聯基新樓業主立案法團 v. YAN YAN MOTORS LTD

HCSA 7/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO. HCSA 7 OF 2015

(On appeal from Small Claims Tribunal Claim No. SCTC 30000 of 2014)

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HCSA 8/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO. HCSA 8 OF 2015

(On appeal from Small Claims Tribunal Claim No. SCTC 30001 of 2014)

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HCSA 9/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO. HCSA 9 OF 2015

(On appeal from Small Claims Tribunal Claim No. SCTC 30002 of 2014)

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HCSA 10/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO. HCSA 10 OF 2015

(On appeal from Small Claims Tribunal Claim No. SCTC 30003 of 2014)

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HCSA 11/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO. HCSA 11 OF 2015

(On appeal from Small Claims Tribunal Claim No. SCTC 30004 of 2014)

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HCSA 12/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO. HCSA 12 OF 2015

(On appeal from Small Claims Tribunal Claim No. SCTC 30005 of 2014)

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HCSA 13/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO. HCSA 13 OF 2015

(On appeal from Small Claims Tribunal Claim No. SCTC 30554 of 2014)

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D E C I S I O N

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INTRODUCTION

1.  On 16 January 2015, the Deputy Adjudicator made a total of 7 awards in SCTC 30000, 30001, 30002, 30003, 30004, 30005 and 30554/2014 in favour of the claimant and ordered the defendant to pay to the claimant various sums representing the defendant’s share of the costs of repairs and maintenance of a building known as Luen Gay Apartments (“the Building”) situated at 124-134 Belcher’s Street, Kennedy Town, Hong Kong, together with interest and costs.

2.  On 23 February 2015, the Deputy Adjudicator dismissed the defendant’s application for review of the said awards.

3.  On 22 April 2015, this court granted leave to the defendant to appeal against the Deputy Adjudicator’s said decision made on 23 February 2015.

4.  As mentioned in this court’s written decision dated 22 April 2015, the defendant argues that that the Deputy Adjudicator erred in law in three aspects in making his awards, namely, that :-

(1) the Deputy Adjudicator misconstrued clause 3 of the relevant deed of mutual covenant in failing to find that the developer had the exclusive right to use two external walls and the main roof of the Building, and hence should be solely responsible for the costs of repairs and maintenance of the said external walls and main roof of the Building;

(2) the Deputy Adjudicator wrongly placed the burden on the defendant to prove that the external walls were, as a matter of fact, used or occupied by the developer; and

(3) the Deputy Adjudicator misunderstood or misapplied the decision of the Court of Appeal in The Incorporated Owners of Goa Building v Wui Tat Company Limited, CACV 349/2002 (17 July 2003).

5.  Before I turn to consider these 3 grounds of complaint raised by the defendant, I shall first set out the background facts relevant to the present appeals.

Background facts

6.  The Building, erected upon Section L of Inland Lot No 906, has twenty four floors.  The ground floor consists of shops or non-domestic units, the first floor consists of business and/or domestic units, and the second to twenty fourth floors consist of domestic flats.

7.  The deed of mutual covenant (“the DMC”) relevant to the Building was entered into on 27 July 1972 amongst Realty Development Corporation Limited (“the Developer”), Wong Hong Chon (“the First Purchaser”), and Kennedy Town Service Company Limited (“the Management Company”).

8.  Clause 3 of the DMC, which forms the focus of the parties’ arguments in these appeals, states as follows:-

“There is reserved unto [the Developer] and its assigns and all persons authorised by it or them, for the residue of the said term of 999 years the exclusive right to use

(a) the main roof of the said building for the erection, installation and maintenance of a cooling tower or compressor or for any other purpose and

to use

(b) the external walls facing Belcher’s Street from the Ground Floor to the 7^th floor inclusive

(c) the external walls facing the private street on the South from the ground floor to the 7^th floor inclusive

(d) the flat roof on the 1^st and 2^nd floor levels

for the erection, installation and display of signboards, advertisements, decorations, lights, lanterns, articles and other display materials.  The above works shall be at the costs of [the Developer], its assigns or licensees who shall make good any damage to the said main roof, the said external walls or the flat roof occasioned thereby and, so long as the said erection installation or display shall remain, maintain and repair the part or parts of main roof, the external walls and of the flat roof so taken up by such erection installation or display.  But the cost for the maintenance and repair of the said main roof, the external walls and the flat roof not taken up by [the Developer] its assigns or licensees shall be part of the management expenses of the said premises and building payable by all co-owners under clause 9(f)(2) hereafter …”

9.  In what follows, the external walls of the Building referred to in clause 3(b) and (c) of the DMC shall be referred to as “the External Walls”, and the main roof of the Building shall be referred to as “the Main Roof”.

10.  On 15 December 2013, a meeting of the owners of the Building was held.  At that meeting, the owners resolved to carry out certain works of repairs and maintenance in relation to the Building, including (i) general repairs and maintenance, and (ii) fire services installation works.  The total costs for these works came to HK$16,813,784 and HK$1,265,022 respectively.

11.  The Incorporated Owners of Luen Gay Apartments (ie the claimant) decided that the said costs ought to be borne by the co-owners of the Building on a pro-rata basis by reference to the number of undivided shares of and in the relevant building and land held by the co-owners.

12.  The defendant was at all material times, and is, one of the co-owners of the Building.  It objected to the claimant’s decision regarding the apportionment of the said costs.  In particular, the defendant considered that under the DMC, the Developer was given the exclusive possession, or exclusive right to the use occupation or enjoyment, of the External Walls and Main Roof of the Building, and therefore ought to be solely responsible for the relevant portions of the costs incurred in the repairs and maintenance of those parts of the Building.  The claimant disagreed with the defendant’s contention.

13.  On 8 August 2014, the claimant brought 7 actions in the Small Claims Tribunal against the defendant to recover the apportioned costs which the claimant considered to be due and payable by the defendant.

14.  As earlier mentioned, the Deputy Adjudicator eventually found in favour of the claimant, and ordered the defendant to pay the total sum of HK$130,569.40 to the claimant by 7 separate awards.

The Developer does not have exclusive possession, or exclusive right to the use occupation OR enjoyment, of the External Walls of the Building under the DMC

15.  The main debate between the parties at the hearing of the appeals relate to the question of whether, upon the true construction of the DMC, the Developer is entitled to the exclusive possession, or exclusive right to the use occupation or enjoyment, of the External Walls and Main Roof of the Building.  If the answer to this question is “yes”, the Developer would be under an obligation to maintain the External Walls and the Main Roof in good repair and condition by virtue of section 34H of the Building Management Ordinance (“the BMO”), notwithstanding any inconsistent provision in the DMC (by the operation of section 34C of the BMO).

16.  In The Incorporated Owners of Goa Building v Wui Tat Company Limited, CACV 349/2002 (17 July 2003), the Court of Appeal held that a provision in the deed of mutual covenant which merely gave the developer the exclusive right to erect signs, signboards, flu pipes, etc on the external walls did not give to the developer either the exclusive possession of the external walls or the exclusive right to the use occupation or enjoyment thereof for the purpose of section 34H of the BMO, and accordingly the developer was not responsible for the whole costs for the maintenance of the external walls.  The reasoning of the Court of Appeal can be found in the following passages in the judgment of Rogers VP (with whom Le Pichon JA and Waung J agreed):-

“ 3. A claim could thus be made against the respondent if it were shown that it had the right to the exclusive possession of any part of the building or had the exclusive right to the use, occupation or enjoyment of that part. Any such right would inevitably stem from the deed of mutual covenant. In this respect reference has to be made to clause 1.01 thereof [which] I shall set out in full.

‘ The Vendor shall for the residue of the term of years set out in the said Schedule have the sole and exclusive right and privilege (A) to the use occupation and enjoyment of all the said units of the said Building and the appurtenances thereto and the entire rents and profits thereof save and except the said Flat ‘A’ on the First Floor and Portion ‘A’ of the Flat Roof on the first floor level of the said Building and the appurtenances thereto and the entire rents and profits thereof and (B) Subject to any necessary approval of the Government Authority or Department to erect, construct, install, affix, fit up, paint and maintain any signs, signboards, advertisements, placards, posters or any other structures whatsoeverof such size and design whether illuminated or otherwise and at to or on such position or positions of the external walls of the said Building and of any part of the said Building in common use as the Vendor shall in its absolute discretion think expedient or desirable and to remove replace or repair the same and to enter upon any unit at all reasonable times with or without workmen for the purpose of so doing and (C) Subject to any necessary approval of the Government Authority or Department to erect, construct, install, affix or fit up one or more flu pipes or smoke stacks or chimneys at to or on such part or parts of the open yard or [yards] and of the external walls of the said Building as the Vendor shall in its absolute discretion think fit and to remove replace or repair the same and to enter upon any unit at all reasonable times with or without workmen for the purpose of so doing.’ (emphasis added)

4. It is important to note that although the respondent (i.e. the Vendor) was given rights in respect of various matters such as the erection of signs and signboards and flu pipes, it was not given either the exclusive possession of the external walls or the exclusive right to the use, occupation or enjoyment thereof. Indeed, such rights as clause 1.01 gave the respondent extended not only to the external walls but also to any part of the building that was in common use.

6. In my view, it was clear that the rights accorded to the respondent under clause 1.01 did not comprise all the rights which would amount to the exclusive possession or the exclusive right to the use, occupation or enjoyment of a part of the building. The rights accorded by clause 1.01 were merely part of the rights which might be enjoyed by an owner but were not the full and exclusive rights. As a result, I consider that the conclusion which was arrived at by the deputy judge in paragraph 11 of his judgment that ‘Clause 1.01 of the DMC confers on the respondent the exclusive right to the use, occupation and enjoyment of the wall’ was wrong. Indeed, as was pointed out during the course of argument, it is impossible to ignore the fact that clause 1.01 refers not only to the external walls but also to the parts of the building in common use. To suggest that the common parts of the building were thus either in the exclusive possession of the respondent or that the respondent had the exclusive right to the use, occupation or enjoyment thereof would be self-contradictory and absurd.

7. In those circumstances, the respondent’s liability in respect of the maintenance of the external walls would fall to be determined under clause 3.02 of the deed of mutual covenant and not under section 34H of the Ordinance.”

17.  In respect of this decision of the Court of Appeal, Mr Soloman Lam (for the defendant) placed emphasis on the fact that the relevant clause (ie clause 1.01 of the deed of mutual covenant in that case) referred not only to the external walls but also to other parts of the building in common use.  I accept that this was a matter which Rogers VP referred to in his judgment, but it is clear from my reading of his Lordship’s judgment as a whole that the conclusion reached was primarily on the basis that the rights accorded to the developer under clause 1.01 did not comprise all the rights which would amount to the exclusive possession or the exclusive right to the use occupation or enjoyment of the external walls.  The fact that clause 1.01 referred not only to the external walls but also other parts of the building in common use was an additional point which Rogers VP considered put the contrary position “self-contradictory and absurd”.

18.  A similar conclusion was reached in a subsequent decision of the Court of Appeal in The Incorporated Owners of Shatin New Town v Yeung Kui, CACV 45/2009 (10 December 2009).  In that case, the relevant deed of mutual covenant gave the developer the exclusive right to erect pipes on the exterior walls and also to use the exterior walls for advertising purposes.  Cheung JA (with whom Stone and Lunn JJ agreed) held that the conferring of such exclusive right to use the exterior walls for limited purpose did not give the developer exclusive possession of the exterior walls.  The following passages in the judgment of Cheung JA are relevant for the present purpose:-

“ 14. The second clause relied upon by the Judge is Clause 7 of Section I of the DMC which confers upon the developers :

‘ (a) ... the exclusive right to erect one or more flu pipes or smoke stackes or chimneys at the rear exterior wall or walls of each Block from the ground floor or any other level to the Roof thereof together with the right to maintain, replace or remove the same provided such erection, maintenance, replacement or removal shall not unnecessarily interrupt the enjoyment of the Residential Units in the Residential Block.

(b) have the exclusive right to use all the external walls of all of the Residential Block for advertising purposes and to display, install, erect, affix or permit to be displayed, installed, erected or affixed thereon and thereto such advertising signboard placards, posters and other advertising signs or structures whatsoever (whether illuminated or not) subject to the approval of the Public Works Department or other Government Authorities concerned and with the right to remove, repair, maintain, service or replace the same provided that the same shall not unnecessarily interrupt the enjoyment of the Residential Units in that Residential Block.’ (emphasis added)

15. The rights that are given to the developers are to erect pipes on the exterior walls, and also to use the exterior walls for advertising purposes. While these are described as exclusive rights, they are in fact qualified. First, the developers must have the prior approval of the manager of the development before they can exercise these rights. Second, in respect of the advertising right this is subject to two further conditions, namely, the approval of government authorities, and that the exercise of the rights must not unnecessarily interrupt the enjoyment of the residential units.

16. Considering that the exterior walls are specifically designated as a common area which is to be used by all the owners, the conferring of the so-called ‘exclusive right’ of the exterior walls to the developers for some limited purpose does not in my view provide the developers with exclusive possession of the exterior walls.

17. In The Incorporated Owners of Goa Building v. Wui Tat Company Limited CACV 349/2002, this Court (Rogers VP, Le Pichon JA and Waung J) construed a similar, although not identical, clause in a DMC which gave the party the exclusive right to use the exterior walls for advertising and to install pipes. There are similar restrictions by way of prior approvals before such rights can be exercised.

18. This Court then held that such rights ‘did not comprise all the rights which would amount to the exclusive possession or the exclusive right to the use, occupation or enjoyment of a part of the building. The rights were merely part of the rights which might be enjoyed by an owner but were not the full and exclusive rights’.

19. Although admittedly the exact wording of the clause in Goa Building is different : ‘the external walls of the said Building and of any part of the Building in common use...’, nevertheless the construction nonetheless of its effect is equally clearly applicable to the present case.”

19.  Again, although the Court of Appeal in The Incorporated Owners of Shatin New Town case took into account other considerations in coming to the conclusion that the developer did not have the exclusive possession of the exterior walls (including the fact that the developer’s right to use the exterior wall was “qualified” by the need to obtain the prior approval of the manager, the exercise of the developer’s advertising right was subject to the approval of government authorities and must not unnecessarily interrupt the enjoyment of the residential units, and the exterior walls were specifically designated as a common area), in my view the consideration central to the decision of the Court of Appeal was that stated in paragraph 18 of the judgment of Cheung JA, namely, whether the rights conferred on the developer comprised “all the rights which would amount to the exclusive possession or the exclusive right to the use, occupation or enjoyment of a part of the building”.

20.  In the present case, the Developer’s exclusive right to use the External Walls under clause 3(b) and (c) of the DMC is limited to the erection, installation and display of signboards, advertisements, decorations, lights, lanterns, articles and other display materials.  Such right cannot be regarded as comprising all the rights which would amount to the exclusive possession or the exclusive right to the use occupation or enjoyment of the External Walls.

21.  Support for this conclusion can also be found in clause 4(a) of the DMC, which confers on the Management Company the “exclusive right to use the external and internal walls …. for signboards, advertisements, decorations, lights, lanterns and other display material as the Management Company may think fit”.  Although this right is, as stated at the beginning of clause 4(a), “[s]ubject to the reservation in favour of [the Developer] under Clause 3”, it seems to me that if the Developer is to be regarded as having the right to the exclusive possession of the External Walls or the exclusive right to the use occupation or enjoyment thereof, the right given to the Management Company under clause 4(a) would be largely meaningless.  In my view, the two clauses ought to be read together such that, subject to the Developer’s right (which shall have priority) to use the External Walls for the limited purposes mentioned in clause 3(b) and (c), the Management Company is also entitled to use External Walls for some limited purposes.  Neither can be regarded as being entitled to the exclusive possession of the External Walls or the exclusive right to the use occupation or enjoyment thereof.

22.  In all, I am of the view that, upon the true construction of the DMC, the Developer does not have the exclusive possession, or exclusive right to the use occupation or enjoyment, of the External Walls for the purpose of section 34H of the BMO. Accordingly, the responsibility to maintain the External Walls in good repair and condition does not fall solely on the Developer.

Whether the Developer has the exclusive possession, or exclusive right to the use occupation OR enjoyment, of the Main Roof does not arise for consideration

23.  Although, in the decision granting leave to appeal, I granted leave to the defendant to amend the applications for leave to appeal so that the defendant could raise the argument that it should not be responsible to share the costs of repairs and maintenance of the Main Roof, as pointed out by Mr Alexsander Wong (for the claimant) and as can be seen from the Deputy Adjudicator’s written reasons for decision, the defendant did not, apparently, raise any issue in respect of the costs of repairs or maintenance of the Main Roof in the proceedings below.  For this reason, there is no specific finding by the Deputy Adjudicator regarding the Developer’s liability to pay the costs of repairs and maintenance of the Main Roof.

24.  Under section 28 of the Small Claims Tribunal Ordinance, an appeal against a decision of the tribunal lies only on a ground involving a question of law alone or on the ground that the claim is outside the jurisdiction of the tribunal (which is not relevant here).

25.  In the absence of any decision by the Deputy Adjudicator regarding the Developer’s right (if any) to the exclusive possession, or exclusive use occupation or enjoyment, of the Main Roof under the DMC and having regard to the fact that this was not even an issue raised by the defendant before him, the issue cannot, in my view, form the proper subject matter of an appeal under section 28 of the Small Claims Tribunal Ordinance.

26.  In any event, both Mr Lam and Mr Wong have taken me to a document described by counsel as a “tender analysis” which set out the scope of the works intended to be carried out by the claimant.  There is nothing in that tender analysis to show that works relating to the repairs or maintenance of the Main Roof were to be carried out.  The works which may conceivably be relevant to the present discussion are item 17 (relating to the repairs and separation of the flushing water tank and fire services water tank on the roof) and item 24 (relating to the replacement of the cover of a water tank on the roof).  They do not, in my view, constitute works of repairs or maintenance of the Main Roof itself.   The only other item which may potentially be relevant is item 18 relating to water proofing works.  There is, however, nothing in the tender analysis to suggest that the water proofing works were intended to be carried out at or on the Main Roof.

27.  Further, even if the Developer is entitled to the exclusive possession, or exclusive right to the use occupation or enjoyment, of the Main Roof under the DMC, there is the further question of whether the Developer should be solely responsible for the maintenance in good repair and condition of the water-proofing layer in the Main Roof which, prima facie, would be for the benefit and enjoyment of all the co-owners of the Building (see Wing Ming Garment Factory Ltd v Wing Ming Industrial Centre [2014] 4 HKLRD 52 at paragraphs 90 to 99, per Godfrey Lam J).

28.  For the above reasons, I consider that the defendant has failed to lay a proper foundation for raising the argument that the Developer should be held solely responsible for the costs of repairs and maintenance of the Main Roof.

29.  Having reached the above conclusions, I reject the defendant’s grounds of complaint against the Deputy Adjudicator’s decision mentioned in paragraph 4(1) and (3) above.

Burden of proof

30.  That leaves the defendant’s complaint mentioned in paragraph 4(2) above, namely, that the Deputy Adjudicator wrongly placed the burden on the defendant to prove that the External Walls were, as a matter of fact, used or occupied by the Developer.

31.  The question of whether the Developer actually used or occupied by the Main Roof is relevant because, under clause 3 of the DMC, “so long as the erection installation or display [by the Developer of signboards, advertisements, decorations, lights, lanterns, articles and other display materials] shall remain, [the Developer is under an obligation to] maintain and repair the part or parts of the main roof, the external walls and of the flat roof so taken up by such erection installation or display”.

32.  The Deputy Adjudicator accepted the evidence given by the claimant’s witness (Ms Wong), and found as a fact, that there was no signboard, advertisement or other structure erected, installed or displayed by the Developer on the External Walls (save that there was apparently a banner which was once erected, installed or displayed by an elderly centre), and no works of repairs or maintenance of the External Walls related to or were caused by any such signboard, advertisement or structure. The Deputy Adjudicator was, in my view, entitled to make this finding of fact. Further, I do not read the Deputy Adjudicator’s reasons for decision (including in particular paragraphs 36 and 37 thereof relied upon by the defendant) as placing on the defendant the burden of proof that the External Walls were, as a matter of fact, used or occupied by the Developer.

33.  I therefore reject the defendant’s grounds of complaint against the Deputy Adjudicator’s decision mentioned in paragraph 4(2) above.

Disposition

34.  In all, I dismiss the defendant’s appeals with costs to the claimant, to be taxed if not agreed.