Incorporated Owners of Million Fortune Industrial Centre v. Jikan Development Ltd.

HCA 14915/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 14915 OF 1998

____________

____________

Coram: Deputy High Court Judge To in Court

Dates of Hearing: 25-27 October and 30 November 2000

Date of Judgment: 9 February 2001

_______________

J U D G M E N T

_______________

Background

1. Lac Kar Investment Limited (hereinafter called "Lac Kar") was the developer and the First Owner of Million Fortune Industrial Centre (hereinafter called "the Building"). On 29 April 1989, Lac Kar entered into a deed of mutual covenant (hereinafter called "the DMC") as the First Owner of the Building, with Square Construction Company Limited as the Second Owner, and the 2nd defendant as the Manager under the DMC. Under the Fourth Schedule to the DMC, the Building and the interest in land was divided into 17,180 equal and undivided shares. One share was allotted to each of the 14 car parking spaces and 7 lorry parking spaces on the ground floor, one share to the external wall and 15 shares to the Common Parts. By an assignment dated 7 July 1989, Lac Kar assigned to the 1st defendant 23 of the 17,180 shares together with exclusive right and privilege to hold, use and enjoy the Common Parts, the external wall and all the seven lorry parking spaces. Subsequently, two of the parking spaces were sold, but that has no bearing on the present dispute. In May 1996, the 1st defendant also acquired all the 14 car parking spaces. Thus effectively, the 1st defendant owned the Common Parts and all the 21 car and lorry parking spaces on the ground floor.

2. The 2nd defendant was appointed the Manager of the Building in June 1989 in accordance with the DMC. On 29 October 1997, the plaintiff was incorporated under section 8(1) of the Building Management Ordinance, Cap. 344. On 30 April 1999 the plaintiff terminated the services of the 2nd defendant as the Manager of the Building.

3. While the Building was under the management of the 2nd defendant, all the 21 parking spaces on the ground floor and an area now in dispute in the Common Parts were used to provide parking facilities for users of the Building. Until July 1997, parking fees collected by the 2nd defendant were handed over to the 1st defendant. The income thereafter until 17 January 1998 was kept by the 2nd defendant pending the resolution of this dispute. Since 18 January 1998, the plaintiff used the Common Parts and other spaces available to provide parking facilities for users of the Building and collected parking fees for the owners incorporation, while the 21 parking spaces were used or rented out by their owners.

4. The 1st defendant's defence is that it is the legal owner and entitled to exclusive possession of the Common Parts and in any event only the First Owner or the 1st defendant as its successor in title has the right to sue and not the plaintiff. The 2nd defendant's defence is that it handed over the income from the car park pursuant to a "Parking Agreement" entered into with the 1st defendant in accordance with Clause 8(b)(i) of the DMC for the benefit and convenience of the co-owners of the Building. In addition, if the 1st defendant is successful in its defence, the 2nd defendant would not be liable.

Ownership of and exclusive right to enjoy the Common Parts:

5. The first issue is whether the assignment by Lac Kar of the 23 shares, including 15 allotted to the Common Parts, to the 1st defendant on 7 July 1999 was effective in transferring ownership in the Common Parts together with the exclusive right and privilege to enjoy the same to the exclusion of the other co-owners.

6. "Common Parts" is defined under Clause 2 of the DMC to mean, among other areas, "the loading and unloading areas and all the drive-ways and leading to and from all the entrances and exits on the Ground Floor and First Floor". There is no dispute that this includes part of the vehicular access on the ground floor behind Car Parking Space No. 6 and opposite to Lorry Parking Spaces No. L4 to L7 (hereinafter called the "Disputed Area"), which had been used for hourly parking.

7. Under Clause 2 of the DMC, Lac Kar was assigned the full right and privilege to the exclusive use occupation and enjoyment and the rents and profits of certain parts of the Building as set out in the Second Column of the First Schedule to the DMC, which expressly excluded the above mentioned Common Parts. Thus the DMC has expressly excepted the Common Parts from the exclusive use and possession of Lac Kar as the First Owner.

8. Clause 1 of the assignment expressly states that the assignment is subject to and with the benefit of the DMC. Under the First Schedule to the DMC, Lac Kar did not have exclusive right and privilege to the use of the Common Parts. Thus while this assignment purported to assign the 15 shares allotted to the Common Parts together with the exclusive right and privilege to use the Common Parts, Lac Kar did not have such exclusive right to assign to the 1st defendant, as the right had been reserved to all the co-owners of the Building.

9. Even though Clause 5(f) of the DMC has reserved unto the First Owner "the absolute right to designate the exclusive use of passages, corridors ways, landings which are not for the common use of the Premises and/or the Building", there is no document or evidence to suggest that Lac Kar as the First Owner or the 1st defendant as its successor in title had so designated the Disputed Area. I am unable to hold that the assignment of 7 July 1989 could have that effect. That assignment purported to assign the right to exclusive possession of the entire Common Parts, not just the Disputed Area, to the 1st defendant. Most of the Common Parts are for the common use of the Premises and/or the Building, such as entrance halls, lobbies, corridors, passages, staircases, lift shafts, lifts, lift machine rooms, pump rooms and transformer rooms. To treat that assignment as an exercise of the First Owner's right to designate the exclusive use of the entire Common Parts is contrary to the limited power reserved under Clause 5(f) of the DMC, i.e. over areas which are not for the common use of the Premises and/or the Building.

10. In relation to multi-storey buildings, ownership of undivided shares in land gives the co-owner the right of possession in common with other co-owners over the land and the building upon it. This is unity of possession. It does not carry with it the right to the exclusive possession of any particular part of the land and building, unless so provided by the DMC. In Jumbo King Ltd v. Faithful Properties Ltd, [1999] 4 HKC 707 at 719, Litton PJ held:

"The issue is simple. Prima facie, the co-owners of land have the right of possession in common to every part of the land. In relation to a multi-storied building there cannot be a proprietary right to the exclusive possession of part of the building except as an incident of common ownership in the land and building. The vendors were, at the time of the agreement, co-owners. They all derived their title ultimately from the developer. So long as the developer had the right of exclusive possession to the utility rooms and the roof spaces, he was able to pass such right to subsequent purchasers of undivided shares, including the vendors in this case. .......

As mentioned earlier, the proprietary right of a co-owner in a multi-storied building is the right to an undivided share in the land and building: Prima facie the owner is entitled to exert rights of possession to every part of the building, in common with his co-owners. This is what is meant by the expression 'unity of possession'. But by the deed of assignment and by the DMC the rights of exclusive possession to individual parts are marked out as between the co-owners."

11. Since the First Owner had not been given the right to exclusive use of the Disputed Area and indeed the entire Common Parts under the DMC, the right to use the Disputed Area belong to all the co-owners in common. The assignment of the 15 equal and undivided shares allotted to the Common Parts to the 1st defendant could make no difference. The assignment only gave the 1st defendant legal title, but not exclusive possession of any particular part of the Building. The 1st defendant has no more and no less right to the use of the Common Parts than any of the co-owners. However, this is not an ownership without substance. For example, after the 1st defendant has disposed of all its factory units, it still has the right to use the Common Parts by virtue of these 15 shares. Similarly, when the interest in the entire Building has to be disposed of, for example, for re-development or in case of compulsory acquisition, these shares give it a 15/17180th joint interest along with the other co-owners in the entire land and building.

12. My conclusion on this issue is therefore that the 1st defendant is the legal owner of the 15 equal and undivided shares in respect of the Common Parts, but does not have the exclusive right to use and enjoy the Common Parts or the Disputed Area to the exclusion of the other co-owners. Accordingly, collecting income in respect of the use of the Disputed Area amounted to conversion of the income which belonged to all the co-owners.

RIGHT TO SUE:

13. Mr Bok for the 1st defendant submitted that only the First Owner, i.e. Lac Kar or the 1st defendant as its successor in title has the right to sue in respect of the Common Parts and not the plaintiff; and alternatively, that the plaintiff as the owners incorporation does not have the right to sue in respect of wrongs committed before its incorporation.

Whether only the First Owner or the 1st defendant has the right to sue:

14. So far as I could understand, Mr Bok's argument is as follows. Only the 1st defendant as the owner of the 15 shares allotted to the Common Parts has the right to sue. Further and in the alternative, the assignment purporting to assign the 15 shares to the 1st defendant was void because it was ineffective in transferring exclusive possession of the Common Parts to the 1st defendant. Hence, Mr Bok submitted, the First Owner remained as the owner of the 15 shares allotted to the Common Parts and only it has the right to sue. While I have found that the assignment was ineffective in conferring the right to exclusive possession of the Common Parts to the 1st defendant, this does not mean the assignment was void for all intents and purposes. For reasons as explained above, the transfer was effective in transferring ownership in the 15 shares to the 1st defendant and all incidents of such ownership, but not the right to exclusive possession of the Common Parts which has been expressly reserved by the DMC to all the co-owners.

15. With respect, Mr Bok missed the issue here. The real issue is not who was or is the owner of the Common Parts, but who were or are entitled to the exclusive right to use and enjoy the Common Parts or the Disputed Area. I have held that the right to exclusive use and enjoyment of the Common Parts belonged and still belongs to the co-owners under the DMC. Certainly, the co-owners at the various times before the incorporation of the plaintiff had the right to sue in respect of the wrong committed prior to the incorporation of the plaintiff, while thereafter the plaintiff as the owners incorporation has the exclusive right to sue in respect of the Common Parts under section 16 of the Building Management Ordinance. This then leads me to Mr Bok's alternative argument.

Plaintiff's right to sue under section 16 of the Building Management Ordinance:

16. Mr Bok submitted that the plaintiff does not have the power or right to sue in respect of a cause of action which accrued before its incorporation. He referred to section 16 of the Building Management Ordinance, Cap 344 which provides:

"When the owners of a building have been incorporated under section 8, the rights, powers, privileges and duties of the owners in relation to the common parts of the building shall be exercised and performed by, and the liabilities of the owners in relation to the common parts of the building shall, subject to the provisions of this Ordinance, be enforceable against, the corporation to the exclusion of the owners, and accordingly - ......."

17. He submitted that on a proper interpretation of this section an owners incorporation may not enforce any right which accrued to the co-owners before incorporation. He drew support for this interpretation from Cheung J's dicta in Koo Sun Yiu v. Victorison Delivery Ltd & Ors, [1996] 4 HKC 152. The issue in that case was whether the owners incorporation was liable in respect of liabilities in tort committed prior to its incorporation. At page 154, Cheung J held:

"The first task in the construction is to look at the section to see if it contains provisions dealing specifically with liabilities prior to the incorporation. It does not. Nor does it specifically restricts the extent of the liabilities. All it provides is that when the owners have been incorporated, the liabilities of the owners in relation to the common parts of the building shall be enforceable against the corporation. Owner is defined in section 2 as meaning a person who for the time being appears from the Land Registry record to be the owner of an undivided share in the building.

Although the section may appear to be in wide terms, my view is that the corporation does not assume liabilities incurred prior to its incorporation. The corporation which is a distinct legal entity, this being clear from s 8(2)(a), and created by statute should only assume the prior liabilities if the Ordinance expressly so provides.

The owners in a multi-storey building may change from time to time. The owners may be different at the time of incorporation from those at the time of the accident, either wholly or partially. In construing s 16, the outcome should not depend on individual situation of a case such as the present, where all the owners at time of accident were also owners at the time of incorporation because there may be cases where the owners may be entirely different. Instead one should ask what is the intent of the legislation in respect of the liabilities of the owners that were incurred prior to the incorporation."

18. This decision was followed in Hang Yick Properties Management Ltd v. Incorporated Owners of Winner Building, [1999] 3 HKC 574. Both cases were about pre-incorporation liabilities but not about rights accrued before incorporation. By adopting a similar approach in statutory interpretation, Mr Bok submitted that the plaintiff has no locus standi to sue or to enforce rights accrued to the co-owners before its incorporation. He also drew support for his proposition from Halsbury's Laws of Hong Kong, Volume 6, page 129, which states the well established principle that a company is not bound by contract purporting to be entered into on its behalf by its promoters or other persons before its incorporation nor can it adopt or ratify such contract.

19. Mr Cheung for the plaintiff submitted that these decisions should be limited to liabilities of a personal nature and not those that run with land, otherwise these decisions would be inconsistent with the Court of Final Appeal decision in Chi Kit Company Limited and Loong Hock Limited v. Lucky Health International Enterprise Limited, FACV No. 18 of 1999. In that case, a visitor obtained damages against the owners incorporation for personal injuries which arose from an accident three years earlier. The owners incorporation was unable to satisfy judgment. The questions were whether the Lands Tribunal is empowered under section 17(1)(b) to give leave to enforce judgment against an owner who becomes owner after the date when the original liability was incurred and hence constitutes a blot on title. The Court of Final Appeal answered both questions in the affirmative. It held that the word "owner" in section 17(1)(b) means owner for the time being and that a liability which attaches to an owner for the time being is one which binds successive owners and thus runs with the property. In my view, that case is about post-incorporation liability and the decision is based upon the meaning of the word "owner" in sections 2 and 17(1)(b). In that case nothing was decided about pre-incorporation liability. I do not consider Koo Sun Yiu v. Victorison Delivery Ltd & Ors, inconsistent with Chi Kit Company Limited and Loong Hock Limited v. Lucky Health International Enterprise Limited.

20. For my part, I have no reason to depart from Cheung J's approach in interpretation of section 16, nor can I find any valid reason for distinguishing between pre-incorporation liability and pre-incorporation rights when interpreting that section. I therefore hold that section 16 does not give the plaintiff the right to sue in respect of pre-incorporation rights to the exclusion of the owners for the time being. Of course, in respect of post-incorporation rights, the plaintiff has the right to sue under section 16 to the exclusion of the co-owners for the time being. This proposition is not disputed by counsel for either the 1st or 2nd defendant.

Plaintiff's right to sue under the DMC:

21. My ruling on section 16 does not mean the end of the plaintiff's case in respect of pre-incorporation rights. The right which is being enforced is the right to the use and enjoyment of the Common Parts, in particular the right to enjoy the benefit of income generated from the Disputed Area. Conversion of the Disputed Area for the 1st defendant's own use as well as retention of the income generated therefrom to the exclusion of the other co-owners is a breach of the DMC. The right which is sought to be enforced was bestowed by the DMC on the co-owners qua owners of the Building. It is a right which runs with the property, as distinguished from liabilities of a personal nature against the co-owners at various points in time. This right may only be enforced by or against co-owners who are either parties to the DMC or are bound by the DMC. This distinguishes the present case from Koo Sun Yiu v. Victorison Delivery Ltd & Ors, and Hang Yick Properties Management Ltd v. Incorporated Owners of Winner Building, where an outside party sought to enforce against the co-owners a right in tort and not a right under the DMC. As it is a right which runs with the property, it has passed through successive owners to the present owners.

22. While the owners incorporation does not as such acquire the right to sue for breaches of the DMC committed before its incorporation, suing for those breaches must be a matter of which the co-owners for the time being has a common interest. To further that interest, the plaintiff has the discretion under section 18(2)(g) of this Building Management Ordinance to sue on behalf of the co-owners, into whose hands the right to sue for pre-incorporation breaches has passed.

23. In addition, the plaintiff, which has stepped into the shoes of the Manager, has the right to sue under the DMC in respect of breaches of the DMC. Under Clause 1 of the DMC, "the Manager" is defined to mean the 2nd defendant "or the Corporation incorporated under the Ordinance in accordance with the provisions of this Deed as the case may be"; and "Ordinance" is defined to mean the Multi-Storey Building (Owner's Incorporation) Ordinance, which has been replaced by the Building Management Ordinance. Thus by virtue of these provisions, the owners incorporation as the present Manager has all the power the 2nd defendant once had under Clause 8(h) of the DMC including the power to commence proceedings for recovering damages for breach of the DMC. Clause 8(h) provides as follows:

"The Manager shall further have power to commence proceedings for the purpose of enforcing the observance and performance by any owner of any one or more undivided shares in the Premises and/or the Building and any person occupying any Workshop through under or with the consent of any such owner of the covenants, conditions and provisions of this Deed and of recovering damages for the breach non-observance or non-performance thereof. The provisions of paragraph (d) (e) and (f) of this Clause shall apply to all such proceedings and to the recovery of any costs damage or other moneys awarded therein."

Thus by virtue of this clause, this power of the incorporation to sue is exercisable by this plaintiff as the Manager under the DMC, in respect of pre- as much as post-incorporation rights.

24. Thus the plaintiff has the right to sue in respect of pre-incorporation rights under the DMC and section 18(2)(g) of the Ordinance, while its right under section 16 to sue to the exclusion of the co-owners in respect of post-incorporation rights is beyond dispute.

The 1st defendant's defence:

25. The 1st defendant did not call any evidence. Mr Bok only sought to argue on points of law, i.e. that the 1st defendant was and is the owner of the Common Parts and that the plaintiff has no right to sue. I have dismissed those arguments. Another point raised by Mr Bok is that the plaintiff has failed to discharge the burden of proving what is pleaded in paragraph 12 of the Statement of Claim, i.e. that the First Owner of the Building had given approval to the allocation or designation of the parking spaces on the ground floor in accordance with Clause 8(b)(i) of the DMC so that the parking fees collected should be deposited into the Management Sink Fund for the benefit of the co-owners. In my view, this failure of the plaintiff does not assist either of the defendants. Whether the First Owner had given approval to the designation is immaterial. What is material is whether the 1st defendant has the right to exclusive possession of the Common Parts. If it has not, then collection of income therefrom to the exclusion of the other co-owners is a conversion of the Common Parts and a breach of the DMC. On the fact, I find the 1st defendant was in breach of the DMC and is liable to account for the income to the plaintiff and to reimburse the co-owners the staff costs paid to the 2nd defendant for the purpose of collecting parking fees.

The 2nd defendant's defence:

26. The case against the 2nd defendant is that it is a party to the DMC and the Manager of the Building appointed in accordance with the DMC and it assisted the 1st defendant in the breach. The defence is that the 2nd defendant had entered into a parking agreement with the 1st defendant in accordance with Clause 8(b)(1) of the DMC in the discharge of its duty as the Manager for the benefit and convenience of the owners of the Building. The ground floor of the Building where the parking spaces and the Disputed Area are located is a narrow passage between the entrance at Hoi Shing Road and the exit at Chai Wan Kok Street. There are pillars in the middle. On one side of this row of pillars are the utility rooms, lobby and seven lorry parking spaces. On the other side is the Disputed Area and six car parking spaces. Opposite to the Disputed Area are four lorry parking spaces, L4 to L7. Because of the position of the pillars, lorries with unladden weight exceeding 3.3 tonnes cannot manoeuvre into these lorry parking spaces and the Disputed Area cannot be used for parking as it had to be kept clear to enable access to and from the spaces at L4 to L7. Under this alleged parking agreement, all of the 1st defendant's 21 parking spaces were to be managed by the 2nd defendant. Lorry parking spaces L4 to L7 were re-designated as car parking spaces, while the Disputed Area opposite was to be used for parking container trucks or large lorries. Access for container trucks was made easier, while the number of car parking spaces was also increased by three. These were the benefits to the users of the Building. Under this arrangement, all parking fees collected, including those from the Disputed Area, were handed over to the 1st defendant.

27. This alleged parking agreement was not documented, though the content of the agreement was referred to in the correspondence from the 2nd defendant's solicitors to the plaintiff's in January 1999, after litigation has commenced. Surprisingly, the existence of this agreement is not even raised as a defence by the 1st defendant in its pleading or supported by any evidence from the 1st defendant, who was allegedly a party to the agreement and the majority co-owner having the control and management of the Building. The only witness called by the 2nd defendant was Mr Yu, the supervisor employed by the 2nd defendant in the management of the building, but he had no knowledge of this agreement. When he started working in the Building, this arrangement had already been in place. In fact Mr Yu's evidence is that he was not aware of the agreement but simply assumed that the 1st defendant was the owner of all the parking spaces.

28. Mr Ho, for the 2nd defendant, submitted that the agreement was a necessary trade off to provide the much need container parking facilities for users of the Building. He submitted that for the benefit of users of the Building, the 1st defendant gave up its right to collect parking fees for his six car parking spaces, C1 to C6, and for its four lorry parking spaces, L4 to L7, but in return it only received parking fees for three or sometimes four lorries parking in parking spaces C1 to C6 and on the Disputed Area and car parking fees for its four lorry parking spaces L4 to L7. I do not think that is a fair or complete picture of the situation. Not only that the 1st defendant suffered no detriment under that arrangement; indeed it had everything to gain. Firstly, the 1st defendant benefited from the three additional car parking spaces created. As a result it was able to collect parking fees for seven instead of six car parking spaces. Secondly, the parking charge for cars and light goods vehicle was $5 for the first half hour and $10 for each half hour thereafter, while that for container trucks was a flat rate of $25 for each half hour. The 1st defendant was able to collect the much higher rate of parking fees for three or four large lorries or container trucks while it might not be able to use its lorry parking space, L4 to L7, for parking lorries over three tonnes anyway because of the obstruction by the pillars and the height clearance. In addition, it also had the free services of the 2nd defendant in managing the car park and collecting parking fees not just in respect of the parking spaces under the alleged trade off but also for all its parking spaces. On the other hand, the co-owners paid the 2nd defendant over $10,000 a month in respect of staff costs for collecting parking fees for the 1st defendant but had no share in the parking fees from the Common Parts and the three additional car parking spaces created. Though in the total absence of fee collection data, I am unable to say how much the 1st defendant had benefited, the arrangement was overtly in favour of the 1st defendant and unfavourable to the co-owners.

29. According to Mr Chui, the chairman of the owners incorporation, the parking arrangement was not really necessary as there was free street side loading available then as it is today and users of the Building preferred free street side loading to paid hourly parking within the Building premises. The 2nd defendant's supervisor offered little to contest that evidence of Mr Chui. Mr Chui impressed me as a simple, frank and straight forward witness. I accept his evidence that the demand for large lorry or container truck parking was not such as to make it necessary for the 2nd defendant to enter into the type of parking arrangement. I do not think it is likely that the co-owners would have entered into such an unfavourable arrangement which was overtly favourable to the 1st defendant and unfavourable to the co-owners.

30. Mr Ho submitted that the long course of conduct from 1989 to mid 1999 supported the existence and terms of the agreement. With respect, I cannot agree. Between 1989 and 1997, the 1st defendant by his majority share holding had the control of the management of the Building and hence the 2nd defendant. The total absence of documentation in support of the agreement and the belief of the supervisor all tend to support the fact that 2nd defendant acted under the erroneous belief as matter of law and of fact that the 1st defendant was the owner of all the parking space and the Common Parts and was entitled to collect parking fees on the ground floor. I reject the 2nd defendant's allegation of parking agreement as a recent invention. It is not even supported by the 1st defendant's pleading. The 2nd defendant as the Manager appointed under the DMC had constructive if not actual knowledge of the provisions of the DMC and that the right to enjoy the Common Parts had been reserved to all the co-owners. If the 2nd defendant had actual knowledge of the co-owners' right to enjoy the Common Parts, it knowingly assisted the 1st defendant's breach of the DMC. If it did not have actual knowledge, it was negligent in the discharge of its duty as the Manager. In either event, it is liable to account to the plaintiff for the parking fees collected and handed over to the 1st defendant and for staff costs incurred in their collection.

Quantum:

31. The defendants are liable to the plaintiff in respect of income derived from the Common Parts and in respect of wasted staff costs in collecting parking fees for the 1st defendant.

32. No separate accounts in respect of income from the Common Parts and from the 1st defendant's own parking spaces have been kept for the period May 1989 to June 1998. It is not known to what extent the 1st defendant's parking income was affected by the arrangement. The total income for this period was $4,565,840.00. The plaintiff took over the management of the Common Parts and collected parking fees of $165,455.00 for the six and half months from 18 January 1999 to 31 July 1999. According to data from the 2nd defendant, for the six months from July 1998 to December 1998, the income from the Common Parts and from the whole of the ground floor were $56,420.00 and $231,545.00 respectively. On the basis of these figures the income from the Common Parts amounted to 24.37% of the total income. This tallies approximately with the percentage floor area of the Disputed Area as compared with to the total parking area. But on the other hand, income from container truck or lorry parking was much more than that from car parking. Mr Bok submitted that the plaintiff's damages for May 1989 to June 1998 should be assessed as 24.73% of the total income.

33. On the other hand, Mr Cheung submitted that from the above data, the total income from the Common Parts from July 1998 to July 1999 was $221,875.00 (i.e. $56,420.00 + $165,455.00), making an average monthly income of $17,609.10 and that the average monthly income from the whole of the ground floor for the 110 months from May 1989 to June 1998 was $41,507.64 (i.e. $4,565,840÷110). He submitted that the plaintiff's damages should be assessed as a percentage which the average monthly income from the Disputed Area during 1998/99 has to bear on the total income from 1989 to 1998, i.e. 42.42% ($17,609.10÷$41,507.64 X 100%). Mr Bok criticised this calculation as using data for different periods for comparison.

34. Mr Bok's formula offers superficial clarity, but I consider the data inherently unreliable. The income from the Disputed Area collected by the 2nd defendant for the six months from July to December 1998 was just about one third of what the plaintiff collected in the six months that immediately followed. The data from both the plaintiff and the 2nd defendant could be subject to manipulation. However, manipulation by way of under-collection by the 2nd defendant in view of the pending litigation was more likely than by inflating the amount collected from the Common Parts by the plaintiff. This is because the collection by the plaintiff is documented and supported by bank documents. It is unlikely that someone would make over-payments to inflate the income, whereas under-collection could be easily effected by misappropriating income from the Disputed Area to the 1st defendant's parking spaces. I therefore take the view that it is unreliable to make my assessment on the basis of the 2nd defendant's data for the six months from July to December 1998 alone. I consider it fairer to assess the plaintiff's damages using the average monthly income from the Disputed Area from July 1998 to July 1999, which has incorporated inputs from both the plaintiff and the 2nd defendant. On that basis I assess the plaintiff's damages for the 110 months from May 1989 to June 1998 and from July 1998 to July 1999 as $1,993,421.00 (i.e. $17,609.10 X 110 + $56,420.00).

35. The 2nd defendant also incurred additional staff costs in collecting parking fees for the 1st defendant. According to Mr Yu, 4 to 6 caretakers were employed at various times, but three only would have been sufficient if the 2nd defendant was only required to manage the Common Parts without having to collect parking fees for the 1st defendant. I adopt the following formula in calculating the wasted staff costs:

[A÷B] x [B - 3] x C

where

A = Total annual emoluments for car park attendants

B = Number of car park attendants employed in the year

C = Number of months during the period

Using this formula and the data provided by the 2nd defendant, I assess the wasted staff costs as $1,537,880.25 which is calculated as follows:

36. Accordingly, I enter judgment in favour of the plaintiff against the 1st and 2nd defendants jointly and severally in the amount of $3,531,301.25 (i.e. $1,993,421.00 + $1,537,880.25) together with interest at judgment rate from 17 September 1998. In view of the damages awarded, I do not consider it necessary to grant any other relief sought, save to order the 2nd defendant to pay over the parking fees now held by it pending litigation which shall be taken into account in the damages to be paid. I make an order nisi that the plaintiff shall have costs against the 1st and 2nd defendants jointly and severally.

37. I also make an order by consent that the 1st defendant shall indemnify the 2nd defendant of all loss and damages arising from and in connection with the plaintiff's claim inclusive of interest.

Representation:

Mr Ernest W H Cheung, instructed by Messrs Ho & Tam, for the Plaintiff

Mr Bok Tin Yuen, instructed by Messrs Johnny Chu & Co, for the 1st Defendant

Mr B K Ho, instructed by Messrs Wong Poon Chan Law & Co, for the 2nd Defendant

Remarks:
On appeal by the 1st and 2nd to Court of Appeal. Appeal dismissed. Please refer to the Appeal Judgment CACV000381/2001.