XCHRX BEST LORD LTD. v. SUN NGAI AND ANOTHER

HCA993/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.993 OF 2000

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J U D G M E N T

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1. This is an application by the plaintiff by summons for an injunction "to restrain the defendants, whether by themselves or by his servants or agents or otherwise howsoever, from blocking or interfering with or obstructing or causing to block, obstruct or interfere the free passage leading from the restaurant premises on the First Floor through the stairways to the exit at street level as indicated by red colour in the annexed layout plan ('the said passage')". Although there was no layout plan annexed to the plaintiff's summons of 28 January 2000, it is common ground that the said passage refers to a staircase inside Shop No.7 on the ground floor of Tone King Building and which leads from the First Floor restaurant premises of that building to street level.

2. The plaintiff is the registered owner of the entire First Floor of Tone King Building as well as Shop No.1 on the ground floor of the same building. The defendants are the registered owner of Shop No.7 on the ground floor of the same building. Both the plaintiff and the defendants became the registered owners of their respective parts of Tone King Building on 3 September 1999. In order to fully appreciate the dispute between the plaintiff and the defendants, it is necessary to go back in time and to trace the devolution of title in relation to those parts of Tone King Building owned by each of them.

DEVOLUTION OF TITLE

3. Tone King Building was developed by Well Sported Limited, the building of which was completed sometime in 1990. The Occupation Permit in respect of this building was issued on 7 March 1990 which states the permitted user for the First Floor to be that of a restaurant. The Occupation Permit made provisions for three shops on the ground floor.

4. A Deed of Mutual Covenant dated 17 March 1990 was also entered into between Well Sported Limited being the first owner and one Wong Yuk Yin being the First Assignee. This Deed of Mutual Covenant was registered in the Land Office by Memorial No.4379050 on 7 April 1990. In Recital 4 of the Deed of Mutual Covenant, it was recited that :-

"(4) For the purposes of sale the Land and the Building have been notionally divided into 1206 equal undivided shares which have been allocated as provided in the FIRST SCHEDULE hereto."

In the First Schedule of the Deed of Mutual Covenant, the three shops on the ground floor were respectively designated Shop A, Shop B and Shop C. The restaurant premises on the First Floor and the staircase which forms part of Shop No.7 now, was collectively referred to as "ALL THAT RESTAURANT on the FIRST FLOOR (including entrance to the Restaurant on the Ground Floor)". 100 equal undivided shares were allocated to the restaurant including the entrance to the restaurant on the ground floor and were vested in the name of the developer. Paragraph 1 of Section 1 of the Deed of Mutual Covenant stipulates, inter alia, that the developer would have the sole and exclusive right and privilege to hold, use, occupy and enjoy to the exclusion of the First Assignee the said building (excepting the premises assigned to the First Assignee) together with the appurtenances thereto. Therefore, the developer's entitlement included the First Floor restaurant premises and what is now known as Shop No.7 as one unit. It also appears that the area now known as Shop No.7 did not, at the time of the Deed of Mutual Covenant, constitute one of the three shops (being Shop A, Shop B and Shop C) referred to in the Occupation Permit and the Deed of Mutual Covenant.

5. Under the Original Deed of Mutual Covenant dated 17 March 1990, Shop A, Shop B and Shop C on the ground floor were each allocated 60, 100 and 90 undivided shares in the said land respectively. On 17 July 1991, a Sub-Deed of Mutual Covenant ("First Sub-DMC") was entered into between Well Sported Limited and the owner of Shop No.2 on the ground floor. The First Sub-DMC was registered in the Land Registry on 16 August 1991 under Memorial No.4939230. This First Sub-DMC provided for, inter alia, the sub-division of Shop A into Shop No.1, Shop No.2 and Shop No.3 (Shop B was subdivided into Shop No.4 and Shop No.5 and Shop C renamed Shop No.6). Each of Shop No.1, Shop No.2 and Shop No.3 were then allocated 20 undivided shares out of the original 60 undivided shares allocated to Shop A. Furthermore, the First Sub-DMC also re-designated the entrance to the restaurant on the ground floor as Shop No.7 and the same 100 undivided shares were allocated to the First Floor restaurant premises and Shop No.7 which were still owned by Well Sported Limited.

THE PLAINTIFF'S TITLE

6. By an assignment dated 29 April 1993 and registered by Memorial No.5657726 in the Land Registry, the First Floor restaurant premises together with Shop No.1 on the ground floor of Tone King Building was assigned by Well Sported Limited to Money Development Limited. This assignment expressly excluded Shop No.7 as being part of the premises assigned. The schedule to the assignment after describing the property assigned states :-

"(Shop 7 (which shall be allocated 20/1206th parts or shares of and in New Kowloon Inland Lot No.1295) on Ground Floor excepted)...."

7. On the same date, another Sub-Deed of Mutual Covenant ("Second Sub-DMC") was entered into between Well Sported Limited and Money Development Limited which provided for and governed the severance of the First Floor restaurant premises from Shop No.7 in Tone King Building. The Second Sub-DMC was registered in the Land Registry by Memorial No.5657727 on 26 May 1993. Furthermore, Shop No.7 (which includes the staircase) was given an independent existence by the Second Sub-DMC which governed the exclusive right of enjoyment of the First Floor and that of Shop No.7. Clauses 1 and 6 and the Schedule to the Second Sub-DMC provide for separate rights including rights of disposal.

8. The First Floor restaurant premises and Shop No.1 on the Ground Floor were then sold by Money Development Limited to Honloy Development Limited on 15 March 1995. Honloy Development Limited then mortgaged these premises to the Bank of China. The Bank of China exercised its power of sale under the mortgage on 3 September 1999 and sold the First Floor and Shop No.1 to the plaintiff. The assignment to the plaintiff again expressly provided in the Schedule that :-

"(Shop 7 (which shall be allocated 20/1206th parts or shares of and in New Kowloon Inland Lot No.1295) on Ground Floor excepted)...."

9. The assignment to the plaintiff further provided that the sale of the First Floor and Shop No.1 on the Ground Floor were subject to the Second Sub-DMC registered by Memorial No.5657727. The plaintiff was represented by solicitors, Ford Kwan & Co., in this transaction.

10. Furthermore, there is also evidence before me that the staircase inside Shop No.1 (which is owned by the plaintiff) does not qualify to be a fire escape route for the purposes of acquiring a restaurant licence in respect of the First Floor restaurant premises because that staircase does not meet the requisite specification. The cost of alterations to that staircase in Shop No.1 so as to meet the requisite specifications for a fire escape route would cost around $100,000.

THE DEFENDANTS' TITLE

11. After the severance of Shop No.7 from the First Floor restaurant premises, Shop No.7 was first assigned by Well Sported Limited to Chung Tung Investment Limited by an assignment dated 15 November 1994 and registered in the Land Registry by Memorial No.6173077. Chung Tung Investment Limited then sold Shop No.7 to the defendants and on 3 September 1999, by an assignment of the same date and registered in the Land Registry by Memorial No.7887706, assigned the same to the defendants. Both these assignments are expressly stated to be subject to the Second Sub-DMC.

THE PLAINTIFF'S APPLICATION

12. In the light of all the documentary evidence, namely, the assignments and the deeds, all of which had been registered in the Land Registry, Mr Keane, SC, who appears for the plaintiff in this application, makes this application for interlocutory injunction on the basis that the defendants are the registered owner and have legal title or exclusive possession to Shop No.7. On that basis, Mr Keane submits that the plaintiff is nevertheless entitled to an interlocutory injunction as sought by them on the footing that the plaintiff is entitled to an implied easement of necessity. Great reliance is placed by the plaintiff on the judgment of Cons JA in Chiu Shu Choi v. Merrilong Dyeing Works Ltd [1990] 1 HKLR 385.

13. The plaintiff also seeks to rely upon section 16 of the Conveyancing and Property Ordinance, Cap.219 which reads :-

"(1) Unless the contrary intention is expressed in the assignment, an assignment shall operate to assign, with the land, all rights, interests, privileges, easements or appurtenances in, over, belonging or appertaining to that land or [at the time of the assignment] used, held, occupied or enjoyed with that land and things attached to the land or permanently fastened to anything attached to the land.

(2) This section shall not operate to give to any person a better title than that assigned or any better title than that enjoyed by the assignor."

14. The importance of the staircase inside Shop No.7 leading from street level to the First Floor restaurant premises can be seen as follows. It is the plaintiff's case that at all times since Tone King Building has been completed, the access to an egress from the First Floor restaurant premises has at all times been served by the following passageways :-

(a) two entrances/exits to the lift lobby on the First Floor of the said building;

(b) one staircase inside Shop No.1 (originally Shop A) connecting the street level with the First Floor restaurant premises of the said building; and

(c) the staircase in question inside Shop No.7 of the said building.

15. Although there are other means of access and egress to the First Floor restaurant premises, the plaintiff says that the staircase inside Shop No.7 of the said building is necessary as a fire escape route without which the relevant government departments will not approve or issue a restaurant licence for a restaurant to be operated from the First Floor of Tone King Building. It is also the plaintiff's case that in August 1999 when the plaintiff's representative inspected the premises before completion of the purchase of the First Floor, there was free and unobstructed passageway in respect of the staircase inside Shop No.7 leading from the First Floor restaurant premises to street level. It was only after the defendants became the registered owner of Shop No.7 on 3 September 1999 that the plaintiff found this staircase inside Shop No.7 to have been blocked/obstructed and that subsequent negotiations between the plaintiff and the defendants for the free and unobstructed use of the staircase inside Shop No.7 resulted in the defendants asking for a sum of HK$3.5 million for the sale by the defendants of that staircase to the plaintiff (the defendants say that the sum asked for was only HK$2 million). Because of the obstruction of this staircase inside Shop No.7 by the defendants, the plaintiff says that it has not been able to operate a restaurant on the First Floor of Tone King Building ever since it became the registered owner thereof. It is on this basis, therefore, that the plaintiff now applies for an interlocutory injunction to restrain the defendants from blocking or obstructing the free and uninterrupted passageway in relation to the staircase inside Shop No.7.

THE DEFENDANTS' CASE

16. The defendants do not dispute the obstruction complained of by the plaintiff in respect of this staircase inside Shop No.7. The defendants' case is quite simply that since they are the registered owner of Shop No.7 with the exclusive right to the use, occupation and enjoyment thereof, and which includes the staircase in question, they are under no obligation to allow the plaintiff the use of that staircase either as a fire escape route or in any other way. It is also submitted by the defendants that from the time Shop No.7 was severed from the First Floor restaurant premises in Tone King Building, all the relevant documents, deeds and assignments had been properly registered in the Land Registry such that when the plaintiff purchased the First Floor together with Shop No.1, the plaintiff must have known that they had no title and no right to Shop No.7, and therefore cannot complain if they do not have the use of the staircase inside Shop No.7.

17. The defendants further submit that the decision in Merrilong's case cannot assist the plaintiff because that case can be distinguished from the present case on facts. It is also submitted by the defendants that section 16 of the Conveyancing and Property Ordinance also does not assist the plaintiff because a contrary intention does appear in the deeds and assignments by reason of the fact that Shop No.7 had been severed from the First Floor restaurant premises and no longer forms part of those premises, but that it has a separate existence on its own and the owner of Shop No.7 has the exclusive right to the use occupation and enjoyment thereof.

DECISION

18. In all applications for interlocutory injunction, the party seeking the injunction has to satisfy the court that there is a serious question to be tried between the parties. It is only when a court is satisfied that there is a serious question to be tried, that the question of the balance of convenience is gone into.

19. It is clear from the Deed of Mutual Covenant dated 17 March 1990 that what was designated at that time to be "entrance to the Restaurant on the Ground Floor", but now known as Shop No.7, was never a common area of Tone King Building. "Common area" under that Deed of Mutual Covenant was expressly defined as :-

"means and includes such of the entrances, lobbies, halls, staircases, landings, management offices, open area, roofs or flat roofs not particularly included in the First Schedule hereto, ...." (emphasis supplied).

20. In the First Schedule to that Deed of Mutual Covenant, the restaurant on the First Floor was expressly stated to include "entrance to the Restaurant on the Ground Floor" which was later re-designated as Shop No.7. By reason therefore that it was expressly included in the First Schedule to the Deed of Mutual Covenant, it cannot form part of the common area of Tone King Building from the outset.

21. In the present case, the plaintiff has chosen to make its application for interlocutory injunction on the basis that the defendants are the registered owner and therefore have the right to exclusive possession of Shop No.7 in Tone King Building, including the staircase in it. Once the plaintiff makes this concession (in the light of the documentary evidence by way of deeds and assignments, it is difficult to see what else the plaintiff could do), then I am unable to see how the plaintiff can establish that there is a serious question to be tried. In short, the plaintiff simply has no right to Shop No.7 including the staircase therein once it is conceded that the defendants have the exclusive right to the use occupation and enjoyment of those premises.

22. Neither can the decision in Merrilong's case, nor an implied easement by necessity assist the plaintiff. Indeed, it was decided in the Merrilong's case that since an owner cannot have an easement over his own land and that the long adopted conveyancing practice in Hong Kong as regards multi-storey buildings is such that an equal undivided specified number of shares in the land is allotted to each owner and the building as a whole is jointly owned by all the owners thereof, the rights of one such owner cannot be put on the basis of easement but had to be put on some other basis. In Merrilong's case, the court circumvented this problem by implying a right-of-way upon the true construction of the Deed of Mutual Covenant.

23. The facts of the Merrilong's case was that the plaintiff owned the entire ninth floor of a factory building and the defendant was the registered owner of the entire eighth floor. The lift in that building only went up as far as the eighth floor and from there a staircase situated behind smoke lobby doors led to the ninth floor. Alterations made by the defendant to the eighth floor blocked off the smoke lobby doors but another door was opened which still allowed access to the staircase leading to the ninth floor. After the plaintiff became the registered owner of the ninth floor, Fire Hazard Abatement Notice was served on the defendant by the Fire Services Department requiring it to reinstate the smoke lobby doors and to close off the other door opened by the defendant. As a result, the plaintiff found that he and his workers were no longer able to go from the lift on the eighth floor to the staircase leading up to the ninth floor and could only get to their factory by climbing nine flights of stairs. The court held that on a true construction of the deed of mutual covenant, there was to be an implied right-of-way over the eighth floor from the lift doors to the nearest staircase for the proper use and enjoyment of the ninth floor as a factory.

24. Can there be an implied right-of-way in favour of the plaintiff in the present case over the staircase inside Shop No.7? When Shop No.7 was severed from the First Floor restaurant premises and given a separate existence back in July 1993, this was expressly stated not only in the assignment by Well Sported Limited to Money Development Limited of the First Floor restaurant premises and Shop No.1 but also in the Second Sub-DMC and to a lesser extent in the First Sub-DMC. Nothing in any of these documents even remotely suggested that there was to be either expressly or by implication a right of way over the staircase inside Shop No.7 in favour of the First Floor restaurant premises. On the contrary, the tone of these documents point in the opposite direction. When the plaintiff acquired the First Floor premises in September 1999, the plaintiff must have been taken to be fully aware not only of the fact that Shop No.7 has its own separate existence but also of the fact that the exclusive right to the use, occupation and enjoyment of Shop No.7 is vested in another party. In these circumstances, it is difficult to see how there can be an implied right-of-way in favour of the plaintiff insofar as the staircase inside Shop No.7 is concerned. Moreover, a term will not be implied if it would be inconsistent with the express wording of the contract. Any implied right-of-way in favour of the plaintiff regarding this staircase inside Shop No.7 would be inconsistent with what is expressly stated in the Second Sub-DMC.

25. For the same reason, neither can section 16 of the Conveyancing and Property Ordinance assist the plaintiff since section 16(1) is premised by the words "unless the contrary intention is expressed in the assignment". The assignment by Well Sported Limited of the First Floor to Money Development Limited is expressly stated to be excluding Shop No.7.

26. For the above reasons, I am of the view that the plaintiff has failed to make out a case that there is here a serious question to be tried between the parties. In the circumstances I do not need go into the question of balance of convenience. Accordingly the application by the plaintiff for an interlocutory injunction is dismissed.

COSTS ORDER NISI

27. I can see no good reasons for departing from the usual order that costs follow the event. Accordingly, I shall make a cost order nisi that the costs of the plaintiff's summons for an interlocutory injunction and of the hearing be paid by the plaintiff to the defendants.