On Loong Investment Co Ltd and Another v. The Incorporated Owners of Wah Luen Industrial Centre and Others

HCA 341/2014

ACTION NO 341 OF 2014

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J U D G M E N T
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1.This is the Plaintiffs’ application for: (i) summary judgment; (ii) injunction against trespass of their car parks; (iii) striking out of part of the defence; and (iv) determination of a question under O 14A. 

2.Wah Luen Industrial Centre (“the Building”) has 80 car parks as required by the land grant.  The Plaintiffs are the registered owners of 22 of them (“the Properties”).

3.The 1^st defendant (“IO”) and the 2^nd defendant (“UPML”) are the incorporated owners and property management company of the Building respectively. These defendants will be referred to together as “the IO defendants”. 

4.The 3^rd defendant comprises persons whom the Plaintiffs are unable to individually identify and who have trespassed on the Properties by stopping or parking their vehicles there.

Undisputed facts

5.The Plaintiffs were the developers of the Building which was for industrial and godown use. The land on which the Building stands was granted by the government to the Plaintiffs by New Grant No. 11862 dated 9 June 1983 (“New Grant”).

6.The Building was completed in 1983. The Plaintiffs sold off the various units in the Building, but retained ownership of the Properties.  The other 58 car parking spaces are owned by individual owners of units within the Building.

7.All car parking spaces are at the Car Parking Lot.  Other than the 80 car parking spaces marked on the formal layout plan, additional ones have been provided by the IO using the available space in the Car Parking Lot since 1995.  The IO defendants regulate access to the Car Parking Lotby a barrier and a manned booth at the entrance.  Visitors to the Car Parking Lot are charged a fee.

8.The elevated loading and unloading platforms in the Car Parking Lot are connected to 2 lift lobbies for access to other parts of the Building.  Goods can be loaded and unloaded directly from vehicles parked at the car parking spaces abutting the platforms (“the abutting car parking spaces”).  The Properties make up 20 out of 28 abutting car parking spaces.

9.The Properties were let by the Plaintiffs to the IO from 1 October 1995 to 30 September 2011 by a series of tenancy agreements.  No new tenancy agreements have been signed thereafter.

10.There is no dispute that in early 2011, the IO defendants raised concerns with the Plaintiffs that the renting of the Properties from the Plaintiffs might amount to a breach of Clause 12(b) of the Special Conditions of the New Grant (“the Clause 12(b) Issue”).

11.Under Special Condition 12(b), the Plaintiffs are prohibited from, amongst others, underletting, parting with possession of the designated car parking spaces  unless the Plaintiffs at the same time underlet or part with possession of an undivided share of an in the Lot together with the right to the exclusive use and occupation of a part of the Building; or the person to whom the Plaintiffs underlet or part with possession is already an owner of an undivided share of an in the Lot together with the right to the exclusive use and occupation of a part of the Building.

12.Neither the Plaintiffs nor the IO defendants own any other part or undivided share in the Building.

13.Despite negotiations, no agreement could be reached between the Plaintiffs and the IO. 

14.The IO defendants admit that the Plaintiffs, as registered owners, have been entitled to possession of the Properties since 1 October 2011.

15.On 22 May 2013, the Plaintiffs’ solicitors issued a letter to the IO defendants purportedly giving notice to terminate a “monthly tenancy” as from 30 June 2013 (“notice of termination”). 

Parties’ cases

16.The Plaintiffs’ case is that, after 30 September 2011, the IO had remained in possession of the Properties under a tenancy at will until it was terminated on 30 June 2013. Since 1 July 2013, the IO defendants have committed trespass by continuing to use them as common car parking spaces. 

17.The IO defendants deny any tenancy at will or any trespass.  They claim to have ceased to be in possession of the Properties since 1 October 2011. Although they charged an entrance and hourly fee for visitors who entered the Car Parking Lot, they claim that the visitors were free to park on other available spaces in the Car Parking Lot. The IO defendants did not direct visitors to park on the Properties.

18.The IO defendants claim to have no intention to rent or possess the Properties until the Clause 12(b) Issue was resolved.

19.Further, IO defendants say that the owners of the Building are in any event entitled to use the Properties for loading and unloading of goods.  They assert that the Plaintiffs have breached the implied obligation of non-derogation from grant.  It is this part of the defence that the Plaintiffs aim at striking out or seek a determination of.

Legal principles – summary judgment

20.The following principles are well-known:

(1) The burden is on the defendant to show a bona fide defence or some other reason for a trial. This is normally done by affidavit, and it is incumbent upon the defendant to “condescend upon particulars” in such affidavit.

(2) The mere assertion in an affidavit of a given situation by the defendant does not, ipso facto, ground leave to defend.  Lau Chun Kam v Lai Tak Shing HCA 2126/2007 (9 December 2008), §12(2), per DHCJ Lisa Wong SC; Choy Po Chun & anor v Au Wing Lun HCAP 7/2010 (14 July 2011), §14, per To J.

(3) Order 14 is only for clear cases, and ought not be applied in cases where there are serious material factual disputes, or a difficult point of law not fit for summary determination, unless it is obvious that the defence put forward is “frivolous and practically moonshine”.  See: HKCP 2016, §14/4/9 at p 270; Choy Po Chun, §15.

(4) The court should not embark on a mini trial on affidavits.  Where there are factual disputes, the issue is not whether the defendant’s assertions are to be believed; it is whether those assertions are believable: HKCP 2016, §14/4/9 at pp 270.

Legal principles –striking out

21.The power to strike out is to be exercised only in plain and obvious cases.  In particular, there should be no trial upon affidavit, and disputed facts are to be taken in favour of the party sought to be struck out. Nor should the Court decide difficult points of law.  Where the legal viability of a cause of action is sensitive to the facts, an order to strike out should not be made.  See: HKCP 2016, §18/19/4 at pp 448-449. 

22.However:

(1) “Plain” is not the same as “simple”, and “obvious” is not the same as “short”: Cheung Chui Sou-ying v The Personal Representatives of Cheung Yuk-luen Deceased and ors [1981] HKLR 585, 588H per Barker J.

(2) Where the Court comes to the conclusion after full argument that the case is plainly and obviously unsustainable, the Court should not decline to strike it out merely because the issues are difficult or complicated: Byjoy Ltd v Thorogood Estates Ltd [1985] 2 HKC 746, 758F-I per Clough J.

Legal principles – Order 14A

23.On an O 14A application, the court will take a three-step approach as stated in Rockwin Enterprises Ltd v Shui Yee Ltd & ors [2003] 3 HKC 174, §§18-21, 27 per Recorder Ma SC (as he then was):

(1) The first step is to ask whether the relevant question is one of law or of construction of a document;

(2) If so, the second step is to ask whether the question is one that should be determined under the O 14A procedure. For that purpose:

(a) The Court needs to be satisfied that the question is one that is suitable for determination without a trial.  In other words, the Court has all the necessary facts and matters before it in order to determine the question of law or construction;

(b) The Court also needs to be satisfied that the question will finally determine (i) the entire cause or matter or (ii) any issue or claim therein. The latter is sufficient: Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co Ltd & anor (2003) 6 HKCFAR 222, §23 per Chan PJ;

(c) Even if the court is satisfied that the aforesaid two conditions are fulfilled, the court retains a residual discretion as to whether to proceed under the O 14A procedure;

(d) It is inappropriate to use this procedure where the issues of fact are interwoven with the legal issues raised, and the question should not be determined on hypothetical facts: Shell, §24 per Chan PJ;

(3) The third step is to proceed to determine the question and the consequential orders to be made.

Injunction against trespass

24.At the hearing the IO defendants have consented to an interlocutory injunction restraining trespass of the Properties and interference with the Plaintiffs’ enjoyment of the Properties.  For the avoidance of doubt, nothing in that injunction order required the IO defendants to take active steps to prevent other persons from trespassing the Properties and interference with the Plaintiffs’ enjoyment of them.

Summary judgment against the IO defendants for trespass

25.Mr Wilson Leung, counsel for the Plaintiffs, has indicated that if an interlocutory injunction is granted against the IO defendants, the Plaintiffs are content not to pursue summary judgment against them, since the Plaintiffs will have achieved their chief aim of securing possession of the Properties. However, he has in the course of the arguments pursued the application.  I will deal with this application briefly.

26.The Plaintiffs’ case is not that the IO defendants physically occupied the Properties but have in effect given permission for outsiders to use the Properties, or at least been negligent in not preventing outsiders from doing so. Two drivers covertly sent by the Plaintiffs to the Car Parking Lot had been able to park on some of the Properties without being stopped by the management staff.  Other vehicles had also parked on some of the Properties.  The Plaintiffs contend that the IO Defendants’ manner of managing the Car Parking Lots (especially their charging of fees for entry into the Car Parking Lots and the lack of any measures to prevent visitors from parking on the Properties) amounted to trespass on the Properties.

27.Six owners of the other 58 car parking spaces have given permission for their spaces to be used for loading and unloading.  In addition, the IO defendants have somehow “carved out” 19 additional parking spaces in the Car Parking Lot.  The Properties would still constitute nearly half of the available parking spaces in the Car Parking Lot.  The Plaintiffs contend that by allowing visitors to enter the Car Parking Lot, the IO defendants must know there is a real likelihood that the visitors would park on one of the Properties. 

28.In my view, notwithstanding that the IO defendants admit that the Plaintiffs have been entitled to possession since 1 July 2013, there are at least the following triable issues of fact.

29.Firstly, the IO defendants have made clear by letter that they would cease to rent the Properties until the Clause 12(b) Issue has been resolved.  Since October 2011, its staff was instructed not to direct any vehicles to park or load and unload goods on the Properties.  The IO defendants also informed the owners of the Building to cease renting the Properties by notice at the end of 2011 and reminded them on various occasions not to park at the Properties.  The IO defendants promptly responded to the notice of termination, asserting that they were no longer in occupation.  Such conduct, if accepted by the court, refuted any intention to trespass.

30.Secondly, the IO defendants’ control over access to the Car Parking Lot cannot be equated with possession or control over the Properties.  Otherwise, the IO defendants would be in possession of all 80 car parking spaces.

31.Thirdly, apart from the Properties, there are 19 additional car parking spaces and 6 temporary car parking spaces borrowed from individual owners.  The fact that the IO defendants had charged visitors did not mean that these visitors could only park on the Properties.

32.Fourthly, the Properties themselves do not have any barrier to entry.  The IO defendants would only be in control over the Properties if they had directed drivers to park on the Properties on a regular basis.

33.Fifthly, whether the IO defendants had “directed” drivers to use the Properties is a triable issue of fact.  The different interpretations placed by the parties on the video recording give rise to the question of whether the IO defendants merely facilitated a tort (as opposed to procuring one), in which case they would not be liable as a joint tortfeasor: Clerk & Lindsell on Torts (21^st ed. 2014), §4-04 at p 298, citing CBS Songs Ltd & ors v Amstrad Consumer Electronics Plc & anor [1988] AC 1013.

34.Sixthly, the question of whether there had been a tenancy at will is triable.  To constitute a tenancy at will, the Plaintiffs must prove the existence of an agreement, express or implied, between him and the defendant, to the effect that the latter shall at least be the tenant at will of the former of the premises occupied, and shall pay for that occupation: AG v De Keyser's Royal Hotel Ltd [1920] AC 508, 533 (Lord Atkinson). 

35.I repeat paragraph 29 above. The parties had not negotiated for a new lease but explored purchase of all the Properties by the IO.  After the expiry of the tenancy, the IO defendants reiterated that it would not continue to rent the Properties, and had refused to pay rent.  Whether there was a tenancy at will would affect the time from which the trespass commenced and that in turn affects the quantum of damages.

36.In summary, there are plenty of triable issues of fact and law over the question of trespass.  It was plainly inappropriate to grant summary judgment against the IO defendants.

Summary judgment against D3

37.The position as regards D3 is different.  An order for substituted service on D3 was granted by Master J Wong.  Despite service of the writ, this summonsand the notice of hearing on them, the 3^rd defendant has not entered an appearance.  By definition, D3 consists of trespassers of the Properties who have not disputed the Plaintiffs’ title.  The evidence of the Plaintiffs showed unidentified drivers using their Properties without their consent after the notice of termination.  Unless restrained, visitors to the car park may continue to trespass the Properties.  It is appropriate to enter summary judgment against D3.

Strike out application against the IO defendants

38.The IO defendants claim that all the owners in the Building are entitled to use the Properties for loading and unloading.  This is allegedly based on the implied term or obligation on the Plaintiffs not to derogate from their grant.   

39.The IO defendants rely on Special Condition 11 of the New Grant and clauses 3(a) and 4(q) of the Deed of Mutual Covenant (“DMC”) dated 25 July 1983 which are said to have given rise to that right.

40.The Special Conditions provide, amongst others, as follows:

(a) Under Clause 11(a) to (c), the Plaintiffs are required to designate space within the Building for the manoeuvring, parking, simultaneous loading and unloading of vehicles. 

(b) Under Clause 11(d), the space provided for loading and unloading of vehicles shall abut a goods handling platform which must be so provided and so laid out that goods loaded or unloaded from or to such platform or area may be transported within the Lot to all parts of the Building both vertically and horizontally. 

(c) Under Clause 11(e) to (f), half of the designated car parking spaces shall be for the use of lorries and in turn one third thereof shall be used for simultaneous loading and unloading of lorries, containers or trailers.

(d) Clause 12(b) as set out in paragraph 11 above.

41.The DMC provides as follows:

(a) Clauses 3(a) gives each owner of the Building full right and liberty to go pass and repass over the entrances and staircases and to use the lifts for all purposes connected with the proper use and enjoyment of his part of the Building.

(b) Clause 4(q) designates, amongst others, the lifts and staircases as commons parts of the Building, but car parking space is not amongst them. 

Legal principles on non-derogation from grant

42.The non-derogation principle is that a grantor, having given a right with one hand, is not to take away the means of enjoying it with the other hand. It is based upon the presumed intention of the parties, and thus is closely connected with the obligation not to breach an implied term: Rank Profit Industries Ltd v Secretary for Justice [2009] 1 HKLRD 194, §§20-21 per Tang VP.

43.It is the conveyancing equivalent of an implied term derived, in a broad sense, from the construction of the transaction into which the parties have entered: Canon Kabushiki Kaisha v Green Cartridge Co (Hong Kong) Ltd[1997] AC 728, at 736H-737A (Privy Council, on appeal from Hong Kong), Lord Hoffmann.

44.The leading case in Hong Kong on the doctrine of non-derogation from grant is the CFA case of Kung Ming Tak Tong Co Ltd v Park Solid Enterprises Ltd(2008) 11 HKCFAR 403, §63, whereby Li CJ adopted the principles summarised in Platt v London Underground Ltd [2001] 2 EGLR 121:-

“3. The exercise of determining the extent of the implied obligation not to derogate from grant involves identifying what obligations, if any, on the part of the grantor can fairly be regarded as necessarily implicit having regard to the particular purpose of the transaction when considered in the light of the circumstances subsisting at the time the transaction was entered into. …

…

6. When considering a claim based on derogation from grant, one has to take into account not only the terms of the lease, but also the surrounding circumstances at the date of the grant as known to the parties. …

7. One test which is often helpful to apply where the act complained of is the landlord’s act or omission on adjoining land is whether the act or omission has caused the demised premises to become unfit or substantially less fit than the purpose for which they were let.”

45.For a non-derogation argument to succeed, the obligation alleged to be necessarily implicit must be one “which both parties must necessarily be taken to have accepted as part of the transaction”: Rank Profit, FAMV 8/2009, 25 June 2009, at §15, Ribeiro PJ.

46.Therefore, in deciding on the existence of an alleged obligation not to derogate, the Court would apply similar principles to those used in determining the existence of an implied term. These include the trite principle that the implication of a term is an exercise in the construction of the contract as a whole: The Reborn[2010] 1 All ER (Comm) 1 at §§9-10, 15-18. 

47.However, where an instrument does not expressly provide for what is to happen, the most usual inference is that the parties did not intend any term to govern the matter. This inference is especially strong where the matter is said to be an important one from the parties’ commercial perspective: Rank Profit[2009] 1 HKLRD 194, §56 per Tang VP.

48.In determining the extent of what the grantor may not do, the touchstone is necessity, not reasonableness. The Court should identify what obligations (if any) on the part of the grantor can “fairly be regarded as necessarily implicit”, having regard to the purpose and circumstances of the transaction. A term can only be implied if there is a “compelling reason for deeming that term to form part of the contract.” See: Rank Profit, §§22-24 per Tang VP.

49.The court may look at circumstances outside the terms of the grant itself.  As explained by Cotton LJ in Birmingham Dudley and District Banking Co v Ross(1888) 38 Ch D 295 at 308:- 

“By an implied obligation or an implied right I mean this: an obligation or right arising not from the express words of an instrument, nor from that which, having regard to the circumstances, must be considered the true meaning and effect of the words in the instrument; but that obligation or that right which results from the position into which the parties have placed themselves by the contract. For instance, where one man grants to another a house, then primâ facie he cannot interfere with that which he has granted; there is an implied obligation on him not to interfere with that which he has granted; namely, the house, and enjoyment of the house. That obligation arises, I repeat, not from any interpretation of the conveyance, but from the duty which is imposed on the grantor in consequence of the relation which he has taken upon himself towards the grantee.”

50.Mr Keith Lam, counsel for the IO defendants, submits that the terms of the grant are not conclusive.  The cases show that there is an “irreducible minimum” of the grant from which the grantor cannot derogate.  See Petra Investments Ltd v Jeffrey Rogers plc (2000) 81 P & CR 267; Platt v London Underground.  However, these 2 cases are distinguishable on the facts as they involved the landlord doing positive acts that changed the character of the property let out, whereas the Plaintiffs in the present case merely refrained from leasing out the Properties.

The IO defendants’ case

51.As this is a striking out application, I take the facts (most of which are in fact undisputed) at the highest in favour of the IO defendants.

52.The Building is used for industrial go-down purposes.  As such, it must have been obvious that each grantee (owner of a unit) would need to transport a large amount of goods to and from the Car Parking Lot to its own unit.  There are about 442 units in the Building.

53.From the layout of the Car Parking Lot, it is plain that vehicles are meant to stop at the abutting car parking spaces so that goods can be loaded onto the elevated platforms directly, and vice versa. From there, the goods can be transported to the cargo lifts and then to individual units in the Building.

54.The IO defendants have adduced evidence to show that it is wholly energy and time wasting for lorries to unload at the outer edges of the Car Parking Lot and for workers to transport the goods using the stairs.  The stairs are narrow and steep and are not suitable for moving goods of larger sizes.  In practice, only 4 out of 8 flights of stairs can be used because the other 4 might be blocked if vehicles are parked at some of the privately owned car parking spaces.  The lengthened loading and unloading time would also cause serious congestion within the Car Parking Lot during peak hours.

55.Only 8 out of the other 58 private car parking spaces are abutting car parking spaces.  Only lorries with a hydraulic platform attached at the back can utilize 4 other of the private car parking spaces.  In the experience of Mr Lo (Property Manager of UPML), only about 30% of the lorries have such hydraulic platforms and even so, such hydraulic platforms have limited loading capacity and loading was at a much slower rate.

56.Mr Lam submits that it is “necessarily implicit” from the above circumstances that the Plaintiffs, as the grantor, shall provide space for the loading and unloading of goods directly onto the loading and unloading platforms from the abutting car parking spaces. This was the “irreducible minimum” of the grant.  Applying Kung Ming Tak Tong, the blocking off of access to the loading and unloading platforms from the abutting car parking spaces would cause the Building units to be “substantially less fit” for use as an industrial godown.  Mr Lam submits that the question of whether there was “substantial interference” is a matter of degree and can only be resolved at trial.

The developer’s obligations

57.It will be useful to review the authorities with a similar set of special conditions.  The principles distilled therefrom can be stated as follows:

(a) Special Condition 11 is not concerned with ownership of the building as a whole or of the parking spaces.  It simply imposes on the grantee developer minimum requirements for parking, loading and unloading.  Nor do they provide that spaces for loading and unloading should be for common use: Carado Company Ltd v The Incorporated Owners of Carado Garden (1996) LDBM 54/1996, page 7; approved by the Court of Appeal in Chan Kwok Hing & anor v The Incorporated Owners of Che Wah Industrial Building (26 November 2010) CACV 49/2010, §§12-13.

(b) The question of ownership, exclusive use or as common area is determined by looking at the deed of mutual covenant. Whatever the reasonableness or practical advantages of leaving the car parks to common use, at least for the purpose of loading and unloading, it cannot be contrary to the express provisions of the deed of mutual covenant: Carado, at page 8.

58.In Carado, the developer had also sold out all the units, except the car parks.  The argument that the developer did not enjoy exclusive use of the car parking spaces but had to allow other owners to use them at least for the purpose of loading and unloading was rejected. 

59.It is true that both Carado and Chan Kwok Hing dealt with the question of whether or not the car parking spaces were for common use or exclusively owned by the relevant Plaintiff.  Theydid not deal with the question of derogation from grant. 

60.However, the recent case ofWing Hong Investment Co Ltd v Fung Sok Han & ors, HCA 2075/2009, 25 September 2015, did deal with derogation from grant.  L Chan J stated at §§122-123:

“122. Mr Yim [counsel for the IO] then relied on the principle of non-derogation from grant (§§85 to 91 of Ds’ Closing). But it is difficult to see how this principle can turn areas ‘B’ and ‘C’ into common areas if the two areas have been reserved and excepted unto the plaintiff’s exclusive occupation by the first assignments.

123. If Mr Yim is trying to argue that the principle of non-derogation from grant would compel the plaintiff to provide access to areas ‘B’ and ‘C’, otherwise the plaintiff would be derogating from its grant of these two areas as common areas, then he is assuming again that the two areas are already common areas.  This argument therefore fails again.”

61.In the present case, the DMC expressly provided that the Properties were for the exclusive use of the Plaintiffs.  Clauses 3(a) and 4(q) do not assist the Plaintiffs as they do not mention car parking spaces.  Section 2 of the Building Management Ordinance and Schedule 1 thereto do not include car parking spaces as “default” common areas either.  The parties could have chosen but did not designate the Car Parking Lot as common area: Carado, at page 8.

62.Clauses 11 and 12 of the Special Conditions of the New Grant are deemed to have been complied with, there being a certificate of compliance issued by the Director of Lands in 1983: s.14(3)(a) Conveyancing and Property Ordinance, Cap. 219.  An occupation permit was issued by the Building Authority in the same year. 

63.It might have been more difficult and time-consuming for the Building users to transport the goods to the lifts if they are denied access to the Properties.  However, this does not assist the IO defendants: Corado, at page 8.  The test is not one of reasonableness but necessity.  There are no circumstances to show that the parties intended the Properties to be for common use or that access to the Properties was necessary to the make the instruments (DMC) work.  The Plaintiffs’ denial of access to the Properties does not fall below the “irreducible minimum” of the grant.

64.Mr Lam further submits that the loading and unloading platforms were “by design” to be used in conjunction with the abutting car parking spaces, a feature absent from Carado or Chan Kwok Hing.  In the latter case, the conditions provided that there should be a goods handling platform, but it was not actually built: see (CA) §§5-7.  Mr Lam relies on “instructive” comments of the courts (Suffiad J and the Court of Appeal) on the special conditions in Tai Fat Development (Holding) Co Ltd v Incorporated Owners of Gold King Industrial Building. 

65.At first instance in HCA 104/2006, 15 January 2014, Suffiad J said:

“68. Those conditions so stipulated are not only understandable but also necessary in that the Building being an industrial building with 26 storeys with 10 units to each storey, it must follow that there would need to be provisions made to accommodate certain busy times of the day when numerous vehicles would be involved in loading and unloading and some would have to wait their turn in parking spaces reserved for that purpose.

69. Therefore, although Special conditions 12 and 13 of the Government Grant make no stipulation or provision as to the ownership of such parking spaces which necessarily need to be reserved for such loading and unloading, it would be quite inconceivable that such parking spaces reserved for such loading and unloading purpose (and stipulated by those conditions not to be used for any other purpose) can be owned or in the exclusive possession of any one particular owner or individual as that would necessarily defeat its intended purpose.” (emphasis added)

66.On appeal, Barma JA in CACV 22/2014, 23 December 2014, made similar observations at §27:-

“… it is apparent that the consequence of all of the 39 numbered spaces being under private ownership is that it would be possible for all of them to be retained for the exclusive use of their owners, resulting in a situation in which there would be no spaces in which vehicles seeking to load or unload goods (which were not given permission by an owner of a space to park in his space) could remain during the process of loading or unloading, necessitating that they simply stop on the driveway for this purpose. This appears to us (as it did to the Judge) to be a wholly impractical arrangement, and as such, not one that should readily be accepted as representing the correct interpretation of the DMC and First Assignment.” (emphasis added)

67.Without disrespect, these comments of the courts do not assist the IO defendants. Tai Fat Development was a dispute on whether or not the car parking spaces were exclusively owned by the plaintiff or common areas and the courts naturally construed the DMC.

68.In the present case, the design of the loading and unloading platforms was contemplated in the approved plans and the DMC.  Unlike Tai Fat Development, the ownership of the car parking spaces had been expressly provided for.  

69.Moreover, looking at Clause 12(b), if the Plaintiffs had been compliant with the New Grant, the Properties would have been sold out alongside the 442 Building units.  It cannot be said that in that scenario, individual owners who have purchased the Properties could not have exclusive rights over them despite the express provision in the DMC. 

70.If an officious bystander had asked whether there was indeed an implied term that Building owners had a right to use the Properties, it was inconceivable that the Plaintiffs (or any owner who had purchased one of the Plaintiffs’ Properties) would have said “of course”.  As pointed out by Mr Wilson Leung, the IO defendants’ current stance that the owners are entitled to use the Properties is inconsistent with their repeated notification to the users of the Building not to park on the Properties from 1 October 2011.

71.The IO defendants rely heavily on Kung Ming Tak Tong as an example of how, despite having exclusive possession to a retained passageway, an owner was nevertheless restrained from blocking off a counter and narrowing down the passageway.  It was held that the counter was an important feature of the structure and location of the first floor shop owned by the plaintiff, and its importance must have been in the parties’ contemplation.  The blocking off of the counter would render the unit substantially less fit for the purpose for which it was acquired.  An injunction was granted.

72.In my view, Kung Ming Tak Tong can be distinguished on its special facts.  The denial of access to the Properties does not substantially alter the nature of the Car Parking Lot as a car parking lot and loading and unloading area.

73.In summary, even taking all facts asserted by the IO defendants in their favour, the bone of contention is one of law that should be resolved in favour of the Plaintiffs.  It is plain and obvious, despite the numerous authorities that have to be considered, that the defence on non-derogation from grant must fail.  The relevant parts of the defence and counterclaim should be struck out pursuant to Order 18, rule 19(1)(b), (c) and (d).

Application under Order 14A

74.The question posed by the Plaintiffs is:

“Whether the owners of the Building and their agents are entitled to use the Properties for loading and unloading of goods onto and from the Loading and Unloading Platforms as pleaded in paragraph 26.1 of the Defence & Counterclaim of the 1^st and 2^nd Defendants.”

75.I am satisfied that this is a question of law. The Court has all the necessary facts and matters before it to determine this question and I have assumed all facts in favour of the IO defendants. Resolution of this question will dispose of a distinct part of the defence on non-derogation from grant.

76.For the reasons given under paragraphs 38-73 on non-derogation from grant, the question must be answered in the negative.

Conclusion

77.I order as follows:

(1) Subject to the striking out below, I give unconditional leave to D1 and D2 to defend the action; on a nisi basis, 50% of the costs of the summons shall be the costs in the cause;

(2) I enter judgment against D3 for trespass (since 1 October 2011) for possession of the Properties, with mesne profits to be assessed and interests thereon; on a nisi basis, 50% of the costs of the action up to this judgment and the summons shall be borne by them;

(3) I strike out paragraphs 3-8 and 26 of the defence and counterclaim of D1 and D2 relating to non-derogation from grant;

(4) I answer the question pursuant to Order 14A in the negative;

(5) In respect of paragraphs (3) and (4), there be an order nisi that 50% of the costs of the summons shall be to the Plaintiffs, to be borne by D1 and D2, summarily assessed at $180,000.

78.I thank counsel for their thorough preparation and great assistance to the court.

Mr Wilson Leung, instructed by Ford, Kwan & Co, for the 1^st and 2^nd plaintiffs

Mr Keith Lam, instructed by Tony Kan & Co, for the 1^st and 2^nd defendants