The Incorporated Owners of Triumph Court v. Law Ping Patsy

CACV 51/2018

[2020] HKCA 272

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 51 OF 2018

(ON APPEAL FROM LDBM NO 331 OF 2013)

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BETWEEN

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JUDGMENT

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Hon Lam VP:

1.1Presently, Yuen JA will give the main judgment of this Court. I respectfully concur. There will be an order in terms of paragraph 40 of the judgment.

1.2I only wish to state clearly that bearing in mind the need to adopt a liberal approach to the construction of Section 36 of the District Court Ordinance as discussed in Ng Cho Chu Judy v Chan Wing Hung [2017] 4 HKLRD 396, I fully agree with Yuen JA’s view that the District Court has jurisdiction to hear the new action on quasi-easement provided that the monetary limit on rateable value as set out in that section is satisfied.

1.3Now that a new action has to be brought in order to resolve the matter, perhaps the parties (as well as the owner of the A3 unit) should make greater efforts to come to a practical solution to settle all the disputes.  It is not necessary for us to remind parties of what had been previously said by the Court at the hearing of 17 August 2018.  If necessary, they can refresh their memories from the transcript which has been included in Bundle C.  

1.4By now, they should understand how further litigation would put a strain on their resources both in terms of money and time and energy.  It is unfortunate that past attempts of mediation could not result in a more positive solution.  But I see no reason why they should not reconsider their respective positions given the outcome of this appeal.  They would be well-advised to undergo further attempts in light of the new situation.

1.5Irrespective of the forum in which the new action is to be litigated, parties can consider asking the court at a suitable stage of the proceedings to direct a judicial settlement conference presided by a master and assisted by a mediator (adopting a process similar to the mediator assisted FDR in the Family Court, which has achieved a very impressive success rate so far). That may prove to be a more fruitful exercise than litigating up to the end.    

Hon Yuen JA:

2.This appeal from the Lands Tribunal Judgment in LDBM331/2013 given by Deputy Judge Eric Tam on 12 April 2017 (“the LT Judgment”) involves a unique set of circumstances concerning two flats, A2 and A3, on the 7^th floor of a building on Electric Road, Causeway Bay called Triumph Court (“the Building”).

3.1.At the hearing of the appeal on 17 August 2018, this court, having read the papers and submissions, and heard counsel for the appellant Law Ping Patsy (“Madam Law”) the owner of A21, and counsel for the respondent the Incorporated Owners (“IO”) of the Building2, as well as one of the owners of A3 who was present, adjourned the appeal sine die to enable the parties to enter into mediation3, with a direction that the parties shall jointly report to the court after 90 days. 

3.2.Thereafter, solicitors for the parties wrote to the court periodically, asking for extensions of time.  Eventually, when they reported after nearly a year that the parties were not able to reach agreement for the disposal of the appeal, this court gave directions for the appeal to be disposed of on paper4 with further submissions to be filed.  Further submissions were duly filed by the parties. 

Background

4.To understand how the parties have arrived at this situation, it is necessary to set out the factual background in some detail.

5.1.The Building which was constructed in the late 1950’s, is 11 - storeys high5.  At the 7^th floor, there is a set back, with a flat roof on the southern side6.  

5.2.Unique to the 7^th floor is the presence of two sets of staircases (“the upper floors staircase” and “the lower floors staircase”) in the common parts.  The presence of these two sets of staircases on only the 7^th floor can be seen from comparing the respective plans for the 1^st to 6^th floors7 (“the lower floors”), the 7^th floor only8, and the 8^th to 10^th floors9 (“the upper floors”) attached to the Deed of Mutual Covenant referred to below¹⁰. 

5.3.From the upper floors, the upper floors staircase provides access to the 7^th floor only.  To go further down, one has to pass along the 7^th floor landing (“the Landing”), and turn a corner to reach the lower floors staircase.  In other words, the Landing connects the two sets of staircases.   

Amended plan submitted for approval

6.1.On 30 September 1959, an architectural firm Hsin-Yieh submitted an “amended plan”¹¹ (showing the 6^th and 7^th floors) to the Building Authority for approval.

6.2.In relation to the 7^th floor, the amended plan showed a total of six flats. 

The Flat depicted in the amended plan (“the Plan Flat”)

7.1.At the south-eastern side of the Building, the amended plan depicted a flat, with a Living & Dining space (“the L&D space”) facing east, a kitchen, 2 bathrooms and 2 bedrooms¹².  For convenience, I will refer to the flat so depicted on the amended plan as “the Plan Flat”.

7.2.According to the amended plan, if a person entered the Plan Flat from the lift lobby, he would first walk through a corridor; looking left he would see the kitchen, and looking right, he would see a bathroom (“Bathroom A”).  Entering the L&D space, looking left he would see a bedroom (“the northern bedroom”) and looking right, he would see the other bedroom (“the southern bedroom”) from which the flat roof could be accessed.  The other bathroom (“Bathroom B”) was near the entrance to the southern bedroom.

Approved Plan

8.The amended plan was approved by the Building Authority (“BA”) on 15 October 1959.  It is common ground that there are no plans at the BA showing any alterations or additions to the amended plan, so I shall refer to the amended plan hereafter as “the Approved Plan”.

Certificates for Occupation Permit

9.1.The previous day, ie 14 October 1959, an authorized architect Mr G. D. Su and an authorized contractor South Sea Construction Co sent to the BA a certificate of completion of the new building.  This certificate was not provided to the court, but it was referred to in the Occupation Permit (“OP”) issued by the BA on 26 October 1959. 

9.2.The architect certified that:

“the building works have been carried out in accordance with the approved plans and are structurally safe”

and the contractor certified that:

“the building works have been carried out in accordance with the regulations and are structurally safe”. (Emphasis added).

Occupation Permit

10.The OP was then issued to the developer U Kwan Investment Co Ltd, granting permission to occupy and use the building for the purpose of (among other things) “European type flats at 1^st to 10^th floors for domestic purpose”.  It did not specify the number of flats on the 7^th (or any other) floor.

Division of Plan Flat into A2 and A3

11.1.At some unknown time, there was a deviation from the Approved Plan, in that the Plan Flat was divided into 2 flats (designated as A2¹³ and A3¹⁴).  According to the evidence of Chan Miu Ling (“Madam Chan”) in the Lands Tribunal hearing¹⁵, she had lived in A3 from 1960 to 1976, and when she moved in, the division had already taken place¹⁶.  (This court was not provided with her witness statement or transcript of her evidence).  

11.2.It is common ground that the division was done by the erection of a wall running from the eastern end of Bathroom A across the L&D space from west to east (“the Partition Wall”).  No plans had been submitted to the BA for the erection of the Partition Wall¹⁷.

11.3.After the division,

- A3 comprised of the corridor, the kitchen, Bathroom A, the northern bedroom and part of the L&D space of the Plan Flat.

- A2 comprised the rest of the Plan Flat together with some additional area.  This additional area was a corridor, built over the headroom of the lower floors staircase, to connect A2 to the Landing (“the A2 Corridor”).  Again, no plans had been submitted to the BA for the erection of the A2 Corridor¹⁸.

The A2 Corridor

12.1.To form this corridor¹⁹, which is approximately 2.8m long, 1.2m wide and 2.7m high²⁰,

- the wall between Bathroom B and the southern bedroom inside A2 was demolished,

- a new structure comprising a wall and a floor slab were added over the headroom of the lower floors staircase²¹, thereby forming an enclosed corridor connecting A2 to the Landing²²,

- part of a wall of the Landing was demolished, forming an opening²³,

- a doorway to A2 was installed at the opening in the Landing²⁴.

12.2.As a result of the erection of the Partition Wall and the A2 Corridor, A2 and A3 became two self-contained units, each with separate access to the Landing. 

Deed of Mutual Covenant 

13.1.The units in the Building were not sold by the developer until 1963.  On 2 April 1963, the developer and the first purchaser²⁵ signed a Deed of Mutual Covenant (“DMC”).

13.2.The Building was divided into 113 shares.  Both A2 and A3 were allotted 1 share each, in common with the other flats on the 7^th - 10^th floors. 

13.3.Further, the First Schedule listing the parts of the Building allotted stated that “the respective locations of the above mentioned shops, flats and Roof are as shown on the Plans hereto annexed” (“the DMC Plans”).

13.4.The DMC Plan for the 7^th floor²⁶, which was signed by a different architect²⁷ from the one who had signed the Approved Plan, showed the Partition Wall, and both A2 and A3. 

- for the area of A3 depicted, see §11.3 above.

- for the area of A2 depicted, see §11.3 above, but without the additional area (ie without the A2 Corridor).

13.5.The DMC Plan did not show the access point from the Landing to A2 (indeed, no access points were shown to any of the flats on any of the floors). 

Assignment of A3

14.1.On 14 May 1963, the developer assigned A3 to Madam Chan’s parents.  The memorial stated that the developer

“DID thereby assign unto the Purchasers ALL THAT the right to the exclusive use occupation and enjoyment of ALL THAT FLAT A-3 on the SEVENTH FLOOR of TRIUMPH COURT as shown and coloured Pink on the Plan hereto and thereto annexed”.

14.2.The plan annexed was the same as the DMC Plan for the 7^th floor, and what was coloured pink was the area of A3 in §11.3 above.

14.3.The ownership of A3 has passed through a few hands.  Since 2000, the owners are Li Fu Kwok Joseph (“Mr Li”) and Zai Pui Ming (“Madam Zai”).

Assignment of A2

15.1.Meanwhile, on 5 August 1965 the developer assigned A2 to Madam Law’s mother.  The assignment stated that the developer

“DOTH hereby assign unto the Purchaser ALL THAT the right to the exclusive use occupation and enjoyment of ALL THAT FLAT ‘A-2' on the SEVENTH FLOOR of TRIUMPH COURT as shown and coloured Pink on the Plan hereto annexed”.

15.2.The plan annexed was signed by yet another architect²⁸, not the ones who had signed the Approved Plan, nor the one who had signed the DMC Plan.  What was coloured pink was the area of A2 in §11.3 above (together with the eastern half of the flat roof), but without the additional area (ie without the A2 Corridor).

15.3.In 2003, A2 devolved to Madam Law from her mother’s estate²⁹.

15.4.Meanwhile, in 1995, the developer was dissolved.

Building Authority actions

16.1.The BA has been interested, in various aspects, in the Partition Wall and the A2 Corridor for some time.

16.2.On 25 February 2005, consultants reporting to the Buildings Department (“BD”) noticed that³⁰ the A2 doorway at the Landing was an unauthorized building work (“UBW”) as the work had been undertaken without BA approval³¹.

16.3.On 14 July 2005, staff of the BD conducted an inspection and found, in addition, that the A2 Corridor was also a UBW³². 

16.4.Then on 6 August 2007 and 25 October 2007, staff of the BD found, in addition, that the Partition Wall was also a UBW³³.

16.5.On 16 December 2009, the BA issued a Fire Safety Direction³⁴ as follows:

“Provision of the [a] protected lobby to the exit of the unit inside the front escape staircase³⁵ on 7/F. The walls and doors of the protected lobby should have a fire resistance period of not less than one hour and half an hour respectively. These doors should be self-closing with transparent upper view panel and should not obstruct the staircase landing”.

In other words, the A2 Corridor should be turned into a “protected lobby” with one door at either end of it³⁶.

16.6.However, on 3 March 2010, the BA gave a “pre-warning” to Madam Law requiring the removal of the A2 Corridor altogether³⁷. This was not complied with.  This led to a s.24C notice being issued against Madam Law on 27 May 2010, which was also not complied with.

17.Finally, the BA made 2 orders on 24 April 2015:

(1) in relation to Partition Wall:

Building Order No.857 (“BO 857") ordered both the owners of A2 and A3 to alter the Partition Wall to comply with Reg. 41(1) of the Building (Planning) Regulations, or otherwise put an end to the contravention (this has been referred to in the BAT Judgment referred to later³⁸ as “UBW- 1”);

(2) in relation to the A2 Corridor:

Building Order No.885 (“BO 885”) ordered Madam Law as the owner of A2 to demolish the A2 Corridor and to reinstate the parts of the Building affected (this has been referred to in the BAT Judgment as “UBW-2”).

Appeals against Building Orders

18.1.Madam Law appealed against BO 857 in BAC141A/2015 and BO 885 in BAC162/2015.  As at the date of the LT Judgment (12 April 2017), these appeals had been heard, but judgment had not been delivered. 

18.2.However, on 6 December 2017, the Buildings Appeal Tribunal gave Judgment (“the BAT Judgment”) determining that no good cause had been shown for a full hearing and dismissed the appeals.  Madam Law has not taken any further steps to challenge the BAT Judgment.   

19.1.Mr Li and Madam Zai, the owners of A3, had also lodged an appeal against BO 857 in BAC141/2015.  As at the date of the LT Judgment, that appeal had not yet been heard. 

19.2.However, Mr Li and Madam Zai have (after the date of the hearing before this court) withdrawn that appeal.

Updated position regarding Building Orders

20.Accordingly, the up to date position is that both BO 857 and BO 885 stand.  Although the Orders have not been complied with by anyone, the position in law is that both the owners of A2 and A3 are obliged by law to remove the Partition Wall, and Madam Law is obliged by law to remove the A2 Corridor. 

LT proceedings

21.1.The appeal with which this court is concerned arises from proceedings taken by the IO against Madam Law in November 2013, for a mandatory injunction (in brief):

(1)     to remove the metal gate for entry to A2 at the opening of the wall in the Landing, and to reinstate the common wall;

(2)     to remove the A2 Corridor, and to reinstate the original common parts of the building.

21.2.It would be noted that the IO did not make any claims against Madam Law in respect of the Partition Wall.  In my view, that is correct because it has been erected on property which is not a common part and the evidence before us does not show that per se it was a breach of the DMC.

22.1.Madam Law opposed the IO’s claim and filed a counterclaim for declarations that:

(1) she had established a possessory title over the A2 Corridor,

(2) there was a licence arrangement between the IO and herself in respect of the said Corridor;

(3) the IO had granted her an easement over the said Corridor.

22.2.As noted previously, at the time of the trial in the LT, Madam Law’s appeals against BO857 and 885 had been heard by the BAT but not determined. 

LT Judgment

23.The Tribunal’s Judgment may be summarized as follows:

(1) the A2 Corridor was in breach of s.34I(1)(b) Building Management Ordinance Cap.344, as it unreasonably interfered with the use and enjoyment of common parts, and further it was in breach of the DMC as the insurance of the building against fire may be rendered void or voidable due to the “legal requirements warranty” contained in the policy;³⁹

(2) Madam Law was bound as a successor in title, and the breach was also a continuing breach;⁴⁰

(3) there was no acquiescence, waiver or estoppel by the IO as it was only made aware in 2013 of the lack of approval⁴¹ and in any event, an IO cannot acquiesce in the retention of illegal structures;⁴²

(4) Madam Law had presented no evidence, and her counsel had not made submissions, on any claim of easement against the IO;⁴³

(5) there was no implied licence due to the absence of any overt acts;⁴⁴

(6) (a) hardship was a factor to be taken into consideration, and it would be a hardship to Madam Law if the A2 Corridor were to be demolished as that would mean she would have no means of legal access to A2;⁴⁵

(b) as for the fire safety requirements,

(i) the reduction of the clear headroom in the lower floors staircase by 0.1m was tolerable as it had been in that condition for over 50 years;⁴⁶

(ii) however, the A2 Corridor should be reinstated as a common part, with fire-resistant doors installed;⁴⁷

(7) taking into account the hardship that would be caused to Madam Law, the LT did not see fit to order demolition of the A2 Corridor but considered that at the least, she should reinstate it as common parts, together with the addition of fire-resistant doors;⁴⁸ Madam Law’s counterclaim was dismissed;⁴⁹

(8) however, the LT then made the following orders:⁵⁰

(1) should she fail in the appeal against BO 885 in the BAT, she should comply with the BO for demolition of the A2 Corridor, and reinstate the premises in accordance with the approved plans;

(2) should she succeed in that appeal, and the BO demolition order is removed, she should convert the A2 Corridor into a smoke lobby for common use, as proposed by her expert.

(9) an order nisi was made that Madam Law was to pay the IO’s costs including costs reserved with certificate for counsel.

24.Subsequently, Madam Law applied to the LT for a review, which was dismissed for reasons given on 7 July 2017.  The LT also refused her application for leave to appeal. 

25.Thereafter, the BAT Judgment was delivered which upheld the BO for demolition of the A2 Corridor.  The consequence was that A2 would have no access to the Landing, as the Partition Wall was still intact and A3’s appeal against the BO for demolition of that Wall had not been fixed to be heard. 

26.Leave to appeal the LT Judgment was granted by a single judge of this court on 20 February 2018.

Appeal

27.1.As noted earlier in this Judgment, this court adjourned the hearing sine die for the parties, together with Mr Li and Madam Zai the owners of A3, to undertake mediation. 

27.2.It would appear from the documents subsequently provided to this court (Bundle C) that an authorized person and architect Warren Pau had been instructed to come up with a proposal to comply with the Building Orders whilst retaining two separate units with independent access to the Landing. 

27.3.Mr Pau proposed changing the layout of A2 and A3⁵¹ which would have the effect of:

(a) providing a separate access to the Landing for A2 in the area of A3’s bathroom (ie Bathroom A in the Plan Flat);

(b) moving that bathroom to the area of one of A3’s existing bedrooms, resulting in that bedroom being left without a window, and that and another bedroom being reduced in size.

27.4.It can be seen from the documents that the owners of A3 do not agree to the proposal.  It is not for this court to comment on their position, as Mr Pau’s proposal has significant impact on the enjoyment of their premises, and the correspondence before the court is intentionally incomplete⁵².  

27.5.Given the failure of the mediation, this court can only deal with the appeal from the LT in the light of the up to date position, especially that the BA’s orders for the demolition of both the Partition Wall and the A2 Corridor now stand.

Discussion

28.I shall first deal with the submissions of Mr George Chu, Madam Law’s counsel at the hearing.  Thereafter he was replaced by Mr Derek J Y Chan, whose written submissions I will discuss later.

29.As far as Mr Chu’s submissions are concerned, there are no merits in the acquiescence, waiver and estoppel submissions. 

- As for acquiescence and waiver, the LT has found as a fact that the IO was not aware of the fact that the A2 Corridor was not approved until 2013⁵³, and it issued proceedings in the same year.  In any event, the construction and maintenance of a UBW which the BA has ordered to be removed (in contrast, say to displaying a sign at the entrance of a flat) is not of the type of breach of an DMC that an IO can acquiesce in or waive⁵⁴.

- As for promissory or proprietary estoppel, the alleged detriment is the payment of management fees and the service provided by Madam Law and her father as chairpersons of the IO previously. There is nothing in these submissions at all because there is no dispute that Madam Law’s mother and, after her death, Madam Law have always had title to 1 share in the building, and were thus liable to pay management fees.  As for serving as chairpersons of the IO, there is no evidence to suggest that their service as chairpersons was connected to the IO’s permission for the continued retention of the A2 Corridor.

30.As for his submission on mutual mistake, it was not pleaded in the Re-amended Notice of Opposition and he should not be allowed to raise it for the first time on appeal.  It is not known if he is alleging mistake of law or mistake of fact.  His submission that “the decisions below clearly failed to consider the contractual elements bind all co-owners who have affirmed the contract inter se (through adopting the DMC) even on the mutually mistaken belief that Flat A2 did not have any illegal entrance and all the subsequent acts that follow, feeding onto the defence of estoppel”⁵⁵ is, as put, incomprehensible, but appears to be part of the estoppel submission which has been discussed in the above paragraph.

31.As for his submission⁵⁶ on infringement of Article 25 of the Basic Law, again it was not pleaded in the Re-Amended Notice of Opposition.  In any event, one cannot see any equality issues at all, and this court must express its disapproval of counsel who casually drop references to the Basic Law into their submissions without any attempt to amplify or explain the Basic Law’s alleged application to the facts of the case.

32.As for his submission on conflict of interests on the part of the IO’s solicitors, it is correct that the IO’s solicitors had previously taken instructions from Madam Law on 5 November 2014, but it was on another issue involving the possibility of dissolving the management committee of the IO. This was proved by the minutes of the meeting which were adduced before the LT.  It was found by the LT that the retainer had ended, and that there was no breach of the duty of confidentiality of information⁵⁷.  For Mr Chu to simply say in his submissions⁵⁸ “self-evidently, [the IO’s] solicitors are in possession of information which is confidential and privy to [Madam Law]” is not enough, without having indicated to the LT what confidential information had been imparted to the solicitors which is relevant to the issues in the LT proceedings. 

33.1.I now come to the real crux of the appeal.  Mr Chu submitted that the LT’s Judgment was not “final”, in that the LT made two alternative orders (Orders 1 and 2), depending on the success or failure of Madam Law in the appeal against BO 885 before the BAT⁵⁹. 

33.2.I do not see any lack of finality in those orders per se.  The LT was not refusing to decide whether to grant the IO a mandatory injunction requiring Madam Law to demolish the A2 Corridor.  Indeed, the LT made it quite clear at §56 of the LT Judgment that it would itself not grant the injunction as that would cause hardship to Madam Law.

33.3.However, the LT was then persuaded to make the order at §58(1) that should Madam Law’s appeal against BO 885 fail, she should comply with the BO for demolition of the A2 Corridor, and reinstate the premises in accordance with the approved plans, i.e. “Order (1)”.  This is not a “lack of finality” issue, but an error in the exercise of discretion, as Mr Chan has rightly analyzed in his written submissions.   

34.1.It seems the LT considered that in the Order (1) scenario, the hardship would have been caused by the decision of the BAT, and not of the LT itself.  This was the LT’s view as stated in the Decision on Review⁶⁰ and the Decision refusing leave to appeal⁶¹.  However, Order (1) nevertheless was an order made by the LT, and that is the only order that is before this court on appeal now, for the BAT has dismissed Madam Law’s appeal against BO 885. 

34.2.With respect to the LT, given that it had found that the demolition of the A2 Corridor would cause such hardship to Madam Law that it militated against the exercise of the discretion to order a mandatory injunction⁶², Order (1) should not have been made.  Order (2) has now been overtaken by events (the BAT Judgment) and is not available as an alternative order. 

35.1.I have considered the fact that the up to date position is that BO 857, which requires the demolition of the Partition Wall, is now conclusive and binding on both Madam Law and the owners of A3.  However, it does not follow that the hardship that would be suffered by Madam Law by Order (1) would necessarily be eliminated or reduced. 

35.2.Even if the Partition Wall is demolished, by the Assignment of A3 the developer had given the owners of that unit the right to the exclusive use occupation and enjoyment of A3 “as shown and coloured Pink on the Plan annexed”.  Thus, the area coloured pink (even if it ended only at a notional line where the Partition Wall used to be) is, on the face of it, within the exclusive possession of Mr Li and Madam Zai. 

35.3.I emphasize the words “on the face of it” because Mr Chan has since raised the argument that Madam Law is entitled to a quasi-easement over part of A3 such that she would be able to access A2 from the Landing.  If he is correct, then the hardship of not having access to the Landing would be eliminated, and the IO would be entitled to the mandatory injunction it sought.  However, if he is not correct, the hardship issue remains.  This issue is a complex one, as can be seen from the brief discussion below.       

36.1.Mr Chan has relied on Chiu Shu-choi v Merrilong Dyeing Works Ltd⁶³ in which the Court of Appeal found, not on the basis of the law of easements, but under contract law on the true construction of the DMC (particularly a clause giving the 9^th floor owner a right to use the lift which only reached the 8^th floor⁶⁴), that he enjoyed an implied right of passage from the lift over part of the 8^th floor to enable access to the 9^th floor. 

36.2.Chiu v Merrilong is a simpler case than ours, because under the approved plans in that case, access to the 9^th floor from the 8^th floor (both intended for individual occupation) was originally unobstructed, whereas under the approved plans in our case, the intention was for simply one single unit with one means of access.

36.3.The holding in Chiu v Merrilong (that the law of easements does not apply to the Hong Kong system of various persons holding a piece of land as tenants in common, with occupation of individual units governed by a DMC) was approved by the Court of Final Appeal in Kung Ming Tak Tong Co Ltd v Park Solid Enterprises Ltd⁶⁵. The CFA held, in a general exposition of the law, that a DMC does not grant proprietary interests between owners, but is “a secondary document regulating the reciprocal rights of the co-owners to the enjoyment of the building by means of mutual covenants”⁶⁶. A DMC is a “separate contractual undertaking by every other co-owner not to exercise the rights of occupation and enjoyment which he would otherwise be able to do as co-owner over units other than his own”⁶⁷. 

36.4.In Kung Ming Tak Tong it was explained that the term “quasi-easement” could be understood in two different senses:

(a) contractual quasi-easements:

such as express “rights of way” or implied rights of passage which arose from the construction of the DMC, as in Chiu v Merrilong⁶⁸, and

(b) Wheeldon v Burrows⁶⁹ quasi-easements:

This may arise where a landowner owns two portions of land, and habitually exercises a right to pass through one portion (portion X) to get to the other (portion Y).  If the land is then divided up for different occupation, then that right (the “quasi- easement”) becomes a full easement which is implied into a grant of portion Y if it is obviously necessary for the reasonable enjoyment of portion Y⁷⁰.  This is founded on the principle against derogation from grant⁷¹.

36.5.Insofar as Mr Chan is relying on the (a) type of quasi-easements, he quoted Clause 2 of the DMC, but it is difficult to see how A3 can be regarded as included in “the entrance hall, lifts, staircases and landings in the said buildings and such of the passages therein as are not included in any part of the said building allotted to any party” (emphasis added) when A3 had been assigned before A2.  

36.6.Insofar as Mr Chan is relying on the (b) type of quasi-easements, one would have to postulate a situation where the developer had habitually exercised a right to pass through A3 to get to A2.  However, there does not appear to be such evidence on the papers before this court⁷². 

36.7.In any event, it is not clear which type of quasi-easement Mr Chan is relying on.  All one can say is that whichever type he is relying on, full argument on the law and its applicability to the facts of the present case is necessary in fairness to all parties as well as (and indeed, in particular) the owners of A3.

Disposal of the appeal

37.1.As for the disposal of the appeal, it can be seen above that the mandatory injunction sought by the IO should not be enforced pending a determination whether Madam Law has any rights in law to access A2 through A3.  Obviously the latter issue is of great significance to Madam Law of the one part, and the owners of A3 Mr Li and Madam Zai of the other.  Although Mr Li has proffered various views in open correspondence, he is not a party to this appeal and no submissions made by any legal representatives representing him have been included in Bundle C.

37.2.In any event, the owners of A2 and A3 would have to sort out, sooner or later, their respective rights and obligations regarding occupation of their premises when the Partition Wall is demolished, since BO 857 is now final and binding on them both.  This court has suggested at the hearing that the least costly way may be for a sale of A2 and A3 to be held after the demolition of the Partition Wall and the A2 Corridor and the reversion of the layout to that of the Plan Flat, but of course that would require the agreement of both owners.  

- The IO’s suggestions for disposal of the appeal

38.1.Coming back to the appeal, the IO’s primary suggestion⁷³ is that this appeal be disposed of by varying Order (1) by imposing a stay until Madam Law has “procured a new access etc”.  However, it seems to me that that would leave the appeal too open-ended.  

38.2.As for the IO’s alternative suggestion⁷⁴ that this court makes, in lieu of Order (1), a declaration that Madam Law is not entitled to occupy the A2 Corridor, with “leave to apply for an injunction if the need arises”, it would not be right for this court to make such a declaration when the hardship point has not yet been finally decided (as it depends on the determination of the “access issue” defined in the paragraph below).  Further the reference to a fresh application for an injunction ignores the fact that the LT has already determined its right to an injunction, with the only error being the making of Order (1) without regard to its own finding of the hardship to Madam Law by being deprived of access to A2.

- Madam Law’s suggestions for disposal of the appeal

39.1.Madam Law’s suggestion is for the matter to be remitted to the LT or the District Court, where she will seek leave to join the owners of A3 as a party, and to bring a counterclaim against them and the IO, for a declaration that on the execution of the BOs, she and her successors will be entitled to pass through the A3 entrance.

39.2.First it seems to me that such proceedings would be in the nature of a new claim against the owners of A3, rather than a counterclaim in the LT proceedings. After all, as noted earlier, the Partition Wall in not located within a common part, and apparently it is not per se a breach of the DMC, and therefore not within the governance of the IO which commenced the LT proceedings. Secondly, there is no dispute between the IO and the owners of A3 as to access from the Landing to A3. Whatever other persons the owners of A3 allow (or are compelled to allow) to use that access is not a matter for the IO.

39.3.Having said that, the IO should be made a party to the new proceedings so that it would be bound by the finding of Madam Law’s entitlement (or otherwise) to pass through A3 to access A2, for that impacts on whether the stay of Order (1) should be lifted. One can understand the IO’s wish to save costs, and it will no doubt be advised by its legal advisers as to how best to save costs during the proceedings.

39.4However, the mere fact that the IO should be joined as a defendant (so as to be bound by the result) does not mean that the new proceedings would fall within the jurisdiction of the LT, and we have not been referred to any authorities to that effect.  Section 36(a) District Court Ordinance Cap.336 provides that that court has jurisdiction to hear and determine any action which would otherwise be within the jurisdiction of the court and in which the title to an interest comes into question if for an easement …, the rateable value, or the annual value, whichever is the less, of the land over which the easement is claimed does not exceed $320,000.  Although “quasi-easement” is not specified, it would not be straining the language of the statute to include it within the term “easement”.

Order

40.It seems to me having considered the above, that the fairest and most comprehensive way of dealing with the problems raised in this case is to make the following orders:

(1) upon Madam Law undertaking through counsel to commence within 28 days new proceedings against the owners of A3 (and with the IO as a party) to determine the issue whether the owners of A2 have a right to access A2 through any part of A3 (“the access issue”), Order (1) be stayed;

(2) if it is determined that there is a right of access, then the stay of Order (1) would be lifted and the appeal would be dismissed;

(3) if it is determined that there is no right of access, then the appeal would be allowed;

(4) liberty to apply;

(5) costs of the appeal are reserved.

(I would add that if the owners of A2 and A3 are unable to agree on anticipated issues regarding physical occupation of their individual units consequent to the demolition of the Partition Wall under BO857, they would be well advised, in the interests of costs and finality, to have that issue determined by the same forum).

Hon Chu JA:

41.I agree with the judgment of Lam VP and Yuen JA and the orders proposed in paragraph 40.

Mr George Chu, instructed by Damien Shea & Co. and Mr Derek J Y Chan, instructed by Foo & Li, for the Appellant

Mr David Tsang, instructed by S.K. Lam, Alfred Chan & Co., for the Respondent

Annex