Spm Ltd v. Appeal Tribunal (Buildings Ordinance)
Read the full judgment text of HCAL 1574/2021 on BabelCite. This High Court CFI judgment was delivered on 19 April 2022.
1. The question arising in this case is whether the external walls (“External Walls”) of the 5/F to 30/F of The Sun’s Group Centre in Gloucester Road (“Building”) are “common parts” of the Building.
Cited by 1 case · Cites 7 cases
|
HCAL 1574/2021 [2022] HKCFI 1105 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 1574 OF 2021 ________________________ BETWEEN
________________________ Before: Hon Coleman J in Court Date of Hearing: 13 April 2022 Date of Judgment: 19 April 2022 ________________________ J U D G M E N T ________________________ A. Introduction 1.The question arising in this case is whether the external walls (“External Walls”) of the 5/F to 30/F of The Sun’s Group Centre in Gloucester Road (“Building”) are “common parts” of the Building. 2.The question arises because a building order dated 29 June 2018 (“Building Order”) issued by the Building Authority requires the owners of the Building as a collective whole to carry out remedial works to the External Walls. The direction to “All Owners” to carry out the works was given on the basis that the External Walls constitute a common part of the Building. 3.No issue is taken as to the necessity or requirement for carrying out the ordered remedial works. The issue taken is, in practical terms, as to who should do them and pay for them. That is because the Applicant (“SPM”), which is the manager of the Building under the Deed of Mutual Covenant (“DMC”) argues that the DMC has allocated the exclusive right to use and possess the External Walls to its registered owner, currently Wideland International Ltd (“Wideland”), so that only Wideland is liable to carry out the repairs. 4.The Building Order was challenged by SPM’s appeal to the Appeal Tribunal (Buildings Ordinance) (“Tribunal”). By its written Determination dated 19 August 2021, the Tribunal dismissed SPM’s appeal. The Tribunal held that the External Walls formed part of the common parts of the Building, meaning the obligation to repair would fall on all owners of the Building, and not just Wideland. 5.Because an error of law made by the Tribunal is amenable to judicial review, SPM has applied by Form 86 dated 15 November 2021 for leave to apply for judicial review, to seek (1) an order to quash the Determination, (2) a declaration that the External Walls do not form part of the common parts of the Building, and (3) consequential relief. 6.On 18 November 2021, I directed that there should be a ‘rolled-up’ hearing of (1) the application for leave to apply for judicial review and (2) the substantive application for judicial review. I also gave certain procedural directions to bring the matter towards the hearing. 7.The ‘rolled-up’ hearing took place on 13 April 2022. SPM was represented by Mr Martin Ho of Counsel, and the Building Authority was represented by Ms Jess Chan, Senior Government Counsel. Both of them had filed succinct skeleton submissions in advance of the hearing. As usual in such proceedings, the Tribunal has not appeared. 8.At the end of the hearing, I reserved my decision. This is my Judgment. B. Factual Background 9.The question for resolution in these proceedings is a question of law, focused on the proper construction of the DMC. Therefore, much of the factual background merely sets the scene. It is common ground between Mr Ho and Ms Chan that there is no need to consider any pre-contractual documents or negotiations in aid of the proper construction of the DMC. I agree. 10.The Building is a 29-story commercial building constructed in 1996 (though there are no floors numbered 14 or 24). The developer and first owner was Fair Capital Properties Ltd (“Fair Capital”). The Building’s former name was Oriental Centre, but it has since been changed to The Sun’s Group Centre. 11.SPM was previously named Pearl Property Management Ltd. At all material times, SPM has been the appointed manager of the Building under the DMC. SPM is appointed the lawful attorney for and on behalf of all owners of the Building, to do all such acts and things as may be necessary or requisite for the management of the Building. 12.Under the DMC, the Building is notionally divided into 234,435 equal undivided shares (each a “Share”). The Shares have been allocated in the manner as set out in Part 1 of the First Schedule to the DMC, as follows:
13.The 1 Share allocated to the External Walls has had three registered legal owners as shown on instruments registered with the Land Registry. The relevant address is shown on the Land Register as:
14.The first registered legal owner of the External Walls was Fair Capital. The second was Proper Investor Group Limited (“Proper Invest”). The third was and remains Wideland. The transfers of legal ownership came about as follows. 15.By an assignment dated 30 March 2004, Fair Capital assigned to Proper Invest 5,486 Shares in the Building together with “the exclusive right and privilege to hold use occupy and enjoy”:
16.In other words, what was assigned by Fair Capital to Proper Invest was the exclusive right to the use and possession of the External Walls (1 Share), the Roof and Upper Roof (4,085 Shares), and the Flat Roof on the 4/F of the Building (1,400 Shares). 17.By further assignment dated 30 November 2010, Proper Invest assigned to Wideland 5,626 Shares in the Building, together with “the sole and exclusive right and privilege to hold use occupy and enjoy” Car Parking Space No. 28 (140 Shares) as well as the External Walls, the Roof and Upper Roof, and the Flat Roof on the 4/F of the Building. 18.On 26 May 2016, the Buildings Department issued a letter to the owner of the 5/F to 30/F External Walls, indicating the intention to issue a building order requiring the owner to carry out certain remedial works. However, on 18 July 2017, a building order was issued to “The Owner of the Common Area [of the Building]” requiring it to carry out the remedial works. 19.After solicitors for SPM invited the Building Authority to reconsider the position, in light of the fact that Wideland was the registered legal owner of the External Walls, that building order was withdrawn on 14 June 2018. Then, on 29 June 2018, the Building Order was issued against “All Owners of [the Building]”. 20.On 16 July 2018, SPM filed its appeal with the Tribunal. The Tribunal held a ‘preliminary hearing’ on 7 June 2021 to determine the legal question as to whether the 5/F to 30/F External Walls form part of the common parts of the Building, which would be determinative and dispositive of the appeal. 21.The Tribunal’s Determination dated 19 August 2021 found that the 5/F to 30/F External Walls are part of the common parts of the Building. As that question is a question of law argued afresh in these proceedings, it is not necessary to set out the Tribunal’s reasoning. In any event, Ms Chan essentially repeats her argument as found favour with the Tribunal. C. The Starting Point 22.It is common ground between Mr Ho and Ms Chan that the starting point of the consideration is section 2 of the Building Management Ordinance Cap 344 (“BMO”). That section provides an exhaustive definition of “common parts” as follows:
23.Schedule 1 includes Item 1 “external walls”. 24.Therefore, as is also common ground, unless an instrument registered in the Land Registry has “specified” or “designated” the External Walls as being for the exclusive use, occupation or enjoyment of an owner, the External Walls should be regarded as common parts of the Building under section 2 of the BMO. 25.The relevant instrument to be considered and construed in this case is the DMC. 26.The proper approach to the question of construction is well-established, and does not require lengthy reference to authorities. 27.It is an objective exercise by which the court seeks to find the intention of the parties, by identifying the meaning of the relevant words in their documentary, factual and commercial context in light of (a) their natural meaning, (b) the overall purpose of the document, (c) other relevant provisions of the document, (d) facts assumed or known to the parties at the time of the execution of the document, and (e) common sense. 28.If there are rival interpretations, it is necessary to decide what seems to be the natural meaning of the relevant words, and then consider whether there is anything in the document or the surrounding circumstances when it was made which calls that interpretation into question. But that is not to suggest any rigid order of consideration, because the construction exercise is an iterative and unitary process. 29.As regards deeds of mutual covenant, like the DMC in this case, the legal purposes of them are also well-established: see, for example, Kong Wai Hsien v Tai Wai Glamour Garden [2019] 5 HKLRD 672 at §30. Co-owners in a multi-storey building are tenants in common of the land where the building is situated. Each of them is prima facie entitled to exercise rights of possession over every part of the building in common with the other co-owners. However, this ‘unity of possession’ is modified by a deed of mutual covenant, under which – as a matter of contract among the co-owners – individual co-owners are given the right to exclusive use occupation and enjoyment of certain parts of the building (ordinarily, the individual units in that building). Common parts or common areas are merely convenient labels to describe any part or area of the building in respect of which no individual owner has been given the right to such exclusive use occupation and enjoyment. 30.I would also add that though the construction exercise involves the application of common sense, and/or commercial sense, that does not give rise to abstract discussions. For example, in this case, there is no benefit in considering whether external walls of buildings should or should not in general be thought of as common parts of the building. Any individual exercise of construction or interpretation will turn on the particular document or documents being construed or interpreted in the individual case. 31.As already stated, in this case the relevant document is the DMC. Unless the DMC includes an express or implied term conferring the right to exclusive use occupation and enjoyment of the External Walls to any particular owner, the External Walls are part of the common parts of the building, by operation of section 2 of the BMO. D. The DMC 32.The DMC is broken down into sections. The sections relevant for present purposes are as follows: Section A ‘Parties and Recitals’; Section B ‘Definitions’; Section C ‘Use of Common Areas’; and Section D ‘Rights of Owners’. As with Mr Ho and Ms Chan, I shall refer to the clauses in those sections as, for example, clause D1(ii). 33.In Section A, the purpose of the allocation of the Shares and the purpose of the Deed as a whole are identified. The purposes of the DMC include that of defining and regulating the rights, interests and obligations of the parties and all subsequent owners in respect of the Land and Development. 34.Section B has the following material definitions, in the alphabetical order in which they appear amongst all other definitions:
35.Section C provides that each of the six component elements of the Common Areas shall be deemed to be the common areas and facilities for the benefit of the owners in the various parts of the building
36.Section D deals materially with ‘Rights of Owners’ as follows:
37.Amongst the clauses in Section D, Mr Ho places emphasis on clause D1(i), which he says has the effect of identifying – at least prima facie – that the allocation of a Share to a part of the Building suggests that the owner of that part of the Building would enjoy the full and exclusive right to use and possess it. 38.Ms Chan places more emphasis on clause D2(ii), because it only expressly refers to the external walls (not capitalised) of the G/F (except the shopfronts), 1/F-4/F of the Development, namely the external walls of the Garage as identified in Section B, and the focus is on limited and conditional rights relating to advertising. E. The Competing Arguments 39.Mr Ho’s argument as to the proper construction of the DMC runs, in summary, as follows:
40.Mr Ho also places reliance on the fact that a separate 1 Share was allocated to the Common Areas. First, there is then a clear distinction between the Common Areas and the External Walls. Secondly, the External Walls might have been included within the definition of Common Areas, but the definition of Common Areas in the DMC includes the specific components relating to the Building Common Areas, Commercial Common Areas and Garage Common Areas. 41.In this regard, where there was some debate between Mr Ho and Ms Chan as to the nature of the definition of Common Areas – Ms Chan having described it as “non-exhaustive” – Mr Ho says the definition is “inclusionary”, by which he means that it includes the designated components (which are themselves also separately defined) but nothing else. 42.Mr Ho also refers to the cases of: (1) Green & Grace Ltd v Wang Long Industrial Building (IO) [2015] 5 HKLRD 170 at §50, where it was pointed out that had the external walls been a common area of the building in that case, it might be wondered why it was not mentioned in the definition of common areas in the DMC; and (2) Kayway Investment Ltd v Focus Winner Ltd (unreported, HCA 967/2013, 30 April 2015) at §16, where it was held that because the Exterior Wall in that case had been allocated a share and its owner was given exclusive possession of it under the schedule to the DMC, to turn it into common parts would be inconsistent with the main purpose of the DMC. 43.Ms Chan’s argument as to the proper construction of the DMC runs, in summary, as follows:
44.Ms Chan also refers to a series of decisions, which she says are supportive of the conclusion that external walls are within the common parts of the building: see Incorporated Owners of Shatin New Town v Yeung Kui [2010] 2 HKC 241 at §§12-19; Incorporated Owners of Goa Building v Wui Tat Co Ltd [2004] 1 HKC 348; and Incorporated Owners of Hong Leong Industrial Complex v HL Resources Ltd [2010] 4 HKC 463. 45.In particular, Ms Chan says that, in the Shatin New Town case, the Court of Appeal noted that shares had been reserved by the developer for common service facilities and communal areas including the external walls of the residential parts of the development, but the reserved rights described as exclusive rights were nevertheless in practice conditional. 46.It can also be mentioned in passing that there has been a previous case, though not involving the Building Authority as a party, which considered the External Walls in question in this case, and where it was held by HHJ Chow that the External Walls did not form part of the common parts of the building: see Pointpiper Investment Ltd v The Sun’s Property Management Ltd (unreported, DCCJ 3512/2006, 22 December 2006), in particular at §§14-15. But, it is common ground that that decision is of no assistance to the current exercise. F. Analysis 47.In my view, the important points of analysis are as follows:
48.Previous cases – not least where the relevant DMC expressly defined “common areas” to include “external walls” are of little assistance to any analysis where the DMC in this case makes a clear distinction. 49.As to Ms Chan’s argument that it does not make sense that the holder of the 1 Share allotted to the “External Walls” has the full rights to use them to the exclusion of the other co-owners, where “Common Areas” is also allotted with 1 Share, it is plain that the Common Areas are by definition not expected to be a Unit to which the holder would have full and exclusive rights. Nor would the Common Areas be a part of the Building to which the full and exclusive right and privilege to hold use occupy and enjoy has been or is intended to be assigned to an Owner. 50.As to the point that clause D2(ii) refers only to G/F and 1/F to 4/F external walls, I think that clause in effect simply provides that no other owner can complain if the owner of the external walls at those locations uses them for advertising purposes in compliance with any necessary Government approvals and so as not interrupt the enjoyment of any Unit. A similar provision relating to the Roof and Upper Roof is to be found in clause D2(iii). It is also not like the clause found in other cases – e.g. the Hong Leong case – where the manager of the building could allow other co-owners to make use of the external walls, which would show that the developer could not be said to have the exclusive right to use and possess them. 51.Indeed, what seems to have happened as a matter of fact in this case was that might be regarded as the outer ‘shell’ of the Building, comprising the External Walls, the Roof on the 4/F, the Roof and Upper Roof have all been retained by the developer for its own use, including for advertising and signage. 52.Further, though it is not strictly relevant to the construction exercise, which is an objective exercise, it can be noted that the exclusive right to possession and use of the External Walls has in fact been assigned from the developer First Capital to Proper Invest and then to Wideland. This is at least consistent with the subjective understanding of those parties, and presumably those legally representing them. G. Conclusion 53.Acknowledging that the starting point is section 2 of the BMO, it is necessary to consider whether there is anything in the relevant instrument – here the DMC – identifying that the External Walls have been designated for the exclusive use, occupation or enjoyment of an owner. 54.In my view, on the proper construction of the DMC, it does designate the owner of the External Walls as having the exclusive use, occupation or enjoyment of the External Walls. The combined effect of the allocation of 1 Share to the External Walls, and the operation of clause D1(i) is to give the exclusive rights to the owner. That owner is Wideland. 55.Further, the approach to the definition of Common Areas identifies that it does not include the External Walls. Put another way, there is no ambiguity which leads back to section 2 of the BMO. So, once the conclusion is reached that the External Walls do not form part of common parts of the building, it follows that the duty to make repairs falls on Wideland under clause F7(a) of the DMC. 56.It is my conclusion that the Tribunal erred as a matter of law, in reaching the incorrect construction of the DMC. 57.Therefore, I would not only grant leave to apply for judicial review but find grounds for review on the substantive hearing. SPM is entitled to (1) an order of certiorari to bring up and quash the Tribunal’s Determination, and to (2) a declaration that the External Walls, specifically 5/F to 30/F, do not form part of the common parts of the Building. 58.I see no practical purpose in remitting the matter to the Tribunal for consequential directions and orders. It is more straightforward simply to quash the Building Order. 59.I see no reason why the cost should not follow the event. In the circumstances, I order SPM’s costs to be paid by the Building Authority, to be taxed if not agreed.
Mr Martin Ho, instructed by C.W. Chan & Co., for the applicant The putative respondent was excused from court attendance Ms Jess Chan, Assistant Principal Government Counsel (Ag.), of the Department of Justice, for the putative interested party | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Other judgments that cite this case
Further hearings and rulings under HCAL 1574/2021