978 equal undivided 3,388th shares of and in all that piece of ground registered in the Land Office as The Remaining Portion of Section A of Marine Lot No.368 ("the Land") and of and in the building thereon known as "Fung House" which comprises twenty-two floors ("the Building") together with the sole and exclusive right and privilege to hold use occupy and enjoy all those floors from the Basement to the 18th Floor of the Building except the 5th Floor.

3. The Defendant is a Hong Kong limited company and is the registered owner of all those 110 equal undivided 3,388th parts on shares of and in the Land and the Building together with the sole and exclusive right and privilege to hold use occupy and enjoy all that 22nd Floor (including the Flat Roof thereof) and all those Roofs above the 22nd Floor of the Building.

4. In the premises, the Plaintiff owns about 87.9% of all the undivided shares of and in the Land and the Building and the Defendant owns about 9.1% thereof.

5. The Plaintiff and the Defendant and the other registered owners of the Building are owners in common of the entire Building and are entitled to joint possession use and enjoyment of the common parts of the Building.

6. On the 14th of April, 1989, the Defendant by its solicitors gave notice to the managing agent of the Building, Guardian Property Management Limited ("the Managing Agent"), that they were going to change the name of the Building to "Seapower Centre" with effect from the 22nd of April, 1989.

7. In the morning of the 22nd of April, 1989, the Defendant by its contractors and/or agents Ar Sum Advertising & Decoration Company sought to remove the signs and to install new signs in place thereof bearing the name of "Seapower Centre". The Defendant's action was stopped by the Managing Agent.

8. On the 5th of May, 1989, the Defendant obtained an injunction from Hopkinson, J. on an ex parte application restraining, inter alia, the Managing Agent its servants or agents from preventing, restricting, obstructing or interfering in any way whatsoever with the contractors engaged by the Defendant in carrying out the installation and affixing of signs to the Building displaying a new name and thereafter removing, obstructing or otherwise howsoever interfering with the new signs.

9. On the 11th May 1989 the writ in the action was issued, but the day before the intended Plaintiff obtained exparte from Hooper J, an interim order to the following effect :-

"That the Defendant be restrained and an injunction is hereby granted restraining it, whether by itself or its servants or agents or any of them or otherwise howsoever, until after the hearing of an inter-partes summons returnable on or before 24th May 1989 or until further order, from interfering with, changing or removing or causing to be interfered with, changed or removed any signs in the common areas of the Building known as 'Fung House', Nos.19-20 Connaught Road, Central, Hong Kong ('the Building'), or from installing, affixing or erecting or causing to be installed, affixed or erected any signs in the common areas of the Building, and an injunction is hereby granted."

10. That injunction was confirmed by Mayo J, on the 18th May 1989 and was effective until disposal of the action or further order. Mayo J, also gave other directions for the further conduct of the proceedings.

11. The Plaintiff avers that they, as owners in common of the Building, have the right and liberty together with the Defendant and the Other Registered Owners to decide whether or not the name of the Building should be changed and, if the same should be changed, to decide what new name should be given in place thereof.

12. The Defendant, in contradiction to that averment claims that, by reason of the matters they have pleaded, the right of change of name has become vested in them solely and as a right appurtenant to their ownership of 30 equal undivided parts or shares of and in the Land.

13. In pursuit of the exercise of the right they claim, the Plaintiff asks for two declarations and an injunction in the following terms :-

14. The Defendant, again in contradiction, claims three declarations in the following terms :-

15. That then is the present position between the Plaintiff and the Defendant.

16. The Defendant has joined the Third Party in the proceedings. The Defendant, as we shall see, purchased 30 of its shares in the building with exclusive occupation of the Roofs from the Third Party on the 28th February 1989.

17. One of the easements or other appurtenant rights, the Defendant says, the benefit of which was specifically assigned with that property was the absolute right and liberty for the Defendant as Purchaser to give whatever name for the Building and to change the name of the Building, which rights were more particularly described in the Assignment.

18. In the circumstances, the Third Party had covenanted that it had good right and title to assign to the Defendant the absolute right and liberty to give whatever name for the Building and to change the name of the Building at any time without reference to any owner or other person having an interest in the said premises and the Building.

19. So if the Defendant is found liable to the Plaintiff the Defendant would be entitled to recover against the Third Party damages suffered by the Defendant by reason of the Third Party's breach of that covenant.

20. Alternatively, the Defendant continues, the Third Party has expressly or impliedly warranted to the Defendant that it had the right to give whatever name for the Building and to change the name of the Building, that the right was valuable and that it was capable of being enjoyed and exercised as a right pertaining to the said 30 equal undivided parts or shares, and so the Defendant can recover damages for the breach by the Third Party of that warranty.

21. The Third Party supports the Defendant in his defence and counterclaim to the Plaintiff's claim. However, they say, if the Defendant fails and is held liable to the Plaintiff, the Third Party is not in breach of any covenant or warranty to the Defendant and the Defendant cannot recover any damages therefrom.

22. In order to fully appreciate the inter-relationship of the three parties to this action it is necessary to trace the assignments to them of their various interests in the property which is the centre of this dispute.

23. Li & Fung Development Limited formerly known as Dragonwood Company Limited ("Li & Fung") was the developer and first owner of the Land and of and in the Building thereon known as "Fung House" which comprises twenty-two floors.

24. By an Assignment dated 17th March 1984, Li & Fung sold and one Lucky Wind Investment Limited ("Lucky Wind") purchased and became the registered owner of the Basement to the 4th floor and the 6th floor to the 18th floor inclusive of Fung House.

25. By an Assignment dated 15th August 1988, Lucky Wind sold and the Plaintiff purchased and became the registered owner of the Basement to the 4th floor and the 6th floor to the 18th floor inclusive of Fung House.

26. That traces the devolution of the Plaintiff's interest.

27. By an Assignment dated 31st January 1984, Li & Fung sold and one Beralter Limited purchased and became the registered owner of the 22nd floor of Fung House.

28. By an assignment dated 31st January 1984 Li & Fung sold and one Farouche Limited purchased and became the registered owner of the roofs above the 22nd floor of Fung House. The disputed right to name the building is contained in this Assignment.

29. By an assignment dated the 2nd July 1986 Farouche Limited sold and Li and Fung (Properties) Limited purchased and became the registered owner of all the interests in Fung House that Farouche Limited had purchased from Li & Fung in the assignment of 31st January 1984.

30. By an assignment dated 28th February 1989 Li & Fung (Properties) Limited and Beralter Limited sold and Lamaya Limited purchased, respectively, all the interests in Fung House that Li & Fung (Properties) Limited had purchased from Farouche on 2nd July 1986 and Beralter's interest in the 22nd floor of Fung House.

31. That traces the devolution of the Defendant's interest.

32. There were other assignments of other parts of the building.

33. By assignments dated the 31st January 1984 Li & Fung sold and On Shing Amusement Company Limited, Hinchinbrook Limited and Albinina Limited purchased and became the registered owners of the 19th, 20th and 21st floors, respectively, of Fung House.

34. By an assignment dated 28th February 1989 Hinchinbrook and Albinina sold and Filtin Limited purchased and became the registered owner of the 20th and 21st floors of Fung House.

35. At B156 of the agreed bundle of documents is an agreement dated the 2nd February 1989 wherein Hinchinbrook, Albinina, Beralter and Li & Fung (Properties) agreed to sell the 20th, 21st, 22nd floors and the Roofs respectively to Seapower Consortium Company Limited. Under paragraph 8(a) of that agreement, I am told from the Bar, Seapower Consortium Limited nominated the Defendant to take the Assignment of the Roofs of Fung House.

36. As a result of the disposal of all the floors of Fung House, Li & Fung do not now own any parts of Fung House and that at the time of the acquisition of the 22nd floor and the roof thereabove of Fung House on or about 28th February 1989 by the Defendant and at the commencement of the present action on or about the 11th May 1989, the whole of Fung House was owned by parties other than, and unrelated to, Li & Fung.

37. In order to represent the various assignments graphically and for better understanding I can do no more than reproduce the helpful chart presented by the Plaintiff.

Devolution of Title

38. It will be seen from the chart that on 31st January 1984 five assignments and the Deed of Mutual Covenants (DMC) were executed.

39. The assignments to Hinchinbrook, Albinina & Beralter exclude therefrom "the premises assigned by the vendor prior to the execution of these presents". The assignment to Farouche contains no such exclusion and so it can be concluded that this assignment was executed before the other three.

40. Hinchinbrook, Albinina, Beralter and Farouche are parties to the DMC so I conclude that this was the third step taken that day. That would leave the assignment to On Shing as the last link in the chain.

41. This chronology is important when construing the DMC, as we shall see.

42. As stated above, on 31st January 1984 Li & Fung assigned part of Fung House to Farouche. This assignment was registered at the Land Office by Memorial No.2542174. The description of property in the assignment is as follows :-

"ALL THOSE 30 equal undivided 3,388th parts or shares of and in ALL THAT piece or parcel of ground situate lying and being at Victoria Hong Kong and registered in the Land Office as THE REMAINING PORTION OF SECTION A OF MARINE LOT NO.368 And of and in the messuage erections and buildings thereon now known as "FUNG HOUSE" (hereinafter called "the said building") TOGETHER with the exclusive right to hold use occupy and enjoy ALL THOSE ROOFS above the Twenty-Second Floor of the said building (which said Roofs are more particularly delineated on the Plan annexed hereto and thereon coloured Pink and labelled "P") And Together also with all rights rights of way (if any) and all other rights privileges easements and appurtenances thereto belonging or appertaining or therewith at any time use held occupied or enjoyed AND particularly with the absolute right and liberty of the Purchaser (a) to erect, construct, install, affix, exhibit or paint or permit any person or persons to erect, construct, install, affix, exhibit or permit such signs, sign boards and festive decorations and/or advertisements whether illuminated or otherwise of such size and design and at such positions of the hereby assigned premises Provided always and it is hereby agreed and declared that the Purchaser shall at all times observe and comply with all laws and regulations relating to the erection maintenance and dismantling of such signs, sign boards or advertisements and subject to such reasonable requirements as the manager of the said building shall deem necessary so as not to interfere with any of the mechanical services or other building services thereon relating to the said building and shall be solely responsible for the repair maintenance upkeep removal and removal of any such signs sign boards festive decorations and/or advertisements and the repair maintenance and upkeep of the said Roofs upon which and/or to which such signs, sign boards and/or advertisements shall be affixed (b) to give wherever name for the building and change the name of the said building at any time without reference to the Vendor or any owner or other person having an interest in the said premises and the said building and all the estate right title interest property claim and demand of the Vendor and the Confirmor respectively therein and thereto except and reserved as in the said Crown Lease is excepted and reserved ... "

43. For convenience I will refer to the subject matter of paragraph (b) set out above as the right to name.

44. Subsequent on the assignments to Farouche and others the DMC was entered into.

45. Paragraph 1(b) of the DMC concerns the right to name and deals with it in the following terms :-

"The Fourth Purchaser hereby expressly reserves and the company, Houston, the First Purchaser, the Second Purchaser and the Third Purchaser hereby acknowledge and grant unto the Fourth Purchaser or its assignees the absolute right and liberty to give whatever name the Fourth Purchaser or its assignees shall think fit for the Building and to change such name at any time without reference to the Company and/or Houston, the First Purchaser, the Second Purchaser, and the Third Purchaser or any owner or other person have an interest in the Building and the Fourth Purchaser or its assignees shall not be liable to any owner or any person having an interest in the Building for any damages, claims, costs or expenses resulting therefrom of in connection therewith."

46. The Fourth Purchaser is, of course, Farouche.

47. The DMC was Registered at the Land Office by Memorial No.2542175.

48. As we have seen, on the 2nd July 1986, Farouche sold its interest in Fung House to Li & Fung (Properties) Limited. The sale is expressly subject to and with the benefit of the DMC Memorial No.2542175.

49. The property is described in the Schedule to the assignment.

50. Paragraph 1(a) contains the description, address, Lot number, sections, undivided shares, etc. and refers to assignment, Memorial No.2542174 ("the said Assignment").

51. Paragraph 1(c) is in the following terms :-

52. This assignment was registered at the Land Office under Memorial No.3089853.

53. Turning now to the assignment dated 28th February 1989 whereby the property came into the hands of the Defendants.

54. The property is described in paragraph 2(a) in Part II of the Schedule and here again there is a reference back to the original assignment of 31st January 1984 Memorial No.2542174.

55. Paragraph 2(c) in Part II of the Schedule is in the following terms :-

56. It is through this chain of assignments and the express reservation at Clause 1(b) of the DMC the Defendant says that the right to name the building is the Defendant's.

57. It should be noted here that each assignment through which the interest of the Plaintiff has passed is expressed as being with the benefit of the DMC Memorial No. 2542175.

58. As can be seen by the statement of claim at paragraph 8 the Plaintiff's claim is in tort for trespass and ouster. The use by a co-owner, the plaintiff says, of any part of a building in such a way which goes further than that which is ordinary and normal is an ouster of other co-owners rights and the offending co-owner can be sued for trespass.

59. By removing the existing signs and installing new ones, with a different name, the Defendant is doing exactly that and unless his actions are justified he commits the tort of trespass. The Defendant must justify his actions by demonstrating a right to do what he intends to do, which right is enforceable against the Plaintiff and the other co-owners of the building.

60. In any event, the Plaintiff continues, he is entitled to the declarations he seeks because the court may grant them independently of any cause of action. He cites 0.15, r.16, Rules of the Supreme Court in support of that proposition and points out that the Defendant is following the same course with his claim for declarations to the contrary.

61. No issue is taken on the nature of the Plaintiff's claim or his claim for the declarations.

62. In fact the Defendant approaches the action in the same way and sets up, in his defence, the right to which he lays claim by virtue of the assignments and the DMC, the relevant provisions of which I have set out above.

63. In the assignment to Farouche the Roofs are assigned "together with rights ... rights of way ... and all other rights privileges easements and appurtenances thereto belonging or appertaining ... AND particularly ... 1(b)", the right to name.

64. In the following assignments to Li and Fung (Properties) Limited and the Defendant, the right to name is found under the umbrella description of "Easements and other appurtenant rights the benefit of which is assigned with the Property".

65. Being described as such in those documents, the right which the grantor wanted to grant must be an easement or appurtenant right or a right identical thereto.

66. In fact in paragraph 5(b) and (e) of the Defence the Defendant claims that it is a right appurtenant to its ownership of the 30 equal undivided shares and the land.

67. The four characteristies of an easement are set out in In re Ellenborough Park, In re Davies, decd. Powell v. Madison, (1956)1 Ch.131 by Evershed M.R. at p.163. They are, he says :-

"(1) there must be a dominant and a servant tenement: (2) an easement must "accommodate" the dominant tenement: (3) dominant and servient owners must be different persons, and (4) a right over land cannot amount to an easement, unless it is capable of forming the subject-matter of a grant."

68. He was content to accept what was contained in a lending text of the day, as am I. Substantially the same definitions can be found in Megarry and Wade, The Law of Real Property, 5th Ed. p.853, and Cheshire and Burn's Modern Law of Real Property, 14th  Ed p.491.

69. Let us take the 4th requirement first, i.e. a right over land cannot amount to an easement, unless it is capable of forming the subject matter of a grant. In other words the right must be within the general nature of rights capable of being created as an easement.

70. Megarry and wade (op cit) at p.838 maintain that the list is not closed and continue :-

"Although most easements fall under one of the well-known heads of easements, such as way, light, support or water, the list of easements is not closed. The category of servitudes and easements must alter and expand with the changes that take place in the circumstances of mankind."

71. But there are limits. In the words of Lord Brougham in Keppell v. Bailey (1834)2 My and K 517 at p.535, 536 :-

"There are certain known incidents to property and its enjoyment; among others, certain burthens wherewith it may be affected, or rights which may be created and enjoyed over it by parties other than the owner; all which incidents are recognised by the law. In respect of possession, the property may be in one, while the reversion is in another; in respect of interest, the life estate in one, the remainder in tail in a second, and the fee in reversion in a third. So in respect of enjoyment; one may have the possession and the fee-simple, and another may have a rent issuing out of it, or the tithes of its produce, or an easement, as a right of way upon it, or of common over it. And such last incorporeal heraditament may be annexed to an estate which is wholly unconnected with the estate affected by the easement, although both estates were originally united in the same owner, and one of them was afterwards granted by him with the benefit, while the other was left subject to the burthen. All these kinds of property, however, all these holdings, are well known to the law and familiarly dealt with by its principles. But it must not therefore be supposed that incidents of a novel kind can be devised and attached to property at the fancy or caprice of any owner. It is clearly inconvenient both to the science of the law and to the public weal that such a latitude should be given. There can be no harm in allowing the fullest latitude to men in [536) binding themselves and for breach of their representatives, that is, their assets real and personal, to answer in damages for breach of their obligations. This tends to no mischief, and is a reasonable liberty to bestow; but great detriment would arise and much confusion of rights if parties were allowed to invent new modes of holding and enjoying real property, and to impress upon their lands and tenements a peculiar character, which should follow them into all hands, however remote. Every close, every message, might thus be held in a several fashion; and it would hardly be possible to know what rights the acquisition of any parcel conferred, or what obligations it imposed. The right of way or of common is of a a public as well as of a simple nature, and no one who sees the premises can be ignorant of what all the vicinage knows. But if one man may bind his messuage and land to take lime from a particular kiln, another may bind his to take coals from a certain pit, while a third may load his property with further obligations to employ one blacksmith's forge, or the members of one corporate body, in various operations upon the premises, besides many other restraints as infinite in variety as the imagination can conceive, ..."

72. I have quoted Lord Brougham in extenso because he sets out in the clearest terms the reasoning behind the imposition of the limits on the creation of such rights as we are here considering.

73. He was speaking in 1834 in England but in my view his dictum is equally applicable to Hong Kong in the present day.

74. It is clear that the undoubted right that a person has to give a name to his property is not a right in rem that operates against all the world. It is the same now as it was in 1878 when Jessel, M.R. said in Day v. Brownrigg (1878)10 Ch.D. 294 at p.301:

"This is an appeal from the Vice-Chancellor Malins, who has held for the first time, as far as I am aware, and as far as the learned counsel in the case on both sides are aware, that a man has a legal right to the exclusive use of any name he chooses to affix to any part of his landed property, whether consisting of a house or land; for there is no distinction, as far as I can find. Such a right is not known to the law, and it has never been decided that there is such a right of property."

75. In my view the right to name a building cannot exist at law as an easement and accordingly lacks the fourth characteristic described by Evershed MR in In re Ellenborough Park (op cit). I do not need then to explore the first three characteristics.

76. Although the Defendant and the Third Party did not press the existence of an easement it appears, as I have described, in the assignments and the claim to be an appurtenant right is in the Defence and Counterclaim.

77. In my view also the fact that the right to name is not an easement, or a right in the nature thereof, has much bearing on what follows.

78. For example if it is not an easement can it be an appurtenant right?

79. S.16 of the Conveyancing and Property Ordinance, Cap.219(CPO) groups easements and appurtenances together in the following way :-

80. As can be seen, the English equivalent of this section is S.62 of the Law of Property Act, 1925.

81. When interpreting S.62 in Phipps v. Pears [1964] All E.R. 35 at p.38G Lord Denning, M.R. said :-

"... in order for S.62 to apply, the right or advantage must be one which is known to the law, in this sense, that it is capable of being granted at law so as to be binding on all successors in title, even those who take without notice."

82. That is the language of easement. In Barnsley's Conveyancing Law and Practice, 3rd Ed at p.489, again in a discussion of S.62 under the heading "(a) Rights known to law" it is stated that the section applies only to a right or advantage capable of existing at law as an easement.

83. I am satisfied that that is a correct statement of the law and as the right to name is not an easement, neither is it an appurtenant right.

84. In that event, says the Defendant, in the DMC there were three covenants which, if not express, can be implied and which directly relate to the right to name. They are :-

85. Clause 27(a) of the DMC expressly provided that the covenants and provisions of the DMC should be binding on the parties thereto and their respective successors in title and assigns, and the benefit and burden thereof should be annexed to the undivided shares by them and to each and every part of the Building held therewith. It was expressly provided that the Law of Property (Enforcement of Covenants) Ordinance and any statutory amendments, modifications or re-enactment thereof for the time being in force should apply to the said covenants and provisions.

86. The Law of Property (Enforcement of Covenants) Ordinance was repealed by the CPO, and the Defendant relies on section 41 thereof.

87. In the circumstances, the Plaintiff as assignee of the original covenantor's land is bound by and the Defendant as assignee of the original covenantee's land is entitled to enforce the said covenant.

88. That, it will be noted, is the language of paras 8(b), 9, 10 and 11 of the Defence and Counterclaim.

89. In Clause 1(b) of the DMC the parties thereto "acknowledge and grant" to Farouche the right to name the building.

90. It will be recollected that Li and Fung had already assigned the right to name to Farouche before the DMC, or the assignments to the other parties to the DMC were executed.

91. Therefore the other parties to the DMC were unable to grant the right to name by the DMC since by that time they didn't have the right and Farouche, in any event, already had it.

92. The word "grant" is therefore otiose.

93. The word "acknowledge" remains. That in my view is the language of covenant. According to Stroud's Judicial Dictionary, Vol I at p.582, 583 :

"A covenant is an agreement by deed between two or more persons to do one of more thing or things, or to do, or give, or to prevent, or refrain from somewhat; and it is either (1) a covenant in law implied from the terms employed, or (2) a covenant in fact, i.e. that which is expressly agreed between the parties."

94. By acknowledging that Farouche had the right to name, the parties to the DMC must have been undertaking that they would not behave in a manner inconsistent with that right. As I have said, that is the language of covenant, as between the parties to the DMC.

95. However in order for that covenant to bind subsequent assignees of those parties it is common cause that the provisions of S.41 of the CPO must be complied with.

96. The CPO is a relatively new piece of legislation. It was Ordinance 62 of 1984. It repealed, and in part replaced, the Law of Property (Enforcement of Covenants) Ordinance, Cap.297. It also, in part, codified the law of real property in Hong Kong.

97. The approach I am asked to take with the CPO is that suggested by Lord Wilberforce in Farwell v. Alexander [1977] AC 59, where, at 72H, he says in connection with a consolidating statute (the Rent Act 1968) .

"I would agree and endorse the principle that it is quite wrong that, in every case where a consolidation Act is under consideration, one should automatically look back through the history of its various provisions, and the cases decided upon them, and minutely trace the language from Act to Act - a process, which, incidentally, has led to an argument of four days' length in this House. In recent times, because modern statutes have become so complicated, the courts myself included, (cf. Inland Revenue Commissioners v. Joiner [1975]1 W.L.R. 1701) rather too easily accept this process, whether under persuasion of counsel or from their own scholarly inclinations. But unless the process of consolidation, which invovles much labour and careful work, is to become nothing but a work of mechanical convenience, I think that this tendency should be firmly resisted; that self-contained statutes, whether consolidating previous law, or so doing with amendments, should be interpreted, if reasonably possible, without recourse to antecedents, and that the recourse should only be had when there is a real and substantial difficulty or ambiguity which classical methods of construction cannot resolve. This is particularly true of Acts such as the Rent Act 1968 which have to be applied by county courts, and which have to be understood or at least explained to great numbers of citizens."

98. With that approach, it is submitted, I can give the words in the C.P.O. their plain meaning without being fettered by any interpretation that has been placed upon these words by cases or commentaries arising before the enactment of the C.P.O.

99. Clearly the words of Lord Wilberforce cannot be faulted in relation to a consolidating statute. I have grave doubts that his approach is applicable to a statute of codification. I think the approach is even less applicable where the statute contains, like the CPO, enactments having retroactive effect.

100. S.41 of the CPO relates to enforcement of covenants. Subsection (2) describes the covenants that will be enforced by the section in the following terms :

101. In relation to 2(a) it is submitted that I can give the word "relate" its ordinary meaning and conclude that the right to name relates to the land of the covenantor i.e. the rest of the Building other than the Roofs. There is no need to apply a more sophisticated test than that. Reference to decided cases is not necessary.

102. The section is considered in a commentary on the Hong Kong Conveyancing and Property Ordinance by S. Nield. That author does not pursue the approach submitted by the Defendant. As far as she is concerned if you wish to ascertain the requirements for a covenant to relate to land reference is needed, inter alia, to Rogers v. Hosegoood [1900]2 Ch.388. In that case, Farwell, J stated that :-

"Covenants which run with the land must have the following characteristics : (1) They must be made with a covenantee who has an interest in the land to which they refer. (2) they must concern or touch the land. It is not contended that the covenants in question in this case have not the first characteristic, but it is said that they fail in the second. I am of opinion that they possess both. Adopting the definition of Bayley J. in Congleton Corporation v. Pattison (2), the covenant must either affect the land as regards mode of occupation, or it must be such as per se, and not merely from collateral circumstances, affects the value of the land."

103. Pausing here, in my view, what the Defendant is saying is that by virtue of the covenant he is able to exercise a right which affects the whole building, not just the parts to which his undivided shares attach or the parts to which he has exclusive occupation, and the ability to exercise that right enhances the value of those shares and that occupation.

104. With that in mind I turn to a recent case in which Rogers v. Hosegood (op cit) was considered.

105. In P & A Swift Investments (A Firm) v Combined English Stores Group PLC [1989]1 AC 633 Farwell, J's dictum was cited with approval by Lord Oliver at p.640 G. Lord Oliver formulated his own test at p.642 E where he said :-

"Formulations of definitive tests are always dangerous, but it seems to me that, without claiming to expound an exhaustive guide, the following provides a satisfactory working test for whether, in any given case, a covenant touches and concerns the land: (1) the covenant benefits only the reversioner for time being, and if separated from the reversion ceases to be of benefit to the covenantee; (2) the covenant affects the nature, quality, mode of user or value of the land of the reversioner; (3) the covenant is not expressed to be personal (that is to say neither being given only to a specific reversioner nor in respect to the obligations only of a specific tenant); (4) the fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land so long as the three foregoing conditions are satisfied and the covenant is connected with something to be done on, to or in relation to the land."

106. Only (1), (2) and (3) are relevant here. In the present case, if the right to name were severed from the ownership of the shares or from the right to exclusive occupation of a part of the building, that right would clearly be of no benefit to the covenantee i.e. the Defendant. I have found nothing in the DMC that would prevent this severance. In my view Clause 27(a) does not and language more akin to Clause 26(a) would be needed.

107. Does the covenant affect the nature, quality, mode of user or value of the land of the Defendant?

108. The Defendant owns, as do all the other co-owners, a number of undivided shares in the building together with the exclusive right to occupy part of the Building, in the Defendant's case it is the Roofs. The right to name does not affect the Defendant's right to exclusive occupation in any way.

109. If it affects the value of anything it can only affect the value of the undivided share. However in my view the value of the undivided share can only be directly proportional to the area of exclusive possession. To add to the value of the undivided share by reference to another factor can only be collateral.

110. The three relevant requirements in Lord Oliver's test are cumulative and I am satisfied that the covenants sought to be implied here fail the first two requirements. That is sufficient for me to hold that S.41(2)(a) has not been complied with, but for completeness I will turn to the third requirement.

111. An express personal covenant will not touch and concern the land. That, with respect, seems to be stating the obvious, but what with the case where the covenant, although not expressly personal, is in fact personal? The same conclusion must surely be arrived at.

112. The covenants here are implied so, clearly, could not be expressly personal. However the right they seek to support, the right to name, is in my view not capable of being granted so as to run with the land.

113. Are covenants, prayed in aid of that right, capable of touching and concerning the land? Because if so, by the implication of the covenants relied upon by the Defendant the right to name could be enjoyed by them as if it had been validly granted in the first place.

114. I think this contention can be dealt with quite shortly.

115. In the case of Ackroyd v. Smith (1850)10 CB 164 it was stated that :-

"It is not competent to a vendor to create rights unconnected with the use or enjoyment of the land, and to annex them to it: neither can the owner of land render it subject to a new species of burthen, so as to bind it in the hands of an assignee. - In trespass quare clausum fregit, the defendants justified under a supposed right of way conveyed to them by A. The plea, after stating the conveyance to A., of 'a certain close, and certain plots, pieces, or parcels of land, & c., together with all ways, & c., particularly the right and privilege to and for the owners and occupiers of the premises conveyed, and all persons having occasion to resort thereto, of passing and repassing, for all purposes, in, over, along, and through a certain road, & c.' alleged an assignment by A. to the defendants of 'the said lands, tenements, hereditaments, premises, and appurtenances,' granted by the former deed; and then averred that the trespasses complained of were committed by the defendants, being owners of the said lands, & c., and in the possession and occupation thereof, in using the right of way for their own purposes. The plaintiffs, after setting out the deed upon oyer, demurred specially to the plea, on the grounds that the defendants claimed a more extensive right than that granted by the deed, and that, if the right as claimed was granted by the deed, it was not assignable and it was held, that the grant to A. was not restricted to the use of the way for purposes connected with the occupation of the land conveyed : but that the right in question was not one which inhered in the land, or which concerned the premises conveyed, or the mode of occupying and enjoying them, and therefore did not pass to the defendants by the assignment."'

116. I have set out the headnote more fully than perhaps is at first sight necessary. However it has been emphasised before me that the scene is so different in modern Hong Kong that there is little guidance to be had from the old cases. I invite comparison between the language used by the conveyancers in Ackroyd v. Smith and that used by the coveyancers in this action.

117. Hence the right, as in this action, was personal only and could not be assigned.

118. He then continues:-

"A Covenant, therefore, that such a right should be enjoyed, could not run with the land."

119. This principle, in my view, supports the view I have taken on non-compliance of the covenants with S.41(2)(a) of the CPO.

120. The requirements of S.41(2) are also cumulative and I do not therefore need to consider S.41(2)(b) and (c) to conclude that the implied covenants are not enforceable in accordance with the provisions of S.41(3).

121. In the second day of the Defendant's case application was made to amend the Defence and Counterclaim. Firstly an amendment to paragraph 20 was sought. This was not opposed by the Plaintiff and the Third Party and was, accordingly allowed.

122. Secondly the Defendant sought to add a new paragraph 11A and to make minor consequential amendments elsewhere. This amendment was opposed by the Plaintiff. I was asked to, and did, deal with the matter de bene esse. After hearing argument from the Defendant and the Plaintiff which included dealing with the substance of the Defendant's case on this point should leave to amend be given, I gave leave to amend the Defence and Counterclaim in the manner applied for. I also gave leave to amend the Plaintiff's Reply and Defence to Counterclaim and for the Defendant to file a rejoinder thereto.

123. I now turn to consider that aspect of the Defendant's case represented by paragraph 11A of the Defence and Counterclaim.

124. There is, says the Defendant, in existence at any one point in time a contract between all the co-owners for the time being. The terms of that contract are the DMC.

125. It is either an express contract manifested by the fact that the assignment to each co-owner is expressly made subject to and with the benefit of the DMC.

126. Alternatively, the contract is to be implied. It is necessarily to be inferred from their acts and conduct in taking shares in the land and buildings, knowing that all co-owners were required to comply with the terms and conditions of the DMC in order to facilitate the scheme of co-ownership and knowing that their acquisition was necessarily subject to the DMC.

127. In either case the reservation by Farouche of the right to name and the acknowledgment that Farouche has that right are contained in the DMC.

128. In my view it doesn't matter whether the contract is express or implied.

"Agreement is not a mental state but an act, an inference from conduct, and since many of the terms of an express contract are often implied, it follows that the distinction between express and implied contracts has very little importance, even if it can be said to exist at all."

Chitty on contracts, 26th Ed. Para 14.

129. The core of the argument here is the DMC.

130. Can a contract subsist between parties in circumstances in which their identities and numbers fluctuate from time to time, as of course they do as co-owners of buildings such as "Fung House"?

131. It has been held that, in certain circumstances, members of an unincorporated association are in continous contractual relationship with the other members for the time being who constitute the constantly fluctuating body, even though there is no entity, or legal person, as such that contracts with each member.

132. An example of this is The Satanita [1895] P249 (affirmed on limitation of liability sub nom Clarke v. The Earl of Dunraven and Mount-Earl [1897] AC 59)

 

Rule 32 : 'Any yacht disobeying or infringing any of these rules, which shall apply to all yachts, whether sailing in the same or different races, shall be disqualified from receiving any prize she would otherwise have won, and her owner shall be liable for all damages arising therefrom ...'"

133. The Satanita, in breach of one of the rules fouled and sank the Valkyrie, and Lord Esher MR at p.256 observed,

"Here the defendant, the owner of the Satanita, entered into a relation with the plaintiff Lord Dunraven, when he sailed his yacht against Lord Dunraven's yacht, and that relation contained an obligation that if, by any breach of any of these rules, he did damage to the yacht of Lord Dunraven, he would have to pay the damages."

and by the time the case reached the House of Lords Lord Herchell was able to say, at [1897] AC p.63,

"I cannot entertain any doubt that there was a contractual relation between the parties to this litigation."

134. Another example, also cited by the Defendant, is Lee v. The Showmen's Guild o Great Britain [1952] 2 QB 329 where the contractual force of the rules of a trade union was considered.

135. Denning L.J. (as he then was) said at p.341:-

"The jurisdiction of a domestic tribunal, such as the committee of the Showmen's Guild, must be founded on a contract, express or implied. Outside the regular courts of this country, no set of men can sit in judgment on their fellows except so far as Parliament authorizes it or the parties agree to it. The jurisdiction of the committee of the Showmen's Guild is contained in a written set of rules to which all the members subscribe. This set of rules contains the contract between the members and is just as much subject to the jurisdiction of these courts as any other contract."

And on the following page he continues,

"Although the jurisdiction of a domestic tribunal is founded on contract, express or implied, nevertheless the parties are not free to make any contract they like. There are important limitations imposed by public policy."

136. An author, writing before the enactment of the CPO, seeks to apply the reasoning behind The Satanita and Lee v. The Showmen's Guild, to the owners of shares in a multi-storey building. He is not cited as any authority but, as I understand it, the Defendant adopts his arguments.

137. Harvey Bramwell in Conveyancing in Hong Kong, Butterworths, 1981 states, at p.275,

"If you apply this reasoning to the owners of shares in a multi-storey building it can be argued that there is privity of contract between individual owners and that the terms of that contract can be inferred from the deed of mutual covenant subject to which each owner purchases his shares. The deed of mutual covenant is not, of course, signed by all the owners but there can still be implied contract between later owners who accept the terms set out in the deed. In fact the undivided shares are assigned expressly subject to the terms of the deed of mutual covenant. If, therefore, there is a contractual relationship between the flat owners, a management company can act as the agent for the owners for the time being in order to enforce the contract between them all. This approach has not been tested in the courts of Hong Kong but if it is correct it may of course bypass the need to apply the law relating to the benefit and burden of covenants attaching to land and in fact would render the Law of Property (Enforcement of Covenants) Ordinance redundant!"

I do not accept that this approach is correct. At p.270/271 Bramwell sets out the purpose, as he sees it, of the DMC. He says,

"The object of the deed of mutual covenant is to provide for the maintenance and management of the common parts of the multi-storey building and to ensure that the benefit and burdens of the rights and obligations created by the deed are annexed to all parts of the land and buildings and run with the ownership of the various shares so that subsequent owners will be equally bound."

138. That is quite correct. That is the object of the DMC but that object will only be achieved in respect of the second leg thereof of the rights and obligations created are recognised by law. If they are not recognised by law they will bind only the original parties to the DMC.

139. Otherwise there would be no common law and equity rules about the running of the benefit and burden of covenants with land in Hong Kong and the CPO would be otiose.

140. Of course statute may modify the common law and the CPO has done so in significant areas where it enforces positive covenants and covenants between owners of the same land.

141. However if there is a purported grant of a right that cannot exist on law or there is a covenant that is not enforceable by S.41 of the CPO it matters not if that purported right or covenant is in the DMC, it will not run with the ownership of the various shares and subsequent owners thereof will not be bound.

142. In my view no exception to the DMC can be taken save for Clause 1(b) the substance of which is not referred to at all thereafter. The Defendants rights under 1(a) are emphasised at 16(i), 17(a)(ii) and 18(a) and qualified at 17 (a) (iii) and 17 (c) .

143. The decision making process as between co-owners for matters not covered by the DMC (and presumably for invoking the right claimed at paragraph 5 of the Statement of Claim) is set out in detail at paragraph 14 of the DMC.

144. Nothing further, in my view, is required.

145. It follows from what I have said that, being unable to justify the actions complained of the Defendant is liable to the Plaintiff in trespass and ouster and there will be judgment for the Plaintiff accordingly in the form of a declaration in terms of the first declaration sought in the prayer of the Statement of Claim, namely, a declaration that the Defendant is not entitled to change the name of the Building known as "Fung House", Nos.19-20, Cannaught Road Central, Hong Kong, and situate at The Remaining Portion of Section A of Marine Lot No.368, or otherwise to give any name which the Defendant shall think fit for the Building.

146. In the light of that declaration I do not consider it necessary to issue the injunction sought or continue the one issued by Mayo J, as described earlier. I am satisfied that so long as my adjudication stands and the declaration I have made remains, the Defendant will behave responsibly.

147. I will make an order nisi that the Plaintiff shall have the costs of the action against the Defendant, such costs to include the costs of all the interlocutory injunctions.

148. I will now turn to the action as between the Defendant and the Third Party.

149. The Defendant pleads the assignment entered into, inter alia, with the Third Party on 28 February 1989.

150. One of the easements or other appurtenant rights the benefit of which was specifically assigned with the Property was the absolute right and liberty for the Defendant as Purchaser to give whatever name for the Building and to change the name of the Building, which rights are more particularly described in the Assignment Memorial No.2542174.

151. By virtue of section 35 of the CPO there was implied in the said Assignment from the Third Party to the Defendant the covenants set out in Part II of the First Schedule.

152. One of the covenants in Part II of the First Schedule is that the Vendor had good right and title to assign the property free from incumbrances save as specified in the assignment and subject to the manner in which the assignment is expressed to be made.

153. Further or alternatively, the Third Party has expressly or impliedly warranted to the Defendant that it had the said right to give whatever name for the Building and to change the name of the Building, that the said right was valuable and that it was capable of being enjoyed and exercised as a right pertaining to the said 30 equal undivided parts or shares.

154. That it will be noted is the language of the Defendant's Statement of Claim against the Third Party.

155. I have already stated that the right to name is not an easement or appurtenant right. Thus it cannot have been assigned by the Third Party to the Defendant.

156. The covenants which were to be implied to support the right to name were not, I have held, covenants enforceable under S.41 of the CPO. They are not covenants relating to land at all and not included in the covenants for title in Part II of the First Schedule to the CPO.

157. Consequently the protection given to the vendor (the Third Party) by the opening words of Part II is neither applicable nor necessary.

158. The Third Party, in a slight change in the direction of the Defence, sought to convince me that this was not so. "Land" in Part II of the First Schedule, it was submitted, was wider than the definition contained in section 2. It really meant "the Property" as described in the Schedule to Form 1, which itself is in the Third Schedule to the Ordinance.

159. Thus the covenant for title was implied in the assignment but, and it is common cause, the Third Party is entitled to the protection set out in the opening words of Part II.

160. Those covenants in Part II it was submitted are express in that they are incorporated by reference into every assignment.

161. There being express covenants in the assignments, there was no room for implied warranties, as described in paragraph 11 of the Defendant's Statement of Claim on the same subject matter.

162. As far as I am concerned land means what section 2 says it means unless the context otherwise requires, and there is no contrary requirement here. Thus in my view the Third Party was correct in paragraph 9 of his Defence (although this has now been abandoned) where it is said the right to name did not form part of the subject matter of any covenant implied by Part II.

163. We are then left with the implied warranty claimed by the Defendant in paragraph 11 of the Statement of Claim against the Third Party.

164. There would be no scope for an implied warranty for title if the right to name were a right or interest in land - and easements, appurtenant rights and covenants enforceable under the CPO are all interests in land.

165. It is submitted by the Defendant that if the court does not regard the right to name as an interest in land then it is a chose in action in respect of the purchase of which, there has been a total failure of consideration. I regret that, beyond boldly stating the proposition, I have not had the benefit of argument on that premise in so far as it relates to paragraph 11 of the Defendant's Statement of Claim. It is certainly not expanded upon further in that pleading.

166. However, says the Third Party, examine the nature of the warranty pleaded in paragraph 11. Whether the Third Party had the right to name and whether the right pertained to the 30 equal and undivided shares, are matters of law. Whether that right is valuable is a matter that the Defendant can decide for itself as a matter of fact.

167. In contrast to that continues the Third Party compare the manner in which the assignment to the Defendant came about.

168. There was, as always, a period of time for investigation of and requisitions on title, the contents of the assignment are the subject of agreement between the parties and furthermore in the absence of any express provision it is for the purchaser to prepare and tender the assignment for the vendor's execution. Thus it is for the purchaser to put in whatever protection he requires from the vendor not only as regards title but in respect of any matter that is the subject of the assignment.

169. It is certainly the case, in my view, that whether the Third Party had the right to name and whether that right was assignable to the Defendant for the Defendant to exercise against all the other cc-owners is matter of law. It is not the subject of an implied warranty but is a matter the Defendant could have ascertained for itself.

170. In the absence of argument I do not propose to deal with the transaction as a transfer of personal property or a chose in action.

171. However the warranty for title has not been established and on the pleadings as between the Defendant and the Third Party the Defendant fails to establish that there is any entitlement to any relief against the Third Party and the claim against the Third Party is dismissed accordingly, with an order nisi for costs against the Defendant.