CACV 235/2011
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 235 OF 2011
(On Appeal from LDBM No. 139 of 2010)
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BETWEEN
廣泰樓業主立案法團
Applicant
And
心意中西美食
1st Respondent
林立機
2nd Respondent
FAME HERO LIMITED
3rd Respondent
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Before : Hon Cheung, Kwan and Chu JJA in Court
Date of Hearing : 27 July 2012
Date of Judgment : 27 July 2012
Date of Reasons for Judgment : 2 August 2012
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REASONS FOR JUDGMENT
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Hon Cheung JA :
1. This Court dismissed the appeal by the 2nd and 3rd respondents against the judgment of Deputy Judge Angela Kot, Presiding Officer of the Lands Tribunal. I now give the reasons.
Background
2. The applicant is the incorporated owners of a building known as “Mountain View Mansion (廣泰樓) (‘the building’) situated in Swatow Street. The 3rd respondent is the owner of shop D1 (‘the Shop’) located on the ground floor of the building. The 2nd respondent is the occupier of a service lane adjacent to one side of the Shop. The applicant claimed that the service lane is a common part of the building and initially commenced the present proceeding against the 1st respondent which operated a restaurant in the Shop. The applicant claimed the 1st respondent had trespassed on the service lane and installed, among other things, a gate at the entrance to the service lane. The applicant asked the 1st respondent to deliver possession of the service lane and remove the gates and other articles placed by it on the service lane. The applicant also asked the 1st respondent to restore the external wall of the Shop which had been removed.
3. The 2nd respondent then intervened and applied to be joined as a party to the proceeding. He claimed that he became a tenant of the Shop in September 1988 and operated a car repair business there. He claimed that he had also ‘trespassed’ on the service lane. In November 1991 he purchased the Shop. In January 2002 he sold the Shop to the 3rd respondent and leased back the Shop until 2004. He kept the service lane for his car repair and metal collection business. In November / December 2007, he granted a licence to the operator of the 1st respondent to use the service lane during the day time. The 2nd respondent used the service lane for his own business after 6 pm. He claimed that he had been in adverse possession of the service lane since 1988 and the right of the owners to the service lane had been extinguished by reason of limitation. In respect of the external wall, the 2nd respondent claimed that in September 1988 he removed the back portion of the external wall. In 1993 or 1994 the front portion of the external wall was demolished by the adjacent owner when it redeveloped its site.
4. Eventually the applicant’s claim was amended to include a claim against the 2nd and 3rd respondents.
5. The 3rd respondent claimed that it had no interest in the service lane. It claimed the demolition of the external wall was done by the 2nd respondent with the approval of the applicant. It had reinstated the front and back portions of the external wall in 2005. Between 2005 and 2006, the tenant of the Shop demolished the wall and replaced it by a glass window.
6. As the 1st respondent had ceased business and left the Shop, the applicant terminated the proceeding against the 1st respondent and pursued its claim only against the 2nd and 3rd respondents.
The decision
7. The Presiding Officer found for the applicant. She rejected the 2nd respondent’s case on adverse possession. She found that the external wall was only demolished by the 2nd respondent in 2000 and the gate was only constructed in 2003. She held that the service lane is a common part of the building and ordered the 2nd respondent to remove the structures constructed by him at the service lane, including a retractable metal awning and gate. The Presiding Officer imposed an injunction restraining the 2nd respondent from using the service lane for his personal use. The Presiding Officer also ordered the 3rd respondent to restore the external wall of the Shop to its original state.
Limitation argument
8. The first point taken by Mr. Anthony Cheung, counsel for the 2nd and 3rd respondents, was that the Presiding Officer was wrong to hold that the principles of adverse possession and the provisions of the Limitation Ordinance (‘LO ’) (Cap. 347) did not apply when the applicant sought to enforce the covenants of the Deed of Mutual Covenant (‘DMC’) of the building.
Service Lane is common part
9. The Presiding Officer’s finding that the service lane is a common part of the building is a finding of fact of which the respondents have not challenged. Under section 16 of the Building Management Ordinance (‘BMO ’) (Cap. 344), the rights of the owners to the common part are to be exercised by the incorporated owners. In section 2 of the BMO ‘common parts’ means :
(a) the whole of a building, except such parts as have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner; and
(b) unless so specified or designated, those parts specified in the First Schedule.
10. Paragraph 8 of the First Schedule includes ‘passageways’ which clearly covers the service lane in question.
11. Clause 3(A) of the DMC also makes the service lane subject to the rights of other owners of the building to use the same.
12. Section 34I further provides that :
(1) No person may –
(a) convert any part of the common parts of a building to his own use unless such conversion is approved by a resolution of the owners’ committee (if any);
(b) use or permit to be used the common parts of a building in such a manner as—
(i) unreasonably to interfere with the use and enjoyment of those parts by any owner or occupier of the building; or
(ii) to cause a nuisance or hazard to any person lawfully in the building.
(2) Any person who contravenes subsection (1) shall be deemed to be in breach of an obligation imposed on him by the deed of mutual covenant in respect of the building.
Enforcement of covenants
13. Section 41(3) of the Conveyancing and Property Ordinance (‘CPO ’) (Cap. 219) provides that notwithstanding any rule of law or equity but subject to subsection (5), a covenant shall run with the land and, in addition to being enforceable between the parties, shall be enforceable against the occupiers of the land and the covenantor and his successors in title and persons deriving title under or through him or them by the covenantee and his successors in title and persons deriving title under or through him or them.
It is of note that section 41(3) covers both positive and restrictive covenants as provided for by section 41(2).
Incorporated Owners of Man Hong Apartments
14. In The Incorporated Owners Of Man Hong Apartments v. Kwong Yuk Ching and others [2001] 3 HKC 116, the incorporated owners sought an injunction against the defendants in relation to their unauthorised structure on and occupation of a passageway adjacent to a shop on the ground floor of the building. The passageway is a common part of the building. The claim was made pursuant to paragraph 3 of the 10th Schedule of the BMO . The 3rd defendant was the registered owner of the shop, the 1st and 2nd defendants were directors and shareholders of the 3rd defendant. The 2nd defendant was previously a tenant of the shop. The 1st defendant was his wife.
15. The defence was that the defendants had been in adverse possession of the passageway and the plaintiff’s title had been extinguished by section 17 of the LO , a similar defence raised by the 2nd respondent in the present case.
16. This Court (Mayo VP, Keith JA and Sakhrani J) rejected the defence and found for the plaintiff. This Court held that the benefits and burden of the DMC are expressed and intended to run with the land. The Court referred to section 41 of CPO and applied the judgment of Collins M.R. in Nisbet and Potts’ Contract [1906] 1 Ch D 386. It held that even if the defendants were able to establish that they had exclusive possession of the passageway as a consequence of their adverse possession, they would still be subject to the terms and conditions contained in the DMC which precluded the exclusive use by anyone of that part.
17. In Nisbet and Potts’ Contract two pieces of land were subject to restrictive covenants. The owner of one land acquired it through possessory title. Collins MR approved the principle that an obligation created by a restrictive covenant is in the nature of a negative easement, creating a paramount right in the person entitled to it over the land to which it relates. He held that,
‘ the squatter, by his squatting, simply acquired a right to land subject to this incident. Of course, the burden of that incident must pass to all persons who subsequently become assignees of the land, and the squatter is not entitled to hand it over freed from the obligation that was imposed on the person whose title he has ousted by his possession.’ (at 402)
18. Mr. Cheung argued that Nisbet and Potts’ Contract involved two pieces of land. But this Court then was dealing with only one piece of land where the co-owners’ rights and liabilities were governed by a DMC. There were no ‘dominant’ and ‘servient’ tenements as such. He argued that the injunction sought by the incorporated owners in The Incorporated Owners of Man Hong Apartments was effectively a claim for possession of the common part through the back door. It was artificial to say that since the incorporated owners were not asking for possession the case had to be treated differently and that the LO had no application.
19. The Incorporated Owners of Man Hong Apartments is binding on this Court and must be applied unless it is plainly wrong. As the Court of Final Appeal pointed out in Solicitor (24/07) v. Law Society of Hong Kong (2008) 11 HKCFAR 117, the departure on such a ground should be wholly exceptional. I am not persuaded that it has been shown to be the case. On the contrary the judgment is clearly correct.
20. As in The Incorporated Owners of Man Hong Apartments , the applicant in this case is not claiming possession of the service lane, but is seeking to enforce the rights given to the owners in relation to the service lane as part of the common parts under Section 34I. Sections 7(2) or 17 of the LO which deal with recovery of land have no application. Neither will section 4 of the LO help the 2nd respondent, because Section 4(7) specifically excludes action for injunction from the operation of the section. Further the principle in Nisbet and Potts’ Contract is clearly applicable because once the service lane is found to be a common part then whoever occupies it, be it another owner from the building or a trespasser who acquired a possessory title by adverse possession, he is bound by the terms of the DMC. The latter cannot be in a stronger position because his paper title is still subject to the covenants in the DMC and he cannot use the service lane to the exclusion of the owners of the building. The applicant is bound to succeed in its claims.
21. The Presiding Officer had in any event found that the 2nd respondent had failed to establish adverse possession to the service lane. If the 2nd respondent cannot establish possessory title, then unless he can show the incorporated owners had given consent to his occupation which clearly can be revoked, I just cannot see on what possible basis he can resist the claim.
九龍漆咸道 27A 號業主立案法團
22. This Court (Woo JA (as he then was), Cheung JA and Chu J (as she then was)) in 九龍漆咸道 27A 號業主立案法團對李先生或非法佔用人(李啟剛、盧鴻鏘) CACV 2238/2001 applied The Incorporated Owners of Man Hong Apartments . This Court further construed the word ‘anyone’ in section 34I(2) as including a person who was not initially subject to the DMC but had converted the common part to his own use.
23. Mr. Cheung again submitted that this view is plainly wrong. He argued that the BMO is for regulating the rights and liabilities of co-owners themselves. It was not right to say that it governed the rights and liabilities between co-owners on the one part and outsiders on the other part.
24. I disagree. The preamble of the BMO states that the purpose of BMO is ‘to facilitate the incorporation of owners of flats in buildings or groups of buildings, to provide for the management of buildings or groups of buildings and for matters incidental thereto or connected therewith ’. BMO is not just for regulating the rights and liabilities of co-owners in a building, but generally to make provisions for ‘the management of buildings’. Further, sections 16 and 18(2)(g) of the BMO provide for the incorporated owners to act on behalf of the co-owners against third parties in respect of matters concerning the common parts or in which the owners have a common interest (see observations of Court of Final Appeal in Chi Kit Co Ltd v Lucky Health International Enterprise Ltd [2000] 2 HKLRD 503, at p. 511B-C). In any event, the determination of this appeal does not depend on the interpretation of section 34I(2).
Other cases
25. Mr. Cheung had further referred to The Incorporated Owners of San Po Kong Mansion v. Shine Empire Limited FACV No. 16 of 2006, Incorporated Owners of Chungking Mansions v. Shamdasani [1991] 2 HKC 342 and 黃景廉對牡丹大厦業主立案法團 DCCJ 2313/2009 where the Courts dealt with claims of adverse possession of the common parts of a multi-storey building. However, these cases do not assist because they did not address the issue discussed in The Incorporated Owners of Man Hong Apartments .
Jurisdiction
26. The next issue taken by Mr. Cheung was that the Lands Tribunal did not have jurisdiction to deal with this matter. He argued that the matter should have been heard in the District Court or High Court. I disagree. It is of note that it was the 2nd respondent (represented by lawyers) who applied to be joined as a party to this proceeding and no application had been made by him to transfer the matter to other courts. In any event the jurisdiction of the Lands Tribunal as provided for by section 45 of the BMO is amply conferred by the following three provisions of Schedule 10 of the BMO , namely,
(1) Proceedings relating to the interpretation and enforcement of the provisions of this Ordinance.
(2) Proceedings relating to the interpretation and enforcement of the terms and provisions of a deed of mutual covenant, including such terms or provisions impliedly incorporated into a deed of mutual covenant under Part VIA.
(3) Proceedings relating to the use, occupation, enjoyment, possession or ownership of the common parts or any other part of a building in which the owners have a common interest.
27. Apart from Schedule 10 of the BMO , the jurisdiction of the Lands Tribunal is expressly provided for in section 8 of Lands Tribunal Ordinance (‘LTO ’) (Cap. 17). Section 8(6) is relevant:
‘ The Tribunal shall have jurisdiction to make an order for the recovery of possession of any premises or for the ejectment of a tenant from those premises, whether under the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) or otherwise .’ (emphasis added)
28. This section is worded widely and is not confined to tenancy matters. Section 8(9) further empowers the Lands Tribunal in the exercise of its jurisdiction, to grant remedies and reliefs, equitable or legal, as the Court of First Instance.
29. These provisions clearly refute Mr. Cheung’s argument that the Lands Tribunal has no jurisdiction or is not equipped to deal with adverse possession claims. In simple terms, adverse possession began with the unauthorised use of an owner’s land. It would be most odd and contrary to the intention of the BMO and LTO that incorporated owners cannot institute proceedings in the Lands Tribunal against someone who, without the authorities of all the co-owners, occupies a common part of the building which belongs to them. In a situation like the present where there are multiple respondents, one of whom is a co-owner and the other is not, is it seriously suggested that the claim against the non co-owner should be separately dealt with in another court or that the whole claim, as a result of the presence of a non co-owner, should be transferred to another court? These questions need only be raised to show the absurdity of the argument. This is more so when the ethos of modern civil litigation is to ensure a speedy and just resolution of the dispute of the parties.
Discretionary argument
30. The third issue raised by the respondents is that injunction is a discretionary remedy and the Presiding Officer ought to have considered that the applicant had long acquiesced in the fact that the wall of the Shop abutting the service lane had long been replaced by a glass window. It has formed a part of the appearance of the Shop. There was no suggestion of any adverse structural effect and there was also no suggestion of any unreasonable interference with the use and enjoyment by the other owners. In particular, the Presiding Officer had not considered the effect of delay and the principles of laches regarding the injunction order.
31. This argument had never been raised by the respondents before the Presiding Officer, whether in their notices of opposition, witness statements, the agreed list of issues (agreed upon at the beginning of the trial), their final submissions, written reply submissions or in their application for review.
32. The defence of laches and delay is a specific defence which must be pleaded : paragraph 18/8/10 of Hong Kong Civil Procedure 2012 Vol. 1. The rationale is certainly not based on some archaic pleading requirements but rather, consonant with modern litigation, to forewarn the opponent of the nature of the defence, particularly on fact sensitive issues.
33. We are not prepared to accept this fresh argument on appeal. In any event we agree with Mr. Lee Tung-ming and Mr. Philip Chan, counsel for the applicant, that an injunction is appropriate because an award of damages is not an adequate remedy. Without the injunction, the 2nd respondent would continue to act in contravention of section 34I of the BMO and clause 3(A) of the DMC by using the service lane to the exclusion of the other owners. The external wall will also continue to be in the altered state in contravention of the terms of the DMC. If no injunction is granted, it would render the judgment to have no practical effect.
Fresh evidence
34. The respondents sought leave to adduce fresh evidence at the hearing of the appeal. This was refused with costs. The new evidence was in the form of a letter from the Building Authority dated 22 July 2011 in which it informed the 2nd respondent and his former lawyers that :
‘ 2. According to our file record, the completion of the demolition works at the captioned site was acknowledged on 13 June, 1995. The demolition works included the staircase and a reinforced concrete wall adjoining thereto between 5 and 7 Amoy Street. ’
and a letter from T. K. Tsui & Associates Ltd., Authorised Person dated 26 July 2011 which stated that the non-structural wall located on the ground floor at No. 5 Amoy Street was removed with the old staircase located at between No. 5 and No. 7 Amoy Street in 1995.
35. The 2nd respondent said these letters showed the removal of the external wall took place in 1995 and the removal was not done by him.
36. These two letters failed to satisfy the Ladd v. Marshall requirement in that these documents could well have been obtained prior to the trial on 16 May 2011. The 2nd respondent had instructed his lawyers to obtain evidence. He merely said that the documents were not made available to him before the trial. This cannot be a proper reason for adducing the letters at this stage.
37. Further the documents can only be of marginal value since further new evidence may be needed to respond to their content. Appeal from the Lands Tribunal to the Court of Appeal is on points of law only.
38. In any event the real issue now is not who demolished the wall but whether the 3rd respondent should reinstate the external wall in place of the existing glass wall.
Conclusion
39. Accordingly the appeal was dismissed with costs to the applicant. There will be certificate for one counsel.
Hon Kwan JA :
40. I agree with the Reasons for Judgment of Cheung JA.
Hon Chu JA :
41. I agree with the judgment of Cheung JA and have nothing to add.
(Peter Cheung)
(Susan Kwan)
(C. Chu)
Mr Lee Tung Ming and Mr Philip Chan, instructed by David Y. Y. Fung & Co., for the applicant
Mr Anthony P.W. Cheung, instructed by Benjamin Au & Billy Chan, for the 2nd and 3rd respondents