THE INCORPORATED OWNERS OF HUNG WAI BUILDING v. SUNNY ELEGANT LTD AND OTHERS

LDBM 76/2019

[2024] HKLdT 43

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO.76 OF 2019

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BETWEEN

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J U D G M E N T

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A Introduction

1.  This case is concerned about Hung Wai Building situated at Nos. 3-5 Fa Yuen Street, Mongkok, Kowloon (the Building), which comprises a commercial podium with a total of 13 shops on the Ground Floor (G/F) and a total of 19 office units on the 1^st Floor (1/F), and two residential blocks (Block 1 and Block 2 respectively) with units on the 2^nd to 24^th Floors[1].

2.  The Lands over which the Building were built (the Lands), and the said podium, are rectangular in shape, with, roughly, its East side facing Fa Yuen Street, its North and West sides facing 2 service lanes respectivley, and its South side adjoining another building. Block 2 is at the Northern side of the Building while Block 1 is at its Southern side.

3.  This trial involves alleged common parts at G/F, 1/F and external walls of the Building which the applicant claimed to have been converted by the respondents to their own use to the exclusion of other owners. The respondents, however, claimed the areas in litigation to be their exclusive use areas.

B Parties to this Application

4.  The applicant (IO) is the incorporated owners of the Building incorporated pursuant to the provisions of Building Managment Ordinance (BMO)[2].

5.  Ms Becky Wong of counsel (Ms Wong) appeared for IO.

6.  The registered Deed of Mutual Covenant governing the Building and the Lands is dated 14 November 1984 (the DMC). It was executed by Chun Wing Investment Company Limited (the Developer), Hong Yip Service Company Limited (Hong Yip) and two first purchsers of flat C on 11/F, Block 1 of the Building (First Purchasers). Hong Yip was named as the Manager in the DMC. Hong Yip has been running the Building until today as its managment company.

7.  At all material times, the 1^st respondent (R1) was, and is, the registered owner of Shop No.8 on G/F (the Shop)[3] and offices Nos.1 to 19 on 1/F (collectively the Offices)[4] of the Building.

8.  At all material times, the 2^nd respondent (R2) was, and is, the principal tenant, or tenant, of the Shop and the Offices from R1.

9.  At all material times, the 3^rd respondent (R3) and the 4^th respondent (R4) respectively were, and are, sub-tenants from R2 and occupier of the Shop and the Offices, where a Chinese restaurant (the Chinese Restaurant) and a café (the Café) were at all material times, and are, operated by R3 and R4 respectively.

10.  Mr K M Chong of counsel (Mr Chong), leading Ms Vivian Li of counsel, appeared for R1 to R4.

C1 Two groups of areas in litigation

11.  IO on one hand and R1 to R4 on the other hand litigate over two groups of areas of the Building.

12.  First, they litigated over external walls of the Building facing West towards one service lane and, further away, Tung Choi Street (External Wall facing West).

13.  It is admitted by R1 to R4[5] that, “since about September 2018, with the consent of R1, R2, R3 and/or R4 has/have erected 43 air-conditioner condensers and two chimneys at [External Wall facing West] for carrying on the said businesses of the Chinese Restaurant and the Café, thereby converting the external wall to their own use”. I take from the evidence that the part of External Wall facing West involved was that of 1/F level of the Building.

14.  Secondly, they litigated over the following 5 areas on G/F and 1/F of the Building (collectively the Disputed Areas), namely: -

(1) an entrance space on G/F (the Entrance Space), two staircases and one stair landing adjacent to the Shop leading to 1/F of the Building (the Staircases and the Stair Landing respectively)^[6]; and

(2) a corridor (the Corridor), two male toilets and two female toilets all on the 1/F of the Building (collectively the Toilets)^[7].

15.  The Disputed Areas were at all material times, and are, used together with the Shop and the Offices as a whole for the said businesses of the Chinese Restaurant and the Café.

C2 5 Main Issues in dispute

C2.1 Issue 1: common parts or exclusive use areas?

16.  IO first claims that 1) the Disputed Areas are “common parts” of the Building since the making of the DMC; and that 2) External Wall facing West has become “common parts” of the Building at the material times after the Developer had assigned all its undivided shares of the Building to purchasers.

17.  R1 to R4 contend otherwise. They say that R1, as owner of the Offices, shall also have the exclusive right to occupy and enjoy the Disputed Areas and that the Disputed Areas are also owned by R1. They further say that R1, as owner of the Offices and the Shop, has exclusive right to those part of the External Wall facing West as part of the said units owned by it.

C2.2 Issue 2: licence and/or misrepresentation or not?

18.  Secondly, IO alleges that it had, in about February 2012, granted to R1 a licence over the Disputed Areas which is revocable at will or upon reasonable notice. The said alleged licence, said IO, had expired in July 2017 or had been revoked or terminated by letter of IO’s solicitors dated 30 May 2018.

19.  To the contrary, R1 specifically denies the making of any oral licence, or alleged licensee agreement, with IO. Though it had signed onto a document headed “鴻威大廈-使用公眾地方責任承諾書” (the Chinese Undertaking), R1 said it was induced doing so prior to the signing of the Chinese Undertaking by alleged misrepresentation made to it by the then chairlady and vic-chairman of the managment commitee (MC) of IO pleaded at paragraph 14 of Amended Notice of Opposition, namely that:-

(1) signing of the Chinese Undertaking was “mere procedure” in making it easier for the said chairlady and vice-chairman to explain to other owners of the Building;

(2) IO “would not enforce” rights stipulated under the Chinese Undertaking against R1; and

(3) R1 woud effectively enjoy “indefinite” right at “the Disputed Areas” (collectively Alleged Misrepresentation).

C2.3 Issue 3: breach of BMO and/or DMC or not?

20.  Thirdly, it is disputed whether or not use and occupation of the Disputed Areas for said businesses of the Chinese Restaurant and the Café by R1, R2, R3 and/or R4 since alleged expiry, or termination, of the alleged licence from IO to R1 was, and is, in breach of the provisions of the DMC and/or s.34I of BMO.

21.  The parties also disagree on whether or not erection of 43 air-conditioner condensers and 2 chimneys at 1/F level of External Wall facing West by R2, R3 and/or R4, with consent of R1, for carrying on the said businesses of the Chinese Restaurant and the Café since about September 2018 was, and is, in breach of the provisions of the DMC and/or s.34I of BMO.

C2.4 Issue 4: estoppel by convention and/or proprietary estoppel

22.  Fourthly, the parties disagree on whether or not estoppel by convention has been pleaded, or properly pleaded, by R1 to R4 in Amended Notice of Opposition, and, if so, whether or not R1 to R4 have, on the evidence, made out estoppel by convention and/or proprietary estoppel to defend IO’s claim and/or to acquire interest on the Disputed Areas.

23.  For proprietary estoppel, it was alleged at paragraph 15 of Amended Notice of Opposition that, “in the premises, R1

(1) entered into the Chinese Undertaking with IO upon inducement by [Alleged Misrepresentation];

(2) In reliance on [Alleged Misrepresentation], entered into the Chinese Undertaking and, to the knowledge of the then chairlady and the then vice-chairman, representative of [IO] and/or upon [IO] standing by, invested and/or jointly with R3 and R4 invested substantial money and money’s worth on the Disputed Areas by, inter alia, the erection of an iron roller shutter door at the Entrance Space, Staircases and Stair Landing and on decoration work on [the Offices and the Shop], particulars of which are set out in a quotation[8] as attached in the 2^nd Schedule herein (collectively 2^nd Schedule Quotations), and, thereby sufferd detriment. In the premises, R1 has acquired a proprietary interest in the Disputed Areas and/or [IO] was and still is estopped by denying R1’s exclusive right to use, occupy and enjoy the Disputed Areas (italics supplied)”.

24.  For estoppel by convention, if pleaded at all, it was alleged at paragraph 48 of Amended Notice of Opposition that “Further, or in the alternative, by reason of the above pleaded facts and matters, even should there be mistake in the construction of the meaning of the DMC, [IO] is estopped and precluded from contending that, on a true construction of the DMC, the Disputed Areas formed part of the common parts of the Building on the ground that R1 have pursuant to such understanding, acted to its detriment (italics supplied)”.

25.  IO submitted that neither estoppel was made out, and that estoppel by convention has not been properly pleaded.

C2.5 Issue 5: what relief, if any, to be grantd ?

26.  Fifthly, it falls upon this Tribual to decide on the appropriate relief to be granted to IO or R1 to R4, depending on the answers to the above 4 issues.

(1) IO seeks against R1 and R2 i) declaration of the Disputed Areas being parts of the common parts, and seeks against R1 to R4 ii) mandatory injunction to restore the Disputed Areas and External Wall facing West, iii) prohibitory injunction against any further or future breaches of the DMC and/or BMO over the Disputed Areas and External Wall facing West, and iv) damages to be assessed.

(2) R1 to R4 counterclaim against IO for i) declaration of the Disputed Areas not forming common parts, ii) declaration that IO is estopped and precluded from contending that, on a true construction of the DMC, the Disputed Areas formed part of the common parts of the Building, iii) declaration that the respondent(s) or any of them have acquired proprietary interest in the Disputed Areas and that IO is estopped from denying respondent(s)’ exclusive right to use and enjoy the Disputed Areas, and iv) damages to be assessed.

D1 Approach in assessing factual evidence

27.  In assessing the testimony of parties’ factual witnesses, I have, inter alia, considered inherent probabilities of their evidence, consistency or otherwise of their evidence with contents of contemparneous documents, their internal consistency or otherwise, and also watched out for any of the witnesses having any motive to misrepresent the truth.

28.  In view of the long lapse of time for some old events, which are beyond witnesses’ personal knowledge to tell and/or memory to recall, it is, I think, more reliable for this Tribunal to give more weight to the contents of contemparneous documents.

D2 Factual witnesses called at trial

D2.1 Ms Lam

29.  IO called Miss Lam Wai Yee (Ms Lam), the chairlady of its MC at the material times, as its sole factual witness at trial.

30.  Ms Lam only started residing at the Building in late 2006. She thus has no personal knowledge of events prior to late 2006. She also purported to speak to matters beyond her personal knowledge in her witness statement. Unless these evidence are corroborated by other evdence, I give no weight to such evidence of hers.

31.  Ms Lam was also cross-examined by Mr Chong at length on her subjective views about design of the Building and its usage over the course of time. As shall be explained below, these questions are, I think, irrelevant to Issues 1 to 5 and the answers given by Ms Lam are also neither here nor there.

32.  Subject to the above 2 caveats, I prefer Ms Lam’s evidence on Issue 2 to those of Mr Chu. Her evidence on Issue 2 was well supported by documents placed before this Tribunal and she was not shaken on the same after cross-examinatoin by Mr Chong.

33.  If necessary, I shall consider the rest of Ms Lam’s evidence issue by issue below.

D2.2 Mr Chu

34.  R1 to R4 called Mr Chu Chung Sing (Mr Chu), director of R1, as their sole factual witness at trial.

35.  In assessing Mr Chu’s evidence, I have given full allowance for his old age and limited education.

36.  However, I still do not find Mr Chu a credible or reliable witness. Save for admissions given by him, which I give full weight thereto, I do not accept his evidence, especially those given by him on Issue 2 and Issue 4.

37.  On material points, Mr Chu’s evidence is, I think, inherently implausible and contradicted by contents of contemporaneous documents. He also contradicted himself in the box when his evidence is compared against the contents of this witness statement. In gist, his evidence in the box materially departed from those in his witness statement.

38.  For the rest of Mr Chu’s evidence on other issues, I consider them issue by issue below if required.

D3 Single Joint Expert Report

39.  Purusant to leave given by this Tribunal, a single joint expert report (SJE report) was prepared by Dr. Shui Cheong Kam (Dr Kam). It was admitted into evidence at trial without calling Dr Kam. In gist, Dr Kam gave opinion on the function of each of the equipment installed at the Switch Room on 1/F of the Building (see [64(3)] below) during the material period from 2017 to present.

E Relevent BMO provisions

40.  According to 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 Schedule 1 (italics supplied).”

41.  Schedule 1 of BMO includes: -

“(1) “External walls” in paragraph 1;

(2) “ … toilets …” in paragraph 7;

(3) “Passageways, corridors, staircases, landings…” in paragraph 8;

(4) “Lifts...” in paragraph 9; and

(5) ... installations intended for the use and benefit of all of the owners generally and any room or chamber in which such apparatus, equipment or installation is fitted or installed (italics supplied) in paragraph 10.”

42.  S.34I (1) & (2) of BMO provide: -

“(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 (italics applied).

F1 Relevant legal principles to resolve Issue 1

43.  Issue 1 is, I think, ultimatley a question of construction of the DMC: 黎偉雄 v 信和物業管理有限公司 [2020] HKCA 448 at [2], per Lam V-P (as he then was). For the record, neither parties addressed me on Issue 1 by reference to the first assignment of flat C, 11/F of Block 1 of the Building made by the Developer and the First Purchasers on the same date of the DMC.

44.  As to how to approach construction of the DMC, Lam V-P (as he then was) explained in 黎偉雄, supra, at [26] as follows: -

“… In a nutshell, the DMC must be construed in the context of the document as a whole and in light of the factual and legal background (which also provides the context) to its execution, and having regard to the practical objects which it was intended to achieve. The overriding objective in construction is to give effect to what a reasonable person would have understood the parties to mean. Instead of focusing on the ordinary and natural meanings of a few words in a clause, very often the broader context provides surer guide. But textual analysis and contextualism are both tools in the exercise of construction and the utility of each tool will vary according to the circumstances of each instrument. Thus, construction is a unitary exercise involving an iterative process (bold and italics supplied).”

45.  Lam PJ has recently repeated the above in Court of Final judgment of Donora Company Limited v The Incorporated Owners of Tsuen Kam Centre [2024] HKCFA 3 at [55] thereof.

F2 Legal background to Issue 1

46.  As to the legal background for execution of DMC in general, Lam V-P (as he then was) has also explained at [27] to [31] of 黎偉雄, supra, as follows: -

“We shall start with a consideration of the legal context and the purpose of the DMC. A DMC is the conveyancing techniques adopted in Hong Kong for dealing with ownership of units in a multi-storey building… In a multi-storey development with blocks consisting of many units, those who acquired ownership in a unit would, as a matter of common law, become co-owners with the owners of other units. As co-owner, because of the principle of unity in possession, each of them is entitled to possession of every part of the Land, including the units sold to other owners. One of the purposes of a DMC is to restrict the exercise of such right of possession by mutual covenants so that the owner of one unit would effectively have exclusive use and occupation of his unit. Unless a restriction over the use and occupation of a particular area is specifically set out in the DMC (which would operate as a covenant running with the interest in land), the default position is that each owner has the right to enter and use such area by virtue of his co-ownership of the land. As we shall see, the same concept is reflected in the statutory regime under the Building Management Ordinance Cap 344.

Further, an estate development has many communal facilities and common areas. The management and expenses concerning such management have to be agreed upon between the co-owners of the land. The obligations and rights of the owners concerning communal facilities and common areas have to be regulated. Thus, another purpose of a DMC is to set out the agreed arrangement in these respects which would be binding on the owners (and every successor in title) and the manager. Though it is common to find in a DMC references to easements in describing the right of an owner to use the common areas, as a matter of law there cannot be any real easement over one’s own land and legally they operate as contractual quasi-easements.

Apart from the common law rule on co-ownership and the conveyancing techniques to provide for ownership and rights in multi-storey buildings, the legal context also include the statutory provisions in the Building Management Ordinance Cap 344 (“BMO”) which… was first enacted in 1970. It is therefore a piece of legislation well-known to conveyancers in Hong Kong and every draftsman of a DMC must have regards to in the preparation of a DMC….

There are statutory provisions in the BMO which regulate the use of common parts and the management of multi-storey building. Section 2 of the BMO has a definition for common parts. It reads:

[Omitted]

In the First Schedule of the BMO, passageways, corridors, staircases, landings are included under paragraph 8. In other words, unless a particular passageway or corridor in the Estate is specified or designated in the DMC as being for the exclusive use, occupation or enjoyment of an owner, it is deemed to be a common part (bold and italics supplied).”

47.  Schedule 1 of BMO serves as a non-exhaustive pointer to what might commonly be regarded as common parts and if a part has been specified in that schedule a stronger indication is required before the court can come to the conclusion that it is not common part: per Lam PJ at [56] of Donora Company Limited, supra, citing Tang Acting CJHC (as he then was) in Westlands Garden (IO) v Oey Chiou Ling [2011] 2 HKLRD 421, in particular [20].

48.  On BMO definition of “common parts”, at [51] and [52] of Donora Company Limited, supra, Lam PJ stressed that:

“51. Thus, in the application of the statutory definition of “common parts” in section 2 of the BMO, the statutory definition should not be applied by simply asking if there is any clause in a registered instrument which stipulated that the exclusive use, occupation or enjoyment of a particular part of the building be given to an owner. One must pay regards to the overall context of the transaction and the other relevant provisions in the instruments effecting the same transaction…

52. Construing the statutory definition purposively, the specification or designation in an instrument referred to in that definition must refer to the relevant and effective specification or designation in the transaction. A specification or designation in the First Assignment which was not intended by the parties to reflect the overall position could not be a relevant and effective specification or designation for the purpose of that definition. (original bold and italics).”

53.  Post agreement (or post-DMC) conduct and statements of the parties are not generally relevant to the construction of the DMC: Hollywood Shopping Centre Owners Committee Ltd v The Incorporated Owners of Wing Wah Building Mongkok Kowloon [2011] 4 HKLRD 623 at [39], per Kwan JA (as she then was). Mr Chong also submitted that established authority obliges this Tribunal to consider (or construe) the DMC against the factual matrix or background “as at the date of the DMC”[9].

F3 Factual background to Issue 1

F3.1 Approved plans dated 1 September 1984

54.  Having regard to G/F, 1/F and 2/F plans of the Building approved by the Building Authority on 1 Sepember 1984[10] laid before me, the following features, arrangments and facilities were, I find, present at the Building at the time of the making of the DMC, which is the crucial date for Issue 1.

F3.2 G/F of the Building

55.  All 19 shops found on G/F look, I think, roughly like 19 parallel columns, except for such spaces occupied by 4 lifts installed in the Building, presence of a tranformer room to the North of the Building and that shop No.13 and the Shop are shorter in depth and smaller in size from the rest. Shop No.1 is the Southern-most one while the Northern-most shop is Shop No.13. The numbering of G/F shop increases as one move North.

56.  Except for the Shop, all the remaining 18 shops on G/F have, I find, their opening (or frontage) towards pavement of Fa Yuen Street. Again, except for the Shop which has no lavatory, each of the remaining 18 shops on G/F has their internal lavatory within the shop.

57.  An “entrance hall”[11] with metal gate opens to Fa Yuen Street (or East) is found between shop Nos. 3 & 4 leading to lift lobby of Block 1, where one fireman’s lift and a passengers lift are found. A second “entrance hall”[12] with metal gate also opens to Fa Yuen Street is found betwen shops Nos.10 and 11 leading to lift lobby of Block 2, where one fireman’s lift and a passengers lift are also found.

58.  According to legend on G/F plan, the two passengers lifts, I find, stop at G/F and those floors of Block 1 and Block 2 with singular numbering starting with 1/F upwards to 23/F, while the 2 fireman’s lifts stop at G/F and those floors of Block 1 and Block 2 with plural numbering starting at 2/F upwards to 24/F.

59.  Apart from taking lifts upstairs, one can, I find, also walk upstairs (and go downstairs from upper floors to G/F on staircases). There is a pair of criss-crossing staircases to the West of Block 1 lift lobby, leading from service lane (to the West of the Building) to, I believe, the highest floor of Block 1. There is another pair of criss-crossing staircases to the West of Block 2 lift lobby, leading from the same service lane to, I believe, the highest floor of Block 2.

60.  An “office entrance hall”[13] separates, I find, the Shop from the pavement of Fa Yuen Street to its South (one must go past the said hall to enter the Shop). The said hall is one out of five of the Disputed Areas i.e. the Entrance Space.

61.  The said hall also leads one to two staircases and one stair landing adjacent to the Shop leading to 1/F i.e. the Staircases and the Stair Landing, another two out of five of the Disputed Areas.

62.  Summing up, at the making of the DMC, there are, I find, 3 entrances for one to enter the Building from pavement of Fa Yuen Street i.e. 1) entrance hall to lift lobby of Block 1 allowing one to go to 1/F and 2/F to 24/F of Block 1, 2) entrance hall to lift lobby of Block 2 allowing one to go to 1/F and 2/F to 24/F of Block 2, and 3) the Entrance Space allowing one to enter the Shop or to go to 1/F through the Staircases and Stair Landing. Of coure, one can equally go out the Building in the opposite direction or manner.

63.  At the same time, if one want to exit at service lane to the West of the Building, one can, I find, go downstairs through the 2 pairs of criss-crossing staircases found repectively to the West of the 2 lift lobbies of Block 1 and Block 2. Of coure, one can equally go in the Building in the opposite direction and manner.

F3.3 1/F of the Building

64.  In terms of setting, I find from looking at 1/F plan 3 horizontal rows within 1/F of the Building i.e.

(1) a first row near Fa Yuen Street consisting all of office units and starting with Office No.1[14] at the Southern end of 1/F to Office No.12 at the Northern end of 1/F as one moves North (First Row);

(2) a second row near service lane to the West of the Building, starting with Office No.19[15] at the Southern end of 1/F, and, as one moves North, 1 male toilet[16] and 1 female toilet[17], 2 lifts to Block 1, their 1/F lift lobby and a pair of criss-crossing staircases going up and down Block 1, Offices No.18 to Office No.14[18], 2 other lifts to Block 2, their 1/F lift lobby and another pair of criss-crossing staircases going up and down Block 2, 1 female toilet[19] and 1 male toilet[20], and, finally, Office No.13[21] at the Northern end of 1/F (Second Row); and

(3) separated by way of partitions and in between First Row and Second Row is 1) a long horizonal “corridor”[22] i.e. the Corridor in dispute and 2) a “switch room”[23] at the Northern end of 1/F (Switch Room). The only opening to the Switch Room is through the Corridor to its South.

65.  So, roughly speaking, the Corridor separates First Row and Second Row in their middle by way of partitions.

66.  The Toilets found within Second Row are also in dispute. They are independent toilets of their own i.e. not located within any of the Offices on 1/F. Unlike Shops Nos.1 to 7, 9 to 13 on G/F, none of the Offices on 1/F has any internal toilet of its own. The Toilets open to 2 passages leading to the Corridor. The Corridor in turn connects with two 1/F lift lobbies, allowing one to enter or leave the lifts at 1/F to and from the Corridor.

67.  Among First Row is Office No.7, whose size is relatively smaller than other offices on First Row, as it is adjacent to remaining part of the Staircases and Stair Landing leading to 1/F and connecting with the Corridor.

68.  In terms of movement, one can, I find, at the time of the making of the DMC, leave 1/F 1) through the Corrior, the Staircases and Stair Landing to the Entrance Space on G/F onto pavement of Fa Yuen Street, 2) by taking the 2 pairs of lifts, one for Block 1 and one for Block 2, either to go up to residential units at upper floors or go down to G/F lift lobbies with “entrance hall” leading out to pavement of Fa Yuen Street, or 3) by walking upstairs to residential units or downstairs to G/F and servcie lane using the 2 pairs of criss-crossing staircases accessible also through the Corridor on 1/F.

F3.4 2/F of the Building

69.  For either Block 1 or Block 2 on 2/F level, I find from 2/F plan the same typical arranagement of 4 one-bedroom flats (with one living and dining room, one kitchen and one bathroom) connecting to one lift lobby with 2 lifts plus a pair of criss-crossing staircases going up and down at the time of the making of the DMC.

F4 The DMC

70.  The DMC was executed on 14 November 1984, about 2.5 months after approval of building plans of the Building.

71.  At recital (3) of the DMC, the Building and the Lands were “notionally divided into 1,440 equal undivided parts or shares which are intended to be assigned to the parties having the exclusive right to hold use occupy and enjoy particular units or other self-contained portions (italics supplied)” of the Building in the manners set down in a “Table of Allocation of Undivded Shares” below i.e.

(1) Each of the 13 shops at G/F have share of its own, ranging from 4 shares for shop No.9 to 34 shares for shop No.8 i.e. the Shop;

(2) Each of the 19 offices at 1/F have share of its own, ranging from 4 shares to 7 shares; and

(3) Each of 8 residential units including flat roof on 2^nd floor (2/F), each of 8 residential units on 3^rd to 22^nd Floors, each of 4 residenital units including flat roof on 23^rd Floor and each of the 4 residential units on 24^th Floor has share of its own, ranging from 6 to 8 shares per unit.

72.  Recital (4) recited first assignment of even date between the Developer and the First Purchasers of 6 equal undivided 1,440^th parts or shares of the Lands and the Building together with exclusive right to use occupy and enjoy flat C on 11/F of Block 1.

73.  Recital (5) says that, in order to provide for “the proper management operation servicing maintenance repair and insurance” of the Lands and the Building, the parties have agreed to enter into the DMC for the purposes of “defining and regulating their rights interests and oblgiations and all subsequent owners thereof”.

74.  The DMC has 8 sections and 2 Schedules.

75.  Section 1 provides as follows.

“1. (a) [The Developer] shall at all times hereafter during the residue of the said term have the full right and privilege to hold use occupy and enjoy to the exclusion of the [First Purchasers] All Those parts of the said Building more particularly set out in Part One of the SECOND SCHEDULE hereto together with the appurtenances thereto and the entire rents and profits thereof to the intent that [the Developer] shall have in all respects the rights of an absolute owner thereof.

(b) The [First Purchasers] shall at all times hereafter during the residue of the said term have the full right and privilege to hold use occupy and enjoy to the exclusion of [the Developer] All That part of the said Building more particularly set out in Part Two of the SECOND SCHEDULE hereto together with the appurtenances thereto and the entire rents and profits thereof to the intent that the [First Purchasers] shall have in all respects the rights of an absolute owner thereof.

3. Each equal undivided share in the said Land and the said Building and the full and exclusive right and privilege to hold use, occupy and enjoy any part of the said Building shall be held by the person or persons from time to time entitled thereto subject to and with the benefit of the easements rights privileges and obligations herein contained.

6. The right to the exclusive use occupation and enjoyment of any part of the said Land or the said Building shall not be sold assigned mortgaged charged leased or otherwise dealt with separately from the undivided share with which the same is held Provided Always that the provisions of this Clause shall not extend to leases or tenancies the terms of which shall not exceed seven years (underline, italics and bold supplied)”.

76.  Section II entitled “EASEMENTS RIGHTS AND PRIVILEGES THE BENEFIT OF WHICH IS HELD WITH EACH EQUAL UNDIVIDED 1,440^TH PART OR SHARE OF AND IN THE SAID LAND AND THE SAID BUILDING (italics supplied)” have Part A and Part B as follows: -

“A. Rights

Subject to the House Rules and subject to the payment by the Owner of his due proportion of the Management Fees as hereinafter provided the Owner of each said undivided share shall have the benefit of the following easements rights and privileges:-

a) Full right and liberty (in common with all other persons having the like right) to go pass and repass over and along and use the Common Areas and Common Facilities of the said Building for all purposes connected with the proper use and enjoyment thereof.

b) The right to subjacent and lateral support and to shelter and protection from the other portions of the said Building.

c) The free and uninterrupted passage and running of water sewage gas and electricity from and to his part of the said Building through the sewers drains watercourses cables pipes pumps tanks and wires which now are or may at any time hereafter be in under or passing through the said Land and the said Building or any part or parts thereof for the proper use and enjoyment of his part of the said Building.

B. Exclusion of Certain Rights

The Owners shall have no right to enter upon any part of the said Land or the said Building save as expressly herein provided it being understood that all work necessary for the maintenance and repair of the said Building subject as hereinafter provided shall be carried out by the Manager who shall have the right to enter in or upon any part of the said Land and/or the said Building for that purpose as herein provided (italics supplied).”

77.  Section IV entitled “COVENANTS PROVISIONS AND RESTRICTIONS TO BE OBSERVED AND PERFORMED BY THE OWNERS (bold and italics supplied)” has, among others, the following covenants, provisions and restrictions, including: -

“4. No Owner shall make any structural alterations or additions to any part of the said Building owned by him which may damage or affect or interfere with the use and enjoyment of any other part or parts of the said Building whether in separate or common occupation nor shall any Owner use cut injure alter or interfere with any part or parts of the Common Areas or any of the Common Facilities or any equipment or apparatus on in or upon the said Land or the said Building not being equipment or apparatus for the exclusive use and benefit of any individual Owner.

13. No part of the Common Areas shall be obstructed or incumbered nor shall any articles boxes material refuse or any other matter or things be placed or left thereon nor shall any part of such Common Areas be used for any business or private purpose and no Owner will do or suffer or permit to be done anything in such Common Areas as may be or become a nuisance or cause annoyance to any other Owners or occupiers of the said Building.

19 (a) Notwithstanding anything hereinbefore contained the Owners only of the shops on the Ground Floor and the Units on the First Floor of the said Building shall be permitted to affix and install such signs or signboard on the exterior walls of their own shops Provided that the size location and design of such signs or signboards shall from time to time be subject to the approval of the Manager in writing Provided further that the Owners installing such signs or signboard shall at all times observe and comply with all the laws and regulations relating to erection and maintenance and dismantling of such signs or signboard and shall indemnify and keep indemnified the other Owners and occupiers for the time being against all loss and damage injury costs expenses claims and demands arising from or on account of or resulting from all the installation reparation maintenance and upkeep of such signs or signboards.

(b) Subject to sub-clause (a) above, the owners of the Units on the 1^st Floor shall not be entitled to display their names in on or at any part of the said Building other than such places as shall be designated by the Manager for that purpose.

20. Subject to Clause 19 above but otherwise notwithstanding anything to the contrary herein contained, [the Developer] its successors assigns or licensees of the exclusive right immediately hereinafter mentioned shall have the sole and exclusive right to erect install affix or put up any signboards or signs (whether illuminated or otherwise) on the external walls main roof open yard or other common areas of the Ground Floor of the said Building and to install construct erect one or more chimneys on such part or parts of the external walls at the rear or side or both the rear and side of the said Building and such signboards or signs chimneys shall be of such design and size as [the Developer] shall think expedient or desirable...

29. No Owner shall cause any damage to or interfere in any way with the Common Areas and Common Facilities.

33. No Owner shall install any air-conditioning units or plants or any other fixture on upon or through the windows or external walls of the said Building without the prior written consent of the Manager of the said Building to any such installations having been first obtained and the conditions of such consent having been complied with.

34. No Owner shall use the corridors, staircases or the other common parts of and in the said Building for the purpose of drying laundry or hanging or placing or storing any dustbins garbage cans furniture machinery goods or chattels or other things thereon or therein (bold and italics supplied).”

78.  Section V concerns appointment of the Manager, its powers and duties, including to: -

“keep all the Common Areas properly lighted and ventilated”;

“prevent the obstruction of all the Common Areas and to remove any article or thing causing obstruction”;

“prevent any person from occupying or using otherwise than in accordance with the written permission of the Manager or the provisions of this Deed any of the Common Areas PROVIDED that the Manager shall have the power to grant ... leases, tenancy agreements and licences to other persons to use such of the Common Areas and on such terms and conditions as the Manager shall in its absolute discretion think fit... (bold and italics supplied)”.

79.  Under clause 1 of Sub-Section D of Section V, each owner shall pay to the Manager Management Fees, out of which the Manager shall pay

“all costs expenses and outgoings incurred by it in the course of managment of the said Land and Building (whether the Manager be obliged hereunder to incur such expenditure or not) including but not limited to the following items”: - “...(g) All charges assessments impositions and other outgoings payable by the Owners in respect of all parts of the Common Areas (italics supplied).”

80.  Under clause 3 of Sub-Section D of Section V,

“...all the electricity charges costs expenses and all other outgoings of whatsoever nature ... incurred in operating maintaining repairing and replacing the lifts which serve the First Floor to the 24th Floor (both floors inclusive) shall be only borne and paid by the Owners of the Units in the First to 24th Floors (italics and bold supplied).”

81.  Under clause 4 of Sub-Section D of Section V,

“…the Owners of the Ground Floor of the said Building or any part thereof shall not be liable for payment of any costs and expenses incurred in the operation, replacement repair and maintenance of the lifts as hereinbefore mentioned (italics and bold supplied).”

82.  Section VII covers “Owners’ Committee”.

83.  Section VIII entitled “MISCELLANEOUS” has clause 4(b) defining “Owner” to include “person in whom for the time being the legal estate in any undivided share in the said Land and said Building is vested” and clause 4(c) defining “Unit” to include, where the context permits or requires, “flat, office, shop or other self-contained portion of the said Building intended for separate use and occupation”.

84.  Clause 5 of Section VIII of the DMC defines “Common Areas” and “Common Facilities” which reads as follows:-

“IT IS HEREBY FURTHER EXPRESSLY AGREED AND DECLARED that in these presents the words “Common Areas” shall mean all such areas which are not included in any part of the said Building exclusively used by [the Developer] or the [First Purchasers] including but not limited to :-

(i) the canopy on the 1^st Floor, and the caretaker counters on the Ground Floor, the male and female toilets on the 1^st Floor, the lift lobbies, the entrance lobbies, staircases, landings and passages which are not included in any part of the Building exclusively owned by [the Developer] of the [First Purchasers];

(ii) the common lifts and the motor rooms thereof;

AND the words “Common Facilities” shall mean the facilities installed for the use and benefit of the said Building and not for the use and benefit of a particular Unit including but not limited to :-

(a) Such of the sewers drains water courses water tanks pipes gutters wells (if any) wires and cables and other service facilities whether ducted or otherwise which are or at any time may be in under or over or passing through the said Land or the said Building through which water sewage gas electricity and any other services are supplied to the said Building or any part or parts thereof;

(b) equipment rooms caretaker counters transformer rooms pump rooms meter rooms telephone equipment rooms switch rooms mechanical rooms mechanical ventilation rooms for the use and benefit of the said Building; and

(c) lighting for the Common Areas (bold and italics supplied).”

85.  The Second Schedule of the DMC has 2 parts: -

(1) Part One that is entitled “The Parts of the said Building exclusivly held used occupied and enjoyed by [the Developer]” reads:

“All Those the shops, offices, flats, main roofs, upper roofs, flat roofs, external walls and other self-contained portion of the said Building comprised in the said Building other than that part of the said Building exclusively held used occupied and enjoyed by the [First Purchasers] as mentioned in Part Two of this Schedule (bold and italics supplied).”

(2) Part Two is entitled “The Part of the said Building exclusively held used occupied and enjoyed by [First Purchasers] reads: “ALL THAT FLAT C on the ELEVENTH FLOOR of Block “1”of the said Building”.

F5. Conclusion on Disputed Areas for Issue 1

86.  Reading the DMC as a coherent whole against the above legal and factual background, and having regard to the objects of the DMC stated in its recital (5), I have no doubt that a reasonable person would have understood its parties to mean that the Disputed Areas are to be common parts of the Building. The parties thereto had not, I think, manifested any common intention to specify or designate the Disputed Areas as being for the exclusive use, occupation or enjoyment of the Developer as alleged by R1 to R4.

(1) If not specified in paragraph 8 of Schedule 1 of BMO, the Entrance Space must be within the words “entrance lobbies” of the defintion of “Common Areas” of the DMC.

(2) The Staircases, the Stair Landing, and the Corridor have been specified in paragraph 8 of Schedule 1 of BMO i.e. “passageways, corridors, staircases and landings”, and they also fall within the words of “staircases, landings and passages” of the definition of “Common Areas” of the DMC[24].

(3) The Toilets have been specified in paragraph 7 of the Schedule of BMO using the word of “toilets” and the Toilets also fall within definition of “Common Areas” of the DMC by way of the clear and specific words of “the male and female toilets on the 1^st Floor”. As mentioned above, the Toilets are not located within any particular office or room.

(4) All 5 areas of the Disputed Areas have not been specified or designated in the DMC as being for the exclusive use, occupation or enjoyment of the Developer as alleged by R1 to R4.

(i) On [75] and [85] above, the parts of the Building exclusively held, occupied and enjoyed by the Developer in Part One of Second Schedule do not include any of the 5 areas of the Disputed Areas. If required, it could have been easily drafted otherwise by the solicitor firm involved in drafting the DMC.

(ii) I disagree with Mr Chong that the words “together with the appurtenances thereto and the entire rents and profits thereof to the intent that [the Developer] shall have in all respects the rights of an absolute owner thereof (italics and bold supplied)” in [75] above could expand the exclusive use areas of the Devloper limited in [85] above to include any of the 5 areas of the Disputed Areas, which are all clearly and unequivocally included within DMC definition of “Common Areas” at [84] above. I do not agree with Mr Chong[25] that the said DMC definition should be qualified by the words he pointed to. There are no words to that effect in the DMC.

(iii) I do not find the case of Re Fry, Reynolds v Denne [1945] Ch 348 cited by Mr Chong useful or relevant at all. It is a case about the contruction of a gift in a will.

(iv) I do not agree with Mr Chong’s submissions that the Disputed Areas are “appurtenant” to the Offices and the Shop. Practically speaking, and on the terms of the DMC, one can, I think, still make use of the Shop and/or any of the Offices on the basis that the Disputed Areas being “Common Areas” to be enjoyed by every “owner” of undivided share of the Land and the Building.

(v) No undivided share of the Lands and of the Building has, one notes, been allocated to any of the 5 areas of the Disputed Areas at all in the “Table of Allocation of Undivided Shares” in the DMC to point to any of them being exclusive use areas. In any event, the Developer has not been allocated with any undivided share allocated to any of the Disputed Areas to make them its exclusive use areas.

(5) I disagree with Mr Chong’s submission at paragraphs 6, 8 to 10 of his final submissions[26] that the Disputed Areas were designed and built as part and parcel of the Offices as a tenement separated from the rest of the Building with the Disputed Areas (save the Toilets) as its only [practical] means of access to such single tenement and the Toilets the only means of convenience to such single tenement, with the residential owners having no interference with the commercial owners in the design of the Building as a whole.

(i) While the Developer owned the Offices and the Shop at the time of the DMC, the Offices and the Shop are, in terms of undivided shares allocated to each of them, 20 separate and individual tenements at law (and they could be separately assigned by the Developer to different purchasers after the making of the DMC) and they are also separate and individual tenements physically separated from each other by partitions and floor at the time of the DMC.

(ii) Post-DMC commom ownership of the Offices (and the Shop) and post-DMC destruction of such physical partitions between the Offices and the Corridor (to be discussed below) is, on authorities in sections F1 and F2, wholly irrelvant to our construction exercise for Issue 1, as the DMC must be construed at the time of its making and not later.

(iii) Notwithstanding marking of the Entrance Space as “Office Entrance Hall”[27], existence of 2 entrances halls to 2 residential G/F lift lobbies, and presence of internal toilet facility to each residential unit, 2 passenger lifts of the Building do stop at 1/F of the Building such that owners and occupants of 2 residential blocks can access the Offices and the Toilets through the Corridor, make use of the Toilets, and go out to Fa Yuen Street through the Corridor, the Staircases, the Stair Landing and the Entrance Space. Owners and occupants of the Offices and the Shop can also, I think, access the Building, including Block 1 and Block 2, in the opposite directions.

(iv) The 2 pairs of criss-crossing staircases, one for Block 1 and one for Block 2, also allow owners and occupants of 2 residential blocks to access the service lane to the West of the Building, the Toilets and the Offices through the Corridor, make use of the Toilets, and go out to Fa Yuen Street through the Corridor, the Staircases, the Stair Landing and the Entrance Space. Owners and occupants of the Offices and the Shop can also, I think, access the Building, including Block 1 and Block 2, in the opposite directions.

(v) Hence, the design of the Building at the time of the DMC does allow, I think, exchange and interaction between residential owners and commercial owners.

(6) Neither do I agree with paragraphs 11 and 12 of Mr Chong’s final submissions that the terms of the DMC support or reinforce the alleged design concept above. Indeed, the position is, I think, to the contrary. R1 to R4 are by their submissions on Issue 1 seeking, I agree with Ms Wong, to re-write the DMC.

(i) The DMC has, I note, not made one set of detailed provisions for the commerical podium (or commercial owners) and a different sets of separate provisions for the 2 residential blocks (or residential owners).

(ii) The DMC has only made provision for “Common Areas” and not, as in some other deeds, “Residential Common Areas” for common use by owners and occupants of Block 1 and Block 2, and “Commercial Common Areas” for common use by owners and occupants of G/F shops and the Offices.

(iii) The DMC makes it clear that the lifts of the Buiding are to enjoyed, and paid for, by 1/F to 24/F owners (see [80] and [81] above) and not by, say, 2/F to 24/F owners.

(iv) The DMC had not provided for specified rights of way (or specified routes) for owners and occupants of the 2 residential blocks distinct from different rights of way (or different routes) to be enjoyed by owners and occupants of the commercial podium.

(v) The right, or benefit, to go pass and repass Common Areas and to use Common Facilities in [76] above is, I would stress, an “easement”, “right” and “privilege” to be enjoyed by every “owner” of each undivided share, with no distinction between residential owners or commercial owners.

(vi) Whether or not any particular manner of exercise of the above right of way on “Common Areas” in a given case by any particular “owner” (or group of owners) of undivided share of the Building is for a purpose “connected with the proper use and enjoyment thereof”[28] is not in issue in this case. It is not within Issues 1 to 5. It is a separate issue to be considered if disputed after one first determine whether particular areas are “Common Areas” or not on the applicable statutory definition and case law principles.

(vii) On the authorities in sections F1 & F2 above, “proper use and enjoyment” is, I agree with Ms Wong, not the test or criteria for determining whether a particular part of a building is common parts or exclusive use areas. Mr Chong produced no authority to support such submissions. His submissions to this effect are also contrary to the statutory definition of “common parts” in BMO.

(viii) Ms Lam gave much subjective views of hers on such “non-issue” of “proper use and enjoyment” of “right of way” of different owners of the Building in the box under cross-examination of Mr Chong. I think all her answers are, contrary to paragraph 16 of Mr Chong’s final submissions, neither here nor there for our case.

(ix) The facts that iron grills had, after the making of the DMC, been erected between 1/F level and 2/F level of the 2 pairs of criss-crossing staircases to allow one going down only (but not going up) cannot assist us in our construction exerise of the DMC for Issue 1: see [53] above. The reason is simple. This case is not about whether such erection infringes one’s (or amounts to) proper use and enjoyment of one’s right of way over such staircases.

(7) The prohibition of drying laundry etc. by clause 34 at [77] above applies across the board to every “owner” over all “corridors”, “staircases” or “the other common parts”.

(8) If, as I hold at [147] below, the Switch Room is “Common Facilities” as defined in the DMC and “common parts” as defined in BMO, it could not, I think, be intention of the parties to the DMC that the only access to the Switch Room i.e. the Corridor is through exclusive use areas of the Developer. This entails possible obstruction or delay to regular or emergency inspections or repairs to such common facility, intrusion into alleged private areas of the Developer during such inspections or repairs, and inconveniences to all concerned.

(9) Indeed, if I may borrow those oft-quoted words of Recorder Edward Chan SC at [50] of his judgment in Metro City Managment Limited v Tsui Fee Hung Vincent and Lam Wai Fun, unreported, HCA 4327/2003, 13 January 2005 cited by Mr Chong in his submissions i.e. “the idea of having a common area within one’s property is an unattractive one” to our different context, the idea of having the Switch Room, Common Facilities defined in the DMC, like an island within the alleged large sea of private properties of the Developer on 1/F of the Building consisting of the Offices, the Corridor and the Toilets is, for reasons I have explained above, also an unattractive one.

(10) To the contrary, it is, I think, wholly not uncommon or not unheard of for different privately-owned offices in commercial premises to be separated from each other by common corridor(s), and for individual privately-owned offices in commercial premises to have no internal toilet and for their owners, occupants and visitors to share common toilets in the vicinity.

F6 Conclusion on External Wall facing West for Issue 1

87.  Reading the DMC as a coherent whole against the above legal and factual background, and having regard to the objects of the DMC stated in its recital (5), a reasonable person would, I think, have understood its parties to mean that external walls are exclusive use areas. The parties thereto had manifested a common intention to specify or designate external walls as being for the exclusive use, occupation or enjoyment of the Developer at the making of the DMC.

(1) “External walls” are found within paragraph 1 of Schedule 1 of BMO. This is a pointer of them being “common parts”.

(2) No undivided share is allocated to external walls of the Building in the DMC. The is another pointer of them being “common parts”.

(3) External walls serve 3 architectual functions to the benefit of all owners of a building, as stressed by Lam PJ at [64] and [66] of Donora Company Limited, supra. These functions also suggest external wall being “common parts”.

(4) Clauses 19(a) and 33 at [77] above are provisions relating to use of external walls for specific purposes. They do not assist us in our construction exercise.

(5) Nevertheless, by clause 1(a) at [75] above and Part One of Second Schedule at [85] above, parties to the DMC have clearly, I think, specified or designated external walls as being for the exclusive use, occupation and enjoyment of the Developer.

88.  But that is not the end of our enquiry.

89.  Looking at land searches of the Building produced before me, I find that the Developer had latest by August 1993 disposed of all its undivided shares of the Building and the Lands (it first disposed of all residential units by late 1986 and last disposed of, inter alia, the Offices and the Shop in July 1993).

90.  At law, there cannot be a proprietary right to the exclusive possession of part of a multi-storey building except as an incident of common ownership in the building. The proprietary right of an owner in a multi-storey building is the right to an undivided share in the building. Where a person does not own any undivided share in a building, he is not entitled to the exclusive possession of those parts of the building to which no share has been allocated, and those parts thereafter revert to all co-owners and becomes common parts of the building: Incorporated Owners of No 27A Chatham Road, Kowloon v Lee Kai Kong [2001-2003] HKCLRT 273, [11]-[15] per Cheung JA[29].

91.  Therefore, once the Developer has alienated all its undivided shares in the Building and the Lands latest by August 1993, its right to exclusive use of the external walls of the Building had extinguished and the external walls of the Building, including External Wall facing West, thereafter become common parts of the Building, over which IO could exercise its rights, powers and duties to the exclusion of the owners pursuant to s.16 of BMO.

92.  I cannot agree with paragraph 41 of Mr Chong’s final submissions that Ms Wong’s reliance of Incorporated Owners of No 27A Chatham Road, supra, and other authorities[30] is misplaced. Indeed, the law in this respect is well settled and Incorporated Owners of No 27A Chatham Road, supra, is a precedent binding on this Tribunal, especially it was an appeal from Lands Tribunal.

93.  Contrary to paragraphs 42 and 43 of Mr Chong’s final submissions, the “proper use and enjoyment” argument has never been pleaded to be run on external walls of the Building. It was pleaded to be run on the Disputed Areas only. In any event, for reasons stated in last section, such argument is irrelevant and not in issue here.

G1 Further facts leading to Issue 2

G2 Lease of the Shop, the Offices and the Disputed Areas by the Developer in 1986

94.  A year or so after the making of the DMC, by a lease dated 21 February 1986 (the 1986 Lease), the Developer, I find, let “the whole of 1/F” and the Shop of the Building more particularly shown in pink on G/F and 1/F plans annexed thereto to China Resources Purchasing Company Limited (First Tenant) “together with the use in common with the Landlord and all others having the like right of the entrances staircases landings passages and toilets in the said building in so far as the same are necessary for the proper use and enjoyment of the said premsies and except in so far as the Landlord may from time to time restrict such use And together with the use in common as aforesaid of the lift service and escalators in the Building (if any and whenever the same shall be operating)”[31] for a fixed term of 9 years commencing no later than 10 December 1985[32] and with user restricted to supermarket and no other purpose whatsover.

95.  On G/F plan annexed to the 1986 Lease, apart from the Shop, the Entrance Spacce, the Staircases and the Stair Landing are also within the demised premises.

96.  On 1/F plan annexed to the 1986 Lease, apart from the Offices, the Staircases, the Stair Landing, the Corridor, the Toilets, the two 1/F lift lobbies are, among others, also within the demised premises. The Switch Room was, however, not one of them.

97.  Among many provisions of the 1986 Lease drafted by the same firm of solicitors which prepared the DMC, the First Tenant may: -

(1) at its own expenses install and maintain during the subsistence of the lease a cargo lift to travel between 1/F and shop No.8 on G/F i.e. the Shop[33]; and

(2) may do away with internal partitions on 1/F and shall not be required to reinstate the same at its expiry or soon determination of the said lease[34].

98.  At the same time, under the 1986 Lease, the First Tenant shall pay to or reimburse to the landlord i.e. the Developer the cost of any damage caused to any part of the common areas of the Building occasioned by it[35].

99.  In view of [94] to [97] above, I accept Mr Chu’s evidence, and find it likely, that the First Tenant had, during the term of the 1986 Lease, removed 1/F internal partitions and occupied the Disputed Areas, for the purpose of its supermaket business, despite they are “common parts” of the Building for common use by all its owners.

100.  Nonetheless, the facts that the Developer had purported to let the Disputed Areas (which I find to be common parts from day 1) as well in the 1986 Lease to the First Tenant as private property would not change their status as common parts: Provident Commercial Investments Ltd v Incorporated Owners of Provident Centre and Others [2005] 4 HKC 155 at [21] per Yuen JA.

G3 Tenancies at the Offices, the Shop and the Disputed Areas from 2004 to July 2017

101.  On land searches before me, save that the 1986 Lease is registered, the following 3 tenancies were, I find, also registered against the Offices and the Shop at the Land Registry, namely :-

(1) one tenancy at a monthly rental of $380,000 in favour of Fairwood Fast Food Limited (Fairwood) for 4 years from 28 March 2004 to 27 May 2008 with an option to renew for 3 years;

(2) another tenancy at a monthly rental of $475,000 in favour of Fairwood for 3 years from 28 May 2008 to 27 May 2011 with an option to renew for 3 years; and

(3) one tenancy at a monthly rental of $600,000 in favour of Maxim’s Caterers Limited (Maxim) for 3 years from 1 August 2011 to 31 July 2014 with an option to renew for 3 further terms (Maxim’s Tenancy).

102.  Looking at G/F and 1/F plans in the Schedules to Chinese Undertaing (see [119] below), I accept the common evidence of the 2 factual witnesses that Maxim had, with R1’s consent, also occupied the Disputed Areas without 1/F partitions (i.e. the Corridor having disappeared) for its catering business carried out at the Offices and the Shop until its departure from the Building in July 2017.

103.  I am also prepared to accept Mr Chu’s unchallenged evidence, and find, that, with R1’s consent, Fairwood had, for its catering business, occupied not only the Shop and the Offices, but also the Disputed Areas during its term of its above registered tenancies from March 2004 to about May 2011.

104.  Pausing here, IO was incorporated on 11 May 2010.

G4 Lack of tenancy evidence for period from 1994 to 2004

105.  However, no other tenancy was registered at the Land Registry against the Shop and the Office for the above one decade.

106.  No documentary evidence was produced to shed light on tenancy, if any, entered during this 10 years and, if so, whether the Disputed Areas were occupied by the tenant(s) or not.

107.  Neither could Ms Lam or Mr Chu give evidence on above from their personal knowledge.

108.  I do not find it safe to rely or act on such uncorroborated hearsay given by Mr Chu from alleged sources of estate agent and alleged neighbourhood enquiry on the situation of 1/F of the Building from 1994 (expiry of the 1986 Lease) to 2004 (the year R1 purchased the Offices and the Shop).

109.  For want of reliable evidence, I therefore cannot find whether the Disputed Areas were occupied, and, if so, who occupied them and for what purpose, during this decade.

G5 Assignment of the Shop and the Offices in 1993

110.  We now move to consider change of ownership of the Shop and the Offices over the years.

111.  Moving back in time, the legal owernship of the Offices and the Shop changed hands after the making of the DMC, I find, as follows as shown by land searchses, and assignment, before me.

(1) On 21 December 1984, the Developer assigned the Shop to one Li Wing Fai, who assigned it back to the Developer on 9 October 1985.

(2) By an assignment dated 7 July 1993 and registered at the Land Registry by Memorial No.UB5766906 (1993 Assignment), the Developer assigned to one Joyday Investment Limited (Joyday) the Offices and the Shop.

G6 Assignment of the Shop and the Offices to R1 in 2004

112.  It was not until 2004 that R1 came into our picture.

113.  By an assignemnt dated 28 May 2004 (2004 Assignment), Joyday assigned to R1 the Offices and the Shop for the consideration of $56,000,000. The 2004 Assignment was signed by, inter alia, Mr Chu on behalf of R1. It was subject to existing lettings and tenancies (i.e. subject to the first tenancy in favour of Fairwood).

114.  The “lot number, sections, undivided shares, description and address etc” of the property so assigned to R1 in 2004 Assignment was set out in paragraph (a) of Schedule thereto as follows: -

“ALL THOSE 134 equal undivided 1,440^th parts or shares of and in [the Lands] and [the Building] TOGETHER with the sole and exclusive right and privilege to hold use occupy and enjoy FIRSTLY ALL THAT SHOP NO.8 on the GROUND FLOOR of the Building and SECONDLY ALL THOSE UNITS NOS. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18 and 19 on the FIRST FLOOR of the Building (which said Shop and Units are respectively shown and coloured Pink on the Ground Floor Plan and the First Floor Plan annexed to [1993 Assignment] (bold and italics supplied).”

Exclusive right to occupy, use and enjoy the Disputed Areas or external walls of the Building is, one should note, not found in the above paragraph (a) of the said Schedule.

115.  The 1993 Assignment is not before me but its G/F and 1/F plans are. Looking at them[36], none of the Disputed Areas was coloured pink (neither was the Switch Room coloured pink in 1/F plan of 1993 Assignment). In other words, on these plans of 1993 Assignment, Joyday, I find, never assigned any of the Disputed Areas (or any exclusive right to external walls of the Building) to R1 in 2004 Assignment.

116.  The “easements and other appurtenant rights, if any” of the property so assigned to R1 in 2004 Assignment set out in paragraph (c) of the same Schedule are as follows: -

“Subject to and with the benefit of all easements, rights and rights of way (if any) and all other appurtenant rights contained described and/or mentioned in [1993 Assignment] (bold and italics supplied).”

117.  Contrary to Mr Chong’s submissions, I do not think the above words “all other appurtenant rights” in paragraph (c) of Schedule to 2004 Assignment could expand R1’s purchase to include the Disputed Areas or external walls. I would repeat my earlier view that the Disputed Areas are not “appurtenant” to the Offices and the Shop. The same, I think, applies to external walls, which are, I think, not “appurtenant” to the Offices. The Offices would not, I think, become practically un-usable without air-conditioner condensers and chimney at 1/F level of External Wall facing West. In any event, this 2004 Assignment to R1 is also, I would stress, subject to and with the benefit of the DMC. And, by 2004, external walls of the Building had, by operation of law explained in section F6 above, become “Common Areas” of the Building as defined in the DMC.

G7 Chinese Undertaking signed by R1 on 30 January 2012

118.  One year or so after IO was incorporated on 11 May 2010, Mr Chu admittedly signed on R1’s behalf on the Chinese Undertaking on 30 January 2012 and on its covering letter addressed to IO and Hong Yip on 7 February 2012. Its main page reads as follows: -

“致：鴻威大廈業主立案法團

鴻威大廈客戶服務處

鴻威大廈 – 使用公眾地方責任承諾書

本公司明白現時租客在公眾地方所擺放私人物件(詳見附表)不僅有違大廈公契條文，亦可能構成第三者公眾責任問題，本公司清楚知道本公司並非該借用地方之業主，亦無享有租客之法律權利。倘由於大多數業主反對或政府有關部門指示，鴻威大廈業主立案法團可隨時收回上述借用地方而無須負任何賠償責任﹔而本公司亦願意承擔：

1. 日後因有關物件所引致的一切賠償及法律責任﹔

2. 為有關物件借用地方購買並提交有效第三者保險副本，保額為最少港幣貳仟萬圓(該保單的受保人必須包括「鴻威大廈業主立案法團」及「康業服務有限公司」)﹔

3. 負責有關物件及借用地方的維修保養責任﹔

4. 借用地方祇供用作擺放附表內所述的私人物件，本公司不可在使用時觸犯任何法例或法規，本公司並需保持該借用地方環境整潔﹔

5. 借用完畢後，本公司必須將上述位置一切裝置及物件搬走，並負責還原受影響位置﹔

6. 如日後將1樓1-19室及地下8號舖(任何一個單位或全部單位)出售，本公司必須還原及復修有關借用的公用地方，包括1樓原有走廊及樓梯等。

業主姓名： SUNNY ELEGANT LTD.       [R1’s chop and signature of Mr Chu]

                        旭彩有限公司                      業主簽署及蓋章：

地址：鴻威大廈地下8號舖及1樓1-19室   日期：30/1/2012 (bold inserted)”

119.  The Schedules to the Chinese Undertaking include, among others, photos[37] of usage of the Disputed Areas by Maxim and its associated companies, G/F and 1/F plans of the Building with the Disputed Areas marked in red indicating areas occupied by Maxim and its associated companies.

120.  For the following reasons, I reject Mr Chu’s evidence at, inter alia, paragraphs 12 to 17 of his witness statement that he (or R1) was induced to sign on the Chinese Undertaking by Alleged Misrepresentation: -

(1) Mr Chu claimed at paragraphs 12 and 13 of his witness statement to have protested through R1’s solicitors about Ms Lam’s (or IO’s) claim of the Corridor being common parts of the Building at MC meeting held on 12 Apirl 2011. But, this alleged solicitors’ protest letter dated 16 April 2011 was never produced at trial.

(2) R1’s representative surnamed Yip (Yip) to whom Alleged Misreprenstation was made during MC meeting held on 22 November 2011 (according to paragraph 15 of Mr Chu’s witness statement) was never called to give evidence at trial[38].

(3) I find it inherently improbable for Mr Chu to believe that the detailed terms of the Chinese Undertaking are not to be enforced and that R1 was to be given indefinite rights at the Disputed Areas for free when its drafting and entry was publicly discussed in MC meetings and thereafter recorded in minutes.

(4) IO has produced at trial minutes of 3 MC meetings held on 12 April 2011[39], 22 November 2011[40] and 10 January 2012[41]. I accept them being accurate records[42] and give them full weight. Their contents plainly showed that R1 was fully consulted by MC (and by Hong Yip) over the drafting of the Chinese Undertaking and its terms for a long period from, at least, April 2011 to January 2012. And their contents are wholly different from Alleged Misrepresentation.

(5) Yip was, it is common ground, a member of MC during the above period. He had, I find, attended the first two MC meetings above and must have participated in discussions recorded in minutes thereof as one of attending “MC members”. I accept Ms Lam’s evidence to that effect.

(6) I find it hard to believe Mr Chu’s evdence in the box that he was not briefed at all by Yip about contents of MC’s discussions in these meetings about the Disputed Areas (but, according to paragraph 16 of his witness statment, Mr Chu called up vice-chairman of MC to verify if Alleged Misrepresentation was made to Yip a week prior to his signing on the Chinese Undertaking).

(7) Mr Chu gave new evidence in the box contrary to the above paragraph 16 that it was Ms Lam who had called him to discuss about the Chinese Undertaking. At a later stage in cross-examination, he even told Ms Wong that “no other MC member” had discussed with him about the matter over the phone.

(8) I find it unbelievable that Mr Chu only bothered, as he claimed in the box, to read the terms numbered (1) to (6) of the Chinese Undertaking he signed but not its introductory, and important, paragraph about, inter alia, the Disputed Areas being “common parts” of the Building not belonging to R1.

(9) In reply to IO’s solicitors’ letter to R1 dated 30 May 2018 seeking to rely on the Chinese Undertaking to recover the Disputed Areas, R1’s solicitors did not in their letter dated 11 June 2018 complain of Allged Misrepresentation despite Mr Chu claimed in the box to have told the same to R1’s solicitors.

(10) Instead, R1’s solicitors said in its letter dated 11 June 2018 that R1 had signed on the Chinese Undertaking on the basis of “以和爲貴” and without prejudice to its rights of suit.

121.  On the above factual dispute, I prefer and accept the contrary evidence given by Ms Lam on Issue 2 set out at paragraphs 26 to 29, 31 to 35 of her witness statement.

H Findings of disputed facts on Issue 2

122.  On factual dispute in Issue 2, I find that Mr Chu had read, and fully understood, the entirety of the Chinese Undertaking and that he had signed on it on R1’s behalf freely and voluntarily. IO never, I find, made Alleged Misrepresentation to R1 at all.

I Legal conclusions on Issue 2

123.  Reading the contents of the Chinese Undertaking, including its Schedules, as a whole, and the minutes of the 3 MC meeting above, I accept Ms Wong’s submissions that IO had granted in about February 2012 a bare licence over the Disputed Areas to R1 for the sole purpose of allowing R1’s then tenant i.e. Maxim to place its objects thereon for its catering business.

124.  On its proper construction, the above licence is, I agree with Ms Wong, revocable unilaterally at the will of IO or upon reasonable notice given to R1 by IO. Alternatively, the said licence shall, I also agree with Ms Wong, expire automatically upon expiry or sooner termiantion of Maxim’s Tenancy and, if I may add, on assignment of any/all unit(s) of the Offices and the Shop from R1 to any third party.

125.  Upon aforesaid termination of the above licence, R1 is, I think, obliged under the same to reinstate the Disputed Areas to its original conditions and return the same to IO.

126.  In arriving at the above legal conclusions, I have had regard to paragraphs 34 to 36 of Ms Wong’s opening submissions, prohibition at s.34I(1)(a) of BMO against conversion of “common parts” except with approval by MC resolution[43], and power of the Manager under the DMC to grant “licence” over “Common Areas” at [78] above.

J1 Proven facts leading to Issue 3

J2 Usage of the Disputed Areas by Maxim from 2012 to July 2017

127.  I find that Maxim had, pursuant to Maxim’s Tenancy, continued carrying out its catering business at the the Shop, the Offices and the Disputed Areas from 2012 to July 2017[44]. It was done with consent of R1, who, however, had been granted licence of the Disputed Areas by IO in February 2012.

128.  Maxim’s Tenancy finally, I find, came to its end in July 2017. Maxim thereafter moved out from its demised premises as well as the Disputed Areas.

J3 Termination of R1’s licence over the Disputed Areas and R1’s failure to vacate

129.  Accordingly, R1’s said licence above automatically expired in July 2017 on termination of Maxim’s Tenancy and R1 is liable at law to reinstate the Disputed Areas to its original conditions and to return the same to IO.

130.  R1, however, did not do so and continued to occupy the Disputed Areas.

131.  By its letter dated 21 November 2017, IO wrote to R1 reminding R1 of the terms of the Chinese Undertaking, pointing to the departure of Maxim and requiring R1 to reinstate the Disputed Areas to its original conditions.

132.  By letter to R1 from IO’s solicitors dated 30 May 2018, IO gave 14 days’ notice to R1 to terminte the said bare licence of Disputed Areas, requiring R1 to remove all objects thereon and to vacate the same by 13 June 2018.

133.  If not expired by termination of Maxim’s Tenancy, in view of IO’s earlier demand letter dated 21 November 2017 above, I find 14 days notice given above by IO’s solicitors to R1 to terminate R1’s licence over the Disputed Areas reasonable in all the circumstances of this case and that R1 is liable at law to return vacant possession of the Disputed Areas to IO by 13 June 2018.

134.  R1, however, did not comply either and continued to occupy the Disputed Areas.

135.  Correspondences thereafter ensured between R1’s solicitors and IO’s solicitors in June 2018 with each disagreeing with the other’s stance of the matter and legal opinion thereof.

J4 R1’s letting of the Offices and the Shop (and the Disputed Areas) to R2

136.  In the meantime, on 18 February 2018, R1, I find, had let the Shop and “entire 1/F” of the Building (i.e. inclusive of the Disputed Areas) to R2 at a monthly rental of $600,000 for commercial purpose for a term of 3 years from 18 May 2018 to 17 May 2021, with an option to renew for another 3 years to 17 May 2024 at an increased monthly rent of $660,000 (R2’s 2018 Lease).

137.  R2 therefore only entered into our picture as from February 2018 and not earlier.

J5 R2’s sub-letting of the Offices and the Shop (and the Disputed Areas) to R3 and R4

138.  In fact, sometime in 2018 prior to entry of R2’s 2018 Lease, with R1’s consent, R2 had, I find, already sub-let: -

(1) such part of the Offices to the South of the Building plus 2 of the Toilets to its South, and part of the Corridor to its South[45] to R3 to run the Chinese Restaurant;

(2) such part of the Offices to the North of the Building plus 2 of the Toilets to its North, and part of the Corridor to its North[46] to R4 to run the Café; and

(3) the Shop, the Entrance Space, the Staircases and the Stair Landing to R3 and R4 for serving as common entrance leading from Fa Yuen Street to, and from, the Chinese Restaurant and the Café.

139.  To above ends, R3 and R4, with consent of R2 and R1, had, I find, started carrying out decoration works to the Offices, the Shop and the Disputed Areas as from about March 2018.

140.  After the aforesaid decoration works were completed in about late 2018, entire 1/F of the Building (save except for the 4 lifts and 2 pairs of criss-crossing staircases) were, I find, effectively divided into two and split between the Chinese Restaurant and the Café as a layout plan of general restaurant licence at 1/F of the Building dated March 2019 depicts[47].

141.  The respective interior decorations and arrangements of the Chinese Restaurant and the Café can also be seen (or gathered) from the said layout plan, a number of photos of the Chinese Restaurant produced[48], a number of photos of the Café produced[49], a number of photos of their common entrance produced[50], and unsigned 2^nd Schedule Quotations all dated 8 February 2018 addresed either to the Chinese Restaurant or the Café[51].

142.  In response to the aforesaid, IO’s solicitors had written on 18 January 2019 to R2 complaining of conversion of the Disputed Areas in breach of BMO and the DMC, demanding for the said decorations works to cease and for the Disputed Areas reinstated to their original conditions.

143.  R2 did not comply with IO’s demands and continued with its sub-letting of the Disputed Areas to R3 and R4.

144.  Solicitors for R1 and R2 thereafter wrote back to IO’s solicitors arguing with IO’s solicitors in correspondences in February and March 2019.

J6 Carrying on the Chinese Restaurant and the Café by R3 and R4 to exclusion of other owners & consequences

145.  From about late 2018 or early 2019 until trial, without IO’s approval by way of MC resolution, in order to carry on their respective businesses of the Chinese Restaurant and of the Café, R3 and R4 had, I find, with consent and/or permission from R1 and R2, occupied and used the Disputed Areas to the exclusion of IO, IO’s agents and workmen, other owners and occupiers of the Buildings (as the case may be) in, among others, the following manners: -

(1) completely converting the Corridor to become part of the Chinese Restaurant and the Café by carrying out decorations in such a way that the Corridor ceases to exist, erecting structures and placing different objects of the said 2 businesses at the space of the Corridor so as to deprive other owners and occupiers of the Building, and/or making it difficult for them, from exercising their right of way under the DMC over the Corridor;

(2) annexing the Toilets to become the 2 respective toilets of the Chinese Restaurant and the Café for exclusive use by their staffs, customers and visitors (so as to deprive other owners and occupiers of the Building from making use of the same);

(3) enclosing the 2 lift lobbies at 1/F of the Building by erecting walls and/or structure thereat such that IO, other owners and occupiers of the Buildings do not have access to and from 1/F of the Building through the said lift lobbies by the 2 passenger lifts concerned;

(4) erecting an iron roller shutter door at the Entrance Space facing Fa Yuen Street (and erecting 2 pairs of glass doors at the Corridor or the 1/F entrances of the Chinese Restaurant and the Café respectively) without giving their keys or means of their opening to other owners and occupiers of the Buildings for them to exercise their right of way over the Corridor and/or to make use of the Toilets under the DMC;

(5) restricting access to the Disputed Areas during the business hours of the Chinese Restaurant and the Café to their staffs, customers and visitors only (such that other owners and occupiers of the Building do not have access to them); and

(6) locking and/or shutting the above iron roller shutter door and the above 2 pairs of glass doors outside business hours of the Chinese Restaurant and the Café such that IO, IO’s agents and workmen, owners and occupiers of the Building do not have access, or immediate/urgent access, to the Disputed Areas and the Switch Room during such period of time without first obtaining consent and/or permission of R1, R2, R3 and/or R4.

146.  Giving full weight to Dr Kam’s opinion in SJE report, one finds, I accept, during the material times since 2017 installed inside the Switch Room a main switchboard[52] which is the main electrical distribution centre of the whole Building[53]. Its functions are for distributing electricity supply for serving 2/F to 24/F domestic users with 4 cable risers, main electricity supply to 1/F meter rooms of the 2 residential blocks, and public services including lifts and public lighting in the Building.

147.  Having regard to paragraph 10 of Schedule 1 of BMO (see [41] above) and “Common Facilities” definition in the DMC (see [84] above) and that no undivided share of the Lands and the Building is allocated to it, I find the Switch Room “common parts” of the Building i.e. it has not been designated or specified in the DMC as within the exclusive use of any owner.

148.  As such, pursuant to s.18(1)(a) of BMO, IO is, I think, under a statutory duty to maintain the Switch Room and the aforesaid main switchboard installed inside the said room in a state of good and serviceable repair and clean condition, be it periodic inspection/repairs or urgent repairs/inspection in the event of emergency. I reject the contrary advanced by Mr Chong at paragraph 29 of his final submissions.

149.  Regarding alleged incident on 26 June 2018 referred to at paragraph 57.2(f) of Ms Lam’s witness statement, I give no weight to its contents as they are entirely hearsay. No staff of Hong Yip or of IO’s electrical contractor concerned was called to give first-hand evidence of the said incident to this Tribunal.

150.  And I do not find it necessasry to resolve parties’ rival contentions on Electricity Ordinance[54], Electricity (Wiring) Regulations[55] and Code of Practice made thereunder.

151.  Nonetheless, on my existing factual findings in this section, I am still further satisified that:

(1) owners and occupiers of the Building (including those of 1/F of the Building) would likely have their means of escape by way of the Corridor, the Staircases, the Stair Landing and the Entrance Space to Fa Yuen Street obstructed in the event of fire, and

(2) IO’s agents and/or workmen would likely encounter delay and/or difficulty in accessing the Switch Room to make required repairs and/or inspection of the equipment installed inside, especially urgent ones in the event of emergency and/or after business hours of the Chinese Restaurant and the Café, in having to obtain keys and/or permissions first from R1 to R4 in order for their agent(s) and/or workmen to enter the Switch Room through the Café and, if necessary to do so after business hours, for them to enter through roller shutter door at the Entrance Space, glass doors at the 1/F entrance to the Café at the Corridor (if not to avoid interior decorations, tables and chairs, customers and staff of the Café during business hours)[56], so as to cause a nuisance and/or hazard to persons lawfully in the Building in that their safety may reasonably be jeopardized as a result.

J7 Conclusions on Issue 3 for the Disputed Areas

152.  On my legal conclusion for the Disputed Areas on Issue 1 at section F5 above, my findings and conclusions on Issue 2 at sections H & I above, and my findings of facts in section J3 to J6 above, as the DMC was, and is, in force in respect of the Building, I find s.34I of BMO applies to the Building, and R1, R2, R3 and R4 in breach of:-

(1) s.34I(1)(a) of BMO in that they had converted, and/or allowed/permitted the conversion of, the Disputed Areas to their own use;

(2) s.34I(1)(b)(i) of BMO in that they had used and/or permitted the Disputed Areas to be used in an unreasonable manner so as to interfere with their use and enjoyment by other owners and/or occupiers of the Building; and

(3) s.34I(1)(b)(ii) of BMO in that they had used and/or permitted the Disputed Areas to be used in such a manner as to cause a nuisance and/or hazard to persons lawfully in the Building.

In this respect, “any person” in s.34I(1) of BMO refers to any person who occupies the common parts: Incorporated Owners of No 27A Chatham Road, supra, at [19] per Cheung JA.

153.  Hence, R1, R2, R3 and R4 shall be deemed to be in breach of an obligation imposed on them by the DMC pursuant to s.34I(2) of BMO.

154.  Regarding clauses 4 and 13 of Section IV of the DMC IO relies upon (see [77] above), on my findings in section J3 to J6 above, I find all R1, R2, R3 and R4 in breach of clause 13 and R1 alone in breach of earlier part of clause 4.

(1) Clause 13 was breached because i) the Disputed Areas (except the Toilets) had been obstructed; ii) articles and objects had been placed on the Corridor and not removed; iii) the Disputed Areas had been used for their business and/or private purposes; and iv) the Disputed Areas had been used and/or permitted to be used by R1 owner in such a way to become a nuisance to other owners and occupiers of the Building[57]. In this respect, negative covenant like clause 13 are enforceable not only against owners of the Building but also aginast occupiers thereof, pursuant to ss.41(3), (5) & (6) of Conveyancing and Property Ordinance[58].

(2) The earlier part of clause 4 was, I think, not breached because there is no evidence that the alteration that were made to the Disputed Areas were “structural” ones. But I agree with IO that R1 owner had “altered” and/or “interfered with” the Entrance Space, the Staircases, the Stair Landing and the Corridor such that R1 was in breach of the latter part of clause 4.

K1 Usage of External Wall facing West from 2018 until trial

155.  In August 2018, while decorations were going on in respect of the Offices and the Shop, R1 had, I find, applied to Hong Yip to install 43 air-conditioner condensers and 2 chimneys at 1/F level of External Wall facing West for the purpose of carrying on the businesses of the Chinese Restaurant and the Café by R3 and R4 respectively. For such application, R1 had submitted to Hong Yip plans showing the locations of proposed equipment prepared by contractor[59].

156.  By letter dated 5 September 2018[60], in response to R1’s application above and plans lodged thereof, Hong Yip demanded R1, inter alia, for payment of deposit for giving consent for the same but R1 disagreed. Thereafter, from about September 2018 until trial, without approval or consent from IO or Hong Yip, R2, R3 and/or R4, with R1’s consent, had erected 43 air-conditioner condensers and 2 chimneys at 1/F level of External Wall facing West as per the locations shown on the said plans for the purpose of carrying on the said businesses of the Chinese Restaurant and the Café.

157.  I accept Ms Lam’s undisputed evidence that, at all material times since September 2018, the above erection of air-conditioner condensers and chimneys at 1/F level of External Wall facing West increased loading on External Wall facing West, produced noise and heated air adversely affecting occupiers of the Building at 2/F and above.

K2 Conclusion on Issue 3 for External Wall facing West

158.  On my legal conclusion that external walls of the Buiding has become “common parts” latest by August 1993 in section F6 above and on my findings of facts in section K1 above, as the DMC was, and is, in force in respect of the Building, I find s.34I of BMO applies to the Building, and R1, R2, R3 and R4 in breach of:-

(1) s.34I(1)(a) of BMO in that they had converted, and/or allowed/permitted the conversion of, 1/F level of External Wall facing West to their own use;

(2) s.34I(1)(b)(i) of BMO in that they had used and/or permitted 1/F level of External Wall facing West to be used in an unreasonable manner so as to interfere with their use and enjoyment by other owners and/or occupiers of the Building; and

(3) s.34I(1)(b)(ii) of BMO in that they had used and/or permitted 1/F level of External Wall facing West to be used in such a manner as to cause a nuisance and/or hazard to persons lawfully in the Building.

159.  Hence, R1, R2, R3 and R4 shall be deemed to be in breach of an obligation imposed on them by the DMC pursuant to s.34I(2) of BMO.

160.  Given that external walls of the Building has latest by August 1993 become “Common Areas” as defined in the DMC by operation of law as was explained in section F6 above, clause 33 of Section IV of the DMC (see [77] above), I think, applied thereafter to require individual owner, including R1, to seek prior written consent from the Manager to install air-conditioning units and plants on external walls of the Building and to comply with such conditions, if any, imposed by the Manager.

161.  I reject Mr Chong’s submissions at paragraph 51 of his final submissons. Clause 33 of Section IV of the DMC expresssly empowers the Manager to impose conditions for giving prior written consent. Deposit payment is, I think, one possible condition that the Manager may reasonably require. Not only that 1/F level of External Wall facing West is not “appurtenant” to the Offices, the situation commented by Rogers V-P in Metro City Managment Limited v Tsui Fee Hung Vincent and Lam Wai Fun, unreported, CACV No.328/2005, 6 June 2006, referred to at paragraph 54 of Mr Chong’s final submissions is also, I think, far removed from the circumstances of this case.

162.  Hence, further or alternatively, I find R1 owner in breach of clause 33 of Section IV of the DMC in that R1 had permitted installaton of the said 43 air-conditioner condensers and 2 chimneys at 1/F level of External Wall facing West without first obtaining prior written consent of IO or Hong Yip to such installation.

L1 Issue 4: Estoppel by convention & proprietary estoppel

L2 Relevant legal principles of the above 2 estoppels

163.  In Cheung Lai Mui v Cheung Wai Shing & Others (2021) 24 HKCFAR 116, Ribeiro PJ and Gummow NPJ explained at [23] to [27] of their joint judgment the requirements of proprietary estoppel as follows:-

‘23. Put shortly, the requirements of equity to recognise and give relief based on proprietary estoppel are (a) a representation or assurance made to the claimant (b) reliance thereon by the claimant and (c) detriment to the claimant in the consequence of that reliance.

24. More specifically, … (i) “the doctrine of proprietary estoppel cannot be treated as subdivided into three or four watertight compartments”, (ii) “the quality of the relevant assurances may influence the issue of reliance”, (iii) “reliance and detriment are often intertwined”, (iv) “the fundamental principle that equity is concerned to prevent unconscionable conduct permeates all elements of the [proprietary estoppel] doctrine” and (v) detriment is “not a narrow or technical concept”; it need not consist of expenditure of money or other quantifiable financial detriment and may consist of manual labour.… “In the end the Court must look at the matter in the round”; there is “a broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances.”

25. With respect to (v) … “where promises are made over a period of years, it is necessary to stand back and look at the claim in the round.”

26. With respect to (iii) … there need not be “a relationship of proportionality between the level of detriment and the relief awarded”; the question on an appeal is whether the relief granted was “out of all proportion to the detriment which the claimant has suffered?”

27. … there are two steps involved.  First, once the elements of the proprietary estoppel are established an equity arises; secondly the court then must decide the most appropriate form of relief, and may have regard to the circumstances as they then exist.’

164.  In Szeto Chak Mei (The sole administratrix of the unadministered properties of the late Szeto Chiu, Deceased) v Chan Lam Shan and Others, unreported, HCMP 836/2012, 1 March 2016, DHCJ Cooney SC also summarized at [31] to [42] of his judgment the principles of proprietary estoppel as follows:-

(1) The three main elements of the doctrine of proprietary estoppel are: (a) a representation or assurance made by the owner of the land to the claimant; (b) reliance on it by the claimant; and (c) detriment to the claimant in consequence of his (reasonable) reliance.

(2) The representation or assurance must be clear enough or, put another way, sufficiently clear and unequivocal. It is the substance of the meaning of the representation or assurance that has to be clear and unequivocal.

(3) The three elements are not separate compartments.

(4) The test for reliance is not a “but for” one. The promises relied upon do not have to be the sole inducement for the conduct; it is sufficient if they are an inducement. Once it has been established that promises were made and that there has been conduct by the plaintiff of such a nature that inducement may be inferred, then the burden of proof shifts to the one claiming vacant possession to establish that the claimant did not rely on the promises.

(5) Turning to detriment, first, there must be a sufficient causal link between the representation or assurance relied upon and the detriment asserted.

(6) Second, since only detriment arising from reasonable reliance is relevant, detriment arising from reliance that could not reasonably be expected is to be disregarded.

(7) Third, detriment need not consist of the expenditure of money or other quantifiable financial detriment, so long as it is something substantial. The issue of detriment must be judged at the moment when the person who has given the assurance seeks to go back on it. Whether the detriment is sufficiently substantial is to be tested by whether it would be unjust or inequitable to allow the assurance to be disregarded, in other words, whether repudiation of an assurance is or is not unconscionable in all the circumstances.

(8) Fourth, if lost benefits or detriment are merely speculative, they should not constitute a relevant detriment, although the mere fact that it is a possibility, as opposed to a probability, that something would have happened may not prevent that possibility founding an estoppel.

(9) Fifth, to look at the question of detriment in the round, a court must consider countervailing benefits acquired by the claimant as a result of the course of conduct by which the claimant has satisfied the reliance element of his claim. Such benefits must be taken into account because the detriment element is established only when that conduct means that, if the promisor were free to act as he wishes, the claimant would then be worse off overall than if he had not acted as he did. If the countervailing benefits are sufficiently substantial they may prevent the claimant establishing a proprietary estoppel claim.

(10) Unconscionability is a very important part of the doctrine such that, if the other elements appear to be present but the result does not shock the conscience of the court, the analysis needs to be looked at again. The court, as a court of conscience, goes no further than is necessary to prevent unconscionable conduct.

165.  In First Laser Ltd. v Fujian Enterprises (Holdings) Co. Ltd & Another (2012) 15 HKCFAR 569, Lord Collins of Mapesbury NPJ said at [79] that Ribeiro PJ had in Unruh v Seeberger (2007) 10 HKCFAR 31 re-stated the essential elements of an estoppel by convention as follows: -

(1) the parties entered into some transaction or legal relationship on the basis of an assumption that was shared by or common to them both, and it was the element of commonality of the assumption that marked out estoppel by convention as a distinct form of estoppel;

(2) it must be shown that assumption was communicated between the parties and acted upon, and there must be some mutually manifest conduct by the parties:

(3) there was no necessity for the parties to believe that the assumed state of affairs was true, nor was there any necessity for the parties to have been mistaken;

(4) what is important is for them to act in the belief, manifested by words or conduct, that they are both proceeding with the transaction on the basis of the same shared assumption;

(5) the contents of the common assumption must be sufficiently certain to enable the court to give effect to it;

(6) estoppel by convention is concerned with a common assumption relied upon as a basis upon which the persons sharing such assumptions enter into a transaction or legal relationship; and

(7) there must be an attempt by one party to depart from the common assumption which departure would be unjust because of the part taken by him in occasioning its adoption by the other party, and the other party would suffer detriment arising out of his having entered into the relevant transaction on the basis of the common assumption if the opposite party were afterwards allowed to set up rights inconsistent with the assumption.

L3 Estoppel by convention properly pleaded or not?

166.  Having considered the principles of estoppel by convention in section L2 above, I agree with Ms Wong that R1 to R4 have not properly pleaded a case of estoppel by convention of the Disputed Areas in their Amended Notice of Opposition for IO to meet.

(1) After setting out at paragraphs 41 to 47 of Amended Notice of Opposition the parties’ roles, the so-called design of the Disputed Areas in the Building on 1984 approved plans, and after alleging therein that the Disputed Areas not falling with “Common Areas” of the DMC on its proper construction or “common parts” defined in BMO, the pleaders have, I think, failed to plead at pargraph 48 of Amended Notice of Opposition [repeated at [24] above] the following material matters, namely: -

(i) what alleged (common or shared) understanding (or assumption) that is relied upon and how it was communicated from one party to the other party/parties;

(ii) the identity of the parties (or the other parties) who had such alleged common or shared understanding or assumption;

(iii) what alleged transaction or legal relationship the above alleged parties had entered into on the basis of such alleged common or shared understanding or assumption; and

(iv) what alleged acts R1 had allegedly carried out to its detriment pursuant to such alleged common or shared understanding or assumption.

(2) I do not think paragraphs 49 to 51 of Amended Notice of Opposition could have cured the above fatal omissions in paragraph 48 of Amended Notice of Opposition.

(3) For the sake of completeness, not a word of “external walls” was mentioned in paragraphs 41 to 51 of Amended Notice of Opposition. No estoppel by convention regarding external walls of the Building was ever pleaded.

L4 Estoppel by convention made out or not?

167.  In any event, on my factual findings and legal conclusions above and on the evidence before me, R1 to R4 have not, I think, made out any estoppel by convention of the Disputed Areas against IO.

168.  I give the following reasons.

(1) Mr Chu gave no evidence to that effect at all (e.g. he gave no evidence of any parties having entered into any alleged transaction or legal relationship on the basis of any alleged common or shared assumption or understanding between them);

(2) In so far Mr Chong seeks at paragraph 68 of his final submissions to rely on the DMC as the alleged transaction or legal relationship for purpose of estoppel by convention, IO and R1 to R4 are not the parties to the DMC. All 5 of them had not enterd into the picture at all as early as in 1984.

(3) The parties to the DMC are instead the Developer, Hong Yip and the First Purchasers. There is no evidence before me of them having executed the DMC in 1984 on the basis of any alleged common or shared assumption or understanding among them (or any two of them) that the Disputed Areas are not to form “Common Areas” as defined in the DMC or “common parts” under BMO.

(4) With respects, the so-called 3-decade evidence relied by Mr Chong at paragraph 71 of his final submissions do not, I think, assist R1 to R4 at all to make out any estoppel by convention regarding the Disputed Areas.

(i) What the Developer did by the 1986 Lease was, I must point out, its unilateral and wrongful letting of the Disputed Areas to First Tenant contrary to the DMC binding on it and BMO at law.

(ii) There is a gap in the evidence (and I made no finding above) as to whether or not the Disputed Areas were occupied by any tenant(s) for the 10-year period from 1994 to 2004.

(iii) G/F and 1/F plans to 1993 Assigment referred to in schedule of 2004 Assignment made it clear that Joyday did not by 2004 Assignment assign the Disputed Areas to R1 at law.

(iv) What R1 did by allowing its tenants i.e. Fairwood and Maxim to occupy or to continue occupying the Disputed Areas from 2004 to 2012 was also, I must point out, its unilateral and wrongful conversion of “common parts” contrary to the DMC and BMO at law.

(v) While there is no evidence of IO, Hong Yip and of other owners of the Building taking issue with wrongful conversion of the Disputed Areas by tenants for such proven length of period prior to 2012, they could have, one thinks, failed to take issue with the Developer, Joyday and R1 for many reasons other than alleged understanding as submitted by Mr Chong.

(vi) Importantly, Mr Chong could point to no evidence that Hong Yip, IO and/or other owners of the Building had, prior to 2012, communicated the alleged shared or common understanding or assumption to R1 which came into the picture in 2004. For example, no record of owners’ committee or MC to that effect is produced at trial. Not one from Hong Yip with personal knowledge of events prior to 2012 was called to testify to that effect. No correspondences with R1 to that effect is produced at trial.

(vii) By signing on the Undertaking and obtaining the grant of a bare licence from IO in February 2012, R1 admittedly, one thinks, acknowledged and agreed with IO that the Disputed Areas being “common parts” (any common or shared assumption thereafter is, one thinks, opposite to that asserted by R1 to R4) and that, as a result, Maxim thereafter lawfully occupied such common parts until July 2017 pursuant to IO’s licence to R1.

(viii) Thereafter, R1, R2, R3 and R4 had converted and/or allowed conversion of the Disputed Areas to the exclusion of other owners contrary to the DMC and BMO at law notwithstanding demands and objections from IO and IO’s solicitors. There could not be any common or shared understanding or assumption thereafter.

(ix) Any alleged expenses R1 had allegdly spent on flat roofs and 1/F level of External Wall facing West is neither here nor there regarding estoppel by convention on the Disputed Areas.

169.  For the above reasons, I absolutely disagree with Mr Chong that the only reasonable inference to be drawn by this Tribunal is that Hong Yip, other owners of the Building and IO had, prior to 2012, conducted their business on an alleged understanding that exclusive rights to use, occupy and enjoy the Disputed Areas be vested in owners from time to time of the Shop and the Offices.

170.  In so far Mr Chong seeks to rely at paragraph 72 of his final submissions on 2004 Assignment as the transaction or legal relationship for purpose of estoppel by convention, the other party to such R1’s transaction is Joyday and not Hong Yip or other owners of the Building than Joyday.

171.  Were Mr Chu really mistaken in the above $56,000,000 transaction to believe (wrongly at law) that R1 was purchasing from Joyday “entire 1/F of the Building” and the Shop, his wrong assumption or understanding in this respect was, on his own evidence in his witness statement and under cross-examination, induced by alleged words of estate agent to him to that effect, his alleged observation of the vinicity, his alleged enquiries of neighbourhood, and alleged failure of explanation from R1’s then conveyancing solicitors on the subject matter of such pricely purchase and no other reasons.

L5 Proprietary estoppel made out or not?

172.  On the basis of the legal principles in Section L2 above, R1 has, I think, failed to make out its case of proprietary estoppel of the Disputed Areas pleaded at paragraph 15 of Amended Notice of Opposition (repeated at [23] above).

173.  My reasons are as follows.

174.  First, R1’s plea of proprietary estoppel of the Disputed Areas is based on Alleged Misrepresentation allegedly made to it by IO a week before signing of the Chinese Undertaking. On Issue 2 above, I have already found against Alleged Misrepresentation and found for R1’s free and voluntary entry into a bare licence with IO in about February 2012 as evidenced by Mr Chu’s signature on the Chinese Undertaking.

175.  In any event, such investment of money and money’s worth on the Disputed Areas particularsized in 2^nd Schedule Quotations was paid for by R3 and R4 and not by R1, as Mr Chu confirmed in cross-examination and as addressees on the face of these unsigned quotations suggest. R1 did not thereby acted to its detriment.

176.  Absent quotations signed by, and records of payments to contractor from, R3 and R4, I would not accept from Mr Chu that R3 and R4 had invested as substantial as “several millions” as he claimed at paragraph 20 of his witness statement.

177.  Neither did, I think, R1 invest jointly with R3 and R4 as alleged. Mr Chu also confirmed under cross-examinatoin that R1 had not relayed Alleged Misrepresentation (or Chinese Undertaking) to R2, R3 or R4. These parties could therefore not have jointly invested in reliance of Alleged Mispresentation.

178.  As a matter of facts, IO did not stand by while R1, R3 and R4 made the alleged investment above. IO made its written demand on R1 to restore the Disputed Areas by letter as early as in November 2017. IO’s solicitors served their demand letter on R1 in May 2018 and their demand letter on R2 in January 2019. In April 2019, these proceedings at Lands Tribunal were taken out first against R1 and R2, with R3 and R4 later added as parties.

179.  In addition, Mr Chu also confirmed in the box that it was not R1 but R1’s tenant who paid for liability insurance required under the terms of the Chinese Undertaking.

180.  R1’s alleged expenditure on flat roof and external walls (whose claimed total amount I do not accept either without sufficient proof) could not, I think, be referrable to IO’s Alleged Misrepresentation on the Disputed Areas.

181.  Mr Chu also produced no document of alleged quantum of expenses allegedly incurred by R1 in maintaining and/or repairing the Disputed Areas in reliance of Alleged Misrepresentation.

182.  Had R1 been induced by Alleged Misrepresentation as alleged, it acted to its great finanical advantage by letting the Disputed Areas together with Offices and the Shop to: -

(1) Maxim at “handsome” monthly rental of $600,000 for its first 3 years and at monthly rental of $680,000 for the next 3 years until July 2017; and

(2) R2 at “handsome” monthly rental of $600,000 for its first 3 years and at monthly rental of $660,000[61] for the next 3 years until May 2024.

183.  The above substantial countervailing benefit acquired by R1 must, I agree with Ms Wong, also be taken into acccount.

184.  Standing back and looking at R1’s claim in the round, I do not find it unconscionable for IO to go back on Alleged Misrepresetation if required.

M. Issue 5 – relief to be granted

185.  For my factual findings and legal conclusions on Issue 1 to Issue 4, all the counterclaims raised by R1 to R4 cannot be supported and must be dismissed.

186.  For the same reasons, it is, I think, just and approrpiate to grant a declaration to clarify the “common parts” status of the Disputed Areas as IO seeks in this application.

187.  Mandatory injunction to require R1, R2, R3 and R4 to remove objects at the Disputed Areas, to reinstate them and vacate them is, in my views, also called for. So is mandatory injuncton to remove air-conditioner condensors and chimneys from 1/F level of External Wall facing West and reinstate the said wall. I agree with Ms Wong that it is appropriate to impose a time limit of 3 months from the handing down of this Judgment for these 2 injunctions.

188.  Prayer (4) of IO’s applicaton is, I think, unnecessary at the moment. I will give parties liberty to apply. IO may apply for the same in future should R1, R2, R3 and R4 be uncooperative.

189.  I will also grant the 2 prohibitory injunctions in prayers (5) and (6) to prevent future breaches of the DMC and BMO by R1, R2, R3 and R4.

190.  IO has, I think, failed to adduce evidence at this trial of the amount of its loss due to conversion of the Disputed Areas and 1/F level of External Wall facing West. Nominal damages will therefore be awarded to IO only.

N. Disposition

191.  I dismiss all the counterclaims of R1, R2, R3 and R4.

192.  On IO’s application, I first grant declaration as per prayer (1) of Amended Notice of Application against R1 and R2.

193.  Secondly, I grant mandatory injunction against R1, R2, R3 and R4 as per prayers (2) and (3) of Amended Notice of Application with a time limit of 3 months from the handing down of this Judgment for each injunction.

194.  Thirdly, instead of making order sought by IO in prayer (4) of Amended Notice of Application, I give parties liberty to apply.

195.  Fourthly, I grant the 2 prohibitory injunctions sought by IO at prayers (5) and (6) of Amended Notice of Application against R1, R2, R3 and R4.

196.  Fifthly, I award damages in sum of $100 in favour of IO against R1, R2, R3 and R4.

197.  Lastly, this Judgment endorsed with penal notice shall be drafted, filed and served by IO’s solicitors on R1, R2, R3 and R4.

O. Costs order nisi

198.  Costs normally follow the event after trial. I see nothing to depart from this general rule in this case.

199.  I make costs order nisi that costs of both application and counterclaims, including all reserved costs of both and the costs of this trial together with certificate for counsel, be paid by R1, R2, R3 and R4 to IO, to be taxed on District Court scale if not agreed.

200.  Should there be no application to vary the above costs order nisi within 14 days of the handing down of the Judgment, the same shall automatically become absolute and effective without further order of this Tribunal.