The Incorporated Owners of Nine Queen's Road Central and Another v. Minkind Development Ltd.

HCMP003979/1996

1996, No. MP 3979

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDING

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Coram: The Hon. Mr. Justice Barnett in Court

Dates of hearing: 12 and 13 May 1997

Date of handing down of judgment: 23 May 1997

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J U D G M E N T

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Introduction

1. Is Hong Kong about to lose the landmark known as "No. 9 Queen's Road Central"? If the Defendant has its way, the building will become "Evergo Plaza" in the exercise of the Defendant's right to name or change the name of the building.

2. The Defendant is one of the co-owners of the building. On 10th September 1994, its solicitors gave notice to the other co-owners that as from 1st April 1995, the name of the building would be changed to Evergo Plaza. On 14th March 1995, the solicitors advised the then management that new signs would be installed on 1st April. By this time, there was resistance to the Defendant. On 4th May 1995, the Defendant commenced proceedings by writ against management and representatives of the co-owners. That action is still pending.

3. In June 1995, the management carried out a survey of the owners which showed that 59% objected to the change of name. The matter then stagnated. On 12th April 1996, the 1st Plaintiff was incorporated. On 1st July 1996, the 2nd Plaintiff became manager.

4. Then, in order to resolve the position, the Plaintiffs commenced these proceedings on 13th November 1996, seeking an injunction to restrain the Defendant from affixing or changing any signs; and declarations that the Defendant is not entitled to name or rename the building without the consent of all the owners, that the Plaintiffs are not obliged to adopt any name as determined by the Defendant, and that the 2nd Plaintiff is not liable to comply with any instructions of the Defendant concerning signs or the name of the building. The Defendant, by affidavit in these proceedings, asks for such declarations to be made in its favour.

History

5. Because of the arguments developed by the Defendant, it is necessary to look in some detail at the documentary history of this building. Hong Kong Land (HKL) developed the building and remained registered owner until 13th June 1993. In the meantime on 10th June 1992, HKL agreed to sell the whole building to Innsbuck Company Limited for $3.8 billion. Clause 32 of that agreement read:

"The Vendor has no knowledge of any impediment to the Purchasers giving the Property such name as it may wish subject to necessary approvals and notices..."

6. On 21st September 1992, Innsbuck agreed to sell to Anglo Arab Trading Limited the basement car park. The agreement contained a provision for Anglo Arab either to enter a Deed of Mutual Covenant(DMC) or to accept an assignment subject to and with the benefit of a DMC. The DMC would include

"(h) a provision that reserves unto the Vendor (which term shall include the successors in title, assigns, nominees and delegates of the vendor) the following rights and privileges:-

i) the right to name the Property at any time and from time to time and to change such name or names at any time and from time to time and the Vendor shall not be liable to any owner or other person having an interest in the Property for any damage, claims, costs or expenses resulting therefrom or in connection therewith and such owner and person shall adopt such name as the name of the Property as the Vendor may so determine from time to time."

7. The agreement also crucially provided:

"32. The Vendor (which expression shall include its successors in title, assigns, nominees and delegates) will have the sole and exclusive right to name the Property and at any time and from time to time change the name of the Property without any liability to the Purchaser or its successor or assign who shall adopt such name as the name for the Property as the Vendor may so determine from time to time. The provisions in this Clause shall survive completion."

and later

"39.

(a) Subject to necessary approvals and notices and provisions of any tenancy/licence agreements and other agreements then in force and in so far as the Vendor is legally capable of doing so, the Vendor will at the direction of the Purchaser (at the costs and expenses of the Purchaser and subject to the indemnity hereinafter contained) name or change the name of the Property at any time after completion, or to assign to the Purchaser or its nominees the right to name and to change the name of the Property, Provided that the Purchaser shall indemnify the Vendor against all losses, damges, claims, costs, expenses, liabilities and actions which the Vendor may incur or sustain as a result of or connected with the naming or changing the name of the Property or the assignment of the right to name and to change the name of the Property.

b) Notwithstanding the provisions in Clause 32 of the Principal Agreement and in sub-clause (a) above and notwithstanding the fact that the Vendor has made a provision in this Agreement to reserve unto itself, its successors in title, assigns, nominees and delegates, the right to name and to change the name of the Property and the fact that the Vendor shall make similar provisions in the agreements for sale and purchaser with purchasers of the other parts of the Property and in the Deed of Mutual Covenant or the Deed of Mutual Covenant and Management Agreement, the Vendor makes no express or implied warranty or representation whatsoever as to its legal capacity to name and/or to change the name of the Property or that it has the right to name and/or change the name of the Property or that the right is assignable and can be exercised or enjoyed by the Purchaser or its nomonees." (sic)

8. On 2nd June 1993, Anglo Arab agreed to sell to the Defendant five car parking spaces (later increased to six). Clause 33 of their agreement contained:

"33. The Purchaser hereby acknowledges the exclusive rights of Innsbuck, its successors in title, assigns, nominees and delegates as set out in Clauses 32 and 33 of the Sub-sale Agreement and agrees that the provisions in the said Clauses 32 and 33 shall survive completion."

9. Clause 33 there mentioned is not relevant to these proceedings.

10. This agreement further provided:

"35.

(a) Subject to necessary approvals and notices and provisions of any tenancy/licence agreements and other agreements then in force and in so far as Innsbuck is legally capable of doing so, Innsbuck will at the direction of the Purchaser (at the costs and expenses of the Purchaser and subject to the indemnity hereinafter contained) name or change the name of the Property at any time after completion, or to assign to the Purchaser or his nominees the right to name and to change the name of the Property, Provided that the Purchaser shall indemnity Innsbuck against all losses, damages, claims, costs, expenses, liabilities and actions which Innsbuck may incur or sustain as a result of or connected with the naming or changing the name of the Property or the assignment of the right to name and to change the name of the Property.

b) Notwithstanding the provisions in Clause 32 of the Principal Agreement and in sub-clause (a) above and notwithstanding the fact that Innsbuck has made a provision in the Sub-sale Agreement to reserve unto itself, its successors in title, assigns, nominees and delegates, the right to name and to change the name of the Property and the fact that Innsbuck shall make similar provisions in the agreements for sale and purchase with purchasers of the other parts of the Property and in the Deed of Mutual Covenant or the Deed of Mutual Covenant and Management Agreement, Innsbuck and the Vendor make no express or implied warranty or representation whatsoever as to Innsbuck's legal capacity to name and/or to change the name of the Property or that Innsbuck has the right to name and/or change the name of the Property or that the right is assignable and can be exercised or enjoyed by the Purchaser or his nominees.

c) The Provisions in this Clause shall survive completion.

36. The Vendor shall use its best endeavours to procure the right to name the Property under the Deed of Mutual Covenant covering the Property or such other document necessary to grant such right to be given to the Purchaser provided that the Purchaser agrees not to name the Property by any name containing any reference to Hong Kong Land. The vendor shall also use its best endeavours to request Innsbuck (i) to add a clause in the first agreements of all other parts of the Property in the form as set out in the Sixth Schedule hereto (ii) to add a similar clause in all subsequent Agreements for Sale and Purchase of other parts of the Property and the Deed of Mutual Covenant and Management Agreement of the Property PROVIDED ALWAYS that the failure, notwithstanding such best endeavours, to procure the aforesaid right to name and additions or any of them shall not constitute a breach of this Agreement on the part of the Vendor."

11. The sixth schedule read

"The Purchaser (who and his successors in title and assigns being the owner or owners of the said premises for the time being from time to time is and are hereinafter in this clause referred to as "the Covenanting Purchaser") hereby grants undertakes and covenants as follows with Innsbuck Company Limited its successors in title and assigns (which Company its successors in title and assigns are hereinafter in this clause referred to as "the Company") to the intent that the burden of the following covenants shall be annexed to and run with the said premises and every part thereof and shall bind the said premises and every part thereof and shall bind the Covenanting Purchaser and the benefit thereof shall ensure for the benefit of such parts or shares of and in the Land and the Building and be enforceable by the Company:-

(a)(1) that the Company (for so long as the Company shall be the Owner of any undivided shares of and in the Land and the Building) shall continue to retain reserve and possess the exclusive right:-

i) to name and re-name the Building from time to time without reference to any Owner or other person having any interest in the Building;

ii) to assign the above rights at its absolute discretion;

d) The Covenanting Purchaser hereby irrevocably appoints the Company to be its attorney and in its name and on its behalf to executes, sign and do all deeds instruments, proxies, resolutions of owners, acts and things whasoever to implement the undertaking and covenants in this clause and to appoint and remove any substitutes for the Company as the attorney of the Covenanting Purchaser in respect of all or any of the powers and matters as aforesaid in this clause. The Covenanting Purchaser covenants that it will ratify and confirm all that the Company and its substitutes as its attorney shall lawfully do or cause to be done by virtue of these presents.

e) The Covenanting Purchaser will not sell assign charge mortgage or otherwise deal with or dispose of the Property or any part thereof except on the terms that the purchaser sub-purchasers assignees nominees charges and/or mortgagees shall execute in favour of the Company including its successors in title and assignees the same undertakings and covenants as given by the Covenanting Purchaser in this clause as approved by the Company's solicitors from time to time."

12. On 30th June 1993, Innsbuck having got all its sub-sale agreements in place, there was a series of assignments to various purchasers. HKL assigned to the Defendant the six car parking spaces, with Innsbuck and Anglo Arab as confirmors. The assignment provided

"3.

(a) Subject to necessary approvals and notices and provisions of any tenancy/licence agreements and other agreements affecting or relating to the Building and the Land or any part thereof in force at the date hereof and in so far as Innsbuck is legally capable of doing so, Innsbuck will at the direction of the Purchaser (at the costs and expenses of the Purchaser and subject to the indemnity hereinafter contained) name or change the name of the Building at any time after the date hereof, or assign to the Purchaser or its nominees the right to name and to change the name of the Building. Provided that the Purchaser shall indemnify Innsbuck and Anglo Arab against all losses, damages, claims, costs, expenses, liabilities and actions which Innsbuck and Anglo Arab may incur or sustain as a result of or connected with the naming or changing the name of the Building or the assignment of the right to name and to change the name of the Building.

b) The Purchaser hereby acknowledges that the Vendor and Innsbuck and Anglo Arab make no express or implied warranty or representation whatsoever as to the legal capacity of Innsbuck and Anglo Arab to name and/or to change the name of the building or that Innsbuck and Anglo Arab have the right to name and/or change the name of the Building or that the right is assignable and can be exercised or enjoyed by the Purchaser or its nominees."

13. A DMC was executed the same day between HKL, Innsbuck as confirmor, the original manager and the first purchaser, Sheen Crown Limited, which was called the "covenanting owner". The DMC provided

"4. Each Share and the full and exclusive right and privilege to hold, use, occupy and enjoy any part of the Building shall be held by the person or persons from time to time entitled thereto subject to and with the benefit of the easements, rights and privileges and obligations herein contained.

5. The Owners and their respective executors, administrators, successors in title and assigns shall at all times hereafter be bound by and shall observe and perform the covenants, provisions and restrictions herein contained and the benefit and burden thereof shall be annexed to every part of the Land and the Building and the Share or Shares held therewith."

"9. Notwithstanding anything to the contrary herein provided or contained there are reserved unto the confirmor (which term shall in this Clause include the successors in title and assigns of the Confirmor) the following rights and privileges:-

a) the right to name the Building at any time or times and from time to time and to change such name or names at any time or times and from time to time upon giving not less than six months' notice and the Confirmor shall not be liable to any Owner or other person having an interest in the Building for any damage, claims, costs or expenses resulting therefrom or in connection therewith Provided that the name of the Building shall not contain any reference to "Hongkong Land" or "HKL".

"B. Powers and Duties of Manager

60. The Manager will manage the Building in a proper manner and in accordance with this Deed and except as otherwise herein expressly provided the Manager shall be responsible for and shall have full and unrestricted authority to do all such acts and things as may in its opinion be necessary or requisite for the proper management of the Building and the Manager is hereby granted all the powers ascribed to it in Clause 14(a) provided always that the Manager shall only be required to use its reasonable endeavours in carrying out the management of the Building and the Land. Without in any way limiting the generality of the foregoing the Manager shall have the following powers and duties namely:-

(s) To enforce the due observance and performance by the Owners or any person occupying any part of the Building through under or with the consent of any such Owner of the terms and conditions of this Deed and the House Rules and at the discretion of the Manager to take action including the commencement and conduct of legal proceedings to enforce the due observance and performance thereof and/or to recover damages for any breach, non-observance or non-performance thereof and the registration and enforcement of charges as hereinafter mentioned."

14. Apart from Sheen Crown, assignments to other initial purchasers with Innsbuck as confirmor were made expressly subject to the DMC and to Innsbuck's naming right. Thus

"2. The Purchaser hereby expressly COVENANTS with the Vendor and Innsbuck to the intent that the burden of the covenants shall run with the Property and be binding on the Purchaser his executors, administrators and assigns or successors in title to:-

(e) acknowledge the right of Innsbuck its successors in title and assigns the right to name the Building at any time or times and from time to time and to change such name or names at any times or times and from time to time and shall not interfere with or impede the exercise of such right by Innsbuck its successor in title and assign."

15. The property assigned was to be subject to various exceptions and reservations

"(3) Except and reserved unto Innsbuck its successors in title and assigns other than the Purchaser:-

(a)(iii) (subject to the terms of the Deed of Mutual Covenant) the right to name and rename the Building or parts thereof at any time or times and from time to time to change such name at any time or times and from time to time.

(b) all rights exceptions and reservations granted excepted and reserved unto Innsbuck and its successors in title and assigns other than the purchaser as are contained in Clauses 8 and 9 of the Deed of Mutual Covenant or otherwise granted or reserved unto Innsbuck under the Deed of Mutual Covenant."

16. Clause 8 of the DMC is not relevant to these proceedings.

17. Later, of course, some of the initial purchasers sold their undivided shares. These subsequent assignments fell into two categories. One category contained an express acknowledgment of the naming right: the other did not although it was of course subject to the DMC and to the exceptions and reservations in the first assignment. As an example of the first type, on 19th March 1996 the first floor was assigned subject to the DMC and with covenants :

"3. The Purchaser hereby covenants with the Vendor that the Purchaser will perform and observe all the covenants terms and conditions in the Deed of Mutual Covenant contained in so far as the same relate to the Property and will keep the Vendor indemnified against all actions suits expenses and claims on account of the breach or non-performance of the said covenants and conditions or any of them.

4. The Purchaser hereby expressly further covenants with the Vendor to the intent that the burden of the covenants shall run with the Property and be binding on the Purchaser his executors, administrators and assigns or successors in title to:-

(a) notify the Manager (as defined in the Deed of Mutual Covenant and Management Agreement Memorial No. 5711938) in writing of any change or intended change of ownership of the Property within one month from the date of the Agreement for Sales and Purchase in respect thereof; and

(b) acknowledge the right of Innsbuck Company Limited ("Innsbuck") its successors in title and assigns to name the Building at any time or times and from time to time and to change such name or names at any time or times and from time to time and shall not interfere with or impede the exercise of such right by Innsbuck its successor in title and assign."

18. Further, the first floor was made subject to "all such exceptions and reservations as are more particularly described, mentioned and/or referred to in" the original assignment.

19. By about the end of 1996, there were seven of the second category of subsequent assignment. There were two types within this category. The first, apart from being subject to the DMC and original exceptions and reservations, contained covenants

"C. The Purchaser in addition to the covenants implied by the Conveyancing and Property Ordinance Cap.219 covenants with Vendor that the Purchaser will henceforth during the residue of the said term of years perform and observe all the covenants and conditions in the Deed and will keep the Vendor indemnified against all actions suits expenses and claims on account of the breach or non-performance of the said covenants and conditions or any of them.

D. The Purchaser hereby expressly COVENANTS with the Vendor to the intent that the burden of the covenant shall run with the Property and be binding on the Purchaser his executors, administrators and assigns or successors in title to notify the Manager (as defined in the Deed) in writing of any change or intended change of ownership of the Property within one month from the date of the Agreement for Sale and Purchase in respect thereof."

20. There were two of these assignments where the subsequent purchaser covenanted to observe "all the covenants" in the DMC without qualification. The other type of subsequent assignment contained a covenant :

"The Purchaser hereby COVENANTS with the Vendor that the Purchaser will henceforth during the residues of the respective said terms perform and observe all the covenants terms and conditions and provisos contained in the Deed of Mutual Covenant and on the part of the lessee to be observed and performed so far as the same relate to or affect the Property and will keep the Vendor indemnified against all actions suits expenses and claims on account of the breach or non-performance of the said covenants terms conditions any provisos or any of them."

21. This covenant was therefore qualified in that it must "relate to or affect the" land.

22. In the meantime, by assignment dated 16th August 1994, at the direction of Anglo Arab and the Defendant, Innsbuck assigned its naming right to the Defendant pursuant to Clause 3 of their agreement dated 30th June 1993.

Defendant's case

23. The problems associated with "naming rights" have been visited before in particular by Mr. Robert Tang QC who appeared for the Defendant. In Lamaya Limited v. Supreme Honour Development Limited (1991) 1HKC 198, Mr. Tang argued that the covenant conferring such a right is enforceable either under S.41 of the Conveyancing and Property Ordinance (Cap. 219) or as a contractual obligation. Both arguments were rejected by the Court of Appeal. As to the first, Mr. Tang accepted that I am bound by the Court of Appeal's decision although he reserved the right to revisit it elsewhere. As to the second, he asserted that on the facts the case is distinguishable.

24. In addition, Mr. Tang introduced a new argument based on what has been called "the pure principle of benefit and burden".

Contract

25. It was not in dispute that the covenant conferring the naming right is enforceable between the immediate parties thereto. Thus, it may be enforced against all the initial purchasers. The issue, therefore, is whether the subsequent purchasers are liable despite their lack of privity.

26. It is convenient to see how Mr. Tang put his argument to the Court of Appeal and how the Court of Appeal dealt with it. At page 204 Cons V.P. who delivered the judgment of the court said :

"Mr Tang supports his alternative approach via pure contract with three possibilities of an underlying legal analysis. The first is that:

... it is an implied term of the deed of mutual covenant that the parties thereto make a continuing offer to any subsequent assignee to enter into a contract with that assignee on the terms of the deed of covenant, with the purchaser's rights and duties under the DMC being identical to those of the original party from whom his title is derived.

Then, by accepting an assignment, the assignee accepts the continuing offer.

Alternatively the deed of mutual covenant contains:

... an implied grant of authority to each co-owner to agree on behalf of all of them a novation of the DMC with the person to whom he sold his interest, under which the purchaser would step into the shoes of the assignor.

Finally:

... where parties to some relationship all intend that it should be governed by a particular set of terms, the law will give contractual force to that intention, even if the formation of the contract cannot satisfactorily be analyzed in terms of offer and acceptance.

For the first of the three possibilities Mr Tang relies on authorities relating to unincorporated associations and the well known case of Clarke v Dunraven (1897) AC 59 where individual entrants to a yacht race were held to be contractually bound to each other to observe the racing rules; for the second possibility, he relies upon New Zealand Shipping v Satterhwaite (1975) AC 154.

We accept that the original parties intended that the benefits and the burdens of the deed of mutual covenant should bind their successors in title. This is apparent, not only as Mr. Tang suggests, from the provisions in the preamble that each party 'shall where the context so admits include the successors and assigns', but also from c127(a) which expressly provides:

The covenants and provisions of this deed shall be binding on the parties hereto and their respective executors, administrators, successors in title and assigns and the benefit and burden thereof shall be annexed to the undivided shares held by them and to each and every part of the building held therewith. The Law of Property (Enforcement of Covenants) Ordinance and any statutory amendments, modifications or re-enactment thereof for the time being in force shall apply to these presents.

But it is not easy to reconcile the words of this clause with a purely contractual intention of any kind. More particularly, we can find nothing in the circumstances of the assignment to the plaintiff which would indicate that it was then intending to enter into contractual obligations over and above the enforceable covenants contained in the deed of mutual covenant. We would respectfully agree with the observations of Dillon J in Lyus v Prowsa Developments Ltd (1982) 1 WLR 1044 at 1051:

By contrast, there are many cases in which land is expressly conveyed subject to possible encumbrances when there is no thought at all of conferring any fresh rights on third parties, who may be entitled to the benefit of the encumbrances. The land is expressed to be sold subject to encumbrances to satisfy the vendor's duty to disclose all possible encumbrances known to him, and to protect the vendor against any possible claim by the purchaser ... So, for instance, land may be contracted to be sold and may be expressed to be conveyed subject to the restrictive covenants contained in a conveyance some 60 or 90 years old. No one would suggest that, by accepting such a form of contract or conveyance, a purchaser is assuming a new liability in favour of third parties to observe the covenants, if there was, for any reason before the contract or conveyance, no one who could make out a title as against the purchaser to the benefit of the covenants.

Those observations are quoted with approval by the English Court of Appeal in Ashburn Anstalt v Arnold & Anor (1989) Ch 1 at 25, the court adding for itself:

The words 'subject to' will, of course, impose notice. But notice is not enough to impose on somebody an obligation to give a contract into which he did not enter.

For these reasons, in our view, the contractual approach fails likewise and the appeal must be dismissed."

27. Before me, Mr. Tang stated that his case was that there was a contract between Innsbuck, the purchaser party to the DMC, and other initial purchasers. By the later assignments, the subsequent purchasers accepted an offer by those parties to become a co-owner on DMC terms. In other words, the subsequent purchasers joined the co-owners' club. That argument was the first argument raised in the Court of Appeal but, in advancing it, Mr. Tang looks for support to New Zealand Shipping. That case involved a bill of lading, Clause 1 of which provided, inter alia.

"It is hereby expressly agreed that no servant or agent of the carrier (including every independent contractor from time to time employed by the carrier) shall in any circumstances whatsoever be under any liability whatsoever to the shipper, consignee or owner of the goods or to any holder of this bill of lading for any loss or damage or delay of whatsoever kind arising or resulting directly or indirectly from any act neglect or default on his part while acting in the course of or in connection with his employment and, without prejudice to the generality of the foregoing provisions in this clause, every exemption, limitation, condition and liberty herein contained and every right, exemption from liability, defence and immunity of whatsoever nature applicable to the carrier or to which the carrier is entitled here under shall also be available and shall extend to protect every such servant or agent of the carrier acting as aforesaid and for the purpose of all the foregoing provisions of this clause the carrier is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all persons who are or might be his servants or agents from time to time (including independent contractors as aforesaid) and all such persons shall to this extent be or be deemed to be parties to the contract in or evidenced by this bill of lading."

28. The Appellant, a stevedore, wished to take advantage of the exemption clause. The Privy Council, by a majority of three to two, found the carrier to have been the stevedore's agent and that the only query was whether consideration had passed. At page 167 Lord Wilberforce, who delivered the majority judgment, observed that

"English law, having committed itself to a rather technical and schematic doctrine of contract, in application takes a practical approach, often at the cost of forcing the facts to fit uneasily into the marked slots of offer, acceptance and consideration."

29. Mr. Tang lay emphasis on that observation. Lord Wilberforce then went on to say

"There is possibly more than one way of analysing this business transaction into the necessary components; that which their Lordships would accept is to say that the bill of lading brought into existence a bargain initially unilateral but capable of becoming mutual, between the shipper and the appellant, made through the carrier as agent. This became a full contract when the appellant performed services by discharging the goods. The performance of these services for the benefit of the shipper was the consideration for the agreement by the shipper that the appellant should have the benefit of the exemptions and limitations contained in the bill of lading."

30. Viscount Dilhorne and Lord Simon of Glaisdale who dissented both subjected the Appellant's various arguments to blistering analyses. These analyses cannot be condensed so as to do them justice but, in effect, each said that there was no way in which Clause 1 could be construed as a bargain between the shipper and stevedore and indeed no justification for doing so.

31. Unlike the position in New Zealand Shipping, Mr. Tang said that the documents in the present case show a much more real connection between the Defendant and the existing owners. He pointed out that in the agreement between Anglo Arab and the Defendant, there was the beginning of a scheme designed to try and ensure that all subsequent purchasers became bound to Innsbuck or its successors and assigns. This, however, proved impractical. Nonetheless, there are the express acknowledgments of the Defendant's naming right in some of the subsequent agreements.

32. Overall, submitted Mr. Tang, there was a clear intention to make the covenant enforceable against remote parties. He said that it is in everyone's interest that it should be enforceable. It would not be right simply because it was impractical to have subsequent purchasers covenant directly with Innsbuck or the Defendant to leave the naming right in limbo.

33. It is clear to me that the draftsman of the documents I have reviewed was alive to the difficulties presented by the Court of Appeal's decision and was intent on trying to overcome them. He was not, however, overconfident in view of the disclaimers which he included. He was right to do so. His apparent solution came to nothing. There were other available solutions as Miss Audrey Eu QC for the Plaintiffs suggested. It might have been possible to constitute the first purchaser as trustee for Innsbuck or the Defendant of the subsequent purchasers' promise. Or an agency device might have been employed. Those solutions were not adopted or at least not contended for. But they were available, said Miss Eu and the fact that the Defendant did not avail itself of them or at least carry through its original scheme should not be a reason for trying to force a contractual relationship out of the documents.

34. It is understandable why, in New Zealand Shipping, at least a majority of the Privy Council were willing to conjure a bargain out of a few lines in a bill of lading. They wished to see effect given to a commercial document. In Dunraven owners of yachts agreed for the purpose of a club race to be bound by the club's sailing rules. The House of Lords appears to have accept that there was a contractual relationship and concentrated simply on the real issue, namely the terms in which the owners had agreed to be bound.

35. I accept that I must, if possible, give effect to the intentions of the parties short of writing a contract for them. Or put another way, I should try and force the facts however uneasily into the component parts of a bargain. The intentions of Innsbuck, Anglo Arab be the Defendant and the initial purchasers are tolerably clear. Those of the subsequent purchasers vary. Some expressly acknowledged the naming right: That in itself does not make enforceable a covenant which does not otherwise run with the land. Other purchasers confined their acceptance of existing covenants to those "relating to or affecting of the property", an echo of what was and is understood to be existing law concerning the burden of a covenant. As to the latter, Mr. Tang acknowledged he was in difficulty. In my view, it was an insuperable difficulty because in effect if these purchasers have joined the co-ownership club, they have joined on terms perhaps different from other co-owners. In relation to a multi-storey building, that is a situation which is plainly unacceptable and unworkable.

36. In my judgment, this is not a case for forcing co-owners into a contractual relationship other than one plainly and clearly contemplated by all. There is, in my view, no warrant for displacing the existing law as set out in Lamaya, the effect of which would no doubt be far reaching.

The Pure Principle

37. This principle was distilled by Megarry VC in Tito & Ors v. Waddell & Ors (1977) 1Ch.106. At page 290, he said

"(a) CONDITIONAL BENEFITS AND INDEPENDENT OBLIGATIONS. One of the most important distinctions is between what for brevity may be called conditional benefits, on the one hand, and on the other hand independent obligations. An instrument may be framed so that it confers only a conditional or qualified right, the condition or qualification being that certain restrictions shall be observed or certain burdens assumed, such as an obligation to make certain payments. Such restrictions or qualifications are an intrinsic part of the right: you take the right as it stands, and you cannot pick out the good and reject the bad. In such cases it is not only the original grantee who is bound by the burden: his successors in title are unable to take the right without also assuming the burden. The benefit and the burden have been annexed to each other ab initio, and so the benefit is only a conditional benefit. in the other class of case the right and the burden, although arising under the same instrument, are independent of each other: X grants a right to Y and by the same instrument Y independently covenants with X to do some act. In such cases, although Y is of course bound by his covenant, questions may arise whether successors in title Y's right can take it free from the obligations of Y's covenant, or whether they are bound by them under what for want of a better name I shall call the pure principle of benefit and burden."

38. The Vice Chancellor went on to analyse a long line of cases in particular, Halsall & Brizell (1957) Ch.169 upon which he heavily relied. Then at page 302, he said :

"I emerge from a consideration of the authorities put before me with a number of conclusions and a number of uncertainties. First, for the reasons I have given, I think that there is ample authority for holding that there has become established in the law what I have called the pure principle of benefit and burden. Second, I also think that this principle is distinct from the conditional benefit cases, and cases of burdens annexed to property. Although language speaking of benefit and burden is sometimes used in the latter classes of case, I do not think it is really apt, and it is liable to confuse. In such cases the rule is really a rule of "all or none," an inelegant but convenient expression that may be used for brevity. A burden that has been made a condition of the benefit, or is annexed to property, simply passes with it: if you take the benefit or the property you must take it as it stands, with all its appendages, good or bad. It is also only where the benefit and the burden are independent that the pure principle of benefit and burden can apply.

Third, it is a question of construction of the instrument or transaction, depending on the intention that has been manifested in it, whether or not it has created a conditional benefit or a burden annexed to property. If it has, that is an end of the matter: if it has not, and the benefit and burden are independent, questions of the pure principle of benefit and burden may arise. On the question of construction, there is a possible parallel in the case of two or more things given by a will to the same person, e.g. a leasehold house and its contents: if the will is construed as making a single gift of the two things, as distinct from two separate to do if the lease is onerous.

Fourth, the application of the benefit and burden principle will normally come later than the question of construction. If the initial transaction has created benefits and burdens which, on its true construction, are distinct, the question whether a person who is not an original party can take one without the other will prima facie depend upon the circumstances in which he comes into the transaction. If, for instance, all that is assigned to him is the benefit of a contract, and the assignor, who is a party to the contract, undertakes to continue to discharge the burdens of it, it would be remarkable if it were to be held that the assignee could not take the benefit without assuming the burden. The circumstances show that the assignee was intended to take only the benefits, and that the burden was intended to be borne in the same way as it had been borne previously.

On the other hand, if the assignee takes as a purported assignee of the whole contract from a company which is on the point of going into liquidation, he undertaking to discharge all the burdens and to indemnify the Company, then, unless the benefit and burden principle is to be rejected in its entirety, I would have thought that the circumstances showed that he was not intended to take the benefit without also assuming the burdens, and that the result would accord with the intention, vis-a-vis not only the company but also the persons entitled to enforce those burdens. No doubt the terms of any relevant document would be of major importance: but I would regard the matter as one which has to be determined from the surrounding circumstances as a whole. One possible way of looking at it is to regard the subsequent transaction as doing what the initial transaction did not, namely, annex the burden to the benefit so that the one could not be taken free from the other: but there are difficulties in this."

39. This principle met with some disfavour in Rhone & Anr. v. Stephens (1994) 2 AC 310. The plaintiffs in that case argued that they should have a remedy to enforce rights which both the parties and their predecessors intended the plaintiffs to have. They relied, inter alia, on Tito. Lord Templeman reviewed the law in relation to positive covenants and referred to the decision in Austerberry v.Oldham Corporation (1885) 29 Ch. D. 750 that, as between persons interested in land, the benefit of a covenant may run with the land but not the burden. At page 322, he said :

"Mr. Munby also sought to persuade your Lordships that the effect of the decision in the Austerberry case had been blunted by the "pure principle of benefit and burden" distilled by Sir Robert Megarry V.C. from the authorities in Tito v. Waddel (No.2) [1977] 1 Ch. 106, 301 et seq. I am not prepared to recognise the "pure principle" that any party deriving any benefit from a conveyance must accept any burden in the same conveyance. Sir Robery Megarry V.C. relied on the decision of Upjohn J. in Halsall v. Brizell [1957] Ch. 169. In that case the defendant's predecessor in title had been granted the right to use the estate roads and sewers and had covenanted to pay a due proportion for the maintenance of these facilities. It was held that the defendant could not exercise the rights without paying his costs of ensuring that they could be exercised. Conditions can be attached to the exercise of a power in express terms or by implication. Halsall v. Brizell was just such a case and I have no difficulty in wholeheartedly agreeing with the decision. It does not follow that any condition can be rendered enforceable by attaching it to a right nor does it follow that every burden imposed by a conveyance may be enforced by depriving the covenantor's successor in title of every benefit which he enjoyed thereunder. The condition must be relevant to the exercise of the right."

40. With some hesitation, I have to say that I am not sure that Lord Templeman fully appreciated the nature of the principle. The principle, as I understand it, is one which depends upon all the circumstances of the case and is not one which is simply applied when it has been established that there are independent burdens and benefits. I am satisfied, therefore, that there is still life in the principle.

41. Plainly, there are independent benefits and burdens in the present case. But I am unable to divine from the documents that the circumstances are such that the subsequent purchasers, at least those who acknowledged only covenants relating to the land, were not intended to take the benefit without also assuming the obligation to recognize the Defendant's naming right. To apply the principle would, in effect, be to imply a contract. The second limb of Mr. Tang's argument, therefore, seems to me almost indistinguishable from his first and is subject to the same criticisms.

42. However unsatisfactory it may be, the law relating to the burden of covenants has been clear for a long time. I do not think that the present case is one which is suitable for overthrowing that certainty. Indeed, it seems doubtful to me whether, in the absence of clear and direct privity of contract, there will ever be such a case. Rather, it is a matter for the legislature.

43. A naming right is undoubtedly important and valuable. To be enforceable, however, it must be brought home to every co-owner for the time being. That could be done by way of the scheme originally envisaged here. It is possible that some prospective subsequent purchasers might be deterred but, for the most part, I imagine purchasers are anxious to secure property in the right place at the right price and do not concern themselves over much with the name of the building.

44. In the circumstances, I grant the injunction and the declarations sought by the Plaintiffs.

45. I make an order nisi that the Defendant pay the Plaintiffs' costs.

Representation:

Miss Audrey Eu, Q.C. and Miss Doris To instructed by M/s Kao, Lee & Yip for Plaintiffs.

Mr. Robert Tang, Q.C. and Kenneth Chow instructed by M/s Vincent T.K. Cheung, Yap & Co. for Defendant.