KONG WAI HSIEN AND OTHERS v. THE INCORPORATED OWNERS OF TAI WAI GLAMOUR GARDEN AND OTHERS

HCA 1442/2013

[2018] HKCFI 1887

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1442 OF 2013

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J U D G M E N T

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I. INTRODUCTION

1.  The 1^st, 2^nd, 4^th, 5^th, 6^th, 8^th, 11^th, 12^th and 14^th plaintiffs (collectively, “Ps”) were the respective registered owners of Shops A, C, F, J, K, M&N, Q, R and T of the Ground Floor (collectively, “Shops”) of Tai Wai Glamour Garden, Nos 1-5 Chik Fai Street & Nos 22-26 Mei Tin Road, Tai Wai, Shatin, New Territories (“Building”) erected on Sha Tin Town Lot No 226 (“Land”). Ps acquired/purchased the Shops subject to and with the benefit of the Subject DMC (see paragraph 3 below).

2.  In 1984, the Land was granted to Gladforce Limited under a government lease registered in the Land Registry as New Grant No 11888 (“New Grant”). The Land and Building were governed by the New Grant. By an Assignment dated 28 March 1985, Gladforce Limited assigned the Land to Avante Company Limited (“Developer” or “D2”). The Developer developed the Land by erection of the Building being a single multi-storey building comprising 20 shops on the ground floor and 8 residential units on each of the 2^nd to 25^th floors (ie 192 residential units). The Developer was the sole registered owner of the Land and Building immediately prior to the sale of the individual shops and flats thereat.

3.  The Developer, Hong Yip Service Company Limited (“Manager”) and Sin Mui (“First Purchaser”) executed a deed of mutual covenant (“DMC”) and management agreement dated 31 January 1986 (“Subject DMC”). The Manager was designated and appointed as manager of the Building since the date of the Subject DMC, and was still such manager at the time of trial.

4.  Under the Subject DMC, the Land and Building were notionally divided into 2,320 equal undivided parts or shares with various shares allotted to shops on the Ground Floor and flats A-H on the 2^nd to 25^th Floors of the Building as stipulated in the Second Schedule of the Subject DMC.

5.  I set out in the Annexure to this Judgment various provisions of the Subject DMC (“Annexure”). Unless otherwise stated, references to “Sections”, “Clauses”, “Second Schedule” and “Third Schedule” in this Judgment are references to Sections, Clauses, Second Schedule and Third Schedule in the Subject DMC. For convenience, references to “Common Areas”, “Common Facilities”, “Common Parts”, “Owners” and “Unit” in this Judgment are references to those areas, facilities, parts, owners and unit of the Building as defined in Section I. Whilst I will refer to skeleton extracts from the Subject DMC to explain/illustrate the discussions below, such extracts should be read together with the more detailed quotations of the relevant provisions of the Subject DMC in the Annexure.

6.  The Developer sold/assigned all 20 shops and 192 residential units of the Building to individual owners leaving 20 equal undivided shares in the Second Schedule[1] held by the Developer. It appeared that an Owners Committee (“OC”) was formed prior to 13 March 2007 to supervise the management of the Building.[2]

7.  On 31 March 2009, the Building Authority (“BA”) issued Order No D00442/NT/08/MS/TC (“1^st Order”). By the 1^st Order, BA formed the view that the common parts of the Building were liable to become dangerous, and ordered the Developer to carry out the following works to commence by 28 June 2009 and to complete by 26 September 2009:

“For common areas and exterior of the building

(a) Remove loose cracked and otherwise defective concrete from the reinforced concrete structure of the Building, clean existing exposed steel bars of loose rust and foreign matter, provide and securely fix in place additional steel bars as necessary and reinstate. The [BA] will be notified prior to placing of new concrete and the [BA] may carry out audit checking in this regard.

(b) Remove all loose and defective rendering.”

8.  The 1^st defendant (“D1”) was the incorporated owners (“IO”) of the Building. D1 was incorporated on 10 July 2009 pursuant to the Building Management Ordinance Cap 344 (“BMO”).

9.  Ps claimed the Developer wrongfully failed to comply with the 1^st Order, and wrongfully failed to commence and complete the stipulated works by the deadlines imposed in the 1^st Order or at all.

10.  The Developer and D1 executed an Assignment dated 19 April 2010 (“Assignment”) whereby for a consideration of $1 paid by D1 to the Developer, the Developer as beneficial owner assigned to D1 all those 20 equal undivided 2,320^th parts or shares of and in the Land and Building “TOGETHER with the sole and exclusive right and privilege to hold use occupy and enjoy ALL THOSE COMMON PARTS of the Building” on trust for the benefit of all the owners for the time being of the undivided shares in the Land for the residue of the term of years created by the New Grant subject to and with the benefit of inter alia the Subject DMC.

11.  Ps claimed that by the Assignment the Developer also purportedly assigned to D1 “the exclusive right to use or grant the right to use all the external walls parapet walls canopies of the Building or any part or parts thereof” conferred on the Developer,[3] but such Assignment did not stipulate such exclusive right was held by D1 as trustee for the benefit of all owners for the time being of the undivided shares in the Land and Building.

12.  Ps also complained D1 did not give notice of execution of the Assignment (whether before or after such execution) or of the “specific subject transactions involved” to Ps and/or other owners of the Building, and no legal advice was made available to them regarding their rights, obligations, risks and liabilities before or after such execution. Ps claimed they first became aware of the Assignment in the course of inspecting the minutes of meeting of D1’s Management Committee (“MC”) in/about early 2013.

13.  On 28 October 2010, the BA issued Order No D00560/NT/08 MS/TC (“2^nd Order”). The 2^nd Order was in the same terms as the 1^st Order save and except (a) it was addressed to D1 and (b) the required works were to commence by 26 January 2011 and to complete by 26 April 2011. The 2^nd Order also stated it substituted the 1^st Order, but Ps claimed the 1^st Order was not discharged/satisfied by the 2^nd Order.

14.  D1 sought contributions from all owners of the Building (including Ps) for funding to comply with the 2^nd Order. Requisite works to comply with the 2^nd Order were carried out. Out of the contributions by the owners of the Building (including Ps) a total sum of $5,348,400 or thereabouts plus consultancy fee of $97,000.00 were paid by D1 for works in compliance with the 2^nd Order, but Ds alleged such sums were spent on carrying out repair/maintenance works of the “Common Areas”,[4] “Common Parts”[5] and “Common Facilities” (collectively, “CCCs”), and were not restricted to works for the 2^nd Order. On 25 July 2012, BA issued a Certificate of Compliance.

15.  On 5 August 2013, Ps commenced the present action against inter alia D1[6] for breach of duties in relation to D1’s acquisition of the “Common Parts” (particularly the external walls of the Building, “External Walls”) from the Developer pursuant to the Assignment for nominal consideration of $1 based on misunderstanding that such External Walls were part of the common parts of the Building.

16.  D1 disputed liability. There were essentially 3 issues raised by the pleadings:

(a)	whether on proper construction/interpretation of the Subject DMC and BMO the External Walls formed part of the common parts of the Building (“External Walls Issue”);
(b)	whether D1 as IO owed any duties to Ps as individual owners in relation to (i) the renovation works carried out in respect of the External Walls and (ii) taking up the “Common Parts” and “Common Parts Shares” by way of the Assignment, and if so, what duties were owed and whether such duties were breached (“Duty Issue”);
(c)	whether Ps were entitled to the reliefs sought, and if so the scope of those reliefs (“Reliefs Issue”).

17.  On the first day of trial,

(a)	on the External Walls Issue, Ps confirmed they would not rely on the contra proferentum rule;
(b)	on the External Walls Issue, Ps confirmed they would rely on interpretation/ construction of the Subject DMC and BMO, and would not rely on any contention that the Developer had actual use, occupation and enjoyment of the External Walls;
(c)	Ps confirmed that if on the External Walls Issue they failed to show the External Walls were part of the common parts of the Building, then their claim would fail without going into the Duty and Reliefs Issues;
(d)	on the Duty/Reliefs Issues, Ps sought to rely on sub-paragraphs (1), (4) and (5) of the particulars of loss and damage pleaded in paragraph 39 of the Amended Statement of Claim, but not sub-paragraphs (2) and (3) thereof;
(e)	on the Duty Issue, Ps averred there were procedural irregularities in relation to the meetings of the OC and MC and Owners, but this was not a standalone complaint but subject to their success on (i) the External Walls Issue and (ii) proving the duty(ies) that IO allegedly owed to Ps under the Duty Issue;
(f)	on the Reliefs Issue, Ps confirmed they would not seek to set aside the Assignment;
(g)	on the Reliefs Issue, I directed the issue of assessment of damages to be split from and dealt with after the trial on liability;
(h)	I granted leave for Ps to amend their Reply and to file/serve their Amended Reply.

18.  I note a number of plaintiffs had dropped out of the present action by withdrawing their claims. On 17 February 2015, the claim by the 1^st to 14^th plaintiffs (including Ps) against D2 was dismissed with no order as to costs.

II.  EXTERNAL WALLS ISSUE

19.  Issue Ps claimed (and D1 disagreed) that upon proper construction of the Subject DMC and BMO the External Walls did not form part of the common parts of the Building, so pursuant to section 34H of the BMO (“section 34H”)[7] all or part of the renovation, repair and maintenance expenses in respect of or pertaining to the External Walls ought to have been borne and paid by the Developer to the exclusion of other Owners of the Building (including Ps) and/or D1, and any inconsistent provision in the Subject DMC was void by operation of sections 34H and 34C(2) of the BMO (“section 34C(2)”).[8] Thus, the External Walls Issue was essentially a matter of construction/interpretation of the Subject DMC and BMO.

20.  Ps’ stance  Ps averred the External Walls were “exclusive use areas” not intended for the common enjoyment of the co-owners and co-occupiers for the time being of the Building. It was said “exclusive use areas”[9] and “common use areas” (or “common parts”)[10] are mutually exclusive even though it does not follow they have to be physically separate from each other.[11] Ps averred the External Walls were “exclusive use areas” as the Developer had exclusive right to the use, occupation and enjoyment (“Exclusive Right”) over the same or any part(s) thereof until the Assignment in 2010:

(a)	according to the Second Schedule, 20 equal and undivided shares (ie “Common Part Shares”) were allotted to the “Common Parts”;
(b)	by virtue of Clause 8(b) of Section II (“Clause 8(b)”), the Developer had “the exclusive right to install in or affix to and use (or permit any person or corporation to install in or affix to and use) any part of the Building to which no Owner(s) has the exclusive right to occupy including the external walls such flues, pipes, conduits …… plant and machinery and other apparatus as the [Developer] shall think fit, together with the right to repair, maintain, service, remove or replace the same” (my emphasis);
(c)	by virtue of Clause 8(c) of Section II (“Clause 8(c)”), the Developer had “the exclusive right to use or grant the right to use all the external walls parapet walls canopies of the Building or any part or parts thereof with the necessary right of support on any part of the flat roofs …… and the Main Roof and Upper Roof for advertising purposes and to display, install, erect, affix or permit to be displayed, installed, erected or affixed thereon and thereto such advertising signs or structures …… with the right to remove, repair, maintain, service or replace the same ……” (my emphasis)

Mr Ng, counsel for Ps, submitted Clauses 8(b)-(c) clearly showed the External Walls were outwith “common use areas” (or “common parts”) notwithstanding the definitions of “Common Areas” and “Common Parts” in Section I. In support of such contention, Ps claimed the Developer by the Assignment assigned the right to “use” the External Walls to D1 (see paragraph 11 above).

21.  D1’s stance  D1 claimed the Developer by the Subject DMC had the Exclusive Right over all shops, flats and self-contained portions and other portions (not otherwise intended to be for the common enjoyment of the co-owners and co-occupiers for the time being of the Building) comprised in the Building other than the flat purchased by the First Purchaser (“FP Flat”).[12] So even though the Developer still held 20 equal undivided shares allocated to the “Common Parts” (ie the “Common Parts Shares”) after selling/assigning all other shops/flats in the Building to individual owners, it did not have the Exclusive Right over CCCs that were intended for the common enjoyment of co-owners and co-occupiers for the time being of the Building because:

(a)	the Owner of each equal and undivided share of the Building had full right and liberty (in common with other persons having the like right) to go pass and repass over and along and use the “Common Areas” and “Common Facilities” “for all purposes connected with the proper use and enjoyment of his Unit ……”;[13]
(b)	the Manager had powers/duties in relation to the CCCs under Clause B1 of Section VI;
(c)	the definitions of “Common Areas”, “Common Parts”, “Common Parts Shares”, “Owners”, “Share” and “Unit” in Section I as well as the provisions in Clauses D1 and D2 of Section VI combined to show the “Common Areas” and “Common Parts” (including the External Walls) and the “Common Facilities” were not any Unit and did not have any saleable area, so the Developer had no obligation under the Subject DMC (i) to manage, maintain and repair the same and/or (ii) to pay or contribute to the management and/or repair/maintenance expenses of the same.

22.  D1 averred that although Clauses 8(b)-(c) gave certain rights to the Developer as to use of the External Walls or part(s) thereof, such rights were subject to “necessary approvals or consents of the appropriate Government authorities having been had and obtained” and/or Special Condition no 6(l) of the New Grant (“SP6(l)”), and did not entitle the Developer to have Exclusive Right over the External Walls or part(s) thereof.

23.  Mr Lam, counsel for D1, argued that a study of the provisions of the Subject DMC would show (a) the Developer did not have Exclusive Right over the External Walls, (b) all Owners shared the use, occupation and enjoyment of the External Walls, and (c) all Owners[14] were responsible for repairing/maintaining the “Common Parts” that would include the External Walls and for paying the costs therefor.

24.  D1 claimed that for the above reasons sections 34C and/or 34H of the BMO had no application.

25.  Ownership and possession in multi-unit building  Cheung JA in Incorporated Owners of Shatin New Town v Yeung Kui explained the nature of ownership in a multi-unit development as follows:[15]

“1. When someone owns a flat or unit in a multi-unit development in Hong Kong, it means in legal terms that he holds a notional share (the amount of which is specified in the original assignment from the vendor to him or in the [DMC]) in the development as tenants in common with the other owners of the development but he is given ‘exclusive possession’ of his own flat to the exclusion of the other co-owners. In contrast to this specific unit, the common parts of the development such as entrance, passageways, garden, utility rooms and exterior walls are not within the exclusive possession of any of the owners but are to be used and enjoyed by all of them. The ambit of the common parts of the development is usually specified in the DMC. If not, the [BMO] will apply and defines the common parts.”

To put it in another way, DHCJ To (as he then was) in Incorporated Owners of Million Fortune Industrial Centre v Jikan Development Ltd & anor[16] said that unity of possession meant the co-owners of undivided shares in a multi-unit development have right of possession in common with other co-owners over the land and building upon it, but it does not carry with it the right to exclusive possession of any particular part of the land and building unless so provided by the DMC.[17]

26.  This is consistent with the definition of “common parts” in section 2 of the BMO, ie (a) the whole of a building, except such parts as have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner, and (b) unless so specified or designated, those parts specified in the First Schedule of the BMO (which schedule provides that “common parts” include inter alia external walls).

27.  Interpretation/construction of DMC  It has been said that the statutory definition of “common parts” means the process of identifying what is a “common part” is by eliminating all those parts of a building that have been specified or designated in, say, a DMC[18] as being for exclusive use, occupation or enjoyment of an owner.[19] Ultimately, it is “a question of construction and application of each DMC or of the BMO or both”.[20]

28.  Lord Hoffmann NPJ in Jumbo King Ltd v Faithful Properties Ltd & ors reminded that “…… [the] construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve”.[21] Cheung JA expressed similar sentiments in Incorporated Owners of Shatin New Town at p 246:

“…… One of the overriding objectives in the construction of a document such as the DMC is to give effect to that which a reasonable man (rather than a pedantic lawyer) would have understood the parties to mean. Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail: Jumbo King Ltd v Faithful Properties Ltd & Ors [1999] 4 HKC 707, (1999) 2 HKCFAR 279 per Litton PJ at 296.”

29.  Mr Lam’s authorities  Before I deal with the Subject DMC, it is perhaps useful to first turn to the relevant authorities. In Incorporated Owners of Million Fortune Industrial Centre, the developer and first owner of a building assigned to the 1^st defendant 7 undivided shares (allotted to 7 parking spaces) and 15 undivided shares (allotted to the common parts of the building) together with the “exclusive right and privilege to hold, use and enjoy [ie the Exclusive Right] the common parts, the external wall and all seven lorry parking spaces” even though under the DMC the developer was not given exclusive use of the common parts. The 1^st defendant converted some of these common parts into parking facilities (ie the disputed area), and the 2^nd defendant collected parking fees and paid them to 1^st defendant. After the IO was formed, it demanded the 1^st and 2^nd defendants to account for such parking fees previously paid by the 2^nd defendant to the 1^st defendant. DHCJ To held the IO was entitled to recover such collected parking fees.[22] The 1^st and 2^nd defendants appealed by contending that the right to such recovery belonged to the owners at the time when such fees were collected, and the 1^st defendant being one of such co-owners was entitled to retain the fees that had been paid to it. The Court of Appeal dismissed the appeal.[23] The relevant issue was whether the assignment by the developer (and first owner) in respect of inter alia 15 undivided shares for the common parts was effective in transferring (a) ownership of the common parts together with (b) Exclusive Right over the same to the 1^st defendant to the exclusion of the other co-owners.

30.  In that case, (a) clause 2 of the DMC defined “Common Parts” as certain itemised areas and all such other spaces/areas (if any) as might be designated by the developer (and first owner) as “Common Parts” or rights of way “[unless] otherwise designated by [the developer (and first owner)]” (my emphasis), (b) the disputed area that the 1^st and 2^nd defendants used for hourly-parking was a common part unless it had been designated otherwise by the developer (and first owner) (see (a) above), (c) the developer (and first owner) did not so “otherwise designate”, and (d) the developer (and first owner) by the DMC assigned the Exclusive Right and rents/profits of certain parts of the building set out in the first schedule of the DMC that expressly excluded such common parts.

31.  DHCJ To (as he then was) held that since the developer as the first owner had not been given Exclusive Right over the disputed area and indeed over the entire common parts under the DMC,[24] and the developer had not re-designated the disputed area for its exclusive use, occupation and enjoyment, the assignment of 15 undivided shares allotted to the common parts to the 1^st defendant (which assignment was expressly stated to be subject to and with the benefit of the DMC) could not make any difference (p 468):

“…… The assignment only gave the first defendant legal title, but not exclusive possession of any particular part of the Building. The first defendant has no more and no less right to the use of the common parts than any of the co-owners. However, this is not an ownership without substance. For example, after the first defendant has disposed of all its factory units, it still has the right to use the common parts by virtue of these 15 shares. Similarly, when the interest in the entire Building has to be disposed of, for example, for re-development or in case of compulsory acquisition, these shares give it a 15/17180th joint interest along with the other co-owners in the entire land and building.” (my emphasis)

DHCJ To (as he then was) therefore held that collecting income from use of the disputed area amounted to conversion of such income that belonged to all co-owners.

32.  The Court of Appeal agreed. Rogers VP held that by virtue of the definition of “Common Parts” under the DMC the developer (and first owner) was not given Exclusive Right over the common parts. Although clause 5 of the DMC listed certain rights/privileges to which the developer (and first owner) was entitled, the developer (and first owner) was only given an absolute right to designate exclusive use of the passages, corridor-ways and landings “which were not for the common use of the premises and/or the Building”. Further (at p 459),

“…… If the matter were in any doubt, the First Schedule specifically lists those parts of the Building of which the First Owner had the exclusive use, and although car parking spaces and lorry parking spaces are referred to, there they were ‘as are more particularly described in the Fourth Schedule’ and the First Schedule makes clear that the areas specified for the exclusive use of the first owner do not include the common parts. The Fourth Schedule makes clear the distinction between the common parts and the car- and lorry-parking spaces. Moreover, under cl.9 of the Third Schedule the owners undertook to use the parts of the Building intended for common use for the purpose of access to and egress from their workshops and not otherwise. Furthermore, under the Third Schedule the owners of the shares relating to the common parts were absolved from any requirement to pay or contribute to the costs and charges relating to the management of the building to which all the other owners had to contribute. In contrast the owners of car and lorry parking spaces were not so exempt.”

Thus, Rogers VP concluded that whatever the effect of the assignment, it did not give the 1^st defendant exclusive use of the common parts nor the right to use the common parts for its own private commercial purpose as a carpark where fees were charged.

33.  The 1^st and 2^nd defendants’ appeal to the Court of Final Appeal was dismissed,[25] and Litton NPJ made observations on distinguishing “common use areas” from “exclusive use areas” (at p.457):

“31. The expression ‘Common Parts’ as used by conveyancers in Hong Kong means those parts of premises designated for the common use of the co-owners, and persons deriving rights under them. But this is not the end of the story. The DMC in a particular case may contain provisions whereby areas constituting the common parts might lawfully be re-designated for the exclusive use of individual owners. But where parts of premises have been designated as Common Parts it goes without saying that they cannot be arrogated unilaterally to the exclusive use of a sole owner. The DMC in this case, as can be seen later on, so provides; this is no more than a reflection of the provisions of s.34I of the [BMO] which says :

34I. Common parts

(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);” (my emphasis)

34.   In Incorporated Owners of Goa Building v Wui Tat Co Ltd, the developer of the building retained ownership of the mezzanine floor and 3 shops on the ground floor. The IO made a claim to the Lands Tribunal (“Tribunal”) under section 34H against the developer for the maintenance cost of the external walls. The Tribunal gave judgment for the IO, and ordered the developer to bear costs of maintaining the whole of the external walls of the building.[26] The Court of Appeal allowed the developer’s appeal, and remitted the matter to the Tribunal.[27]

35.   The Court of Appeal held the IO could maintain its claim against the developer only if it were shown it had the right to exclusive possession of the relevant part of the building or had Exclusive Right over that part. Such right would inevitably stem from the DMC. It is useful to refer to clauses 1.01 and 3.02 of the DMC in that case in full as follows:

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

“3.02 The person or persons either solely or between themselves in whom the sole and exclusive right and privilege to erect, construct, install, affix, fit up or maintain any sign, signboard, advertisement, placard, poster, other structure, chimney, flu pipe or smoke stack mentioned in Clause 1.01 hereof or the right to receive the rents and profits thereof is for the time being vested for the residue now to come and unexpired of the term of years as set out in the said Schedule shall at all times observe and comply with all the laws and regulations relating to the erection maintenance and dismantling thereof and shall be solely responsible for the repair, maintenance, upkeep, renewal and removal of any such sign, a signboard, advertisement, placard, poster, other structure, chimney, flu pipe or smoke stack and the part of the said Building in common use and the portion or portions of the external walls and the portion or portions of the open yard or yards of the said Building at which and/or to which and/or upon which such sign, signboard, advertisement, placard, poster, other structure, chimney, flu pipe or smoke stack shall be erected, constructed, installed, affixed, fitted up or maintained and such person or persons shall at all times indemnify and keep indemnified the owners and occupiers for the time being of the said Building against all loss, damage, injury, costs, expenses, actions, claims and demands arising out of or on account of or resulting from the installation, repair, renewal, removal, maintenance and upkeep of such sign, signboard, advertisement, placard, poster, other structure, chimney, flu pipe or smoke stack or any defect therein or any failure to maintain the same in proper repair and condition.”

36.   Rogers VP held clause 1.01 of the DMC gave the developer various rights (that extended not only to the external walls but also to any part of the building that was in common use) such as erection of signs, signboards and flu pipes, but not exclusive possession or External Right of the external walls. As for clause 3.02 of the DMC, the developer was required to (a) comply with various laws/regulations that might be involved, (b) be solely responsible for repair/maintenance of any relevant item that might be so placed and also of “the part of the Building in common use and the portion or portions of the external walls and the portion or portions of the open yard or yards of the said Building at which and/or to which and/or upon which” any such item was placed, and (c) keep the other owners indemnified for any loss or damage which might be occasioned by exercise of the rights granted under clause 1.01 of the DMC.

37.   Rogers VP concluded at p 351 that the rights accorded to the developer under clause 1.01 of the DMC did not comprise all rights that would amount to exclusive possession or Exclusive Right over the relevant part of the building, but were merely part of the rights that might be enjoyed by an owner but were not full/exclusive rights. The Tribunal was therefore wrong to rule the relevant clauses of the DMC had conferred on the developer such Exclusive Right. Rogers VP further held that since clause 1.01 of the DMC referred not only to the external walls but also to the parts of the building in common use, it would be contradictory and absurd to suggest the common parts of the building were thus either in the exclusive possession of the developer or the developer had Exclusive Right thereof.

38.   In Incorporated Owners of Shatin New Town, the development (developed by 4 developers) had a commercial portion made up of 4 levels and a basement consisting of shops and carparks, and 8 high-rise blocks of 1,400 residential units. Resolutions were passed at an owners’ meeting to carry out maintenance works to the lobbies, entrance halls and exterior walls of the residential blocks (ie the disputed area), and to increase monthly management fees of the residential units for 24 months for carrying out such works. The respondent owner of a residential unit paid the increased management fees for a few months and thereafter refused to pay. The issue was whether the disputed area was within the exclusive possession of the developers who therefore should be solely responsible for their maintenance, or whether it was part of the common parts of the development the maintenance and expenses of which should be shared by contributions from owners of the residential units. At the Tribunal, HH Judge Wong dismissed the IO’s claim for recovery of the respondent’s unpaid monthly expenses on the basis that the disputed area was “owned” by the developers so maintenance thereof should be their sole responsibility and not that of the respondent.[28]

39.   The first schedule of the DMC allotted 23 undivided shares for various itemised areas and “Exterior Walls”, and 7 undivided shares for various itemised areas and “all communal areas of the Estate and of each Block not hereinbefore mentioned”, which undivided shares were still retained by the developers. The disputed area came within such ambit, so the real issue was whether the disputed area was within the developers’ exclusive possession. Cheung JA decided it was not.[29]

40.   The fact the developers reserved the common area (ie the 7 undivided shares that was inclusive of the disputed area) described in the first schedule of the DMC did not mean they had exclusive possession over it. After all, co-owners had full right and liberty under clause A1 of section II of the DMC to go, pass and repass over and along and use such of the entrance halls, lobbies, staircases, landing, passages, lifts and other common areas as formed part of the residential blocks. Cheung JA said at p 246 as follows:

“The consequence of any other interpretation would be unthinkable: it would mean that the owners of the 1,400 residential units would not have the right to use such essential facilities such as the entrance halls and lobbies, and could only do so at the whim and pleasure of the developers. ……”

Further, although the rights upon the developers in clause 7 of section I of the DMC inter alia to erect pipes on the exterior walls and to use the exterior walls for advertising purposes were described as exclusive rights, they were in fact qualified as (a) the developer required prior approval of the manager of the development before they could exercise these rights, and (b) 2 further conditions applied in respect of the advertising right, ie the approval of the government authorities, and the exercise of such right must not unnecessarily interrupt the enjoyment of the residential units. Taking into account the specific designation of exterior walls as a common area to be used by all owners, the conferring of these so-called “exclusive rights” over the exterior walls to the developers for some limited purpose did not provide them with exclusive possession of the exterior walls. Although the exact wording of the clauses in the DMC was different from those in Incorporated Owners of Goa Building,[30] Cheung JA found the construction of their effect “equally clearly applicable”, and further found the relevant clauses in the DMC did not confer exclusive possession of the disputed area to the developers, so section 34H was not applicable and the residential owners had to share the maintenance expenses of the disputed area.

41.   In Incorporated Owners of Hong Leong Industrial Complex v HL Resources Ltd, the manager used the management fund to replace the waterproofing layer sandwiched within the floor slab of the roof. The IO and an individual owner alleged the developer was the owner of the roof and responsible for the relevant repair/maintenance expenses. Sakhrani J held the waterproofing layer was a common part of the building, so the cost of repairs had to borne by the owners generally, and the manager was entitled to use the management fund for repair/maintenance even though the developer owned the roof.[31] It was held that paragraph (j) of the fourth schedule to the DMC only gave the developer rights to exhibit advertisements or affix structures to (but not confer Exclusive Right over) the external walls, so section 34H had no application.

42.   The Court of Appeal dismissed the appeal by the IO and individual owner.[32] Rogers VP held on proper consideration of the DMC, the developer’s exclusive right to use the external walls was not an exclusive right as normally understood, particularly under section 34H. The learned judge noted paragraph (k) of the fourth schedule of the DMC provided the owners had bound themselves not to put anything on the external walls or exterior of the building except with written approval of the manager and subject to such conditions as the manager might impose, so whatever right the developer had in relation to the external walls was necessarily subject to such conditions as the manager might permit. Further, clauses 12(a)-(b) of the DMC gave the manager power to absolve an owner from a restriction on placing signs, signboards or advertisements on the external walls. So whatever interest the developer might have had in the outer or external walls, it did not have exclusive possession and/or Exclusive Right over such parts of the building as the manager could permit others to make use of the external walls.

43.   In 聯基新樓業主立案法團 v Yan Yan Motors Ltd,[33] the building comprised shops and domestic units. Clause 3 of the DMC stated there was reserved unto the developer and its assigns and all persons authorised by it/them “exclusive right to use” the main roof for the erection, installation and maintenance of a cooling tower or compressor “or for any other purpose”, and “to use” the external walls and flat roof:

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

The IO decided certain repair costs were to be borne by co-owners of the building, but the defendant co-owner objected on the basis that under the DMC the developer was given exclusive possession or Exclusive Right over the external walls and main roof so it should be solely responsible for relevant portions of the costs incurred in repair/maintenance of those parts of the building. The IO brought 7 claims in the Small Claims Tribunal against the defendant co-owner for recovery of the apportioned costs that were said to be due and payable. The Small Claims Tribunal found in favour of the IO, and the defendant appealed.

44.   The main debate on appeal was whether, upon true construction of the DMC, the developer was entitled to exclusive possession or Exclusive Right over the external walls and main roof of the building. It was said that if the answer was yes, then notwithstanding any inconsistent provision in the DMC, the developer would have to maintain such parts in good repair/condition by operation of sections 34C(2) and 34H. Chow J referred to Incorporated Owners of Goa Building and Incorporated Owners of Shatin New Town, and concluded as follows:

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

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

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

45.   Although each DMC may be worded somewhat differently, the above line of authorities is consistent in approach, and the ratio that fell from the Court of Appeal is binding on this court.

46.   Mr Ng’s authorities  I now turn to the 2 first instance authorities cited by Mr Ng, ie Uniland Investment Enterprises Ltd v Incorporated Owners of Sea View Estate & anor,[34] and Green & Grace Ltd v Wang Lung Industrial Building (IO).[35]

47.   In Uniland Investment Enterprises Limited, the plaintiff was the owner of the outer wall and flat roof of a building (ie the disputed area). In 1996, a building order was served on the IO requiring it to carry out repair works for the external areas and common areas of the building, including works on the disputed area. In 1998, the owner of the disputed area was served with a building order requiring it to carry out the same repair works over the disputed area. The owner claimed against the IO and manager for breach of the covenant to repair under the DMC.

48.   It is useful to take a look at the relevant provisions in the DMC in that case (at p 143):

“Under recital (3) of the DMC the building is divided into 95,000 equal undivided shares. The outer wall and flat roof was allocated one share which was originally held by the developer and is now acquired and held by the plaintiff.

Under cl 1(i) of the DMC, the plaintiff has the full and exclusive right and privilege to hold, use, occupy and enjoy the outer wall and flat roof in so far as the same have not been assigned to any other owners. Hence, the outer wall and flat roof do not form part of the common areas of the building. However, under cl 3, the plaintiff's exclusive right is subject to the easements and rights set out in the second schedule. These easements and rights include ‘the free and uninterrupted passages and running of water, sewage, gas and electricity from and to the units’ and the right of the management company to enter upon to effect rebuilding and repairing, etc. Clause 17(i) also imposes other restrictions on the plaintiff's exclusive right to use and enjoy the outer wall and flat roof. The plaintiff has, in the enjoyment of its exclusive right, licensed parts of the outer wall and flat roof to others for various purposes.

Clause 7(a) of the DMC imposes on the management company the responsibility of repairing and maintaining the outer wall and flat roof. Clause 8 requires the management company to budget for the maintenance of the building, including specifically the outer wall and flat roof and to recover contributions from the owners. But cl 8(i) specifically exempts the owners of the dangerous goods stores, sub-terranean level tank and outer wall and flat roof from having to make such contribution. Thus in effect, the plaintiff as owner of that one share is entitled to exclusive possession, use and enjoyment of the outer wall and flat roof, subject to certain easements and rights of other owners, while the management company shall be responsible for its maintenance at no costs to the plaintiff. The costs are to be shared by the other owners of the building. This interpretation is not disputed by counsel for the first and second defendants.” (my emphasis)

49.   On the basis of such common ground, the only remaining issue was whether the provisions in the DMC as to liability for maintenance of the disputed area were rendered void by sections 34H and 34C(2), and DHCJ To (as he then was) held section 34H imposed on the owner (as owner, occupier and user) the obligation to maintain the disputed area notwithstanding that under the DMC such obligation fell on the manager and hence the IO upon its incorporation. It was held the provision to such effect in the DMC was void as being inconsistent with section 34H.

50.   As Mr Lam pointed out, Uniland Investment Enterprises Ltd was made on the common ground between the IO and the owner of the disputed area that under the DMC such owner had exclusive possession and Exclusive Right over the disputed area such that the disputed area was not part of the common areas of the building. This was recognised in Lily Tse Lai Yin & ors v The Incorporated Owners of Albert House (also known as the Owner Incorporation of Albert House) & ors.[36] In that case, the IO sought to rely on Uniland Investment Enterprises Ltd to submit that once there was an owner, occupier or user having the obligation to maintain, no other person would have the same obligation. Suffiad J did not share such view, and held Uniland Investment Enterprises Ltd (which was decided on very different facts) was clearly distinguishable. The learned judge said “[so] it was upon those facts pertaining to Uniland’s case [ie the aforesaid common ground between the parties] that Deputy Judge To decided that Section 34H of the [BMO] applied and that since one of the terms of the [DMC], which provided for the management company to maintain the outer wall, was inconsistent with section 34H, that term was void as being inconsistent with Part VIA of the [BMO] as provided for in section 34C(2)” (my emphasis).

51.   In my view, bearing in mind that the ratio of Uniland Investment Enterprises Ltd concerned the issue/determination set out in paragraph 49 above which was premised on the aforesaid common ground between the parties referred to in paragraphs 48 and 50 above, such ratio did not address the disputed External Walls Issue in the present action, ie whether the Developer had exclusive possession or Exclusive Right over the External Walls. Further, when such disputed issue was debated before DHCJ To (as he then was) in the subsequent case of Incorporated Owners of Million Fortune Industrial Centre, the learned judge came to a view consistent with the line of authorities cited by Mr Lam (see paragraph 31 above). Further, when DHCJ To (as he then was) decided Uniland Investment Enterprises Ltd, he did not have the benefit (as I now do) of the guidance by the Court of Appeal in the line of authorities cited by Mr Lam. I am not persuaded Uniland Investment Enterprises Ltd would provide helpful assistance in the construction of the Subject DMC as it turned on particular provisions of the DMC in question (which I find to be quite different from those in the Subject DMC) and on the aforesaid common ground between the parties (which was absent in the present action).

52.   In Green & Grace Ltd, an owner of a workshop in a building failed to pay contributions towards the cost of maintenance/renovation works for the building including its external walls that had been carried out. Clause 7 of section I of the DMC provided the developer had exclusive use and enjoyment of the external walls, but no corresponding obligation to repair and maintain them. The owner of the workshop argued sections 34C(2) and 34H were applicable, so the developer and not the other owners should pay the costs of the works. The IO asserted inter alia the other clauses in the DMC restricted the developer’s exclusive right to use the external walls by requiring the manager’s prior permission. DDJ Angela Kot (as she then was) concluded clause 7 of section I of the DMC was inconsistent with section 34H and therefore void, so the developer (and not other owners) should shoulder the obligation to repair/maintain the external walls and also the costs/expenses for the same.

53.   In that case, no undivided share was allocated to the external walls, so the developer did not own the external walls. Turning to the relevant provisions in the DMC, common area was defined in clause 1(1)(a) but the external walls were not amongst it.[37] Clause 7(c)-(d) of section I of the DMC provided as follows (at pp 173-174):

“7. Notwithstanding any provision to the contrary herein, there is reserved unto the Registered Owner its successors and assigns the following rights and privileges :-

……

(c) the exclusive right and privilege to hold use occupy and enjoy or otherwise dispose of or deal with the external walls of the Building.

(d) the exclusive right and privileges to, and to permit its or their licensees to, display, install, erect, affix, attach, dismantle, remove, repair, service and maintain to, in, on or from the Upper Roof … and/or the external walls of the Building or any part or parts thereof (i) signboards, neon signs … Provided Always that the Registered Owner and its successors and assigns having such exclusive right and privilege shall not be required to repair and maintain the … external walls of the Building or any part or parts thereof … save as provided in the following proviso and Provided that in displaying, installing … or maintaining any such signboards, neon signs … as aforesaid, the Registered Owner … shall at its or their own costs and expenses:

(A) obtain the requisite approval of the Director of Buildings and Lands and other Government Authorities concerned,

(B) observe and comply with all the laws and regulations for the time being in force and applicable thereto,

(C) make good all damage done to the Building occasioned thereby,

(D) remove, dismantle or replace the same if and whenever the same shall constitute any danger or hazard to the safety of the other Owners and/or occupiers of the other parts of the Building and/or any other person, and

(E) indemnify and keep indemnified the other Owners and occupiers for the time being of the other parts of the Building against all loss, damage, injury, costs, expenses, actions, claims and demands whatsoever arising out or on account thereof or of any defects therein or of the failure to maintain the same in proper repair and condition.”  (my emphasis)

54.   The learned judge also considered other clauses of the DMC, eg clauses 16-18 and 25 of section IV[38] and clause B1(4) of section V.[39] It was held that clause 7(c) of section I of the DMC unreservedly conferred on the developer exclusive use and enjoyment of the external walls, which right was not affected by other provisions in the DMC that were either irrelevant[40] or expressly/specifically “subject to” the developer’s right under clause 7 of section I of the DMC.[41] The learned judge distinguished Incorporated Owners of Hong Leong Industrial Complex based on different wording of the DMC as it was unclear but unlikely that the clauses in the DMC in that case had any proviso similar to “subject to cl.7 of Section I”. So “[it] is beyond argument that cl.7(c) of Section I of the DMC had specifically provided that the external walls are to the exclusive use and enjoyment of the Developer”. Further, “from the assignment produced in this case, such an exclusive right towards the external walls was also specifically reserved in the Schedule of the assignment” (at p 183).

55.   In the circumstances, the learned judge followed the ratio in Uniland Investment Enterprises Ltd in paragraph 49 above, and held the developer (who had Exclusive Right over the external walls) to be responsible for maintenance of the external walls in accordance with sections 34C(2) and 34H, and clause B1(4) of section V of the DMC that imposed on the manager a duty to paint and white-wash the external walls was void as being inconsistent with section 34H of the BMO.

56.   Mr Lam submitted Green & Grace Ltd was distinguishable on the facts as it turned on particular provisions of the DMC in that case, and Mr Ng fairly accepted provisions in such DMC were somewhat different from those in the Subject DMC. I note particularly that the Subject DMC did not have any express provision like clause 7(c) of section I of the DMC in Green & Grace Ltd, so the Subject DMC did not give similar rights in respect of the External Walls to the Developer. Given the emphasis laid by the learned judge on clause 7(c) of section I of the DMC in Green & Grace Ltd in coming to her conclusion, I find this authority to be of limited assistance.

57.   Discussion Turning to the Subject DMC, there were a few obvious and indisputable matters:

58.   The fact the Developer reserved the Common Part Shares (see paragraph 57(c) above) did not ipso facto mean it had exclusive possession over the “Common Parts” as defined in the Subject DMC (see paragraphs 31 and 40 above). But I have no doubt the definitions of “Common Areas” and “Common Parts” in the Subject DMC insofar as they related to the External Walls were to designate the External Walls as common parts of the Building. This is borne out by:

59.   Ps’ contention that Clauses 8(b)-(c) expressly gave or reserved Exclusive Right over the External Walls to the Developer (and thereby excluded the same from the common parts of the Building since “exclusive use areas” and “common use areas” were mutually exclusive – see paragraph 20 above) appeared to directly contradict the express and specific identification of the External Walls as common parts of the Building under the definitions of “Common Areas” and “Common Parts” in section I as explained above.

60.   Mr Ng made 2 submissions in this respect, which I do not accept. First, Mr Ng argued sections 38C(2) and 34H required the definitions of “Common Areas” and “Common Parts” in Section I insofar as and to the extent they suggested the External Walls were common parts of the Building (such that all Owners except the Developer had to bear the repair/maintenance expenses) to be read down as subject to Clauses 8(b)-(c) (which (as Ps contended) gave or reserved Exclusive Right over the External Walls to the Developer). I disagree as such argument mixed up 2 issues:

61.   Secondly, Mr Ng submitted Incorporated Owners of Million Fortune Industrial Centre helpfully pointed out that even though a DMC defined certain parts of the land and building as common parts, it might “contain provisions whereby areas constituting the common parts might lawfully be re-designated for the exclusive use of individual owners”, so here Clauses 8(b)-(c) clearly “re-designated” exclusive use of the External Walls to the Developer notwithstanding inclusion of the External Walls in the definitions of “Common Areas” and “Common Parts” in the Section I. I disagree.

62.   Careful study of Incorporated Owners of Million Fortune Industrial Centre showed the definition of “Common Parts” in the DMC was expressly subject to the proviso “[unless] otherwise designated by [the developer and first owner]” (see paragraph 30 above). So the DMC itself contemplated the areas expressly defined as “Common Parts” could (if re-designated by the developer and first owner) cease to be such. This was why Litton NPJ said “[the] DMC in a particular case may contain provisions whereby areas constituting the common parts might lawfully be re-designated for the exclusive use of individual owners” (see paragraph 33 above). Here, there was no such or similar proviso in the definitions of “Common Areas” and “Common Parts” in the Subject DMC which essentially were unqualified, and one must read such definitions together Clauses 8(b)-(c) in light of the Subject DMC as a whole to elicit the proper construction. In carrying out such exercise, an obvious question would arise as to why, if (as Ps contended) Clauses 8(b)-(c) granted or reserved Exclusive Right over the External Walls to the Developer, the External Walls were expressly identified as “Common Areas” or “Common Parts” in Section I. The specific designation of the External Walls as a common part in the DMC was something that Cheung JA took into account in Incorporated Owners of Shatin New Town (see paragraph 40 above).

63.   Before I deal with Clauses 8(b)-(c), I turn to Clause 1 of Section II that provided that the Developer was entitled to “full right and privilege to the exclusive use occupation and enjoyment and this rents and profits” in respect of parts of the Land and Building against its name in the Third Schedule, ie all shops, flats and self-contained portions and other portions (not otherwise intended to be used for the common enjoyment of the co-owners and co-occupiers for the time being of the Building) other than the FP Flat which the First Purchaser had exclusive use, occupation and enjoyment.

64.   As seen in the Second Schedule, shops and flats referred to shops A to T on the ground floor and the flats A-H on the 2^nd to 25^th floors of the Building. Where the context permitted or required, “Unit” was defined in Section I to include “Flat, Shop or self-contained portion of the Building intended for separate use and occupation”. Plainly, the External Walls were not shops, flats or self-contained portions. By virtue of the definitions of “Common Areas” and “Common Parts” as explained above, the External Walls were identified as common parts of the Building and not for “separate use and occupation”,[44] so the External Walls were also not Units. Whilst on the matter of “Units”, I digress to note that whilst the Developer was the legal owner of 20 undivided shares being the “Common Parts Shares” (that comprised the External Walls), it did not have to pay management fees in relation thereto.[45]

65.   But were the External Walls “other portions (not otherwise intended to be used for the common enjoyment of the co-owners and co-occupiers for the time being of the Building)”? Given the definitions of “Common Areas” and “Common Parts” in Section I, and for reasons set out in paragraph 58 above, the Subject DMC essentially defined “Common Areas” and “Common Parts” (which included the External Walls) as for the common enjoyment of co-owners/co-occupiers for the time being of the Building. As the areas specified for exclusive use by the developer in Clause 1 of Section II and the Third Schedule did not include the “Common Areas” and “Common Parts”, such provisions did not grant or reserve unto the Developer Exclusive Right over the External Walls. I bear in mind that Mr Ng suggested the process of identifying “common parts” is by eliminating the “exclusive use areas” (see paragraph 27 above), and the External Walls were plainly not an “exclusive use area” under Clause 1 of Section II and the Third Schedule.

66.   But Mr Ng submitted Clause 1 of Section II and the Third Schedule were not exhaustive as to portions of the Land and Building in respect of which the Developer had Exclusive Right because Clauses 8(b)-(c) gave or reserved unto the Developer Exclusive Right over the External Walls. I have the following observations:

67.   It is convenient to now turn to Clauses 8(b)-(c). I start with Clause 8(b). Mr Ng emphasised the word “use” in the reservation of “…… the exclusive right to install in or affix to and use (or permit any person or corporation to install in or affix and to use) …… the external walls ……” (my emphasis) unto the Developer to say it was an “unqualified right” that gave the Developer final say as to who could use the External Walls and how the External Walls would be used, so the Developer had Exclusive Right over the External Walls that would bring in section 38H. I disagree.

68.   First, it is necessary to properly understand what right was actually reserved under Clause 8(b). When pared down to the essentials and ignoring for the time being the proviso, Clause 8(b) could be summarised as follows:

69.   From paragraph 68(b) above, Clause 8(b) clearly recognised the External Walls were part of the Building to which no Owner(s) had exclusive right to occupy. So the remaining question was whether the right granted or reserved under Clause 8(b) amounted to Exclusive Right to use and enjoy the External Walls. I prefer the construction in paragraph 68(a), (b) and (c)(ii) above which, in my view, made natural reading and logical sense. The construction in paragraph 68(c)(i) above suggested by Mr Ng had inherent difficulties:

70.   Thus, notwithstanding Ps’ contention that the Developer had Exclusive Right and corresponding obligation over the External Walls, I am of the view the rights reserved under Clause 8(b) were limited rights that gave the Developer exclusive ability to put up and use (or allow others to put up and use) the objects in paragraph 68(c)(ii) above at inter alia the External Walls over which it had no exclusive right to occupy.

71.   Clause 8(b) is similar to clause 1.01(C) of the DMC in Incorporated Owners of Goa Building (see paragraph 35 above) although the wording was not exactly the same:

“The Vendor …… have the sole and exclusive right and privilege …… (C) Subject to any necessary approval of the Government Authority or Department to erect, construct, install, affix or fit up one or more flu pipes or smoke stacks or chimneys at to or on such part or parts of the open yard or yards and of the external walls of the said Building as the Vendor shall in its absolute discretion think fit and to remove replace or repair the same and to enter upon any unit at all reasonable times with or without workmen for the purpose of so doing.” (my emphasis)

Rogers VP held such provision did not give exclusive possession of the open yard(s) and external walls of the building to the first owner (ie the developer), and it only gave part but not all of the full/exclusive rights that might be enjoyed by the developer and first owner (see paragraphs 36-37 above). This, in my view, lent weight to my construction of Clause 8(b) that the rights granted or reserved thereunder were not all but only some of the rights over the External Walls.

72.   Mr Ng submitted Incorporated Owners of Goa Building could not assist because clause 1.01 of the DMC in that case gave Exclusive Right for “units” (Clause 1.01(A)) but only gave the right to erect/ maintain signboards, flu pipes, smoke stacks or chimneys etc at the external walls (Clauses 1.01(B)-(C)), which led Rogers VP to conclude that the developer was not given exclusive possession or Exclusive Right over the External Walls, but such provisions were fundamentally different from Clauses 8(b)-(c). I disagree.

73.   It was true that Clause 8(b) gave “exclusive right to install in or affix to and use (or permit any person or corporation to install in or affix to and use) ……” (my emphasis), and clause 1.01(B)-(C) of the DMC in Incorporated Owners of Goa Building did not refer to right to “use”. But the label “exclusive rights” for erecting pipes on the exterior walls and using exterior walls for advertising purposes did not aid the respondent in Incorporated Owners of Shatin New Town when those rights were in truth qualified (see paragraph 40 above). Indeed, even though Cheung JA found the wording of the relevant clause in the DMC in Incorporated Owners of Goa Building different from that in Incorporated Owners of Shatin Town Lot, construction of the effect of the former clause was equally applicable to the latter clause (see paragraph 40 above). Likewise, the developer was given exclusive right to use the external walls in the DMC in Incorporated Owners of Hong Leong Industrial Complex, but Rogers VP held such right was not an exclusive right as normally understood as it was qualified by the manager’s powers in relation to the external wall (see paragraph 42 above). In Yan Yan Motors Ltd, the DMC drew a distinction between “the exclusive right to use” the main roof and the right “to use” the external walls and flat roof that was reserved to the developer, but Chow J considered/discussed the latter right on the basis that it was “the Developer’s exclusive right to use the External Walls under clause 3(b) and (c) of the DMC …… limited to the erection, installation and display of signboards, advertisements, decorations, lights, lanterns, articles and other display materials” (see paragraph 44 above). This did not dissuade the learned judge from finding such right did not comprise all rights amounting to exclusive possession or Exclusive Right over the external walls, especially when such right was qualified by the manager’s powers over the external walls for some limited purposes (see paragraph 44 above).

74.   As seen in paragraph 78 below, a host of powers/obligations in relation to the External Walls was given to the Manager (not the Developer) under the Subject DMC. Whilst other relevant clauses in the Subject DMC will be discussed in further detail in paragraph 97 below, it is useful to highlight here Clause B1(4) of Section VI which provided inter alia the Manager had full/unrestricted authority to manage the Building with a duty “[to] paint white-wash tile (or otherwise treat as may be appropriate) and put in hand any other necessary maintenance of the exterior wall and Common Areas ……”.

75.   Mr Ng submitted such segregation of the exterior walls (ie External Walls) from the “Common Areas” in such provision reflected an intention to carve out the External Walls from “Common Areas”, and by imposing a mandatory duty on the Manager to be responsible for maintaining the External Walls such provision was void for contravening sections 34C(2) and 34H. I disagree:

76.   Further, irrespective whether or not the construction of Clause 8(b) should be as set out in paragraph 68(c)(i) above (as Mr Ng suggested) or 68(c)(ii) above, the rights reserved thereunder were restricted/qualified and not any Exclusive Right envisaged in section 34H. After all, such rights were not absolute but were “subject to all necessary approvals or consents of the appropriate Government authorities having been had and obtained”.

7.   Whilst the DMC in the cases cited by Mr Lam were all somewhat differently worded, the constant theme was notwithstanding the grant or reservation unto the developer of any “exclusive right” to use the disputed area or to do certain acts, the developer would not have exclusive possession or Exclusive Right over the disputed area (whether external walls or otherwise) if in fact such right (a) was not the entirety of all rights that amounted to exclusive possession or Exclusive Right and/or (b) was qualified by, say, such rights/powers (which might be limited) given to the manager or others. This had to be read together with (i) the definition of common parts in the DMC and any provision in the DMC for absolution of the developer from having to pay costs/charges relating to the management of the building in respect of such common parts (see paragraphs 32 and 40 above), and (ii) Clause 20 of Section V to which I now turn.

78.   Clause 20 of Section V insofar as it related to Clause 8(b) gave or reserved unto “the [Developer] …… or licensees of the exclusive right immediately mentioned” “…… the sole and exclusive right …… to install construct erect one or more flue pipes, smoke stacks or chimneys on such part or parts of the external walls at the rear or side or both the rear and side of the Building ……”, but “[notwithstanding] anything to the contrary herein contained” such right was qualified by the following:

79.   Reading Clause 8(b) together with Clause 20 of Section V[47] plainly showed the “exclusive right” given or reserved unto the Developer under Clause 8(b) was qualified/restricted as explained in paragraphs 76-78 above.

80.   Indeed, rights given or reserved unto the developer in clause 1.01(C) (see paragraphs 35 and 71 above) and clause 3.02 (see paragraph 35 above) in the DMC in Incorporated Owners of Goa Building contained mirror (or at least very similar) qualifications:

It was for these very qualifications/restrictions that Rogers VP came to the view the rights granted or reserved unto the developer by the DMC in Incorporated Owners of Goa Building did not amount to exclusive possession or Exclusive Right over the external walls (see paragraphs 36-37 above). Likewise, the DMC in Incorporated Owners of Shatin New Town contained restrictions/qualifications similar to those in the Subject DMC (see paragraphs 40 and 78(a)-(b) above), and Cheung JA found the so-called “exclusive rights” as to the exterior walls in such DMC only conferred rights for limited purpose and not exclusive possession or Exclusive Rights over the external walls (see paragraph 40 above). The DMC in Incorporated Owners of Hong Leong Industrial Complex had a qualification similar to the one in paragraph 78(a) above, and since the developer’s rights in relation to the external walls were subject to such condition Rogers VP found it did not have exclusive possession or Exclusive Right over the external walls (see paragraph 42 above).

81.   Mr Ng tried to downplay the impact of these case authorities, but I disagree with his contentions:

82.   Mr Ng submitted the indemnity proviso in Clause 20 of Section V (see paragraph 78(e) above) supported Ps’ stance. But I find the 2 provisos in paragraph 78(d)-(e) above were in fact against Ps’ contentions. First, as seen in Clause B1(4) of Section VI (see paragraph 74-75 above) and Clause D1 of Section VI, the Subject DMC imposed on the Manager and not Developer the duty to paint, white-wash, tile, treat and maintain the External Walls, and obliged the Owners (except the Developer – see Clause D2 of Section VI) to pay maintenance and management expenses. But the repair/maintenance proviso in paragraph 78(d) above required the Developer to inter alia repair/maintain the chimney erected/installed at the rear/side External Wall and “such portion(s) of the external walls …… that have been used by them” (ie only those parts of the External Walls that had been used for erection/ installation of such chimneys). This did not sit well with Ps’ contention that the Developer had Exclusive Right over all External Walls and hence had obligation to repair/maintain all External Walls (rather than portions used for, say, advertising or putting up a chimney) and pay the costs therefor.

83.   Mr Ng submitted the provisos under Clause 20 of Section V would be applicable where the Developer granted permission to a licensee to exercise the rights given or reserved under Clause 8(b). But such provision referred not just to the licensee but also to the Developer itself, and there was no sensible explanation why particular mention was made of the Developer’s responsibility to repair/maintain portions of the External Walls that it had used for the limited purpose of, say, advertising or putting up a chimney. In my view, such proviso was plainly of limited scope and did not reflect Exclusive Right over all External Walls or any obligation on the part of the Developer for all External Walls.

84.   Secondly, for the indemnity proviso in Clause 20 of Section V (see paragraph 78(e) above), it likewise provided for the Developer and its licensee to indemnify other Owners/occupiers for loss and damage as a result of, say, installing a chimney on the side/rear External Wall or “resulting from the use of such portion(s) of the external walls …… or from any defect therein or any failure to maintain the same ……” This echoed the repair/maintenance proviso in that the indemnity (insofar as the External Walls were concerned) only covered those parts of the External Walls used for, say, installing a chimney and did not extend to all External Walls. Mr Ng submitted the indemnity proviso was a “catch-all safety-net provision” which the Developer had to be responsible in any event. But if that were the case, there was little point to make particular mention of the Developer’s limited responsibility over portions of the External Walls.

85.   Thirdly, there were similar repair/maintenance and indemnity provisos in the DMC in Incorporated Owners of Goa Building (see paragraph 80(c)-(d) above), and the limitations inherent in such provisos were factors that Rogers VP took into account in coming to the conclusion that the developer in that case did not have exclusive possession or Exclusive Right over the external walls (see paragraph 36 above). In my view, Clause 20 of Section V leaned in favour of D1’s stance and did not help Ps’ stance.

86.   Mr Lam next submitted that to read Clause 8(b) as Ps suggested (ie the Developer reserved Exclusive Right over the External Walls) would bring about an absurd result similar to what Rogers VP observed in relation to the proposed reading of clause 1.01 of the DMC in Incorporated owners of Goa Building (see paragraph 37 above). Here, the Developer by Clause 8(b) reserved the right of putting up and using (or allowing others to do so) the objects in paragraph 68(c)(ii) above at “any part of the Building to which no Owner(s) has the exclusive right to occupy including the External Walls”, so the Developer could put up (or allow others to put up) such objects not only at the External Walls but also any other “part of the Building to which no Owner(s) has the exclusive right to occupy” such as the “Common Areas” and/or “Common Parts” as defined in Section I. If Ps’ argument[48] were to its logical conclusion, the Developer also would have sole obligation to repair/maintain the “Common Areas” or at least the “Common Parts”[49] (being areas where the Developer could exercise its alleged Exclusive Right under Clause 8(b)) and to bear the costs/expenses therefor, but at the same time other Owners could also use, occupy and enjoy the other “Common Areas” or “Common Parts” as defined in Section I. After all, Mr Ng made clear Ps accepted the other “Common Areas” and “Common Parts” were common parts of the building for which the Owners and D1 (not the Developer) had responsibility to repair/maintain and to pay the costs therefor. I agree with Mr Lam the construction put forward by Ps would lead to a troubled result, and could not have been the true intention of such provisions in the Subject DMC.

87.   I now turn to Clause 8(c). When pared down to the essentials and ignoring the provisos for the time being, the rights reserved unto the Developer under Clause 8(c) could be summarised as follows:

88.   In my view, Clause 8(c) did not give or reserve unto the Developer Exclusive Right over the External Walls. Rather, it reserved advertising rights in relation to inter alia the External Walls, and such advertising rights would at best be one of the rights in respect of the External Walls. I note Clause 8(c) was similar to clause 1.01(B) of the DMC in Incorporated Owners of Goa Building (see paragraph 35 above) although the wording is not exactly the same:

“The Vendor shall …… have the sole and exclusive right and privilege …… (B) Subject to any necessary approval of the Government Authority or Department to erect, construct, install, affix, fit up, paint and maintain any signs, signboards, advertisements, placards, posters or any other structureswhatsoever of such size and design whether illuminated or otherwise and at to or on such position or positions of the external walls of the said Building and of any part of the said Building in common use as the Vendor shall in its absolute discretion think expedient or desirable and to remove replace or repair the same and to enter upon any unit at all reasonable times with or without workmen for the purpose of so doing …… ” (my emphasis)

Rogers VP held such provision did not give exclusion possession or Exclusive Right over the external walls to the developer, and such rights as given or reserved were merely part of the rights that might be enjoyed by an owner but not the full and exclusive rights (see paragraphs 36-37 above). The discussion in paragraphs 71-75 above applied mutatis mutandis.

89.   Further, the advertising rights reserved under Clause 8(c) were in any event limited rights and not any Exclusive Right since they were subject to the provisions of SC6(l) and the requirement for “all necessary approvals and consents of the appropriate Government authorities having been had and obtained”. The discussion in paragraph 77 above also applied mutatis mutandis, so Clause 8(c) had to be read together with Clause 20 of Section V which insofar as it related to Clause 8(c) gave or reserved unto “the [Developer] …… or licensees of the exclusive right immediately mentioned” being “…… the sole and exclusive right to erect install affix fit up exhibit or paint any signboards signs or advertisements (whether illuminated or otherwise) on the external walls parapet walls of the Building”, but “[notwithstanding anything to the contrary herein contained” such right was qualified by the following:

90.   In my view, Clause 8(c) when read together with Clause 20 of Section V plainly showed the so-called “exclusive rights” given or reserved unto the Developer thereunder was qualified or restricted as explained in the above paragraph. In fact, the rights given or reserved unto the developer in clauses 1.01(B) and 3.02 above (see paragraph 35 above) in the DMC in Incorporated Owners of Goa Building contained mirror or very similar qualifications:

91.   As explained in paragraph 80 above, similar provisions in Incorporated Owners of Goa Building, Incorporated Owners of Shatin New Town and Incorporated Owners of Hong Leong Industrial Complex suggested the so-called “exclusive rights” given or reserved unto the developer were in fact not Exclusive Right over the external walls. I reiterate the discussions in paragraph 81-85 above. In my view, they would inform on the construction Clause 8(c), which by itself contained an added restriction of having to comply with SC6(l) in the exercise of the rights given or reserved thereunder.

92.   Mr Lam made submissions mutatis mutandis to paragraph 86 above that since the Developer’s alleged exclusive right under Clause 8(c) to “use” or to grant the right to “use” covered not just the “external walls” but also “parapet walls and canopies of the Building or any part or parts thereof”, so the logical conclusion of Ps’ argument was that the Developer was obliged only to repair/maintain the “external walls” but also the “parapet walls and canopies of the Building or any part or parts thereof” and also to bear the costs therefor whilst the other Owners would enjoy the use, occupation and enjoyment of “the parapet walls, canopies of the Building or any part or parts thereof”. I agree for the same reasons in paragraph 86 above applied mutatis mutandis.

93.   Mr Ng made a fall-back submission in relation to Clauses 8(b)-(c) by citing Rogers VP’s observations in Incorporated Owners of Hong Leong Industrial Complex that in practical reality “the only use which could have been made of the external walls would be for putting up signs, signboards or advertisements on the walls, or for erecting a chimney up the side of the building”, which Mr Ng argued was encapsulated in Clauses 8(b)-(c). However, I cannot see how this would assist because in Incorporated Owners of Hong Leong Industrial Complex Rogers VP’s observation was made in the following context (at p 468):

“16. Equally importantly, clause 12(a) and (b) give the Manager the power to absolve an owner from a restriction on placing signs or signboards or advertisements on the external walls. Hence, it was said that whatever interest the first defendant might have in the outer or external walls, it did not have the exclusive possession and the exclusive right to use and enjoy that part of the building because the Manager could permit others to make use of the external walls. In this respect, it is pertinent to observe that under clauses 2(a)(i) and (ii) of the DMC it would seem that, as a matter of practical reality, the only use which could be made of the external walls would be for putting signs, signboards or advertisements on the walls, or for erecting a chimney up the side of the building.”

So even though it was said the only use for the external walls was for, say, advertising purpose or erecting chimney, it was found the developer did not have exclusive possession or Exclusive Right over the external walls because under the DMC in that case the manager could permit others to use the external walls. Although there was no similar provision in the Subject DMC, there were other restriction discussed in paragraphs 76-80 and 91 above.

94.   In my view, Clauses 8(b)-(c) did not support Ps’ contentions. It was even more obvious when such clauses were read together with Clause 8(d) that reserved unto the Developer the right to assign all or part of the “Common Parts” (and corresponding undivided shares) “to the Manager (or to an incorporated company whose principal business is that of estate management) for the general amenity of the Owners and other residents of the Building” but subject to the Subject DMC and the particulars and conditions of the New Grant. In my view, since the “Common Parts” (which included the External Walls) could only be assigned to the Manager or estate management company (and not exclusively any individual Owner) for the common use, occupation and enjoyment of all the Owners, such provision flied against any contention that the Developer reserved exclusive possession or Exclusive Right over the External Walls.

95.   As alluded to above, Mr Lam submitted there were other provisions in the Subject DMC in relation to “Common Areas” and “Common Parts” supporting the construction that the External Walls were for common enjoyment of the co-owners/co-occupiers for the time being of the Building:

96.   For all of the above reasons, the External Walls were common parts of the Building and not the Developer’s “exclusive use areas”. The Developer (who was merely the legal owner of the Common Parts Shares) never had any exclusive possession or Exclusive Right over the External Walls. In the circumstances, Ps’ claim fell to be dismissed without going into the Duty and Relief Issues (see paragraphs 17(c) and 97 below). However, for the sake of completeness, I will briefly deal with the Duty Issue.

III.  DUTY ISSUE

97.   Irrelevance of Duty Issue  Clauses D1(b), (f), (g) and (m) of Section VI provided “[each] owner” (ie all co-owners of the Building) shall pay (a) the cost of carrying out all or any of the duties of the Manager set out in the Subject DMC, (b) the cost of effecting insurance in respect of or in connection with the management of the Building, (c) all charges payable by the Owners in respect of “all parts of” the Common Areas, and (d) any other items of expenditure, charges, premium, fees and other outgoings relating to the management, maintenance, operation, servicing, renewal, renovation or replacing of the Building necessary for good estate management of the Building. Thus, the Developer never had any general obligation to repair/maintain the External Walls except for limited obligation under Clause 20 of Section II to repair/maintain parts of the External Walls used for inter alia advertising signs and signboards or flue pipes and chimneys put up pursuant under Clauses 8(b)-(c) and 20.

98.   Further, by reason of the matters discussed in paragraph 21(c), 23(c) and 64 above and Clause D2 of Section VI, the Developer had no obligation under the Subject DMC to pay or contribute to the management expenses and/or repair/maintenance expenses. So quite irrespective of the Assignment, the Owners (and later the IO) were responsible for the repair/maintenance of the External Walls and for payment of costs/expenses therefor. So Ps’ complaints about the Assignment and renovation works for the External Walls carried out in 2008 to 2012 were irrelevant to the issue of liability, and Mr Ng properly conceded Ps’ claim fell to be dismissed without going into the Duty and Relief Issues should I find (which I did) the External Walls to be common parts of the Building.

99.   Duty Issue  The Duty Issue concerned inter alia whether D1 properly took up the External Walls (being part of the “Common Parts” and “Common Parts Shares”) from the Developer by way of the Assignment and/or whether it was in breach of duties owed to the Owners (including Ps) in doing so. Ps’ attack against the Assignment was limited to the External Walls and not other parts of the “Common Parts”, so for convenience I refer to the Assignment insofar as it related to the External Walls as “EW Assignment” below.

100.   There was no dispute that D1, Developer and Manager were bound to comply with and observe the stipulations in the New Grant and Subject DMC and also the provisions in the BMO.

101.   Ps’ case  In paragraphs 9-15 of Mr Ng’s written opening submissions, it was said D1 owed each Owner (including Ps) statutory,[51] fiduciary[52] and common law agency duties.[53] On such basis, Ps claimed that by implication of law D1 owed Ps inter alia the following duties: (a) to act in the best interests of Ps, (b) to exercise reasonable care and skill in the discharge of its duties, (c) not to put itself in a position where its interest and duty conflict, (d) to act in good faith, and (e) to act for proper purposes. Ps further claimed D1 owed a duty of care to them on the basis that inter alia it had assumed responsibility vis-à-vis them to take due care in execution of the Assignment and in managing/handling affairs in relation to the “Common Parts” and/or External Walls.

102.   On such basis, Ps claimed D1 was in breach of such duties:

103.   In short, Ps alleged the Assignment was not in the common or best interest of the Owners, and its execution (and manner thereof) was contrary to D1’s duties owed to the Owners (including Ps), which breach of duty was not cured by subsequent resolution/approval by the Owners in respect of renovation works for the External Walls and collection of contributions from the Owners (including Ps) for such purpose. Ps’ complaints essentially focused on (a) whether proper notice with adequate disclosure had been given to the Owners (including Ps) in relation to renovation of the External Walls and EW Assignment, and (b) whether in the decision-making process D1 had sought/provided to the Owners (including Ps) any or any proper legal advice in relation to the External Walls. Further and/or alternatively, Ps claimed insofar as attributable or pertaining to the External Walls, all or at least part of the costs/expenses for discharge of the 2^nd Order (being a continuation of and in identical terms to the 1^st Order) should have been borne and paid by the Developer, who should have kept D1 fully indemnified of any claim or enforcement action by BA (which contention I have rejected).

104.   D1’s case  D1’s responses can be summarised as follows:

105.   For the purpose of the Duty Issue, I assume (but without making any findings on law and/or facts at all) D1 owed the duties alleged in paragraph 101 above to Ps.

106.   Witnesses  Mong Kwok Keung (director of the 6^th plaintiff that bought Shop K in 2003, “Mong”) gave evidence for Ps. Tse Ka Ho (D1’s chairman at the time of trial who lived at the Building since 1994 and who owned a residential unit thereat since 2007, “Tse”), Kwong Yuen Cheung (owner/occupier of a residential unit of the Building from 1996 to 2011 and former chairman of D1, “Kwong”) and Chan Lap Yin (property manager of the Manager who was assigned to manage the Building from 2008 to 2012, “Chan”) gave evidence for D1. All witnesses adopted their respective statement evidence, and Kwong/Chan adopted parts of Tse’s statement evidence that were relevant to them.

107.   Tse and Kwong gave statement/oral evidence to the effect that they suspected Ps’ motive in commencing the present action against D1 was to take revenge against D1’s/Manager’s demands and legal actions against various owners/occupiers of the shops on the ground floor of the Building for occupying the “Common Areas” and/or “Common Parts” to display their wares in breach of the Subject DMC. In light of my conclusion on the External Walls Issue, it was unnecessary for me to delve into Ps’ motives for the present action for the purpose of the Duty Issue.

108.   Historical matters The Building was completed in mid-1980s. Tse said the Developer never enjoyed Exclusive Right over the CCCs, and all Owners/occupiers for the time being of the Building had common use and enjoyment thereof. Due to natural wear and tear of the CCCs (eg (a) deterioration of the physical condition of the passageways, lift lobbies, lighting system, transformer room and other facilities, (b) expiry of the validity period of fire services tanks/facilities, and (c) occurrence of cracks,[55] water seepage[56] and fallen concrete[57] at the External Walls).[58] Tse said and I accept the Manager arranged for cleaning, repair and maintenance of those parts of the External Walls in (c) above with corresponding costs/expenses paid from management fees contributed to by the Owners/occupiers for the time being of the Building (except the Developer). Even Mong “見到嗰個 …… 外牆啲位有啲地方係有啲崩缺位” and agreed general repairs (“一般嘅維修”) were carried out every now and then even though he personally had not seen/noticed repairs done to and/or scaffolding erected on the External Walls.

109.   Tse explained that as the Building aged over the years, the physical condition of the CCCs deteriorated more rapidly, so repairs/maintenance (as needed) became more frequent, and loosened/ fallen concrete from the walls and ceilings (including the External Walls) exposed the steel bars and reinforced concrete structure underneath.

110.   Tse said quite a few Owners felt these minor repairs/ maintenance failed to solve the more fundamental problems (eg cracks at the External Walls causing water seepage) and they feared loosened/ defective tiles and concrete falling off the External Walls might cause danger, so since 2003 there were requests for large scale renovation of the CCCs. In 2004, the Manager engaged a surveyor to ascertain what parts of the CCCs required large scale renovation and to submit a report. By its report, the surveyor proposed inter alia to replace the fresh water pipes, to repair/maintain the External Walls, and to carry out waterproofing work on the roof at an estimated cost of about $2,700,000.[59] Due to the cost involved, the Owners decided to first replace the fresh water pipes, and such works were completed in 2005, and the relevant cost and expenses were paid for as part of the management expenses contributed to by the Owners/ occupiers of the Building except the Developer. Mong had no impression of such survey and works on the fresh water pipes in 2004-2005.

111.   Tse said quite a few Owners continued to request for large scale renovation of the Building (including the External Walls). In early 2007, the OC again discussed such matter, and the Manager proposed to ascertain the preliminary views of the Owners thereto by questionnaire survey.[60] The questionnaire was issued to the Owners, and the outcome was that most of the Owners who submitted responses supported a large scale renovation of the Building with contributions for expenses to be collected from the Owners over 36 months.[61] The OC asked the Manager to put forward 2 proposals for renovation of the External Walls, and to put such proposals to the Owners for consideration by way of questionnaire.[62] In 2008, the Manager issued such questionnaire with 2 proposals for renovation of the External Walls to the Owners for their views,[63] but Mong claimed the 6^th plaintiff and some shop owners did not receive such questionnaire. The majority of the replies preferred partial rather than total repairs of the External Walls. The combined outcome of the 2 questionnaire surveys suggested the preferred option was to have partial repairs to the External Walls with collection of contributions from the Owners for such expenses over 36 months. The OC discussed such outcome and considered the way forward, including coming up with cost estimation for such renovation and arranging Owners’ meeting to discuss such matters.[64] On 17 March 2009, the Manager informed the OC in meeting that representatives from the Home Affairs Department (“HAD”) and Hong Kong Housing Society (“HKHS”) would be invited to attend the proposed Owners’ meeting to explain about formation of an IO and also about the Building Maintenance Assistance Scheme (“Scheme”).[65]

112.   Before I turn to the various OC, MC and Owners’ meetings, I deal briefly with notice of such meetings/minutes. Mong confirmed that usually notice of meeting (with agenda) and minutes of meeting for Owners’ and OC’s/MC’s meetings would be posted on the notice board at the ground floor entrance hall of the Building, but the Manger would send the same by delivery/fax to the Owners of the shops on the ground floor. Tse said it was possible (but not necessarily so) that documents/information mentioned in the minutes of meeting would also be posted up at the notice board, but the OC/MC would provide copy to any resident who wished to read the same. Tse accepted that normally an Owner (who was not a member of the OC/MC) would learn about the topics for discussion at the aforesaid meetings from the agenda in the notice of meeting.

113.   Mong said that since 2009 he started to pay attention to the affairs of the Building. BA issued the 1^st Order on 31 March 2009. The OC convened an Owners’ meeting on 25 April 2009 attended by inter alia Tse, Mong and representatives from BA, HKHS and HAD. BA’s representative explained to the Owners the 1^st Order was issued to the registered owner of the “Common Parts” to carry out the specified works on the “Common Parts” and External Walls.[66] HKHS’ representative gave explanation about the Scheme and application for subsidy thereunder for large scale renovation of common parts of the Building.[67] HAD’s representative gave explanation about the formation of an IO.[68] After discussion, the Owners passed resolution by majority vote to carry out large scale renovation of common parts of the Building including repairs to the External Walls, and to collect contributions of not more than $4,000,000 for such purpose from the Owners by 24 monthly instalments commencing from 1 July 2009.[69] Mong said there was no breakdown of the estimated cost for repairs solely for the External Walls. In my view, such complaint was immaterial since I have found the External Walls to be part of the common parts of the Building.

114.   Tse said the Owners at such meeting knew the Developer was the registered owner of the “Common Parts”, and the 1^st Order was addressed to the Developer. Some Owners asked who (ie the Developer or Owners) were legally responsible for the repair/maintenance of the Common Parts (including External Walls), and Tse said the solicitor engaged by the OC, ie 陳志華 (“Mr Chan”) of Cheung & Kwan, explained “(大意是)[Building’s]公用部份(包括外牆)屬於所有業主共同享有及使用, 因此保養維修責任屬於所有業主”. According to the minutes of such meeting, Mr Chan gave the following explanation (B/312):

“[Mr Chan]表示, 根據土地註冊處資料, [the Building]的公眾地方登記名屬一間私人公司所擁有。但依據終審庭的過案, 公契下的公眾地方是視乎實際的使用, 而實際受益人是業主, 所以泛指公眾地方的負責人都是眾業主負責。而業主未有收到維修命令是基於不同部門的法例所規管。[BA]是根據建築物條例第123章, 向業權人發出維修命令。但執行者是根據物業樓易及財產條例辦事, 而建築物管理條例第344章則按實際使用地方的受益人, 其次維修分攤費是根據公契([the Building]是以單位面積分攤維修費用)。”

115.   Mong claimed the Owners at such meeting were anxious over who would be responsible for funding the renovation costs as there was concern the Owners would be responsible, but BA’s representative explained the 1^st Order was issued to the legal owner, and repeatedly said it was for “Avante”, ie the Owner (according to the land search records and Subject DMC) of the common parts and External Walls, to deal with the 1^st Order, so the Owners “起哄” and said the Developer should be responsible for the renovation costs for the External Walls (but the Developer did not send any representative to attend such meeting).

116.   On balance, I do not accept Mong’s evidence that the Owners at such meeting had impression that the Developer should be responsible for the cost of renovating the External Walls. First, Mong complained that Mr Chan was only introduced as a solicitor, and the Owners did not know why he attended such meeting and who was his client. On balance I do not accept such complaint. The Developer did not attend such meeting. Other than representatives of BA, HKHS and HAD, there was just the OC and Manager. In my view, the Owners could not fail to appreciate Mr Chan was engaged by the OC and/or Manager.

117.   Secondly, the minutes of meeting showed Mr Chan made clear that notwithstanding (a) the External Walls were privately owned and (b) the BA was statutorily required to issue the 1^st Order to the registered owner, the owners having actual use and enjoyment of the common parts were responsible for the same, and under the BMO the owners had to make contributions according to the provisions of the Subject DMC. In my view, there was nothing unclear about such explanation which put the responsibility of cost of repairs to the common parts of the Building squarely on the Owners. Mong tried to shy away from this by saying Mr Chan only made a general observation (“一般情況, 好籠統, 好快咁樣就講咗”) that “在所謂「通常」的情況下[DMC]的[common parts]是視乎實際的使用, 而「通常」的情況下受益人是業主所以我們都要負責” with brief mention of a case authority and the Conveyancing and Property Ordinance Cap 219 but without specific advice as to the External Walls of the Building and the Subject DMC when the Developer was still the legal owner of the External Walls. But Mong’s account of Mr Chan’s explanation was similar to what was recorded in the minutes of meeting. Even if Mr Chan did not make any specific reference to the Subject DMC, he did not suggest the obligation to pay the cost of repairs for the External Walls amounted to any exception to the general position, and I do not believe the Owners thought differently. This explained why Mong said that after Mr Chan’s explanation, the Owners quietened down, “…… 佢話咁樣樣, 所以大家都冇再喺嗰度去討論喇, 已經基本上就係咁”.

118.   Thirdly, in light of my conclusion on the External Walls Issue that the External Walls were common parts of the Building, Mr Chan’s advice was plainly correct and not in any way misleading or inadequate.

119.   Mong confirmed when the resolutions in paragraphs 113 above were passed by the Owners they knew an essential part of the large scale renovation concerned the External Walls, and also knew contribution of $4,000,000 to be collected from the Owners were for renovation of the common parts including the External Walls (of which the Developer was still the legal owner). Mong said after Mr Chan’s explanation, “佢話係我哋嘅責任, …… 咁我哋咪唯有係履行番即係做一個小業主嘅責任囉”.

120.   On 31 May 2009, the Manager issued a notice to inform the Owners of the amount of their respective contribution towards the costs of the large scale renovation of the common parts of the Building (B/594). At the Owners’ meeting held on 6 June 2009, the Owners passed resolutions by majority vote to incorporate an IO and to elect members of the MC (B/322-325). Kwong was elected chairman of the MC (and remained as such until 2011), and Tse was elected member of the MC. D1 was incorporated on 10 July 2009. Kwong said up until the execution of the Assignment, the MC considered it unnecessary to seek (and did not seek) further legal advice about liability for renovation costs in respect of the External Walls. I see nothing wrong about this as Mr Chan’s views as expressed at the Owners’ meeting held on 25 April 2009 were correct.

121.   At a meeting of the 1^st MC held on 6 August 2009, it was resolved D1 should apply to HKHS under the Scheme for financial subsidy to carry out large scale renovation of the common parts of the Building including the External Walls.[70] On/about 26 August 2009, D1 submitted such application to HKHS. The minutes of such meeting of D1’s MC noted the Manager reported that:[71]

“…… 另外, 早前[MC] 提出要求為公眾地方(業主為「Avante Company Limited」) 轉名予[D1] 名下。「新鴻基」對上述要求持開放及同意態度, 但要再詳細研究<大廈公契>之條文, 並了解[D1] 是否需要以象徵式收費取回大廈公眾部份。而上述轉名的律師費[the Manager] 陳先生表示需由大廈支付。稍後等了解<大廈公契>後, 面向[MC] 交代細節。”

122.   The 3^rd meeting of D1’s 1^st MC was held on 9 October 2009. According to the notice of such meeting dated 30 September 2009 prepared by the Manager and signed by the secretary of the MC, the relevant agenda items included “商討大廈大維修事宜” and “其他事項”. Tse attended such meeting. He said certain member(s) of the MC noted (a) Mr Chan’s views at the Owners’ meeting held on 25 April 2009 and (b) the reality was that ever since completion of the construction of the Building the Owners were responsible for repair/maintenance of the CCCs even though the Developer was registered owner of the “Common Parts”, and suggested that for better management (including repair/maintenance) of the CCCs it would be preferable to transfer ownership of the Common Parts to D1. Tse said that after discussion the MC unanimously resolved to have the ownership of the “Common Parts” transferred to D1 as being in the common interests of all Owners (including Ps). Paragraph 5.1 of the minutes of such meeting (B/406) recorded as follows:

“…… [the Manager]陳先生表示, 需要[MC]通過有關跟進工作, 經各委員商討後一致贊成將大廈公共部份由大業主Avante Company Limited轉名予[D1]的名下。

[The Manager]陳先生表示, 轉名所需之有關法律費用需由[MC]負責, 有關費將於下次會議向各委員提交。”

Thereafter, the MC engaged solicitors to deal with the relevant legal procedures.

123.   Mr Ng complained the discussions about the proposed Assignment at the MC’s 1^st and 3^rd meetings as documented in the minutes of meeting merely referred to the “Common Parts” and not to the External Walls specifically. This was a constant theme in Mr Ng’s cross-examination of Tse and Kwong in relation to a number of Owners’ and MC’s meetings. In my view, there was no merit in such complaint as I have found the External Walls were defined as part of the “Common Parts” and they were also common parts as defined in the BMO.

124.   Mong complained the Owners trusted and relied on D1 in respect of “所謂集資計劃” and they paid to “[D1]聲稱的大維修款項”, but D1 kept them in the dark about the proposed Assignment. But Tse said the proposed Assignment was raised at the 3^rd MC meeting as a follow-up from the 1^st MC meeting even though it was not the agenda, “大家都有諗過, 想了解下嗰個--即係轉名嗰--嗰件事情嘅, …… 即係嗰個大廈嗰個公用部分轉番嚟法團名下嗰個跟進成點呀, 想了解清楚啲嘅, 本身都一致--有咁嘅諗法嘅, 都有”. Tse added that MC meetings were transparent as the MC welcomed owners to sit in their meetings to understand more about the affairs of the Building, and “可以當場嚟諮詢或者問 ……” and minutes of MC meetings were posted on the notice board.

125.   In my view, there is nothing in Mong’s complaint of secrecy on the part of the MC over the Assignment. Given that D1/Owners had use, occupation and enjoyment of the “Common Parts” (including the External Walls despite certain rights given to the Developer under Clauses 8(b)-(c) and Clause 20 of Section V) and had obligation to repair and maintain the same under the DMC, and the Owners (except the Developer) were responsible for the costs and expenses in repairing/maintaining the “Common Parts”, ie D1/Owners had the benefit and burden of the “Common Parts” (including the External Walls), it made sense and in the common interest of the Owners (including Ps) to have the legal title of the “Common Parts” transferred to D1 for nominal consideration. In any event, the Assignment caused no loss to the Owners (including Ps) at all. In such circumstances, this could be appropriately handled by the MC (see section 29 of the BMO).

126.   On 10 November 2009, HKHS wrote to D1 saying it would process D1’s application under the Scheme after it had acquired registered ownership of the “Common Parts”. Tse said this reinforced the MC’s belief that their resolution in paragraph 122 above was correct and in the common interest of all Owners, so they urged the solicitors to deal with the relevant legal procedures as soon as possible.[72] D1 executed the Assignment on 19 April 2010 (see paragraph 10 above). This was the first time Tse saw the Assignment. There was some complaint that the MC failed to keep themselves apprised of the progress of preparation of the Assignment by reviewing the solicitors’ correspondence and the draft assignment. However, this had no adverse consequence for the External Walls were part of the “Common Parts” and (and as explained above) it was in the common and best interests of the Owners (including Ps) to have the legal ownership of the same under its own name. On 28 October 2010, BA issued the 2^nd Order to the IO.

127.   At the annual general meeting of the IO held on 9 October 2010 (which Mong did not attend), the Owners were told HKHS’ subsidy might be about $576,000.[73] The Manager explained and the Owners passed resolutions by majority vote on the methodology for locating defective areas of the External Wall and on the appointment of consultant for the large scale renovation of the common parts of the Building.[74]

128.   Mong complained D1 failed to disclose to the Owners at such annual general meeting that the IO had secretly entered into the Assignment a few months ago without notice to the Owners, and there was no explanation given to the Owners (including Ps) as the pros/cons of such Assignment of the “Common Parts” (including the External Walls), whether the Assignment was necessitated by the financial subsidy under the Scheme, and why the IO executed the Assignment without protective indemnity provisions when the External Walls were encumbered by the 1^st Order which the Developer failed to comply with. Mong claimed Ps only discovered the Assignment in early 2013 when they inspected the minutes of MC’s meetings, and he alleged the Assignment “是不可接受的行為並明顯是疏忽和蓄意出賣業主的利益” as the IO/Owners were forced to comply with the 2^nd Order and bear the cost of repairs/renovation of the External Walls. For reasons set out in paragraph 125 above, I reject such complaints. I have found that the Owners (and not the Developer) were in fact liable for the repair and renovation costs vis-à-vis the External Walls.

129.   After completion of the tendering and selection process,[75] at the annual general meeting of the IO held on 30 July 2011, the Owners were told the total costs/expenses for the large scale renovation of the common parts of the Building (including the External Walls) would be about $5,600,000 instead of the previous estimation of $4,000,000, but taking into account HKHS’ financial subsidy of $576,000 further contribution of $1,000,000 would have collected from the Owners. A resolution was passed on majority vote that such $1,000,000 was to be collected from the Owners by 6 monthly instalments.[76] The consultant also reported to the Owners on the status and scope of works in relation to the common parts, and a resolution was passed on majority vote at such meeting to appoint the contractor for carrying such works.[77] Although Mong could not be sure whether he attended such annual general meeting, he knew of the resolution for collection of further contribution of $1,000,000 for the large scale renovation because he either attended such meeting or the 6^th plaintiff paid its share of the further contribution of $1,000,000 by 6 instalments.

130.   The large scale renovation works in relation to the common parts of the Building (including the External Walls) were eventually completed, and on 25 July 2012 the BA issued a certificate of compliance. At the annual general meeting of the IO held on 6 October 2012 (which Mong believed he did not attend), the Owners were informed the large scale renovation of the common parts of the Building had been completed, and the 2^nd Order has been discharged.[78] The Owners passed a resolution by majority vote to defray the costs/expenses of such large scale renovation in the total sum of $5,445,400 from contribution payments by the Owners ($5,000,000) and by HKHS’ financial subsidy ($596,000).[79] Mong said he personally learnt of such costs/expenses about half year later or in 2013.

131.   On/about 23 November 2012, HKHS granted a financial subsidy of $596,000 under the Scheme for D1 to carry out large scale renovation works of the CCCs including the External Walls. Tse said had D1 not entered into the Assignment, it would not have been able to obtain such financial subsidy, which meant the Owners (including Ps) would have to pay increased contributions for costs/expenses of such large scale renovation. In my view, this lent weight to the view that the Assignment was in the common interest of the parties.

132.   Mong agreed that the minutes of the Owners’ meetings and OC’s/MC’s meetings from 2009 (when large scale renovation of inter alia the External Walls was first mentioned) to 2012 (when the specified works under the 2^nd Order were completed) showed the OC/D1 had given information to the Owners “包括局部抑或全面維修外牆。二，分別涉及嘅費用。三，勘察外牆嘅方法。四，預計總額是多少。五，各業主應付數額。六，集資嘅時段” to let them choose whether to support or oppose the proposed resolutions.

133.   Mong complained such voting would only be fair to the Owners/Ps had they been aware who owned and who was responsible for the External Walls, or had D1 secured for them proper legal advice on whether the Owners or particular Owner were/was responsible before they could make any informed decision whether to support or oppose the relevant resolutions. On balance I reject such argument. For reasons explained above, the Owners/Ps had sufficient notice, advice from Mr Chan and explanations from representatives of BA, HKHS and HAD before they voted to pass the resolution for carrying out renovation works for the common parts (including the External Walls).

134.   Bearing in mind the Subject DMC and section 18(1)(a) of the BMO required the Owners (except the Developer) to repair/maintain the common parts including the External Walls, and section 18(2)(g) of the BMO enabled D1 in its discretion to act on behalf of the Owners in respect of any matter in which the Owners have a common interest, it must be in the Owners’ common interest to repair/maintain the CCCs including the External Walls in a state of good and serviceable repair and clean condition, and to acquire the “Common Parts” of the Building including the External Walls for the purposes of regularising legal ownership of the “Common Parts” of which the IO/Owners in any event had the benefit and burden and of making application and obtaining HKHS’ financial subsidy for the large scale renovation of the common parts of the Building including the External Walls. Given Mr Ng’s concession that any procedural irregularity in relation to the aforesaid meetings was not any standalone argument but premised on success on the External Walls Issue, any such procedural irregularity (which I do not accept) would not take Ps’ case any further.

135.   In all the circumstances, I reject Ps’ contentions that D1/Manager wrongfully failed to carry out their duties in not demanding/ collecting payment contributions from the Developer relating to inter alia repair/maintenance of the External Walls.

IV.  RELIEF ISSUE

136.   In light of my conclusions in the External Walls and Duty Issues, there is no need to deal with the Relief Issue.

V.  CONCLUSION

137.   In the premises, Ps’ claim against D1 is dismissed. There is no reason why costs should not follow event. I grant a costs order nisi that Ps shall pay D1 costs of the action including all costs reserved if any on High Court scale to be taxed if not agreed.

Schedule