Donora Co Ltd v. The Incorporated Owners of Tsuen Kam Centre
Read the full judgment text of LDBM 176/2018 on BabelCite. This Lands Tribunal judgment was delivered on 24 May 2021.
1. By Summons dated 19 April 2021 (“the Summons”), the respondent seeks leave to appeal against my judgment dated 22 March 2021 (“the Judgment”) to the Court of Appeal.
Cited by 1 case · Cites 10 cases
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LDBM 176/2018 [2021] HKLdT 49 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION BUILDING MANAGEMENT APPLICATION NO 176 OF 2018 _________________ BETWEEN
_________________ Before: His Honour Judge M WONG, Presiding Officer of the Lands Tribunal Date of Last Written Submission: 24 May 2021 Date of Handing Down of Decision: 6 July 2021 _________________ DECISION _________________ Background 1.By Summons dated 19 April 2021 (“the Summons”), the respondent seeks leave to appeal against my judgment dated 22 March 2021 (“the Judgment”) to the Court of Appeal. 2.The parties agreed that the Summons could be dealt with on paper. Hence, on 21 April 2021, I ordered that the Summons be dealt with on paper and the parties to file and serve their respective written submissions accordingly. 3.In gist, the respondent submits that the Judgment, which involves construction and/or interpretation of the DMC pertinent to the question of whether the external walls of the Building are common parts or areas of the Building, is erroneous in point of law. 4.Section 11(2) of the Lands Tribunal Ordinance, Cap 17 (“the Ordinance”) stipulates that “any party to the proceedings before the Tribunal may appeal to the Court of Appeal against a judgment, order or decision of the Tribunal on the ground that such judgment, order or decision is erroneous in point of law”. Thus, the respondent must first establish that the Judgment is erroneous in points of law before leave to appeal can be granted. 5.The respondent relies on 2 grounds of appeal as set out in the Summons (which will be discussed further below) and contends that both grounds involve questions of construction and are therefore questions of law (see Maeda Kensetsu Kogyo Kabushiki Kaisha also known as Maeda Corporation and Another v Bauer Hong Kong Ltd [2020] HKCA 768; and Swire Properties Ltd & Others v Secretary for Justice (2003) 6 HKCFAR 236). 6.However, it does not mean that the Tribunal must grant leave to appeal whenever a point of law is raised. Section 11AA(6) of the Ordinance stipulates that leave to appeal shall not be granted unless the Tribunal is satisfied that: (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal should be heard. 7.In SMSE v KL [2009] 4 HKLRD 125, the Court of Appeal held that reasonable prospects of success involved the notion that the prospects of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable”. The respondent contends that the 2 grounds of appeal do have reasonable prospects of success. 8.Further and/or alternatively, the respondent also contends that it is in the interests of justice for the appeal to be heard, as the Court of Appeal would then be able to consider the respondent’s arguments advanced in respect of Kong Wai Hsien and Fung Lai Sheung v Tai Wai Glamour Garden (IO) [2019] 5 HKLRD 672 insofar as it is binding on the Tribunal. 9.I shall therefore deal with the 2 grounds of appeal as discussed below. Ground 1 10.The first ground raised by the respondent is that I have erred in law in the construction and/or interpretation of the DMC in holding that the external walls of the Building are common parts or areas of the Building and are not for the exclusive use, occupation and/or enjoyment of the applicant, such that the applicant should not be solely responsible for the repair and maintenance of the external walls of the Building or to bear the costs thereof. 11.The respondent contends that I have failed to correctly understand and accept the respondent’s submissions, in reliance on the well-established principle of law, that the construction and/or interpretation of the DMC should be made against the relevant background and context, including the First Assignment and/or the Subsequent Assignment, which provide “further aid to construction” (see Jumbo King Ltd v Faithful Properties Ltd & Others (1999) 2 HKCFAR 279, Fully Profit (Asia) Ltd v Secretary for Justice (2013) 16 HKCFAR 351 and New Mercury Holding Corporation v Secretary for Justice, CACV 73/2013, unreported and dated 15 April 2014), in that the exceptions and reservations clause in the First Assignment, reserving to the applicant “the right to the exclusive use, occupation and enjoyment” of the external walls (similarly found in the Subsequent Assignment), is consistent with Section I, Clause 1 of the DMC. 12.The respondent submits that I should have accepted that, on a proper analysis of the DMC, the applicant has specified or designated the external walls to be for its exclusive use, occupation or enjoyment in that:-
13.The respondent submits that my reasoning for refusing the respondent’s submissions aforesaid is flawed and erroneous in point of law for the reasons stipulated below. 14.First of all, Section I, Clause 2 of the DMC provides no support to my conclusion that the external walls are common parts of the Building. None of “the Building Common Areas”, “the Commercial Common Areas”, “the Domestic Blocks Common Areas”, “the Car Port Common Areas”, “the Building Common Facilities”, “the Car Port Common Facilities”, “the Commercial Areas and Facilities” and “Domestic Blocks Common Areas and Facilities” contains, includes or refers to the external walls at all. The “words” “expressly covering areas which have not been specifically reserved to the developer (the applicant) or any particular owner, or intended for common use”, relied upon by me, begs the question whether the external walls are common parts in the first place. My purported reliance on the said words to provide answer to the very question under determination is circular and leads to nowhere. 15.Secondly, the rights reserved by the applicant over the external walls are set out under Section I, Clause 1 of the DMC to be “full and exclusive”, and are not “for specific limited purposes”. The rights under Section I, Clauses 9(d) & 9(e) of the DMC only form part of such full and exclusive rights of the applicant. The respondent has not “presupposed” such full and exclusive rights of the applicant. 16.Thirdly, in respect of the Court of Appeal’s decision in Kong Wai Hsien (supra), the respondent submits that:-
17.Fourthly, with respect to the drains and pipes fixed on the external walls, I have overlooked that there is no evidence to show or prove which part of them is for whose use. In any event, other co-owners are granted the right to derive support from the external walls – for the purpose of fixing these drains and pipes – by the applicant under Section II of the DMC by way of quasi-easements. 18.Fifthly, Section I, Clauses 1 & 2 of the DMC plainly override the definitions in the Predecessor Ordinance relied on by me. 19.Sixthly, the point that other co-owners’ use of the external walls under Section IV(A), Clauses 19, 20, 21, 26 and 27 of the DMC does not require the applicant’s consent demonstrates my failure to consider or understand that where the applicant chooses to grant rights to the co-owners, by way of quasi-easements, the applicant as grantor cannot derogate from such grant without justification. 20.Further, in relation to such uses by other co-owners, the Manager is empowered under the DMC to regulate from a building management perspective (see Section V(A), Clauses 1 & 2 & Section V(B)). 21.Lastly, when considering Section I, Clause 6 of the DMC, I should have recognized and applied the Court of Final Appeal’s ruling in Jumbo King Ltd (supra) at 290A-C. 22.Despite the respondent’s submissions as aforesaid, I am not convinced that there is a reasonable prospect of success for this first ground of appeal. The respondent is in fact repeating the points which have already been argued before me and have been considered and rejected by me. 23.The fundamental flaw of the respondent’s arguments is that the respondent has not treated the statutory definition of “common parts” under the BMO or the Predecessor Ordinance, which specified common parts to include external walls, as the starting point. The burden is on the respondent to demonstrate that the external walls of the Building are for the exclusive use, occupation or enjoyment of the applicant by pointing to a specification or designation in the DMC. 24.I have already scrutinised the provisions in the DMC and concluded that on their proper construction, the applicant does not have exclusive use, occupation or enjoyment of the external walls of the Building. I have also analysed the respondent’s arguments based on the First Assignment and the Subsequent Assignment and held that they do not assist the respondent’s case. Thus, it is not a case that I have failed to consider the principle of law that the construction and/or interpretation of the DMC should be made against the relevant background and context including the First Assignment and/or the Subsequent Assignment. 25.The reasons put forward by the respondent as to why my reasoning is erroneous are not reasonably arguable as discussed below. 26.Firstly, it is difficult to see why the definitional section in the DMC on the various “Common Areas” or “Common Facilities” is circular. It is just obvious that the external walls of the Building fall within such definitions, as the ordinary function of external walls must be for common use and benefit of co-owners of the Building. Also, the treatment of external walls as common parts in the Predecessor Ordinance formed part of the background matrix in construing the DMC. 27.Secondly, it is clear that Section I, Clause 1 of the DMC cannot be read in isolation. The next clause in the DMC (ie Section I, Clause 2) immediately goes on to set out that “Building Common Areas”, “Commercial Building Common Areas”, “Domestic Blocks Common Areas” and “Car Port Common Areas” shall be deemed to be common areas for the benefit of the relevant owners of such areas. The two clauses (and indeed the whole DMC) must be read together. Thus, if the external walls of the Building fall within the definition of these expressions, Section I, Clause 1 plainly does not have the effect of reserving to the applicant exclusive rights over the external walls. 28.The fact that the applicant was not intended to have exclusive rights over the external walls of the Building is squarely supported by Section IV(A), Clauses 19, 20, 21, 26 and 27 of the DMC, which confer a wide range of rights to the co-owners of the Buildings, in particular the right to put aerials and install air-conditioning units or plants or fixture on the external walls, with the approval of Hong Yip but without any need to seek the applicant’s consent. 29.Thirdly, in relation to the attempt to distinguish or depart from Kong Wai Hsien (supra), there is simply no basis to make the distinction because of the different covenants in that case, as it is irrelevant to the legal principle established in Kong Wai Hsien (supra). The legal principle is that when the deed of mutual covenant only accords limited and specific rights (ie the rights conferred in Section I, Clauses 9(d) and 9(e) in the present case) to the developer, such specific rights did not comprise all the rights which would amount to exclusive possession or exclusive right to use, occupy or enjoy the external walls. There can be other rights in relation to the use and enjoyment of the external walls which are not exclusively reserved to the developer. 30.The case of Uniland (supra) was a first instance decision decided before the decisions by the Court of Appeal (including Incorporated Owners of Goa Building v Wui Tat Co Ltd [2004] 1 HKC 348, Incorporated Owners of Shatin New Town v Yeung Kui [2010] 2 HKC 241 and Kong Wai Hsien (supra)). Its facts are wholly different, as Clause 1(i) of the deed of mutual covenants in that case unambiguously provided that the plaintiff has the full and exclusive right and privilege to hold, use, occupy and enjoy the outer wall and flat roof insofar as the same have not been assigned to any other owners, subject to the easements and rights set out in the Second Schedule. 31.The quasi-easement argument based on Section II(A), Clause 2, Section II(B), Clause 3 and Section II(C), Clause 2 of the DMC is fundamentally flawed as it pre-supposes that the applicant has full and exclusive right to use occupy and enjoy the external walls. I have already given my full reasoning in rejecting this argument in the Judgment. In short, there is no basis to assume from the mere use of the expression “easement” (as part of the expression “easements, rights and privileges”) in these clauses that there must have been a servient owner (being the applicant) who has exclusive right to the relevant part of the Building including the external walls. 32.Fourthly, it is just common sense that the drains and pipes fixed on the external walls of the Building are for common use and benefit of all the co-owners. It is difficult to see why there should be specific evidence to show or prove which part of them is for whose use. The suggestion that the right to fix and use these drains and pipes on the external walls derives from the co-owner’s right to derive support under Section II of the DMC is clearly wrong, as the two rights are of completely different natures. 33.Fifthly, as discussed in paragraphs 26-28 above, it is wrong for the respondent to suggest that Section I, Clauses 1 and 2 of the DMC override the definitions in the Predecessor Ordinance. These clauses on their proper construction do not rebut the presumption in the Predecessor Ordinance at all. 34.Sixthly, the respondent’s attempt to undermine the significance of Section IV(A), Clauses 19, 20, 21, 26 and 27 by arguing that the wide range of rights conferred to the co-owners to use the external walls without the applicant’s consent in these clauses was granted by the applicant to the co-owners by way of quasi-easements is an utterly baseless contention. Nothing at all in Section IV(A) Clauses 19, 20, 21, 26 and 27 suggests that the co-owners’ rights in relation to the external walls were granted by the applicant as grantor (or servient owner) by way of quasi-easements. 35.The fact that in relation to the uses in Section IV(A) Clauses 19, 20, 21, 26 and 27, Hong Yip as the Manager has to properly exercise its discretion in determining whether to permit them shows that the applicant has no power to control the uses by the co-owners and the applicant does not have the exclusive possession and the exclusive right to use and enjoy the external walls. This is supported by the Court of Appeal’s decision in Incorporated Owners of Hong Leong Industrial Complex v HL Resources Ltd [2010] 4 HKC 463 as discussed in the Judgment, and the respondent raises no challenge on this point. 36.Seventhly, the decision in Jumbo King Ltd (supra) only suggests that when a developer had the right of exclusive possession to certain parts of a building (to which no undivided shares were allocated), it could pass such right to subsequent purchasers of undivided shares. However, in the present case, the feature that the external walls (to which no undivided shares were allocated) cannot be assigned independently according to Section I Clause 6 is much more consistent with (and points to) the conclusion that they are common parts. It is difficult to see how Jumbo King Ltd (supra) could assist the respondent. 37.By reasons aforesaid, I am of the view that Ground 1 has no reasonable prospect of success. Ground 2 38.On the second ground, the respondent submits that I have erred in law in concluding, both contrary to facts and/or without evidence, that such walls should be notionally divided into 4 parts and the costs of the repair and maintenance of the Domestic Walls, the Commercial Walls, the Car Port Walls and the Building Common Walls should be charged to the relevant account maintained for each category. The reasons for this contention are as stated below. 39.Firstly, the Building is a mixed-use development comprising Blocks 1 and 2, erected on the Podium, which in turn comprises the Basement, Ground, 1st, 2nd, and 3rd Floors, with Shops A to D on the Ground Floor, Car Parks on the 1st Floor and the whole of the 2nd Floor. The respondent submits that in reality, the external walls of the Building form one composite whole, and it should be properly viewed and considered by me as such. 40.Secondly, my ruling that the external walls “can be” sub-divided into 4 parts has no evidential basis or support. My reliance on the “physical configuration” of the Building is unsubstantiated, where neither party – particularly not the applicant – has adduced any expert evidence in respect of that subject matter, and is thus highly questionable. 41.As a matter of fact, it is also indisputable that the so-called “sub-division” has only been made by Hong Yip, and has been done so by Hong Yip entirely as an “administrative and budgetary treatment”. Such treatment of the external walls by Hong Yip is, on record, subject to dispute by the respondent. 42.Thirdly, the external walls are held by me to be common parts applying Kong Wai Hsien (supra). The respondent submits that the use of external walls as “external framework” held by the Court of Appeal in that case should not be wrongly understood by me to confine, narrowly or restrictively, to the use of the external walls for physical or structural support only. I have disregarded that the external walls in the present case, in providing the external framework of the Building, provide also the external appearance or outlook of the entire Building. By parity of reasoning, the concept of “peaceful enjoyment” of the Building is not limited to enjoyment of the external walls for physical or structural support only. All these matters, when properly and sufficiently taken into account, show or support that the decision to sub-divide the external walls into different parts is artificial and wrong. 43.Fourthly, if and to the extent that the external walls are common parts of the Building, my ruling that such walls should be “sub-divided” is contrary to the trite principle of law that the proprietary right of a co-owner in a multi-storey building is the right to an undivided share of the building, which entitles him to exert right of possession over each and every part of the building, in common with all his co-owners (see Kung Ming Tak Tong (supra)). 44.As provided by Section I, Clause 2(a) of the DMC, the Building Common Areas shall be deemed to be common areas “for the benefit of the Owners of the Building which areas, may, subject to the provisions hereof, be used by each Owner in common with all other Owners and occupiers of the Building or any part thereof”. 45.The external walls give and determine the external appearance or outlook of the whole Building. Other than Hong Yip’s own “sub-division” of the external walls as a matter of “administrative and budgetary treatment”, the “Domestic Walls”, “Commercial Walls”, “Car Port Walls” and “Building Common Walls” simply do not exist. 46.The external walls, being the façade of the whole Building, can hardly be described or considered as the “Commercial Common Areas”, “Domestic Blocks Common Areas” and “Car Port Common Areas”, which areas are for the benefit of the Owners of the [Commercial Development/Domestic Blocks/Car Ports] to be used by “each Owner [of the Commercial Development/Domestic Blocks/Car Port] in common with all other Owners and occupiers of the [Commercial Development/Domestic Blocks/Car Port]” only. 47.Lastly, my notional sub-division of the external walls has not taken into consideration the following relevant and practical matters in the present case:-
48.However, the reason why I held that the external walls of the Building can be further sub-divided into Domestic Common Areas and Facilities, Commercial Common Areas and Facilities, Car Port Common Areas/Facilities and Building Common Areas is because the Domestic Walls, the Commercial Walls, the Car Port Walls were physically separated and intended for the common use and benefit of the Domestic Blocks, the Commercial Development and the Car Port respectively. The remaining parts of the external walls (Building Common Walls) would fall under Building Common Areas/Facilities. As such, applying section 34H(1) of the BMO, the costs of their repair and maintenance should be charged to the relevant account maintained for each category of common areas/facilities. 49.The first and second points made by the respondent are in essence that the Building is a composite development, and there is no evidential basis to support the sub-division of the external walls of the Building into 4 parts. However, I had the benefit of the photos of the Building. It is clear that the Domestic Walls do not support the Commercial Development beneath them, and it is not obvious how the Commercial Walls or Car Port Walls could provide support to the Domestic Blocks given the physical configuration of the Building. This is a finding of fact against which the respondent cannot appeal. 50.The sub-division of the external walls has nothing to do with the administrative and budgetary treatment made by Hong Yip. The sub-division is justified from the fact that different parts of the external walls were intended for the common use and benefit of different parts of the Building (i.e. the Domestic Blocks, the Commercial Development, the Car Port and the Building Common Areas/Facilities), hence they fall within the definition of Domestic Common Areas and Facilities, Commercial Common Areas and Facilities, Car Port Common Areas/Facilities and Building Common Areas respectively. 51.The third point of the respondent suggests that since the external walls of the Building provide the external appearance or outlook of the entire Building, and also allow the co-owners to have peaceful enjoyment of the Building, the external walls should not be sub-divided into different categories. This cannot be correct in view of the express provision of the 4 types of common areas and common facilities in the DMC. A construction must be consistent with their context and purpose, ie there must be some areas which fall under the specific categories of Domestic, Commercial and Car Port. 52.The fourth point of the respondent is simply not right. The principle that a co-owner holding an undivided share is entitled to have right of possession over each and every part of the Building is of course subject to the modification under the DMC. The sub-division of the external walls into different categories of common parts defined under the DMC does not contravene the principle. 53.The fifth point of the respondent is devoid of merit. The so-called “practical considerations” are plainly irrelevant to whether the external walls of the Building could be sub-divided into 4 different categories under the DMC. In any event, SHKP/its subsidiary and/or associate company have no interest in the Domestic Blocks and the maintenance or renovation of the Domestic Walls. No evidence was adduced at the trial to make good the allegation that maintaining the external walls as a whole (including the Domestic Walls) would help highlight the advertisements and decoration posted by the applicant on the external walls of the Commercial Development. There is no factual evidence (or indeed any factual allegation properly raised at the trial) which can justify this conclusion. The respondent cannot mount a factual appeal and ask the Court of Appeal to find such a fact in these circumstances. 54.In the premises, Ground 2 has also no reasonable prospect of success. Interests of justice 55.Even though I have concluded that the respondent has no reasonable prospect of success in the intended appeal as aforesaid, I still need to consider whether there is some other reason in the interests of justice to grant leave to appeal. 56.In this regard, I agree that the respondent should be allowed to present their full arguments to the Court of Appeal in relation to the legal principles derived from Kong Wai Hsien (supra) and Uniland (supra). In particular, Kong Wai Hsien (supra) has a very far-reaching impact on many buildings, as it is almost inevitable that external walls of any building used as external framework and for support would be classified as common parts and not otherwise. 57.As Kong Wai Hsien (supra) is a Court of Appeal decision and is binding on me, it is certainly in the interests of justice that leave should be granted to the respondent to properly advance all these legal arguments further before the Court of Appeal. As held in Chiu Kwai Ping v Yip, Tse & Tang (A Firm) [2019] HKCFI 2592, “the question of how the relevant case law should be properly understood and applied should be placed before the appellate court”. 58.Thus, in the interests of justice, I will grant leave to the respondent to appeal against the Judgment. Costs 59.By a settlement agreement dated 17 July 2018 (“the Settlement Agreement”), the parties have agreed not to seek costs against each other in these proceedings. However, the parties are in disagreement as to whether the Settlement Agreement covers the costs issue in relation to the present application for leave to appeal. 60.It seems to me that Clause 5 of the Settlement Agreement covers only the proceedings in the Lands Tribunal. In particular, Clause 5.2 stipulates that the applicant and the respondent “agree to bear their own costs and not to seek costs against each other in the legal proceedings, irrespective of the outcome of the above application at the Tribunal”. The words “in the legal proceedings” should be referring to the application to the Lands Tribunal as stipulated in Clause 5.1. 61.Thus, it is my view that the agreement on costs does not cover the present application for leave to appeal. 62.Nevertheless, as I am giving leave to the respondent to appeal, the costs of the leave application should be in the cause of the appeal. Conclusion 63.For the above reasons, I order as follows:-
Mr Bernard MAN, SC and Mr James MAN, instructed by Mayer Brown, for the applicant Ms Teresa WU and Mr Tommy CHEUNG, instructed by Chan, Wong & Lam, for the respondent |
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