Grenville House Ltd (in Voluntary Liquidation) and Others v. The Incorporated Owners of Grenville House
Read the full judgment text of CACV 32/1977 on BabelCite. This Court of Appeal judgment.
1. This is an appeal from the judgment of Li, J., adjudicating a preliminary issue in the action framed by consent of all parties. That issue is in the following terms:
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CACV000032/1977
----------------- Coram: Pickering, J.A., McMullin & O'Connor, JJ. Date of Judgment: 14th February, 1978. ----------------- JUDGMENT ----------------- McMullin, J.: 1. This is an appeal from the judgment of Li, J., adjudicating a preliminary issue in the action framed by consent of all parties. That issue is in the following terms:
The learned judge ruled, against the contention of all appellants, that the respondent corporation was entitled to maintain an action in the form pleaded in the writ and statement of claim which reaches its final form in a re-re-amended statement dated 29th of January 1976. The first defendant is a company in voluntary liquidation. It was the original owner of Grenville House a block of flats erected by it as developer of the property. The first defendant employed the second defendant firm, a firm of architects, for the purpose of the said construction. That firm was employed from March 1969 superseding the former architects, Messrs. Harriman Realty Co. Ltd. The third defendant is a limited company which was employed by the first defendant as contractors for the construction of Grenville House. The Attorney General is the fourth defendant and is sued as representing the Building Authority. The fifth defendant is an engineer and authorised architect and a partner in the second defendant firm. The sixth defendant is a firm of contractors and was the registered contractor in respect of the building works in 1969. The fourth and sixth defendant are not appellants. The seventh defendant is a firm of architects and engineers and was the first firm employed by the first defendant in the construction of the project. 2. Grenville House consists of 120 high-grade residential flats. The project was completed on the 26th of January 1972 by which date most of the dwelling units had already been sold. On 10th of August 1972 individual owners of the flats formed themselves into an incorporated body which is the plaintiff in the present action. Each of these owners is, after the usual fashion of enjoyment of such real estate in Hong Kong, the owner of an equal undivided 120th part of the land together with the exclusive right of occupation of the flat purchased by him. 3. On the 11th of August 1972, the very day after the incorporated body came into existence, a landslide occurred on part of the slopes adjoining the flats. It is agreed that the land affected is a portion of the "common parts" of the property as defined in the Ordinance and is the common property of all owners. There were three further slips over one year later on the 11th, 12th and 21st of August 1973 and it appears that over that period and thereafter a great deal of work had to be done by way of reinstating the slopes to make them safe. In the same period numbers of the residents were obliged to vacate their premises in Grenville House and seek temporary accommodation elsewhere. It is common ground that an initial sum of $180,000 was paid to contractors to carry out this work and that, when finally completed, the corporation, on behalf of the owners, had paid to contractors a further sum of $3.4 million. The corporation, has under sections 20 to 23 of the Ordinance, various powers to raise a fund by exacting contributions from the members and also to create a contingency fund for special emergencies in the same way. It is a curious feature of the present case that we do not know what was the source of the funds used by the corporation to pay the contractors but it may be assumed that a great part of it at least must have come from these contributions. 4. Mr. Martin Lee for the second and fifth defendants bore the brunt of the argument and is fair to say that his case against the plaintiff has been, without serious reservation, accepted by counsel for all the other defendants. Indeed what has been added on behalf of the other defendants may be said to amount to embellishments upon the main theme. The principal argument is directed at the terms of section 16 of the Mulli-storey Buildings (Owners) Incorporation Ordinance, Cap.344
"Owner" is defined in section 2 in the following way:
The plaintiff corporation claims to sue both on its own behalf and on behalf of all the owners. The former aspect of its claim is the aspect to which section 16 is relevant. Mr. Swaine for the plaintiff concedes that if he succeeds in his argument upon that point he cannot also claim that the action is on behalf of the owners under section 18(2)(g). 5. At the centre of Mr. Lee's argument - and counsel for all other defendants are at one with him on this point - is the contention that in order to succeed the plaintiff must show that it is entitled to bring the action in its own name and to recover damages on its own behalf. Mr. Swaine concedes for the purpose of argument, and taking the matter at its most favourable to his opponents, that the cause of action may be said to have arisen upon the occurrence of the first land slip on the 11th of August 1972. It is likewise common ground that the body of owners in existence at the date of the accrual of the right of action, i.e. the date of the landslip, had changed between that date and the date of issue of the writ and has further changed, since the issue of the writ, by the departure of several owners and the introduction of new owners in their stead. The claims against all defendants are based in negligence and breach of statutory duty. It is said that that these several alleged tortfeasors, by virtue of their various capacities relating to the scheme, should have foreseen results of the alleged negligence and breach of duty and ought to have had in contemplation the damage to those persons who were eventually injured thereby. To this it is replied generally (a) that none of the defendants could have foreseen the existence of this corporation as a body which only came into existence long after the occurrence of the acts complained of and (b) inasmuch as the corporation professes to act on behalf of all the owners, that means owners for the time being at the date of accrual of the action (the 11th of August 1972) and only for such owners in virtue of their joint interest in the common parts of the property. Therefore, it is said, since those owners are not now the same body of owners as existed at the time of the issue of the writ, the plaintiff company can no longer claim to be the representative of the owners for the time being at the relevant date. This, counsel said, debars it from acting on behalf of the present owners. The result would be that all the owners who were in fact injured by the alleged tortious acts of the defendants are relegated to their several rights of action in respect of such injuries as they deem themselves to have suffered at the hands of the defendants. Although the Ordinance establishes the corporation as a body with perpetual succession (section 8(2)(a)) Mr. Lee puts it that there is no perpetual succession of ownership in the owners as regards the common parts of the building and all therefore own the common parts directly and not through the vehicle of the company as shareholders. The plaintiff, he says, although it claims to sue by statutory authority does not own and indeed does not claim to own the common parts. These remain vested in the individual owners for the time being. Moreover he points out that there is no evidence and no pleading to the effect that the incoming or new owners have agreed to share any liability which the old owners may have incurred by reason of the need to reinstate the slopes. Counsel maintains that the plaintiff corporation has no capacity to sue on its own behalf. It consists only of the present owners at any given moment of time. The owners as they existed at the hearing before Mr. Justice Li are patently not the same as those referred to in paragraph 1 of the statement of claim. He puts the matter alternatively by saying that the plaintiff corporation, as presently constituted, has no interest in the matters complained of and only the owners at the date of the occurrence of the landslide have a cause of action. Further in the alternative, he says that the plaintiff has no cause of action in its own right because it has not suffered any damage in its own notional person. He relies upon the decision in De Fries(1) as authority for the view that the action in tort, being personal to the individual injured; is not in any event assignable at common law. He adopts a point made by Mr. Bokhary for the third defendant which was to the effect that section 16 is intended to assist the corporation in its task of managing the building and the site and carrying out such works of maintenance as might reasonably be regarded as directly ancillary to those duties. Such duties would not, he says, confer a right upon the corporation to sue in respect of such a matter as we are here confronted with either on behalf of the owners or in its own behalf. In common with all the defendants he urges most strongly the view that section 16 does not have the effect of vesting the rights of suit of the owners at any time in the plaintiff corporation. 6. Notwithstanding a great deal that was persuasive in the arguments of counsel for the defendants I am satisfied in the end that Mr. Swaine was clearly right in his contention that section 16, although it does not expressly say so, has the effect of vesting permanently in the corporation a right of suit which may accrue to an individual owner as a result of tortious acts relating to the common parts of the property. Mr. Ching suggested that the use of the words "in relation to the common parts" which appears in the opening part of the section should be distinguished from the phrase "in respect of any of the common parts of the building" which appears in paragraph (b) of that section. He argued that this difference shows a clear intention on the part of the Legislature to provide for two different situations. Thus, he says, by the use of the word "shall" in the first part of the section, acts which might be regarded as reasonably ancillary to the maintenance of the building are mandatorily put in the sole care and disposition of the corporation while the form of words used in paragraph (b), coupled as it is with the permissive "may", is specifically designed to reserve to individual owners rights of action of a kind arising from the use of the common parts which may be wider than the narrow ambit of the duties which, it is argued, are reserved to the exclusive care of the corporation by the first part of the section. That is an adroit and persuasive argument but I do not think that it can prevail over considerations of a more general character deriving from the whole nature of the Ordinance itself. We are advised by the long title to the Ordinance that its purpose is "to provide for the management of such buildings and for matters incidental thereto or connected therewith." It is conceded that it would be fully within the intendment of those words for the corporation to exercise an exclusive right of suit on behalf of the owners for the time being on such a matter as the blockage of drains whether that was caused by one of the individual owners or whether it arose through interference by some outside agency. For my own part I find it difficult to see what distinction in principle can be drawn between that situation and the situation arising in the present case as a result of the landslide. 7. The distinction to which counsel for several of the defendants have drawn our attention is a valid one: the distinction between a cause of action and a right to sue. It is quite true that nowhere in the ordinance is there any provision amounting to a statutory vesting in the corporation of the individual owner's cause of action arising from the common parts; what the corporation is given is the right to pursue any such action to the exclusion of the owners. No doubt this might result in a situation in which an individual owner, having gone out of possession after the accrual of his cause of action, and being already damnified by payment of his share of the levy exacted by the corporation in defraying the expenses of reinstating the slope, finds himself, by virtue of section 16, deprived of his right to pursue his cause of action. It was however a part of Mr. Ching's own argument that a person may have a just cause of action and yet be unable to pursue it through the intervention of statutory provisions of one kind or another. He gave as examples the Limitation Ordinance and section 4 of the Statute of Frauds. Mr. Ching argues that since section 16 confers no separate cause of action upon the corporation in its separate entity, but only a right to sue on behalf of the owners to the exclusion of their several rights of suit then, when an individual owner ceases to be a constituent of the corporation and sells his individual flat, he takes his cause of action with him and, being no longer "a person who for the time being appears ... to be the owner of an undivided share" of the premises (section 2), his exclusion by section 16 from the right to sue no longer binds him and he may bring action on his own behalf in respect of damage accruing through the tort to the common parts. Counsel concluded this part of his argument by saying that it could not be the intention of the Legislature that in such circumstances the corporation should also retain a right to sue in respect of the same damage since in that event the tortfeasor would be subjected to a double penalty for a single tort. It is perhaps here that we touch the kernel of the difficulty which counsel have found in the interpretation and application of section 16. As it appears to me there are two broad categories of damage which might be said to affect an individual owner arising from tortious acts to the common parts. The first is the easily assessable loss to which he is put as a result of his obligation to contribute to the cost of reinstatement of the slopes; the second is any consequential loss which the damage to the slopes may have caused him in his own person or in the enjoyment of his own individual part of the premises. Let us suppose that one of the owners had suffered personal injury as a result of the landslide. It certainly seems unlikely that the Legislature intended by section 16 to relegate him, in his right of suit for such a particular personal injury, to the same area of relief which he enjoys in common with the other owners who are put to expense through the reinstatement of the slope. It is the damage suffered in common by the tenants in common of the premises which is placed specially in the care of the corporation to pursue on their behalf. A liability to contribute to the cost of reinstating is clearly such a damage. Although we have no evidence before us as to whether any of the individual owners have actually contributed to the fund which was used to pay the contractors yet the arguments of all counsel seem to assume that it is this species of damage which is in question. 8. Mr. Swaine contends, and Mr. Ching concedes, that there may be what was termed a "hybrid action" in which the individual owner might join as a separate plaintiff together with the corporation. In suggesting that Mr. Swaine was of course not dealing with an illustration of the kind I have chosen but with the situation posed to him by the court which was that of the individual owner who, because of the landslide, had sold his premises at a considerable loss and had ceased to be a constituent of the corporation. But the same principle I apprehend would apply to that situation also. Damage thus suffered could not be said to be a damage touching the interests of all the tenants in common. Clearly the Ordinance is intended to supply to the corporation a variety of powers and to confer upon it a variety of duties for the general convenience of persons who own such multi-storey buildings as well as for the general convenience of the public at large who may have to deal with them. Thus, if some third party, let us say as stranger or visitor to the premises, were injured by some dangerous object on the common parts he would presumably be entitled to join the owners of the common parts together with any other persons whom he thought might be responsible for the tort. If he did so it would clearly be highly impractical and inconvenient to have to joint 120 individual persons as defendants. Yet if the contention of Mr. Lee, and counsel for the other defendants who agree with him, is to be taken at its full rigour the fact that there was a change in the constituency of the corporation immediately after the occurrence would render the corporation immune from separate suit on the basis that its identity was not that of the body to which the right to sue had been given by the statute. While I am far from saying that there was no weight, and perhaps considerable weight, in many of the arguments put before the court by counsel, and while the sensible application of the terms of section 16 is not without difficulty, I think that the purpose of it is reasonably plain and that we should be doing no injustice to give effect to that purpose. I can see no abiding objection which would prevent that course. I think what we are confronted with should be regarded as an exceptional statutory right. It is not, as Mr. Swaine seemed to suggest at some points in his argument, a right of action. It is a right to pursue a cause of action deriving from such an interest in common even after the owner's particular interest in the premises has ceased. There can be no question of a new owner acquiring the cause of action possessed by the old owner merely by the assignment of the old owner's interest in the land. The personal cause of action remains with the old owner even after he has ceased to be the owner. The corporation is the persistent persona of all the owners of the premises at any moment of time but in respect only of one part of all possible actionable damage which might derive from a tort affecting the common parts. In regard to that type of damage the right of suit is vested permanently in the corporation. That type of damage would include any pecuniary loss suffered by alltthe individual owners in common deriving from damage to the common parts. It is at this point that I derive the only illumination which I have been able to gather from the provisions of section 18(1)(g). The argument relating to the corporation's powers under that provision was alternative to the argument under section 16 and in view of what I have said concerning section 16 I would prefer to express no opinion on the alternative proposed by Mr. Swaine under section 18. I am however somewhat strengthened in the views I have expressed by what I find in the latter section. Paragraph (g) is in the following terms:
The emphasis I find there on the joint interest of the tenants in common, in the matter which is placed in the care of the corporation to pursue on their behalf, is to my mind some indication that the intention of the Legislature is to restrict the agency of the corporation on behalf of the owners to such matters only as show a joint interest in them all. In this regard I believe Mr. Swaine is right to maintain that "joint interest" is not there employed as a term of art importing considerations relevant to the idea of joint tenancy but is intended simply to convey the idea of a common interest the term "joint" being employed perhaps to avoid what the draftsman may have felt to be an inelegant repetion of the word "common". 9. I realise that this manner of construing section 16 will leave unanswered certain practical questions which may be suggested by the arguments addressed to the court. That cannot be helped for in any event we lack the evidence necessary to direct our attention to such questions. Has any one of the owners been actually damnified by contributing to the fund to reinstate the slopes? Have all owners at the date of the landslide been so damnified? Have only some of those owners been so damnified? Have any of these owners left the premises without contributing to the fund? Has any new owner come into possession of premises assigned to him after the accrual of the cause of action and been obliged to contribute to the fund? Are there new owners now in possession who have never contributed anything? But in any event the answers to all such questions, as it seems to me, would not be relevant to establishing or controverting the principle which I have attempted to enunciate. All such questions concern the disposal of damages recovered. The distribution of those damages had best be left to the commonsense and integrity of all who are in fact concerned. As a notional separate entity from its constituents it is quite true, as counsel have said, that the corporation has not itself suffered any damage and has no cause of action. It does purport to sue "on its own behalf", but it does not do to lean too heavily upon these words. In one sense of course it is true that it is suing on its own behalf since it is that corporate persona which is given the right to sue but it is not suing on its own behalf in the sense that it has a separate cause of action apart from the several causes of its constituents. Its action on its own behalf is for practical purposes indistinguishable from its action on behalf of the owners. What the Ordinance has done is to create a persisting entity capable of representing all the owners at any moment of time for any of the given purposes. No doubt it would be true to say that in discharging many of its duties the corporation is doing so solely on behalf of those who are the owners at the date of such discharge; but that cannot be so in regard to the special rights and obligations of suit under section 16. If it were so it would go a long way towards annulling the value of the incorporation by putting the rights of the public, no less than those of the owners, to the hazard of a strange uncertainty: for if the appellants are right, proceedings properly founded by or against the corporation in the very form which the Ordinance obliges might be frustrated by some adventitious change in the corporation's constituency even in the course of the proceedings between writ and judgment. The same argument which would prevent suit because of change between the arising of the cause and the suing of the writ would apply to prevent recovery of judgment because of change between the date of the writ and the date of judgment. In each case what is said is that the body which sues or is sued is not the same body as that entitled to recover or responsible for judgment. Under section 16 the rights and duties of the corporation in matters of suit touching the common parts of the property are limited to circumstances which concern all the owners as a result of their joint interest in the due maintenance management and control of those parts. 10. For those limited purposes the body of the owners may be said to consist of every individual who ever has been a constituent of the corporation. It matters not that at the time of issuing the writ the body of the constituents is not the same as it was at the time of accrual of the action any more than it would matter that that body is not the same at the time of judgment even though it had been the same at the time of issue of the writ. In pursuing those purposes it is serving the interests of all including those who are no longer constituents but have been damnified and those who are now constituents and have never been damnified. For a major purpose of the incorporation of the owners is to facilitate convenience in suit. For these reasons I would dismiss the appeals of all the appellants and affirm the ruling of the judge below.
Representation: R. Mills-Owens (Deacons) for 1st appellant. M. Lee and H. Poon (T.S. Tong & Co.) for 2nd and 5th appellants. K.S. Bokhary (K.K. Chu & Co.) for 3rd appellant. C. Ching, Q.C. and A. Sakhrani (atrick Poon & Co.) for 7th appellant. J. Swaine, Q.C. and R. Kotewall (Edmund Cheung & Co.) for Respondent. (1) (1913) 1 Ch. D. 98.
----------------- Coram: Pickering, J.A., McMullin & O'Connor, JJ. Date of Judgment: 14th February, 1978 ----------------- JUDGMENT ----------------- Pickering, J.A.: 11. I concur. I have nothing to add.
Representation: R. Mills-Owens (Deacons) for 1st appellant. M. Lee and H. Poon (T.S. Tong & Co.) for 2nd and 5th appellants. K.S. Bokhary (K.K. Chu & Co.) for 3rd appellant. C. Ching, Q.C. and A. Sakhrani (Patrick Poon & Co.) for 7th appellant. J. Swaine, Q.C. and R. Kotewall (Edmund Cheung & Co.) for Respondent.
----------------- Coram: Pickering, J.A., McMullin & O'Connor, JJ. Date of Judgment: 14th February, 1978. ----------------- JUDGMENT ----------------- O'Connor, J.: 12. I concur.
Representation: R. Mills-Owens (Deacons) for 1st appellant. M. Lee and H. Poon (T.S. Tong & Co.) for 2nd and 5th appellants. K.S. Bokhary (K.K. Chu & Co.) for 3rd appellant. C. Ching, Q.C. and A. Sakhrani (Patrick Poon & Co.) for 7th appellant. J. Swaine, Q.C. and R. Kotewall (Edmund Cheung & Co.) for Respondent.
----------------- Coram: Pickering, J.A., McMullin & O'Connor, JJ. Date of Judgment: 14th February, 1978 ----------------- JUDGMENT ----------------- Pickering, J.A.: 13. I concur. I have nothing to add.
Representation: R. Mills-Owens (Deacons) for 1st appellant. M. Lee and H. Poon (T.S. Tong & Co.) for 2nd and 5th appellants. K.S. Bokhary (K.K. Chu & Co.) for 3rd appellant. C. Ching, Q.C. and A. Sakhrani (Patrick Poon & Co.) for 7th appellant. J. Swaine, Q.C. and R. Kotewall (Edmund Cheung & Co.) for Respondent.
----------------- Coram: Pickering, J.A., McMullin & O'Connor, JJ. Date of Judgment: 14th February, 1978. ----------------- JUDGMENT ----------------- O'Connor, J.: 14. I concur.
Representation: R. Mills-Owens (Deacons) for 1st appellant. M. Lee and H. Poon (T.S. Tong & Co.) for 2nd and 5th appellants. K.S. Bokhary (K.K. Chu & Co.) for 3rd appellant. C. Ching, Q.C. and A. Sakhrani (Patrick Poon & Co.) for 7th appellant. J. Swaine, Q.C. and R. Kotewall (Edmund Cheung & Co.) for Respondent. |