The Incorporated Owners of Wah Ha Factory Building v. Wah Ha Realty Co Ltd
Read the full judgment text of HCA 1576/1977 on BabelCite. This High Court CFI judgment was delivered on 12 April 1979.
1. The plaintiffs in this action were incorporated on 28th August 1975, under the provisions of the Multi-Storey Buildings (Owners Incorporation) Ordinance Cap. 344 for the purpose of managing the Wah Ha Factory Building which is situate at No. 8, Shipyard Lane in Quarry Bay. The defendant was originally the registered owner of the ground upon which that factory building is erected and was responsible for its erection. I had before me by way of agreed documents the following:
Cited by 2 cases
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HCA001576/1977
----------------- Coram: Leonard, J. Date of Judgment: 12 April 1979 ----------------- JUDGMENT ----------------- 1. The plaintiffs in this action were incorporated on 28th August 1975, under the provisions of the Multi-Storey Buildings (Owners Incorporation) Ordinance Cap. 344 for the purpose of managing the Wah Ha Factory Building which is situate at No. 8, Shipyard Lane in Quarry Bay. The defendant was originally the registered owner of the ground upon which that factory building is erected and was responsible for its erection. I had before me by way of agreed documents the following:
2. The building consisted of several factory units and the defendant had entered into a number of similar transactions, each involving an agreement, an assignment and a deed of mutual covenant, with several persons who wished to purchase flats in the building, it had sold all the flats in the building, with the exception of one and was at all material times and still is the owner of 19 equal undivided parts or shares of the land and building, the land and building being notionally divided to 1,800 equal undivided parts or shares. Each purchaser acquired an appropriate number of equal undivided parts or shares in the land and building presumably proportionate to the value or cost of the flat the right to occupation of which he also acquired. In addition to remaining the owner of one flat and the 19 equal undivided parts or shares the defendant was appointed as professional managers of the building for the purpose of carrying out the duties of a management committee set up by the Deed of Mutual Covenant for a term of three years commencing from the 15th March 1972. This appointment was not renewed on its expiry. 3. The action concerned itself on the pleadings with alleged breaches by the defendant of the terms of the Deed of Mutual Covenant. The plaintiffs claimed
4. When the case came before me it was conceded that the plaintiffs were entitled to the relief claimed in these prayers. I gave judgment by consent and ordered that the question of the taking of various accounts which I have mentioned be adjourned to the Registrar in chambers. 5. There was a further claim for an injunction restraining the defendant and/or its servants or agents from letting and/or hiring out the surfaces of the external walls of the said building for the exhibition of advertisements without the prior written consent of the plaintiffs. This claim was resisted it being contended on behalf of the defendant that the defendant was the owner of the external walls and was entitled to use them for advertisement as it thought fit. 6. It was common case that the plaintiffs had taken over the management of the building and that the defendant had let out or permitted the external walls to be used for advertisement without the permission of the plaintiffs, the management committee of the building or any professional managers and claimed to be entitled so to do in the exercise of a proprietary right. No evidence was called before me but the three documents which I have mentioned were agreed to be representative of similar documents entered into by each of the purchasers of the factory flats in the building each being identical in its terms save in relation to the number of undivided parts or shares to be acquired and the description of the flat to be occupied. 7. In order to appreciate the nature of the dispute it is necessary for me to indicate and deal with he relevant terms of these three documents. The Agreement which is dated the 23rd September 1971 was made between the defendant (therein called "the Vendor") and the purchasers. Having recited that the defendant was the registered owner of the parcel of ground in question, that it had caused plans and specifications to be prepared for its development by the erection of a new factory building, that these plans had been duly approved and that the building was to comprise 78 units it being intended that the land and building should be divided into 1,800 equal undivided parts or shares to be allocated to each of the units in manner and number therein described, it went on to provide that the defendant would
It is clear that by the description "the said premises" the draftsman intended to encompass not only Factory Flat D but also the 18 undivided 1,800 parts or shares for by Clause 2 the price of "the said premises" was fixed. Having covered various matters irrelevant to my considerations the Agreement went on to provide by Clause 18 that
Clause 34 reads as follows:
Clause 21 of the Agreement is of some importance for from it stems the defendant's claim to be entitled to use the exterior walls of the building for advertising. It is in the following terms:
8. The deed of Assignment is dated the 4th April 1972. It is made between the defendant ("the Vendor") of the one part and the purchasers of the other part. Having recited the Crown leases and that
goes on in its operative words to assign unto the purchasers
The deed of Assignment further witnesses that
It is unnecessary for me to quote further from the Assignment. Suffice it to remark at this stage that it was clearly the understanding of its draftsman that the Vendor had an interest in the external walls which he was granting to the Vendor and co-owners and that each of the co-owners in accepting their respective grants would make reciprocal grants to the Vendor and the co-owners in their turn. 9. The Deed of Mutual Covenant is also dated the 4th April 1972. Unlike the Agreement and the Assignment it is tripartite. It is made between the Hong Kong & Shanghai Banking Corporation as "Mortgagee" of the first part, the defendant therein called "the Vendor" of the second part and the purchasers therein called "the Flat Owner" of the third part. This document recites firstly that
I pause to remark that the premises described in the Fourth Schedule consist of the parcel of land in question so that where the phrase "the said premises" occurs in this document it refers to that parcel of land and not to any undivided part or share of it. It goes on to recite that there have been erected on "the said premises" a new Factory Building containing several factory units known as the Wah Ha Factory Building (thereinafter called "the said building") and thirdly recites that:
and there follows a table under the headings "Floor", "Units", "Shares per Unit" and "Total Shares". It further recites that
Having made these recitals the Deed provided in Clause 1
Clause 3 of this Deed of Mutual Covenant provides that each undivided 1,800th part or share in the premises and the full and exclusive right and privilege to hold use occupy and enjoy each factory unit shall be held by the person entitled thereto "subject to and with the benefit of the easements, rights, privileges and obligations set out in the First Schedule hereto." Clause 4 obliged the owners of each factory unit "observe and perform the covenants provisions and restrictions set out in the Second Schedule" and provided for meetings of the owners for the time being of undivided shares in the premises and the manner in which such meetings should be conducted. Clause 7 provided for the establishment of a management committee and the powers of the management committee, the constitution and the election of its members, its functions and duties including its power to make, revoke and amend house rules, regulating the use operation and maintenance of the said premises, and for the appointment of professional managers, manner of dealing with management funds. The only one of the "covenants, provisions and restrictions set out in the Second Schedule" which is of importance in relation to this action is No. 8. It reads:
As has already been indicated the Fifth Schedule to this document is divided into three parts: Part One specifies the flat to which the individual purchaser to which the deed refers has become entitled by virtue of the deed of Assignment made in his favour. It reads:
Part Two reads:
totalling in all some 38 factory flats described by reference to letter and floor. Part Three of this Schedule reads:
The plaintiffs in their statement of claim relied solely on the Deed of Mutual Covenant as entitling them to the injunction which they now claim. Paragraph 7 of the amended statement of claim reads:
Paragraph 11 of the statement of claim reads:
The injunction claimed is one"
Paragraph 8 of the defence admits that the defendant allowed or permitted advertisements to be put up on the external wall on the side of Flat A of the building but claims that it is entitled so to do
It is because of these averments and because of the way in which the argument before me progressed that I have thought it necessary to make such lengthy reference to the three documents concerned. As will be appreciated it is common case that the plaintiffs had taken over the management of the factory building and that defendant in allowing the external wall to be used for the purpose of advertising did so without the permission of the plaintiffs, the management committee or any professional manager. It is also common case that the defendant continues to be the owner of 19 equal undivided parts or shares of the land and building coupled with the right to occupy one factory flat therein. It is the owner of a factory unit and by Clause 4 of the Deed of Mutual Covenant bound by and obliged to observe and perform the covenants provisions and restrictions set out in Paragraph 8 of the Second Schedule to that deed. 10. Even if the defendant remains the owner of the external walls or retains their exclusive use it has covenanted not to exhibit
One may retain ownership or the exclusive use of premises and at the same time agree with one's neighbours not to exercise some of one's rights of ownership or use without the consent of a third party. That to my mind is sufficient to dispose of this matter since the plaintiffs are entrusted with the duty and power of enforcing the Deed of Mutual Covenant. 11. Counsel for the defendant has argued that this cannot have been the intention of the parties and suggests that the Deed of Mutual Covenant exists for two reasons only - firstly to provide for the management of the building and to set up the management committee and secondly to define and regulate rights already granted. I do not consider that the Deed of Mutual Covenant can be so narrowed down. The Agreement upon which the defendant must rely to succeed itself suggests otherwise in Clauses 18 and 34. No such limitations are to be found in the Agreement. Clearly, however, these are the principal reasons for the existence of the Deed of Mutual Covenant. What then are the rights already granted? By the terms of the several assignments executed by the defendant as Vendor each purchaser is granted an assignment of undivided shares or parts of the land, various rights of way etc. to hold absolutely or as joint tenants and is further granted full right and privilege to hold use occupy and enjoy to the exclusion of the defendant and other co-owners a specified portion of the Factory Building and in return grants to the defendant and other co-owners full right and title to hold use occupy and enjoy to the exclusion of the purchasers the remaining factory flats open yards and exterior walls save only the specified portion earlier granted to each. There is therefore reserved to each purchaser the "portion" over which the right and privilege to hold use and enjoy was originally granted to him. This must include the exterior walls to that portion (KOO Cheuk-son v. TANG Wai-chun(1) and Sturge v. Hackett(2)). Mr. Bleach suggests that this cannot be so, if I understand him aright, because of Clause 21 of the Agreement. This clause reserves a right to use and not a right of ownership (as pleaded). No right to hold the external walls is reserved to the defendant by it; the right to hold the external wall enclosing the "portion" allocated to each purchaser is by the Assignment reserved to such purchaser. There is however a clear conflict between the Agreement and the Assignment in that in the one the right to use the external walls in their entirety is reserved to the defendant, while in the other the right to hold use and enjoy the external wall enclosing his "portion" is reserved to the purchaser. As I see it in such a conflict the Assignment must prevail over the Agreement it being the more formal document in that it is under seal and later in point of time, supersedes the Agreement (Millbourn v. Lvons(3)). There is no counterclaim for rectification of it so the Assignment must stand. 12. Mr. Bleach argues that a difficulty arises because of conflict not only between the Agreement and the Assignment but also between the Assignment and the Deed of Mutual Covenant. In the Assignment there are as I have noted grants by the defendant to the purchasers of the right to hold use occupy and enjoy specified portions and a grant back by each purchaser, to the defendant and the co-owners, of the remaining portions, exterior walls being expressly mentioned in the description of those remaining portions but as I have pointed out there is no grant back of the "portion" allocated to the individual purchaser and that portion includes the external walls enclosing the particular flat. In the Deed of Mutual Covenant on the other hand the Mortgagee and Vendor grant to each individual Flat Owner the right to hold use occupy and enjoy a specified self-contained premises described by flat number to the intent that the Flat Owner shall have the rights of an absolute owner the Mortgagee and Flat Owner grant to the defendant the right and privilege to hold use occupy and enjoy a number of other self-contained premises similarly described to the intent that the Vendor shall have the rights of an absolute owner and the Flat Owner grants to the Mortgagee and the defendant still other and different self-contained premises similarly described and to the intent that the Mortgagee and Vendor shall have the rights of an absolute owner. I do not see that there is any conflict between these grants. The introduction of a Mortgagee makes the drafting more complicated but each purchaser (Flat Owner) gets the right to occupy his own flat and gives the right to occupy others just as in the Assignment he gets the same right to occupy his "portion". The right to enjoy the external walls of his particular flat is given in both documents. I see no necessity to consult any other document to assist in the interpretation or construction of these two documents even if they be regarded as executed contemporaneously. They are reconcilable with one another even if they are not easy to reconcile with Clause 21 of the Agreement. That clause as I see it relates to a matter, namely enjoyment of the external walls, which is dealt with by both the Assignment and the Deed of Mutual Covenant so that Hissett v. Reading(4)has no application. I therefore hold that the defendant is not entitled to allow or permit advertisements to be put on the external wall by virtue of its ownership or otherwise. He as an owner for the time being of a factory unit is in any event bound by the Deed of Mutual Covenant and even if he were entitled to the ownership of the external wall is still obliged to obtain the consent of the management committee or the professional manager before exhibiting any advertisement on it. 13. There must be judgment for the plaintiff for the injunction claimed with costs.
Representation: Mr. M. Mok (Maurice Lee * Co.) for plaintiff. Mr. J. Bleach (P.H. Sin & Co.) for defendant. (1) (1963) H.K.L.R. 891 at page 901. (2) (1962) All E.R. 166 at page 172. (3) (1914) 2 Ch. 213. (4) (1970) 1 All E.R. 122. |