Mirador Mansion Owners and Tenants Association Ltd and Others v. Chan Tak Tai and Others
Read the full judgment text of HCA 539/1967 on BabelCite. This High Court CFI judgment.
1. I shall begin this judgment by recording what appears to have happened since the original writ of summons issued on 5th May 1967. In the original writ the plaintiffs were described as:-
Cited by 5 cases
|
IN THE SUPREME COURT OF HONG KONG ORIGINAL JURISDICTION ACTION NO. 539 OF 1967 -----------------
----------------- Coram: Blair-Kerr, J. Date of Judgment: 25th April 1970 ----------------- JUDGMENT ----------------- 1. I shall begin this judgment by recording what appears to have happened since the original writ of summons issued on 5th May 1967. In the original writ the plaintiffs were described as:-
There were 174 named defendants; and between 31st May and 14th September 1967 service of the writ was apparently effected upon the following:- Nos. 1, 2, 3, 4, 7, 9, 10, 11, 12, 13, 14, 15, 16, 18, 19, 23, 25, 26, 29, 31, 34, 36, 38, 39, 41, 43, 52, 54, 55, 57, 60, 61, 62, 63, 64, 65, 66, 67, 68, 70, 71, 72, 73, 74, 75, 78, 79, 80, 82, 84, 85, 88, 90, 91, 95, 97, 101, 106, 108, 111, 112, 116, 119, 122, 125, 128, 131, 133, 136, 137, 141 (1st named), 144, 145, 146, 147, 149, 150, 155, 157, 160, 165, 167 and 168. (Total 83.) 2. On 22nd November 1967, upon the application of the plaintiffs, the Registrar ordered substituted service of the writ (which had been amended in certain minor respects) upon the 5th, 20th, 21st, 28th, 30th, 37th, 77th and 143rd defendants; and this order was complied with. 3. Therefore 91 defendants were served with the original writ either personally or by substituted service. It does not appear that any of the other defendants named in the original writ were served. 4. On 29th November 1967 the Registrar gave the plaintiffs leave to amend their writ:-
The writ was amended accordingly; and a statement of claim was filed on 16th January 1968. 5. In March 1968 the 1st, 2nd, 3rd, 60th, 62nd, 63rd, 64th and 66th defendants applied to Huggins J. under 0.18 r.19 for an order that the endorsement of the writ and the statement of claim be struck out on the ground that it disclosed no cause of action against these defendants. 6. There is no record before me of what happened before Huggins J.; but counsel who appeared on behalf of the applicants (Mr. Zimmern) informed me that before the learned judge he submitted that the Mirador Mansion Owners and Tenants Association Ltd. had no locus standi to sue firstly because they were not an "owner" or "tenant" of Mirador Mansion and secondly because they could not sue in a representative capacity. I am informed by counsel that the learned judge upheld this submission, and that he would have struck out the writ and the statement of claim as disclosing no cause of action, but that he gave the plaintiffs an opportunity to amend. On the file there is an order dated 1st June, 1968 in which the learned judge ordered,
No order was made dispensing with re-service; but it does not appear from the court file that the "amended" statement of claim was served on any of the defendants. 7. In this amended statement of claim the name of the plaintiffs was still the Association suing "on behalf of themselves and all co-owners except the 1st defendant and the other defendants who are co-owners". Mr. Zimmern has informed me that the learned judge gave the plaintiffs one further opportunity to amend their pleadings. This account of what happened before Huggins J. seems to be confirmed by Mr. Bernacchi who, in his closing address, said:-
which the plaintiffs did; and, on 21st February, 1969, Huggins J. ordered that they be at liberty to re-amend the writ:-
The learned judge also-ordered as follows:-
8. Pursuant to this order, substituted service appears to have been effected, as previously, upon the 5th, 20th, 21st, 28th, 37th, 77th and 143rd defendants, and personal service appears to have been effected upon the 26th, 41st, 95th, 141st, (1st named) 144th, 145th, 146th, 167th, 177th, 178th and 179th defendants. Certain firms of solicitors accepted service of the re-amended statement of claim on behalf of their clients, as follows:-
Placing the numbers of these defendants in sequence, it appears that the following were served with the re-amended writ:-
9. The action as against the 13th and 30th defendants was dismissed by Briggs J. in Chambers on 25th July 1969. 10. The trial commenced on 2nd March 1970. Mr. Bernacchi and Mr. Asome appeared for the 1st and 2nd plaintiffs. Mr. Zimmern and Mr. Martin Lee appeared for the 1st 2nd and 3rd defendants. Mr. Miu appeared for the 7th, 9th, 12th, 14th and 39th defendants. The only other defendants present in court were the first-named 95th defendant (Alice Leung) and the 143rd defendant (Lung Tong Miu Hing). They appeared in person. They asked to be excused from attending the trial; and when it was explained to them that their attendance in court was a matter for them to decide, they left court; and their only other appearance was towards the end of the case when they gave certain evidence. 11. Mr. Bernacchi announced at the beginning of the trial that he was discontinuing the action against the 26th defendant (Hasso G. Moorjani). Mr. Bernacchi also requested that the names of three of the second plaintiffs be struck out of the writ and statement of claim viz:-
12. The action against the 165th defendant was discontinued on the second day of the trial (3rd March 1970). Mr. Bernacchi said:-
13. On the third day of the trial, Mr. Bernacchi announced that he was discontinuing the action against Mr. Miu's clients viz. the 7th, 9th, 12th, 14th and 39th defendants. 14. Therefore, at that stage, the position was that the action had been either discontinued or dismissed as against the following defendants:- 7th, 9th, 12th, 13th, 14th, 18th, 26th, 30th, 34th, 39th, 49th, 54th, 56th, 79th, 97th, 116th, 125th, 133rd and 165th defendants. (Total 19). Of the defendants served with the original writ in 1967, this left:-
Of the 34 defendants served with the re-amended writ and re-amended statement of claim pursuant to the order of Huggins J. dated 21st February 1969, there remained the following:-
15. Assuming for the moment that these 25 defendants are properly before the court, what is the position as regards the following defendants:-
Defendants Nos. 1, 2, 3, 5, 20, 21, 28, 37, 41, 60, 62, 63, 64, 66, 77, 95, 141 (1st named), 143, 144, 145, 146 and 167 (Total 22) appear to have been served with both the original writ and the re-amended writ and re-amended statement of claim. Are the above 25 defendants the only defendants which are properly before this court? Or are there 77 defendants before the court namely:-
16. On raising this matter at the commencement of the trial, Mr. Bernacchi appeared to be under the impression that the 174 defendants named in the writ dated 5th May 1967 had all been served with that writ; but upon his checking with his instructing solicitor as to what the position was, he said that it came as a surprise to him that so many defendants named in that writ had not been served in 1967 and that only a relatively small number had been served with the re-amended writ and statement of claim pursuant to the order of Huggins, J. dated 21st February 1969. 17. Mr. Bernacchi submitted that I should regard the above 77 defendants as being properly before the court. I shall deal with that submission after I have reviewed the evidence. Meantime I would merely add that, according to the court file, the following defendants entered an appearance:-
18. A number of those served with the original writ and statement of claim or the re-amended writ and statement of claim have, at various times, filed statements of defence, as follows:-
19. The 1st defendant is a property developer. Prior to 1956 he was sole proprietor of a business called the Tai Cheung Construction Company (referred to throughout this trial as "the unlimited company"). The 2nd defendant company which is the successor of the unlimited company was incorporated on 5th November 1956 with an authorised capital of $2,000,000 divided into 10,000 shares of $200 each. The only shareholders are the 1st defendant and his wife. He holds 2,400, and his wife holds 100, shares. They have been directors of the company since its incorporation, but two employees of his (Woo Chan Sum and Chan Ming Shan) were appointed directors in 1957. 20. There is no doubt at all that the 2nd defendant company is entirely under the control of the 1st defendant. It was this company which developed the site on which there now stands Mirador Mansion, a large multi-storey building the address of which, as given in various documents registered in the Land Office, is 54, 54A, 56, 56A, 58, 58A, 60, 60A, 62, 62A, 64, 64A and 64B Nathan Road; 1A, 1B, 1C, 1D, 1E, 1F, 1G, 1H, and 1J Nody Road; 3, 5, 7, 9 and 11 Bristol Avenue; and 1A, 3, 3A, 5, 5A, 7, 7A, 9 and 9A Carnarvon Road, Kowloon. 21. The Conditions of Regrant (or Renewal) relating to the development of the site is numbered 5804 and was signed by the 1st defendant on 3rd September 1957. The Crown Rent is stated to be $306 per annum until 1978 and $4,362 per annum for the remaining period of the lease which, if granted, will be for 150 years as from 25th December 1903. The premium is $2,274,106 payable in 30 equal annual instalments of $140,995. General Conditions 4(c), 6(a), 6(b), 7, 9, and 10, so far as relevant, read:-
Special Conditions (b) and (1) read:-
The words "for the parking of motor vehicles" appears to have been intended by the Crown to mean that the developer should provide parking space for vehicles owned by residents in the building to be erected on the site, presumably in the basement. It is common ground that no space has been provided for the parking of vehicles owned by residents of Mirador Mansion. But the Crown is not a party to these proceedings; and the statement of claim does not raise any issue as to whether the lot has been developed in accordance with the General and Special conditions. 22. When the building was in course of construction the 1st defendant issued a brochure (Ex. Z) the object of which was apparently to give prospective purchasers of shops and flats an idea of what they would be paying for. There is a sketch plan at the end of this brochure showing the location of Mirador Mansion and other buildings in the immediate vicinity. Today, of course, the President Hotel occupies a site on the opposite side of Nathan Road and the Imperial and Ambassador Hotels are nearby. But when Mirador Mansion was being built, these hotels had not been built. A witness called by the defendants (Lo Shung Wing) said that in 1957 there was old property on the sites where the President, Imperial and Ambassador Hotels are now. 23. The building was completed in 1959; but most of the agreements for sale and purchase of the shops and flats were executed long before the building was completed. Shortly before this case began, the records in the Land Registry were examined. The results of this search were embodied in a document (Ex. E) which was put in as an agreed document. From a cursory glance at the right hand column of Ex. E, the position as regards sale and purchase agreements appears to be:-
I gathered from the evidence that a considerable number of prospective purchasers had no intention of residing in the building. Indeed, the 95th and 143rd defendants frankly admitted that they had each purchased a flat purely as an investment; that they had never lived there, and that they had, from the beginning, let the flats out to tenants on a monthly basis. 24. The building consists of a basement and seventeen floors. Paragraph 2 of the occupation permit dated 8th July, 1959 (Ex. S) reads:- "Permission is hereby granted to occupy and use the building for the purpose stated hereunder:- In other words, planning permission had been given on the footing that the basement would be used as a carport, that the ground, 1st and 2nd floors would be a shopping arcade consisting of 193 shops, and that the upper floors consisting of 498 units, to all intents and purposes would be used for residential purposes only. 25. Although, it is not a matter which is in issue in this case, I would mention here that the figures in the occupation permit do not tally with the plans which are attached to a Deed of Mutual Covenant dated 28th April 1960 (Ex. A2). It is common ground that the shopping arcade consists of the following:-
There are 36 flats on each of the floors from the 3rd to the 16th floor (14 storeys). The flats bear the numbers A, B, C, D, E, and F. On each of the 14 upper floors there are 15 flats marked A1 to A15; 5 flats marked B1 to B5; 4 flats marked C1 to C4; 4 flats marked D1 to D4; 4 flats marked E1 to E4; and 4 flats marked F1 to F4. (Total 36 flats). All flats bearing the same letter are of approximately the same size except the D1, E1 and F1 flats which are considerably larger than the other D, E, and F flats. For example, flat D1 on each of the upper floors, appears to be 29' 10" x 36' 5" (approximately, 085 sq. ft.) whereas flat D2 appears to be 14' 6" x 36' 5" (approximately 529 sq. ft.). The C flats are smaller than the A and B flats. Whereas the latter are approximately 15' x 46' (690 sq. ft.) the former are approximately 15' x 35' (525 sq. ft.). 26. On the ground floor, the shops vary considerably in size. For example, shops Nos. 5 and 6, according to the plan, appear to be one unit. The floor space of each is 655 sq. ft. and 627 sq. ft. respectively. If the two shops were sold as one unit (as the plan appears to suggest) the floor space would be 1,382 sq. feet. Shops Nos. 7 to 11 are each approximately 840 sq. feet; shop 30 is 602 sq. feet; shop 35 is 542 sq. feet; shop 47 is 447 sq. feet; shop 52 is 326 sq. feet; shop 53 is 232 sq. feet; shop 51 is 148 sq. feet; shop 61 is 50 sq. feet; shop 63 is 20 sq. feet; and as regards shop 65 (if it is a shop and not simply a show case), the plan does not indicate any measurements. Certainly it is a very small unit indeed. 27. The variations on the 1st and 2nd floors are not so marked, but on the 1st floor the shops do vary in size from 562 sq. feet (shop 60) to 70 sq. feet (shop 73). A considerable number are in the 220-320 sq. feet bracket. The same is true as regards the 2nd floor. For example, shop 27 is 622 sq. feet; shop 60 is 562 sq. feet; shop 68 is 348 sq. feet; shop 45 is 176 sq. feet; and shop 72 is 50 sq. feet. 28. On the ground floor there is an area between the escalators and the lifts which is marked "court" on plan 2. According to the evidence, it was originally intended as a garden. The upper floors are arranged round one large central light well. 29. Ingress and egress to and from the upper floors is by the shopping arcade on the ground floor. There are 4 entrances to this arcade. There are escalators to the first and second floors and lifts to floors Nos. 3 to 16. There are also four staircases from the ground level to the roof. One leads to Bristol Avenue from the upper floors. Another leads to Mody Road near Bristol Avenue. Another leads to Mody Road near Nathan Road; and another leads to Carnarvon Road. There is another stair from the ground floor to the basement on the Carnarvon Road side adjacent to the stair from the upper floors. There stairs were referred to in evidence sometimes as fire-escapes or "escape routes", the latter being a phrase used in a report (Ex. UU) by an architect (C. Haffner) who visited the building on the 4th and 8th March 1970 and wrote 2 reports on the state of the building (Exs. TT and UU). 30. All the agreements for sale and purchase and the subsequent assignments of the units appear to have been executed in the offices of Messrs. Lo and Lo, the 1st defendant's solicitors; and on each occasion this firm acted as solicitors for both parties. No assignments were executed in 1959; the first documents of this nature were signed on 24th April 1960. Between that date and 31st December 1960 some 515 assignments were executed; and in 1961 143 assignments were executed. One of the assignees in 1960 was a Mr. David Anthony Paulie and his assignment (Ex. B4 in respect of shop 60 on 2nd floor) was executed on 15th November 1960. It appears from Ex. E that some 500 assignments of units in Mirador Mansion had been executed prior to the 15th November 1960. 31. The assignments executed by the 1st defendant on 28th April 1960 were the following:-
On the same day (28th April 1960) the 1st defendant entered into a Deed of Mutual Covenant (Ex. A2) with the above four assignees. The recitals read in part:-
The Second Schedule reads:-
Clauses 1-7, 10, and 11 of the Deed of Mutual Covenant, so far as relevant, read:- "1. Each of the parties hereto for himself and his executors administrators and assigns hereby grants unto each of the other parties hereto and their or his respective executors, administrators and assigns full right and privilege to hold and enjoy to the exclusion of the grantors the part of the said building set out in the Second Column of the First Schedule hereto opposite to the respective names of the grantees as set out in the First Column of the said First Schedule To The Intent that each of the parties hereto shall be entitled to the exclusive use occupation and enjoyment of the other part of the said building so set out opposite to his name as aforesaid. 32. Clause 13 gives each party the right to sell or dispose of his "share" in the building and to let "any part ....... to which he is entitled hereunder" to any tenant. But it is provided that
33. Clause 15 provides that:-
34. Clause 16 of the Deed reads:-
35. Clause 15 appears to contemplate meetings of different groups of co-owners for different purposes; and from sub-clause (j) it appears that all resolutions may be passed by a simple majority of the owners entitled to attend and vote on the particular matter under discussion. 36. For example, there might be a meeting of "owners of shops and units on the basement, ground, first and second floors" to discuss matters under clause 7; or a meeting of "owners of the shops on the first and second floors" to discuss matters under clause 5; or a meeting of "owners of flats and units on all floors from the 3rd to the 16th floors" to discuss matters arising under clause 6, or a meeting of "owners ........ of units that is to say shops or flats for the time being owned by such owners" to discuss matters under clause 4 and with regard to meetings to discuss matters under clause 4 and with respect to the sharing of expenses of the items mentioned in that clause, it is agreed that the basement, for these purposes, shall be deemed to consist of 36 units. In other words, the voting power of "owners" of the basement is limited to 36 votes and it would appear that the basement may not be divided up into more than 36 "parts". But there is nothing in the Deed of Mutual Covenant to say that the basement may not be divided up into a lesser number of units of widely varying sizes. 37. As regards clause 3, section 3 of the Law of Property (Enforcement of Covenants) Ordinance reads:-
"Owner" is defined by the Ordinance thus:-
38. In the left hand column of the Second Schedule to the Deed of Mutual Covenant there appears opposite to the names of the Peninsula Taxi Co. Ltd., George Zee, Woo Chung Ming, and Fung Tze Shing the number of undivided shares of the building of which each is respectively the owner; and in the right hand column there appears details of shops, flats and other areas in respect of which each party to the Deed is given "exclusive use, occupation and enjoyment" under clause 1. 39. Opposite the 1st defendant's name there appears details of the remaining shops and flats on the ground to the 16th floors. There also appears the following:-
And the last item opposite the first defendant's name reads:-
These are the areas on the various floors (including the basement and the roof) in respect of which, according to the Deed, the 1st defendant was given "exclusive use, occupation and enjoyment" by clause 1 of the Deed. There would appear to be a typing error in the paragraph enumerating the shops on the second floor in respect of which the 1st defendant is given exclusive possession. It states "shop Nos. 1-74 inclusive". According to plan No.4 attached to the Deed, there are 73 shops on the second floor. 40. Clearly the parties to the Deed divided up the building into 752 undivided shares; and the number of undivided shares of the building of which each party was declared to be the owner was set out in the First Schedule as follows:-
41. The assignments were all in substantially the same form. Taking Ex.B4 (Mr. Paulie's assignment) as an example, the recitals commence by a reference to the Deed of Mutual Covenant and to the Conditions of Renewal, thus:- "Whereas at the date of the Deed of Covenant ........... all that one equal undivided seven hundred and fifty second part or share of and in all that piece or parcel of ground ............... was vested and now remains vested in the Vendor absolutely under and in accordance with .... Conditions of Renewal 5804. The vendor assigns:-
The assignment also assigns:-
The vendor then covenants with the purchaser that
And the purchaser covenants with the vendor that he
42. As I have said, the vast majority of the shares in and parts of Mirador Mansion were assigned during 1960 and 1961. Apart from the basement (which I shall deal with presently), at the beginning of 1963 there were still 23 shares and parts in respect of which assignments had not been executed, although sale and purchase agreements had been executed in 1957 and 1958 in respect of the vast majority of these. Particulars are as follows:-
43. Whatever may have been the original intention as regards the use of the basement by residents in the upper floors of Mirador Mansion, it is common ground that the exclusive use of all parts of the basement (other than the right of way, switch room and such like areas) have been assigned by the 1st defendant, as follows:-
The 1st defendant also assigned the roof to Hoe Hin Investment Co. Ltd. on 19th June, 1962 (Ex.E page 39). The assignment is Ex.B68. 44. Although it is not apparent from the terms of the assignment the proportion of premium payable annually by each assignee is calculated on the basis of $65 per $10,000 of consideration. In other words if the purchase price of a share of the building was $10,000, the annual premium was fixed at $65. It appears from Ex.W page 21 that the whole building has now been sold by the 1st defendant for $21,691,524; and the total of all sums which assignees have convenanted to pay by way of premium is $141,507.95, that is to say $512.95 more than the annual instalment payable to Government by 1st defendant. Of course, under the Conditions of Regrant, the first instalment of premium was payable on or before 17th September 1957; the second instalment was payable on 25th December 1957; the third instalment was payable on 25th December 1958; and the fourth instalment was payable on the 25th December 1959; and so on annually. It is evident from Lowe Bingham & Mathews' audited accounts (Ex.D p.11) that assignees only began to contribute towards the fourth and subsequent instalments. 45. In certain letters (which I shall come to) written by the Chairman of the 1st plaintiff association prior to the commencement of these proceedings in 1967, it was being maintained that 12/752 parts of the building were in the name of the 1st defendant. Indeed paragraph 2 of the statement of claim reads:-
In his defence, the 1st defendant pleads (para. 2):-
46. On the first day of the trial Ex.F was put in evidence by the plaintiffs. This document purported to represent the results of a search in the Land Office records as at 20th October 1966 and appears to have been put in evidence with a view to proving that the 1st defendant had "reserved to himself parts of the said building". Mr. Zimmern did not accept the accuracy of this document; and eventually Mr. Bernacchi agreed that the defendants' document (Ex.W) was accurate. 47. On the very last day of the trial when Mr. Asome was endeavouring to explain the reliefs claimed by the plaintiffs, he took the opportunity of amending finally paragraph 15 of the statement of claim, which now reads:-
I do not understand the allegation in the latter part of this paragraph. Clause 4 of the Deed of Mutual Covenant deals with Crown rent, and the Deed makes no reference to the payment of proportion of premium. On the last day of the trial, counsel for the plaintiffs finally abandoned all allegations and claims in relation to Crown rent and amended the statement of claim accordingly. I shall come back to the question of premium later. But meantime, I shall examine the plaintiffs' allegation (expressed in different language in paragraphs 2 and 15) that the 1st defendant is still the owner of "parts of the said building". 48. Ex. F. was put in evidence before paragraph 15 was finally amended; and in putting this document in evidence it would appear that the plaintiffs were endeavouring to prove that: Shop 64 (ground floor) (which are items (1), (5), (12), (13), (15), (18), (20), and (21) on the above list) had not been assigned by 1st defendant on 20th October, 1966. Clearly Ex. W is the result of a search undertaken on a date subsequent to 20th October, 1966 because it purports to show that all these units have been assigned. The plaintiffs' solicitor produced the memorials relating to the registration of the assignments in respect of Shop 64 ground floor, which was assigned together with a portion of the basement marked purple on plan 1, to Wang Yip Construction Co. Ltd. (Ex. HH); Shop 42 2nd floor (Ex. II); flats B.3 and B.4 8th floor (Ex. JJ); flat B.5 9th floor (Ex. KK); flat R1 14th floor (Ex. LL); flat E.3 15th floor (Ex. MM); and flat B.4 16th floor (Ex.NN). 49. But throughout the trial, the plaintiffs' contention was that the 1st defendant is still the legal owner of: Flat F.2 12th floor; 50. As regards flat F.2 12th floor, there was an agreement dated 5th September, 1958 for the sale and purchase of this flat (Ex. E. page 31). The "name of the assignee" is not given - presumably because no assignment has yet been registered. There was another agreement dated 11th February, 1960 for the sale and purchase of this flat (Ex. B.67). Mr. Stevenson said that no assignment has yet been registered in respect of this flat; but he agreed with Mr. Zimmern that the absence of any record in the Land Office of an assignment having been registered might mean nothing more than that the prospective assignee has either not called for an assignment or that he has not paid the solicitors fees or the stamp duty, or both. Mr. Stevenson agreed that if there was no question of mortgaging or further assigning the flat, the prospective assignee might well consider that there was no immediate neccssity to call for an assignment. Of course, he was merely expressing an opinion as an experienced solicitor. 51. As regards the assignment (Ex. B.66) in respect of shop 8 1st floor, it is undated and unstamped, and consequently not registered in the Land Office. Mr. Stevenson was asked by Mr. Zimmern if he could, as an experienced solicitor, express any view as to why an assignment such as Ex. B.66 should not have been registered. His answer was:-
52. However, Mr. Bernacchi submitted that Ex. B.66 is a worthless piece of paper in the absence of some evidence either from the 1st defendant that he had ceased to have any beneficial interest in shop 8, 1st floor, or evidence from the purchaser that he had paid the purchase price, or that he had entered into possession of the shop and intended to complete. 53. I do not agree with this submission. In the light of Mr. Stevenson's evidence, and the fact that, on the face of the document, there is a receipt by the 1st defendant to the effect that he has received the purchase price, there is prima facie evidence of a bona fide assignment of the shop. The deed was signed in the offices of Lo and Lo; and if the plaintiffs wished to impugn the transaction, it was up to them to call some evidence to this effect. 54. Throughout the trial, the plaintiffs referred to the 2nd and 3rd defendants and to Wang Yip Construction Co. Ltd. as "artificial extensions" of the 1st defendant. The 1st defendant has never denied that he was in a position to control entirely the activities of the 2nd defendant company. He and his wife are the only shareholders. They are directors; and the other two directors (Woo Chan Sum and Chan Ming Shan) are his employees. He is not a shareholder of the 3rd defendant company; but the shareholders and directors appear to be his employees. This company was incorporated on 2nd February, 1962 (Ex. B.5 is a copy of their memorandum and Articles). One of the subscribers is one Au Yeung Tak San, who was the Sales Manager of the 2nd defendants. Since 1st May 1954 Lo Shung Wing has been a director of the 3rd defendants; and he said in evidence that he was an employee of the 2nd defendants. Huer Kwok Chai was appointed a director on 15th October 1958; and he admitted that he was an accountant, or bookkeeper, employed by the 1st defendant and that he was paid by the 2nd defendants. The authorised capital of the 3rd defendants is $10,000, divided into 1,000 shares of $10 each. On incorporation, Au and one other each took one share, Lo and Huen each hold one share. Only 5 shares have so far been issued. The submission made on behalf of the 1st, 2nd and 3rd defendants was that whoever eventually takes over the management of Mirador Mansion should take over the 3rd defendant company as well. 55. The original, amended, and re-amended statement of claim made no mention of Wang Yip Construction Co. Ltd. It was after the trial commenced that paragraph 14A was added. This reads:-
56. Mr. Zimmern said that he was not going to bother filing a defence in regard to this allegation at such a late stage; but he asked me to take it that the defendants were denying that the shares in this building sold to Wang Yip Construction Co. Ltd. were sold at an undervalue, and that Wang Yip Construction Co. Ltd. was an "artificial extension" of the 1st defendant. 57. Wang Yip Construction Co. Ltd. was incorporated on 14th April, 1958, that is to say some 15 months before the occupation permit was issued. The issued capital is $200,000 divided into 2,000 shares of $100 each. The subscribers were Chan Ming Shan and Woo Chan Sum. They are, and have been since incorporation, the only directors of this company. They are the only shareholders; and each holds 10 shares; and, as I have said, they have been directors of the 2nd defendant company since 1967. 58. In opening, Mr. Bernacchi cited Jones v. Lipman(1). The headnote to the report of this case reads:- "By an agreement dated February 27th, 1961, the first defendant agreed to sell for £5,250 to the plaintiffs certain freehold land ........... Pending completion the first defendant sold and transferred the land to the defendant company for £3,000. The company, which had a nominal capital of £100, had been acquired by the first defendant and he and a clerk employed by his solicitors were the only shareholders and directors. This sale was financed by the borrowing by the company of £1,564 from a bank whilst the rest of the purchase-money remained owing to the first defendant. In his judgment, Russell J. at page 835, says:-
It is hardly surprising therefore that the learned Judge held (p.836) that:
59. But I am not sure how far this case assists the plaintiffs. Mr. Bernacchi's submission was that I should infer from all the circumstances that the 1st defendant did his utmost to assign all remaining shares in the building when, in 1967, he realised that proceedings against him were about to be instituted, that is to say that he deliberately planned matters (presumably under legal advice from Lo and Lo) so that he could get the benefit of proviso (b) to sub-section (1) or, if not, the benefit of sub-section (2) of section 3 of Cap. 297 as read with clause 3 of the Deed of Mutual Covenant. If that is so, then it is surprising that he did not take the precaution of giving the purchaser of flat F2, 12th floor, an assignment which, according to the plaintiffs, would in effect have been in favour of himself, and that he did not ensure that both this assignment and the assignment of shop 8, 1st floor, were registered - if need be by paying the stamp duty and legal expenses. It is said that he is a wealthy man; and this should not have inconvenienced him to any appreciable extent. 60. The facts relating to the constitution of Wang Yip Construction Co. Ltd. are undoubtedly such as to raise one's suspicions that this company is in fact controlled by the 1st defendant. The only directors and shareholders are the 1st defendants' employees in the 2nd defendant company. But unlike the 1st defendant in JONES(1), the 1st defendant in this case is neither a shareholder nor a director of Wang Yip Construction Co. Ltd. He is certainly not in a position to control that company against the wishes of its registered shareholders and directors. The legal consequences of that distinction might be illustrated by the following example. Let us suppose that 1st defendant, purporting to act as agent for Wang Yip Construction Co., Ltd., entered into an agreement for the sale and purchase of shop 64, ground floor, that the purchaser instituted proceedings for specific performance of that agreement, that Wang Yip Construction Co., Ltd. pleaded that they had not authorised the 1st defendant to enter into any agreement for the sale and purchase of shop 64, and that the 1st defendant was unable to produce any such authority. Can one imagine any court ordering Wang Yip Construction Co. Ltd. to complete the agreement for sale and purchase? I venture to suggest that on the evidence which the plaintiffs have chosen to adduce, no court could reasonably do so. The plaintiffs have not called a scrap of evidence to show what sort of activities are being carried on by Wang Yip Construction Co. Ltd. in the basement. For all I know, these two employees of the 1st defendant may be carrying on a perfectly bona fide business of their own. 61. The plaintiffs' attitude throughout this case has been: "We do not need to call evidence; the facts speak for themselves." The facts, as I know them, are that Wang Yip Construction Co. Ltd. is the registered owner of 10 shares of Mirador Mansion. The company may well be an "artificial extension" of the 1st defendant; but how can I say that the 1st defendant has not parted with the legal and beneficial ownership of the premises in question in the absence of some evidence on the plaintiffs' side to impugn the transaction? 62. Paragraph 13 of the Statement of Claim reads:
63. By Ex.B 68, the 1st defendant assigned to the 75th defendant "four equal undivided seven hundred and fifty second" parts or shares ..... in the building and "the exclusive use occupation and enjoyment" of the roof. The consideration was $40,000. The 75th defendant undertook to pay "the annual sum of $260 being the due proportion of the annual instalment of the premium reserved by the said Conditions." 64. By Clause 4 of the Deed of Mutual Covenant, the parties to that deed agreed that certain expenses should be shared and paid by the owners "in proportion to the number of units, that is to say shops or flats for the time being owned by such owners and for the purpose of this clause the basement shall be deemed to consist of 36 units." 65. Clause 1 of the Deed, as read with the First Schedule, declares that Peninsula Taxi Co. Ltd. owns 4/752 shares in the building and has exclusive possession of a specified portion of the basement. It is not known how many shares of the building were assigned to Chan Pak Yeung and Others; but they were given exclusive use of the 12 basement shops; and from the Land Office Control Card (Ex.QQ) it would appear that the 1st defendant probably assigned 12 shares to Chan Pak Yeung and Others. Similarly, Harilela probably received 5 shares and the exclusive use of basement shops Nos. 27A - 31A. 66. As I have said Mr. Stevenson's evidence was that from his examination of the Land Office cards, it was evident that the whole of the basement had been assigned by the 1st defendant (apart from such portions as the right of way and the area occupied by the lifts and the transformer and switch room). The plaintiffs say that if one looks at Ex. QQ1, it appears that at the date this card was prepared the assignment to Wang Yip Construction Co. Ltd. had not been entered up by the Land Office staff; that there are 23 entries on Ex.QQ, leaving 13 shares unallocated; that the figure 10 appears in the Memorial of the assignment of the portion of the basement marked purple on plan No. I together with Shop 64 on the ground floor to Wang Yip Construction Co. Ltd. (Ex.HH); that if one takes one unit for shop 64, this leaves 9 units for the basement portion assigned to this company; 23 plus 9 is 32; and the plaintiffs argue that the 1st defendant has "allocated the remaining 4 units" to the roof (Exs. QQ8 and B68). 67. I find this reasoning somewhat difficult to follow. As late as February 1960, the 1st defendant appears to have contemplated dividing the building into "800 units" (vide the recitals on page 1 of Ex.B67). In fact the purchaser of flat F2 12th floor agreed to purchase "one equal undivided eight hundredth part or share" in the building as a whole (clause 1 of Ex.B67). However, clause 18 of the agreement for sale and purchase (Ex.B.67) reads:-
68. According to the plans attached to the Deed of Mutual Covenant, there are 716 shops and flats. Therefore in February 1960, the 1st defendant presumably contemplated dividing the building into 786 undivided parts or shares (716+70). But this plan did not materialize. The Deed divides the building into 752 undivided parts or shares, but the main purpose of the Deed was to accord to each of the signatories exclusive possession of a given number of "units" i.e. shops or flats. Furthermore the Deed does not carry out the apparent intention disclosed in clause 18 of Ex. B67. The Deed says nothing about the owner of each shop or flat having one undivided share in the building as a whole, nor does it say that the "owners of the basement" shall together be entitled to 36 undivided shares in the building as a whole. Clause 4 merely says that for the purpose of sharing certain expenses, the basement shall be "deemed to consist" of 36 units. The Deed does not say that the 1st defendant must divide the basement into any particular number of units of any particular size in the event of his deciding to assign the exclusive possession of the remainder. Under the Deed, he is given an entirely free hand so far as the granting of exclusive possession of the remainder of the basement and the roof is concerned. He was free to give exclusive possession of portions of varying size of both the basement and the roof. He could not, of course, derogate from his grant by assigning more than 752 undivided shares in the building as a whole. But, in assigning the exclusive possession of portions, of varying size, of the basement and roof to a number of persons and companies, together with such number of undivided shares in the entire building as he thought fit, subject to the total not exceeding 752, the 1st defendant was not in breach of the provisions of the Deed of Mutual Covenant. 69. The Deed of Mutual Covenant is not a very well-drafted document. In the phrase "in proportion to the number of units that is to say shops or flats - - - - - - owned by such owners" which appears in clause 4, the word "owned" is quite inappropriate. Of course, the draftsman obviously intended it to mean "of which the assignee has exclusive possession". But throughout this case, the words "unit", "part", and "share" have been frequently used as if these words were synonymous. They are not synonymous. 70. The point surely is this: although under clause 18 of the agreements for sale and purchase the 1st defendant apparently intended that the building should be divided into such number of undivided shares as would accord with the number of shops and flats on the 17 floors of the building plus a further number in respect of the basement, and contemplated agreeing with his co-owners that each shop or flat would be entitled to one undivided share in the whole building and that the owners of the basement would be entitled to 70 (later 36) undivided shares in the building, he never, so far as I can see, gave effect to that intention. The Deed divided the building into 752 undivided shares; and although in the First Schedule to the Deed, the number of undivided shares apparently assigned to the Peninsula Taxi Co. Ltd., George Zee, Woo Chung Ming and Fung Tze Shing appear to be the number of shops and flats to which each of these co-signatories was given exclusive possession, there is nothing in the Deed itself to say that one undivided share in the building would be assigned together with the exclusive possession of each shop or flat; and even assuming that this could be inferred so far as the 716 shops or flats on the 17 floors are concerned, the Deed was silent as to how the remaining 36 undivided shares should be allocated and as to how the basement or the roof should be divided. 71. Mr. Bernacchi argued that it is illegal to assign possession of the roof of a building because the roof must be kept open for the common use of all residents in the event of a fire. Mr. Zimmern said that since the Deed of Mutual Covenant was signed, Government (in some way which was not explained to me) has taken steps to prevent developers from assigning possession of the roof to anyone. That may well be so. It may well have been contrary to various statutory provisions to have done so in 1962. But such provisions, if any, were not brought to my attention; and in any event, in these proceedings the allegation (or one of the allegations) in paragraph 13 of the statement of claim is that the assignment of the roof in 1962 to the 75th defendant was in breach of the Deed of Mutual Covenant. 72. It is also said that in assigning the roof (Ex.B68) to the 75th defendant the 1st defendant was in breach of his assignment to all other co-owners, including the assignment Ex.B4. It is said that Ex.B68 was in derogation of all previous grants by the 1st defendant. The words of the assignments which are relied upon are:-
and the words:-
It is argued that the intention of the parties to the assignment was that the assignee should have a "privilege" or "right of way" over the roof in the event of a fire; that in any case the 1st defendant could only assign the roof subject to other co-owners' right of way over the roof, and that Ex.B68 does not do so. It is further argued that the roof is not a shop, a flat, or a unit. 73. I do not agree that the words "rights, rights of way - - privileges easements and appurtenances" give the assignee of a share in the building a right to wander over the roof at any time, whether during a fire or otherwise. I agree that the roof is not a shop or a flat. I also agree that in clause 4 of the Deed the word "units" is used as being synonymous with the words "shops and flats". But in the assignments, the phrase is "shops, flats and units". The word "unit" in the assignment clearly must mean something other than a shop or flat; and the only other assignable portions are the basement and the roof. 74. The assignments are "subject to - - - - - - the performance of the terms and conditions" in the Conditions of Regrant; but there is nothing in the Conditions of Regrant which precludes the 1st defendant from assigning exclusive possession of the roof. 75. It is a term of the Conditions of Regrant that "adequate space shall be provided - - - - - - for the parking of motor vehicles to the satisfaction of the Director of Public Works, and any space so provided shall not be used for any other purpose." Clearly, the basement was the space which the Director approved for the parking of motor vehicles, and if it is the case that any portion of the basement has been assigned for some other purpose (I was told that Harilela operates a bar) it may well be that there has been a breach of the Conditions of Regrant. Indeed, from the scanty evidence before me, I would have thought that it was obvious that there had been a breach of special condition (1), yet the plaintiffs have not chosen to take the point. Of course, I can understand Harilela (the 1st named of the 2nd plaintiffs) not wishing to take the point. But it is surprising that some of the other plaintiffs, if they reside in Mirador Mansion, have not complained that they are unable to park their cars in the basement. But that is not an issue in this case; and the validity of the assignment of a portion of the basement to, say, Wang Yip Construction Co. Ltd. may not, in these proceedings, be questioned on that ground. 76. As I have said, the Deed of Mutual Covenant did not provide that if the 1st defendant assigned the exclusive use of the basement to one or more assignees he should also give the assignees 36/752 shares in the building as a whole, nor did it provide that any part of the basement or roof so assigned (or rather if the exclusive use of a part of the basement or roof were assigned,) this would necessitate the assignment of any particular number of shares in the building as a whole to the assignee of that part - whatever the size of that part might be. In my view, therefore, so far as paragraph 15 of the statement of claim is concerned, there is no evidence which would justify me in coming to the conclusion that the 1st defendant "has reserved to himself parts of the building" or that the transactions relating to Garage D and flat F2 on the 12th floor were not bona fide. There is no evidence to justify the allegation that the 1st defendant "has never contributed his share in respect of such units to the payment of the Government premium." 77. As regards paragraph 14A, Mr. Zimmern's comment was: "So what?" I agree. So far as the Deed of Mutual Covenant is concerned, it says nothing about units being sold at "undervalue" or "overvalue". The 1st defendant was not in breach of the Deed of Mutual Covenant or in breach of the other assignments when he assigned 4/752 undivided shares of the building together with exclusive possession of the roof to the 75th defendant; nor was he in breach of the Deed or the assignments when he assigned parts of the basement, including 9/752 undivided shares together with the use of the part marked purple on Plan 1, to Wang Yip Construction Co. Ltd. 78. One of the most unsatisfactory aspects of this case is the fact that both sides have chosen to call so little evidence. The plaintiffs kept harping on about the fact that, in their view, this action is a representative action and that it was therefore not necessary that all the co-owners should give evidence. But when it came to the alleged "representatives" (i.e. the 2nd plaintiffs) giving evidence, not one of them went into the witness box to prove any of the allegations in the statement of claim. Their main witness was Mr. D.A. Paulie, who is a co-owner and occupier of Mirador Mansion, and Chairman of the 1st plaintiff association. But he is not himself a plaintiff. Apparently, he tried to sue the 1st defendant in 1965 (O.J. 1596 of 1965). The endorsement on the writ appears to have been drafted by himself. I cannot believe that it was drafted by any legally-qualified person; and it is hardly surprising that the Judge in Chambers ordered that it be struck out as disclosing no cause of action. It is said by counsel for the plaintiffs that that is why Mr. Paulie is not a plaintiff in this action, namely that he might have had to face a submission of res judicata. 79. Mr. Paulie's evidence was very revealing in a number of respects. He was cross-examined as to why he had not paid the $191.78 which, by his assignment, he had covenanted to pay. Apparently, on 16th December 1965 he paid 3 years arrears of premium; and on 27th February 1970 he paid 4 years arrears. Obviously he had been advised by his legal advisers to pay this before the trial of the action commenced. In evidence he said that he had paid it under protest. He also admitted that he had not paid any management fees for the year 1969. In fact the defendants proved that, with the exception of February and March 1966, Mr. Paulie has paid no management fees since 1963. They produced their books to prove this; and the whole tenor of his answers in cross-examination on the subject of his non-payment of dues was in effect: "Why should I pay management fees when the building is so badly managed?" He also said twice in evidence that one of his objects in not paying management fees and the proportion of premium due under his assignment was to goad the 1st defendant into suing him so that he would then have a chance of cross-examining the 1st defendant - presumably about matters completely irrelevant to the question of payment or non-payment of management fees or premium! 80. The plaintiffs seem to have gone to trial hoping that the defendants would be forced to call the 1st defendant and a number of responsible officials in the 2nd defendant company, and that, by dint of skilful cross-examination, they would be able to prove their case out of the mouths of the defendants' witnesses. 81. The 1st defendant did not choose to oblige the plaintiffs in this regard! Indeed, Mr. Zimmern's opening address was virtually a no-case-to-answer submission. The defendants did however call three witnesses, namely, the auditor in Lowe, Bingham & Matthews who had examined the books of the unlimited company and the books of the 2nd and 3rd defendants, a book-keeper employed by the 1st and 2nd defendants named Huen Kwok Chai, and Mr. Lo Shung Wing, a director of the 3rd defendants and a caretaker of the building. But these witnesses could not really answer many of the questions which Mr. Bernacchi wanted to know. The result was that Mr. Zimmern was, to some extent, justified in his complaint that Mr. Bernacchi's cross-examination of these witnesses was to some extent a "fishing expedition". It was. I am not suggesting that Mr. Bernacchi wasted the time of the court or that his questions were irrelevant; but I am not prepared to put anything like as much weight on some of the answers given by these witnesses as Mr. Bernacchi would like. 82. For example, the auditor was asked some questions about the basis on which the 1st, 2nd and 3rd defendants had charged management fees. The auditor spent many hours re-examining the defendants' books and documents. He produced a memo, the result of his researches (Ex. KKK) which, according to the plaintiff, indicates that the defendants have never charged management fees against all the occupiers of "the 752 units." In 1959, 712 units were so charged; in 1963 the figure seems to have dropped to 688; in 1968, it was 697, 693, 699, 695, and 707 at different times during that one year; and the plaintiffs say that this supports their view that the 1st defendant must have an interest in portions of the building; that the net result was that unit holders (688 in 1963 and so on) were paying more in management fees than they ought to have done; and furthermore that in going through the motions of assigning properties to a number of assignees such as Wang Yip Construction Co. Ltd. and purporting to charge the assignees a proportion of the premium, the 1st defendant was merely transferring money from one pocket to the other. 83. It is all very well to argue in this way; but it is up to the plaintiffs to prove their case. It is no good adopting the attitude: "Use your common sense; the facts speak for themselves." Every court must use its common sense; but it may not speculate. It can only act on evidence. 84. There are 716 shops and flats on the 17 floors (ground floor to the 16 floor). In 1959, 712 units were, according to Ex. KKK, charged management fees. The fact that the books did not show the receipt of management fees in respect of the remaining units could obviously be due to any one of a number of reasons. But, in any event, it appeared to me from the auditor's evidence that he could not have been certain from his examination of the books that the figures 712, 688 etc. were not simply the number of units which had in fact paid management fees. There was ample evidence that a very considerable number of unit holders had not paid management fees. There was evidence from Huen that the defendants would not pay more than $17.50 per month by way of management fees. This was said in answer to a question in cross-examination. This figure was put to him because the defendants disclosed a document (Ex. "G") which appears to have been a carefully worked out calculation of monthly expenditure for the month of February 1969 and which indicated that management fees for that month in respect of the upper floors was $17.50. Not only did Ex. G state the actual number of units of electricity consumed with reference to the common passageways, etc. during that month, it even made reference to expenditure on a Chinese New Year bonus to the staff. That, of course, could only have been applicable to February 1969. On the other hand, as a result of cross-examination of the defence witnesses, who really were not qualified to answer such questions, it was elicited that after 1967 there was a fixed charge of $17.50 per month for management fees. But this could not have been accurate either because in September 1967, the 3rd defendants sued the occupants of 3 flats on the 10th floor for management fees in respect of various periods during the years 1965 - 1967, all of which were calculated at the rate of $17.50 per month. (Exs. C20, C21, C22) The evidence of Huen was that the occupants of Mirador Mansion would not pay a cent more than $17.50 per month, at any rate in recent years, although in the early years management fees were charged on an ad hoc basis. 85. But, if that is so, how does it come about that the actual amount for February 1969 (which includes a Chinese New Year bonus) should also come to $17.50? I am left, to a large extent, in the dark on such matters; and that is due to the manner in which the plaintiffs conducted their case. 86. In his closing address, Mr. Bernacchi suggested that the defendants' books of account might well be false; that the auditor could only speak about what was in those books, not what may, or may not, have been omitted from the books; and he commented that the defendants had called no witness to say that the entries in the books were accurate and that every transaction had been entered up in the books which the auditor examined. 87. I shall come to the evidence of the auditor presently. But I would say here that on several occasions throughout the trial, Mr. Zimmern made it clear that the defendants' books had been available for inspection for many months prior to the commencement of the trial - indeed. I think he said that he had offered the books for the plaintiffs' inspection; he certainly did so during the trial. Mr. Zimmern submitted, and I think rightly so, that if the plaintiffs had intended to challenge the books of account kept by the defendants, it was up to them to have them re-audited by their own auditors. This was not done. Instead, the plaintiffs appear to imagine, because they may have obtained a few answers from witnesses who were not capable of answering the questions put to them, and consequently a number of points have been left "in the air", that I should now order that the defendants' books of account be re-examined. I do not propose to do any such thing. I shall decide this case on the evidence which the parties have chosen to place before me. 88. In their closing addresses, counsel for the defendants had some caustic comments to make on the fact that none of the plaintiffs chose to enter the witness box. Mr. Bernacchi also had quite a lot to say about the absence of the 1st defendant. It is not for me to say how I would have conducted the case if I had been in counsel's position. As far as I am concerned, the onus was upon the plaintiffs to prove their case. 89. The statement of claim alleges that the 1st defendant has over-charged the co-owners as regards proportion of premium. Paragraph 14 reads:-
90. The suggestion in this paragraph that the co-owners are liable to the Crown to pay the annual premium "by privity of estate and by assignment by the 1st defendant of the original contract he had with the Crown" appears to be irrelevant to the issues raised in this action. The Conditions of Regrant certainly governs the position of the 1st defendant vis-a-vis the Crown; but I am concerned in this case with the position of the 1st defendant vis-a-vis the co-owners of Mirador Mansion, not with the position of the co-owners of Mirador Mansion vis-a-vis the Crown. 91. It is not true that since "1957" the 1st defendant has collected premiums from co-owners of Mirador Mansion. It is now common ground that the co-owners contributed nothing towards the payment of the first three instalments of premium. Sums were collected from them according to the assignments beginning from 1959. 92. It is clear from Exs. M and D that, under the assignments, the 1st defendant should receive annually from the co-owners $141,507.95. His annual obligation to Government for 30 years under the Conditions of Regrant is $140,995. The first figure exceeds the second to the extent of $512.95. The auditor from Lowe Bingham & Matthews, when giving evidence, commented that, having regard to the size of Mirador Mansion, this small sum would hardly cover the cost of collecting the premiums from the large number of co-owners involved. 93. Paragraph 14 is silent as to the mode of calculating the premiums payable by the various assignees. Obviously, when their statement of claim was drafted the plaintiffs did not know the method of calculation viz. $65 per $10,000 of consideration. From letters signed by Mr. Paulie before proceedings were instituted it appears that all he knew from his researches at the Land Office was that no two co-owners were paying the same amount. 94. In my view the allegation in paragraph 14 that the premiums collected were in breach of the Deed of Mutual Covenant is just plain nonsense. The Deed (clause 4) deals with Crown rent. It says nothing about premium. The payment of premium is governed by the individual assignments. 95. The plaintiffs' submission is that the fixed amounts in the assignments are not "the due proportion of the annual instalments of the premium reserved by" the Conditions of Regrant; that quite irrespective of the size of the flat or shop, for each 1/752 part or share of the building assigned, the due proportion of premium payable by the assignee should have been calculated simply by dividing $140,995 by 752; that the result would have been that each of the 752 "units" would have been required to pay $187.50 ($140,995 ÷ 752) and there would consequently have been no over-collection of $512.95 per annum; that there is no other satisfactory way of calculating "due proportion" of premium; that to calculate it on the basis of selling price is whimsical because market pricesvary; that Wang Yip Construction Co. Ltd., the assignee of 10 shares in the building, should be paying $1,875 and not $130; and that in paying $191.78, Mr. Paulie is paying $4.28 per annum too much. 96. If the plaintiffs' submission is correct, Chan Pak Yeung and others who are the assignees of 12 shares in the building with exclusive possession of 12 basement shops should be paying annually $2250 as their proportion of the premium ($187.50 x 12) instead of $1736.80 which is calculated at $65 per $10,000 on a selling price of $267,200. Similarly, the Cordial Co. Ltd. (formerly the 9th defendant against whom proceedings have now been discontinued, and who paid only $16,800 for shop 37 on the 1st floor - page 4 of Ex.W) should, according to the plaintiffs, be paying $187.50 per annum instead of $109.20 which they in fact pay in accordance with the "$65 per $10,000 of consideration" method of calculation. The co-owner of shop 73 1st floor pays only $65 per annum. In fact, from a cursory glance through the pages of Ex.W it is clear that there are 560 shops and flats in Mirador Mansion paying less than $187.50 annually by way of proportion of premium. A considerable proportion of the premium is paid by the more expensive shops with a good frontage on the ground floor and the shops and other areas in the basement - with the exception of Wang Yip Construction Co. Ltd. 97. Would the co-owners of these 560 shops and flats approve of this court increasing the amounts which they pay at present to $187.50? It would suit a number of the 2nd plaintiffs. Five of the 2nd plaintiffs pay the following amounts:-
98. An order fixing the proportion of premium payable by each co-owner at $187.50 would benefit the above group and a few others such as the co-owners of shops Nos. 7, 8, 10, 11 ground floor - in fact most of the co-owners of shops on the ground floor and the basement co-owners other than Wang Yip Construction Co. Ltd. But it would certainly not benefit financially the co-owners of 560 shops and flats throughout the entire building. 99. The assignments do not disclose on their face what premium was payable by the 1st defendant to Government. So, on the face of the assignments, there was no means of checking the fixed amounts said to be the "due proportion" of the premium due to Government. But the plaintiffs are not alleging misrepresentation. They do not seek rectification of the assignments nor do they seek to avoid them. They do not deny that they contracted with their eyes open. All Mr. Paulie would say was: "I took the assignment in good faith." The question therefore arises: is it open to these plaintiffs to plead as they have done in paragraph 14? 100. But first, do the words "being the due proportion" etc. in the assignments add anything to the fact that the assignee has covenanted to pay a specified sum? Assuming for the moment that these words should be given some meaning in these proceedings, having regard to the considerable variations in the size of the shops and flats, it would be surprising if the parties to the assignments intended that each assignee should pay 1/752 part of what the 1st defendant was obliged to pay to Government (although that appears to have been the intention in regard to the sharing of expenses under clause 4 of the Deed). But if that was the parties' intention it is even more surprising to find that they have expressed themselves so badly in the assignments. If the intention was that each assignee should pay 1/752 part or share of $140.995, why did they not say so, or perhaps say "..... will hereafter pay 1/752nd share of the Crown rent and annual instalment of the premium reserved by the Conditions of Regrant"? Why specify "1/752nd share" in regard to rent and "due proportion" in regard to premium? Why a mode of calculation in the one case, and a specific amount in the other? On the face of it, one would expect the parties to have intended "due proportion" to mean something other than 1/752nd share of the premium reserved in the Conditions of Regrant, if this phrase meant anything at all. 101. There could be said to be two methods of fixing the proportion of premium apart from simply dividing $140,995 by 752: (1) to calculate it according to the size of the unit in respect of which the assignee has exclusive possession; and (2) to make it a fixed proportion of the sale price of the "part" or "share" of the building assigned. The 1st defendant chose the latter method of calculation. Can it be said that he erred in doing so? 102. At first sight method (1) would appear to be the fairest; but on reconsideration, I do not think it is because the number of square feet in a unit is only one factor to be considered when estimating the value to be attached to the exclusive possession of any particular unit. True, market prices vary; but I do not see anything inherently wrong in calculating "due proportion" on the basis of the more valuable units paying more than the others; and, if that is accepted, market price seems to be as good a guide as any. Considering the large proportion of sale and purchase agreements signed in 1957 the developer obviously saw no difficulty in getting rid of the units and he decided that $65 per $10,000 of consideration would result in his being able to recover the total amount of $140,995 when all 752 shares had been sold. 103. From the figures at page 11 of the auditor's accounts (Ex.D) it would appear that the assignees did not start contributing as from the date of the assignments, but in respect of the 4th instalment of the premium and that the amount receivable (although not all received) was $141,507.95. 104. However, Mr. Zimmern's submission was that as none of the plaintiffs have suggested that they were misled in any way, and that rectification or avoidance of the assignments is not sought, it matters not how the various amounts were described in the assignments; that each plaintiff covenanted to pay a particular amount annually and that he should be held to his covenant. Mr. Zimmern even went so far as to say that if the 1st defendant had wished to make a profit on the premium, there was nothing to prevent him doing so; and that the manner in which the 1st defendant contracted with each individual co-owner has nothing to do with these plaintiffs in this action. 105. If, in an assignment of an interest in land, the assignee covenants to pay to the assignor annually "$191.78 being the due proportion of" something-or-other, is he covenanting to pay this sum of money or covenanting to pay "the due proportion" of whatever is mentioned in the assignment? Supposing the assignee covenanted to pay "$191.78 being the price of 100 cases of beer" and it was agreed on all sides that $191.78 was the market price of 10 cases of beer. Is it to be said that the covenantor has undertaken to pay the market price of 100 cases of beer or the market price of 10 cases of beer or $191.78? In my view, the covenantor has undertaken to pay $191.78. The fact that this amount is said, accurately or inaccurately, to represent the value or share of something or other is quite immaterial to the issues which have been raised in this action which does not involve allegations of misrepresentation and consequently claims for rectification or avoidance of the deed. I am entitled to assume, until I have some evidence to the contrary, that in signing these assignments, the co-owners, including the plaintiffs and Mr. Paulie, understood what they were signing. It was up to them to raise any query on the manner in which the proportion of premium had been calculated when they took their assignments - not 10 years later. 106. I am not prepared to interfere with the method of calculation which the 1st defendant chose to adopt, or to order that any small excess in the total amounts receivable should be refunded. I say "receivable" because when one examines the accounts Ex.D (p.11), it is clear that the total of the arrears of premium owing to the 1st defendant by the co-owners of Mirador Mansion as at 31st March 1967 was $125,750.51; and by 28th February 1970, this figure had increased to $159,215.75. 107. The unlimited company and the 2nd defendants were and are construction companies. They have developed 32 sites in Hong Kong and Kowloon (Ex. LLL); and, according to Mr. Lo Shung Wing, the 2nd defendants have managed buildings erected on those 32 sites for short periods after construction was completed until such time as the co-owners them selves took over. I have no real evidence as to how things have worked out in practice in these other buildings; but Lo said that they have had no trouble in handing over to the co-owners; and, according to him, the only trouble they have ever had has been with the occupants of Mirador Mansion - or, at any rate, with some of the occupants. 108. Returning for a moment to the Deed of Mutual Covenant, (Ex.A2), it seems to me that although a document of this nature may be adequate for a small building of say 3 or 4 floors, it is utterly inadequate for a multi-storey building such as Mirador Mansion. It made no provision for the appointment of any person or company to manage the building, even on a temporary basis. The 1st defendant was under an obligation to the Crown to keep the building (1) in good substantial repair and condition; (2) see that all refuse matter was properly removed daily and (3) not to use the lot for industrial purposes (General Conditions 6(a) and 7, and Special Condition (b)); and, of course, it was in his own interests to do what was necessary to protect the building until all parts of it had been assigned. But he was under no legal duty to take over the management as such. 109. Clause 15 of the Deed is, in my view, utterly inadequate for a large multi-storey building. It provides for the holding of meetings to decide matters concerning the building which are mentioned in clauses 4, 5, 6 and 7. But who is supposed to take the initiative and put the machinery of management in motion? And how can a building such as this be managed otherwise than by a paid full-time manager (be it an individual or company) with an adequate staff and managerial organisation behind him? 110. No one concerned with the management of the building in its early years gave evidence; but, from such scanty evidence as was placed before me, I gather that the 1st defendant, through the 2nd defendants, simply began to manage the building without any sort of mandate from the assignees who moved into the building one by one after the issue of the occupation permit in July 1959. 111. The first known act of management on the part of the 2nd defendants (or rather their predecessors, the unlimited company) appears to have been the issue of a circular letter dated 1st May 1959 (Ex.B2). It reads:-
This document was issued nearly a year before the Deed of Mutual Covenant was signed. Clearly, the unlimited company visualised that very considerable sums in electricity and water deposits would be necessary to enable the water and electricity to be turned on by the appropriate authorities, and the writer of the letter also considered that some kind of reserve fund for the management of the building was a necessity. 112. There are 212 shops on the ground, 1st and 2nd floors (65 on the ground floor, 74 on the first floor and 73 on the 2nd floor). There are 36 units on each of the 14 upper floors. Six large units on each of the 14 upper floors (i.e. 84 units) were each to pay $270; and the remaining 30 units on each of the 14 upper floors (420 units) were each to pay $200. It therefore appears that if all units in the building in fact made payments on this basis, the unlimited company should have received $127,880. This figure is arrived at by the following simple calculation:-
This was the figure which those concerned with the unlimited company thought the company would require to enable it to pay the various electricity and water deposits and to have some sort of reserve fund for the management of the building. 113. Mr. Paulie said that he moved into Mirador Mansion in February 1960, but that he received his deed of mutual covenant and assignment a long time after that. (As I have said, he signed the assignment on 15th November 1960). He then said:-
Apparently, this is the evidence upon which the allegations in the first part of paragraph 11 of the statement of claim are founded. This paragraph reads:-
114. Towards the end of the trial Mr. Bernacchi withdrew the allegation of fraud; but he submitted that the allegations of fact in the paragraph had been proved. The allegations of fact in the first part of the paragraph are quite extraordinary. No evidence was called to say what happened in the office of Lo & Lo when any of the assignments were executed. Mr. Paulie did not even tell the court. The schedule to the Deed of Mutual Covenant shall, of course, always indicate that on 28th April 1960 the 1st defendant owned 741 shares in Mirador Mansion. But the preposterous suggestion implicit in this paragraph, as read with Faulie's evidence, is that when each and every prospective purchaser had left the offices of Lo & Lo, having taken his assignment, he firmly believed that the 1st defendant had built this huge building for himself; that he, the assignee of, say, 1/752 part was one of a very small number; and that, as time passed, each assignee said to himself: "I must accept the 1st defendant as manager of this building because he owns practically the whole building, and there is not a hope that we can ever put clause 15 of the Deed of Mutual Covenant into operation; but if I had only known that by the end of 1958 the 1st defendant had entered into 639 sale & purchase agreements, I would never have accepted him, or any of his companies, as manager of Mirador Mansion!" 115. In all probability, the truth of the matter was that they never gave a thought as to who was going to manage the building, that they never bothered to read their Deed of Mutual Covenant, and that the first time any of them adverted to the question of what they could themselves do about managing the building was when they found that the management was not to their liking. I say 'they' - I have no idea how many took the view that the management was, and is, unsatisfactory. But there is no question about it: They acquiesced in the 1st or 2nd defendants (and later the 3rd defendants) managing the building, not because they were deceived in any way but simply because they assumed that, somehow or other, the building would be managed. 116. Thrown into this paragraph under the heading "particulars" is an allegation of mismanagement which, one would have thought, was deserving of a paragraph on its own. After all, as I understood the case by listening to the cross-examination of the witnesses, the main purpose of this action is to force the 1st defendant to spend something in the region of $250,000 in order to put the building back into the state it was in when it was built in 1959, or at any rate into the state which Mr. Paulie thinks it should be in. I shall deal with the latter part of paragraph 11 later. 117. Mr. Paulie was asked in cross-examination why his association (1st plaintiffs) have not invoked clause 15 of the Deed of Mutual Covenant long ago with a view to taking over the management. He said:-
In other words, they want an order from this court that the 1st plaintiffs take over the management of the building, but only if the 1st defendant is also ordered to spend a great deal of money cleaning it up. However, I have no doubt that the plaintiffs anticipated that a question might well be asked why clause 15 had not been invoked by any of the co-owners during the last 10 years. So, clause 12 of the statement of claim was drafted. It reads:-
118. The requests "both in writing and orally" presumably included Mr. Paulie's letter dated 14th August 1962 (Ex. B14) to the 2nd defendants. It reads:- "I understand that most of the shops and flats have now been sold to various people like myself; and that a good few of the owners do not reside in the building. Therefore would it be possible for your good office to let me have an up-to-date list of all the other co-owners whereby I might be able to contact these people and try to put paragraph 15 of the Deed of Covenant into actual operation. There was another letter from a Dr. Wong containing a similar request. 119. Mr. Zimmern described paragraph 12 as irresponsible pleading. In his closing address, Mr. Bernacchi said: "These paragraphs (11 and 12) have caused me some difficulty." I am not surprised. How can it be argued that the failure of the defendants to supply a list of co-owners" nullified the operation" of clause 15? The defendants were under no obligation to supply a list of co-owners. The local law, such as it was, lay in clause 15; it was there to be invoked by the co-owners. It was up to the co-owners to set up a machinery for taking over the management of the building at once, certainly as soon as they regarded the defendants' efforts as inadequate. 120. Paragraphs 5, 20 and 21 of the statement of claim refer to the 4th and 5th defendants in addition to the 1st, 2nd and 3rd defendants. Paragraphs 20 and 21 read:-
The 1st, 2nd and 3rd defendants' defence to these allegations is contained in paragraphs 4, 5, 12 and 13 of their defence. These paragraphs read:-
121. My note of Mr. Paulie's evidence relating to these allegations reads:-
Later, he said:-
122. A business named "Tai Cheong Co." was registered on 14th March 1961. From the Business Registration Certificate (Ex. C2) it would appear that there are 6 partners. The first name on the list is Chan Shui Tong; and Paulie's evidence that Chan Shui Tong and Chan Kin are one and the same person was not challenged. It would appear from Ex. C2 that the firm commenced business on 1st January 1961. 123. The receipts (Exs. P and Q are examples) issued by Chan Kin bore the name Tai Cheung Co. (not Cheong). But it is common ground that it is the same firm. Each of the co-owners (or the tenants of the co-owners) paid $8 per month. The receipts state "Charging for cleaning. Charging for caring water pump. Total $8". It appears from Mr. Paulie's evidence and from the receipts that this $8 was in respect of the "disposal of garbage from all floors ....... and the cleaning of all parts of the building in common use" and at least "........ maintaining ........... the ............ electric pumps for supplying water to the flush system ........." (sub-clauses (d) and (e) of clause 4 of the Deed of Mutual Covenant). I have no reason to think that it covered "the keeping in good and tenantable repair of the ....................... staircases landings and passages (except as regards damage caused or resulted from any act or default or negligence by any of the parties hereto or for which any of them is responsible)" which is sub-clause (b) of clause 4 of the Deed. Presumably this latter item was the responsibility of the co-owners who regarded the 1st, 2nd and 3rd defendants as their "agent". At least that is the allegation in paragraph 11 of the statement of claim. 124. Until the very end of the trial the plaintiffs' attitude in regard to Chan Kin's position seemed doubtful. Mr. Bernacchi, in his closing address, submitted that, if it could be said that the co-owners acquiesced in the 1st, 2nd and 3rd defendants managing the building "as their agent", then it was not open to these defendants to "delegate" their duties under clause 4 to others. However, in his closing submission in connection with the relief sought, Mr. Asome said that the plaintiffs asked this court to regard Chan Kin and his company (4th defendants) as sub-contractors of the 1st and/or 2nd defendants. 125. It seemed to me during the examination of Mr. Paulie it was expected that he would, or might, say that, for a long time, he regarded Tai Cheung Co. and Tai Cheung Construction Co. as one and the same. It was perfectly clear to me that Paulie was under no such illusion; and there is not a scrap of evidence that in paying Tai Cheung Co. $8 per month for cleaning the common parts, maintaining the water pump and removing the garbage, any of the other co-owners or occupiers imagined that their money was going into the pockets of the 1st, 2nd or 3rd defendants. 126. Paulie appears to have moved into the building in February 1960. His evidence that Chan Kin was at that time already the cleaning contractor was not challenged; and, as so often happens in these courts, very little weight can be placed on the details entered up on Business Registration Certificates. That being so, it appears that the co-owners have dealt direct with Chan Kin for the last 10 years. It may have been the 1st defendant who put the cleaning contract in Chan Kin's way, or "appointed" him as the pleadings say; but that "appointment" was ratified over and over again by the fact that the co-owners continued to deal direct with him. From the scanty evidence adduced, it seems to me that Chan Kin was regarded by the co-owners and by the 1st, 2nd and 3rd defendants as an independent contractor so far as concerns the matters set out in sub-clause (d) and part of sub-clause (f) of clause 4 of the Deed of Mutual Covenant. "The implied contract" referred to in paragraph 21 of the statement of claim was between the co-owners and Chan Kin, not between the co-owners and the 1st, 2nd and 3rd defendants. Whatever may be the 1st defendant's position vis-a-vis the Crown under condition 6(a) of the Conditions of Regrant, he had no responsibilities to the other co-owners in regard to the matters covered by sub-clause (d) and part of sub-clause (f) of the Deed. If the plaintiffs felt (quite erroneously) that Chan Kin's contract could be rescinded by the institution of this action (paragraph 21), why did they not terminate his services long ago by giving him a month's notice? Why didn't they appoint someone else to do the cleaning after deciding upon what to do at a properly convened meeting? 127. At this stage I wish to refer to another matter relating to paragraph 20 of the statement of claim. Mr. Paulie gave evidence about a conversation which he said he had had with Dr. C.C. Wong and Chan Kin in 1965. (At that time this Dr. Wong, apparently, lived in Flat A15 on the 15th floor and owned shop 46 on the 1st floor). Mr. Paulie said:-
He said Chan Kin spoke in Cantonese; and Mr. Paulie was asked to repeat what Chan Kin said in Cantonese. He did so; and the Court Interpreter translated his words as:-
Mr. Paulie said that Dr. Wong was now in Sydney; that he had "suddenly" sold his shop and his flat in Mirador Mansion and had left Hongkong in December 1968. 128. When Mr. Paulie had finished giving evidence, counsel for the plaintiffs applied for an affidavit dated 5th December 1968 by Dr. Wong to be admitted in evidence. In this affidavit Dr. Wong said that he had sold his flat on 7th August 1968; that he had disposed of his shop and flat because "I intend very shortly to leave Hong Kong permanently." He then referred to the alleged conversation with Mr. Paulie thus:- "10. During the course of the said discussion the said Chan Kin stated to the said Dave Paulie and me that he had paid the sum of $12,000 to Chan Tak Tai ...... as a bribe for the purpose of obtaining from the said Chan Tak Tai the cleaning contract of ..... Mirador Mansion for his said firm Tai Cheung Company ..... The application was made under Order 38 rule 2(1); and it was strongly opposed by Mr. Zimmern not so much because of the contents of the affidavit but because, as he said, to admit an affidavit in such circumstances would be to create a dangerous precedent. 129. I admitted the affidavit (Ex. VV); but I place no weight on it at all. I informed counsel of this during the trial; and my only reason for admitting it was to enable me to say why I think such documents should not be admitted in evidence in circumstances of this kind. 130. Firstly, the affidavit itself, on its face, is calculated to arouse suspicion. The statement of claim was not "re-amended" until after the date on which the affidavit was sworn. Secondly, why was no application made for the evidence of Dr. Wong to be taken de bene esse? There is no affidavit by any of the plaintiffs' solicitors (and they have employed several from time to time) that Dr. Wong left Hongkong in such a hurry that they had no time to make such an application. Thirdly, if a witness has left the jurisdiction and a party intends to place reliance upon his evidence on matters which are to be contested and the party regards the evidence as of importance, it is that party's duty to take steps to have the evidence taken on commission. 131. But the matter does not end there. The existence of this affidavit was known to the plaintiffs' legal advisers as from the date when it was sworn, and, presumably, it was intended from the beginning that an application for its admission in evidence would be made. No mention was made of it to the 1st defendant's legal advisers upon the Summons for Directions. Indeed, neither Mr. Zimmern nor the court knew anything about the affidavit until after the trial of the action had commenced. 132. Why should Chan Kin come to see Paulie at all? Paulie gave no reason for the visit. If Chan Kin did tell Paulie and Wong this story about being "financially embarrassed" it was probably because Wong and Paulie had been complaining to him about the fact that he was not keeping the common passages clean, and Chan Kin might have thought that this was as good a story as any in order to pacify Paulie and Wong. But I simply do not know. I have not seen Chan Kin or Wong; and I have no chance of probing the whole matter. 133. There is no doubt at all that the 1st defendant received $12,000 from the 5th defendant (Chan Kin). But I place no reliance whatsoever on Dr. Wong's allegation that Chan Kin paid $12,000 "as a bribe", or on his allegation that the payment of this sum resulted in Tai Cheung Co. being "financially embarrassed" with the result that they could not clean Mirador Mansion properly. The latter allegation is double-hearsay and not admissible against 1st defendant; and in any case 1st defendant has been deprived of his opportunity of cross-examining Dr. Wong and Chan Kin in regard to both allegations. Any future application to admit an affidavit in circumstances which in any way resemble the circumstances disclosed in this case will get short shrift by this court. 134. Clearly the 1st defendant did not accept the $12,000 as a co-owner. The most reasonable inference is that, as manager of the building, he knew that the building had to be cleaned, and he put the cleaning contract in the way of Chan Kin and charged him $12,000 for so doing. The defendants entered the payment in their books of account and used the money on general expenditure in the building. 135. I shall deal later with the plaintiffs' allegations in paragraph 21 that the 4th defendants did not keep the building clean and have kept it "in a very poor condition" together with their allegations in paragraph 11 that the 1st, 2nd and 3rd defendants "have not kept the building in good order and the plaintiffs, including the co-owners, suffered damage". 136. I shall now summarise the evidence relating to what was referred to throughout this case as "the illegal shops and stalls". These structures are shown on plans 2, 3 and 4 attached to Ex. A.4 (which was put in evidence as an additional copy of the Deed of Mutual Covenant). It is necessary to set out the evidence in some detail because no person has come forward to say that he was obstructed or inconvenienced in any way by the presence of these structures; and it is necessary to have a clear mental picture of their size and location. 137. A summary of Mr. Paulie's evidence relating to these structures and that of an architect (Christopher Haffner) who visited the building on 4th and 8th March 1970 and subsequently made two reports (Exs. TT and UU) is as follows:- Polly's Co. Emporium: This is defendant No. 178 in the statement of claim. Mr. Paulie said that this firm is now in occupation of the space by the side of the escalator on the ground floor, and that at the commencement of the action the occupiers were Peter's Gift Shop (defendant No.60). 138. Paragraph 3 of Mr. Haffner's report (Ex. UU) reads:- "Escape routes from other floors at ground level 139. Mr. Haffner speaks of the possibility of the grilles on the escape routes being locked. Mr. Paulie said that several months ago the iron grilles were locked. On othe other hand, there was evidence that although these grilles may well have been closed years ago, they have not been used recently - at any rate during the last few months; and that, although there are boards put up at night at the entrance to one of the staircases, there is always someone sleeping there who is in a position to open the boards whenever necessary. 140. Mr. Paulie's evidence continued thus:-
141. The statement of claim against Fan Kar Fan (Ex. PP1) is in the usual form. The 3rd defendants say that the "premises were let to the defendant" and that he had failed to pay the rent. In his defence (Ex. PP3) Fan Kar Fan denied that he was a tenant, but pleaded that if he was, the letting was in breach of the Deed of Mutual Covenant. In their Reply (Ex. PP4) the 3rd defendants say Fan Kar Fan is not a party or privy to the Deed of Mutual Covenant; that he has paid the rent and that he is estopped from denying that the 3rd defendants are his landlords. 142. With regard to these staircases, my note of Mr. Paulie's evidence reads:-
143. Paragraph 10(g) of Ex.O, which was a report of a "survey" carried out by the Fire Services Department in regard to Mirador Mansion on 14th December 1964 reads:-
144. Ching Sue Man trading as Lebanon. This is defendant No. 179. In regard to this defendant, Mr. Paulie said:-
Turning now to the 1st floor (plan 3 attached to Ex.A4):- 145. Chih Luen Press. This is defendant No. 70. Mr. Haffner's report reads: "Occupies an area near the escalator of 6'7" x 15'4 1/2" (101.17 sq. ft). It appears to be marked red on plan 3. 146. Arts Palace. This is defendant No. 71. My note of Mr. Paulie's evidence is:- "He was occupying shop 61 at the commencement of this action. He has vacated. That unit is now used by the Hongkong Gift Centre" (presumably the 61st defendant). 147. Spring Co. This is defendant No. 72. This defendant and Arts Palace are not referred to specifically by Mr. Haffner. There is a subparagraph in his report which reads:- "A shoe repair firm occupies an approximate area of 4' 4" x 11' 2" (48.37 sq. ft.) near shop 72." Mr. Paulie refers to another name shown on plan 3, namely Venus Co. My note of his evidence reads:-
Turning now to the 2nd floor (plan 4 attached to Exh.A4):- 148. Shui Kee Coffee Store. This is defendant No. 73. My note of Mr. Paulie's evidence reads:-
149. With reference to this, Mr. Haffner writes:
150. Alejo Trading Co. This is defendant No.74. The firm was registered as a business in February 1963 (Ex. C9). My note of Mr. Paulie's evidence relating to this defendant reads:-
151. As regards the 3rd floor (plan 5 attached to Ex. A4), my note of Mr. Paulie's evidence reads:- "The red areas round the sides of the plan show the zinc awnings constructed above what were designed as verandahs of the flats. These are all the traders shops. These awnings gather filth from the upper floors and are a fire and health hazard. 152. Mr. Paulie said that there were no assignments registered in the Land Office in respect of the "illegal shops and stalls", and that they did not contribute anything towards the annual premium which the 1st defendant was obliged to pay to Government. That is not denied by the 1st defendant. 153. In paragraph 5 of Ex. O (the "survey" carried out by the Fire Services Department in December 1964) the names Pak Kee (defendant No.65) Lebanon (defendant No.179) and Shun Kee (defendant No.73) are mentioned (items C(1), C(6) and C(12) of paragraph 5). 154. Paragraph 7 of Ex. O deals with what the writer calls "illegal building alterations". Item (b) reads:-
As I have said, the Cordial Company Ltd. are defendant No.9. They were represented at the beginning of the trial by Mr. Miu, and on the 3rd day of the trial Mr. Bernacchi announced that the plaintiffs were discontinuing the action against them. 155. Paragraphs 8 and 18 of the statement of claim refer to the "illegal shops and stalls". Paragraph 8 reads:-
Paragraph 18 reads:-
In paragraph 10 of their defence, 1st, 2nd and 3rd defendants say:-
The admission is that the occupants of these structures are licencees. The plans together with Mr. Haffner's report indicate their location. There was no evidence as to which "two instances" the 3rd defendants are referring in regard to areas for access and egress. They are probably referring to Polly's and the Hong Kong Gift Centre (plan 2) i.e. the passageway adjoining the escalators on the ground floor. 156. As regards the allegation in the latter part of paragraph 10 of the defence, it will be seen presently from Ex.D that it is the case that all licence fees collected (or rentals as they are called by the auditor) are accounted for in the defendants' books and have been utilised for purposes of management. However, the 3rd defendants were incorporated on 2nd February 1962; and Ex.D indicates that a certain amount of rental income was received in respect of the years ending March 1960 and March 1961. Therefore it is not strictly true to say that "the 3rd defendants granted the licences". But I do not think anything turns on that. During the trial, counsel for the 1st defendant made it perfectly clear that the 2nd and 3rd defendants were under his control. 157. The defendants' witness Huen Kwok Chai said in evidence that he collected the following "rent" from the "illegal shops and stalls":-
He said that the 3rd defendants do not collect any rent from Wah Nan Store (def. No.68) or Kowloon Curio Bazaar (def. No.67) and that the 3rd defendants were in no way responsible for the presence of these stalls or show cases; but he did not know the position as regards the 1st and 2nd defendants. He also said that no rent was collected from Luxury Co. 158. In opening his case, Mr. Bernacchi referred to clauses 1, 10 and 11 of the Deed of Mutual Covenant and submitted that the licencing or renting of these shops on the passageways near lifts and escalators was a clear breach of clauses 10 and 11. I do not read clauses 10 and 11 in that way. Clause 10 says that each party may make additions and improvements "in his own part". Clause 11(a) is a covenant by each party not to make any structural alterations in "his part" which may damage the other "parts" or cause inconvenience to the other occupiers. Clause 11(b) is a further covenant by each party not to do anything which is likely to increase the insurance premiums on the "building" and so on. Clause 11(c) is a further covenant.
The word "part" in these clauses obviously has the same meaning as in clause 1; and the parts set out in the second schedule opposite the name of each party are, with the exception of the basement and the roof, specified shops and flats - not common passages. In other words clauses 10, 11(a) and 11(c) refer to what each party may, and may not, do in relation to the shops or flats of which he has exclusive possession. True, clause 11(b) refers to activities which may affect the building as a whole in the matter of insurance. But clauses 10, 11(a) and 11(c) do not appear to apply to common passageways. The Deed of Mutual Covenant did not give the 1st defendant exclusive possession of the common passageways. From the moment when he assigned 4/752 shares of the whole building to the Peninsula Taxi Co. Ltd. on 28th April 1960, he owned 648/752 shares in the whole building, until, of course, he assigned more shares to subsequent assignees. At no time did the 1st defendant assign shares in the whole building to the occupiers of the "illegal structures". But, in licensing them, he has, of course, given them exclusive possession of portions of the common passageways. 159. I would have thought that clause 2 was more relevant to the question of the licensing of the illegal structures on the common passageways. This clause reads:-
So far as I can see, no passages are included in any part of the building allotted to any party under clause 1 and the second schedule. If there has been a breach of the Deed of Mutual Covenant, so far as the licencing of these "illegal" structures is concerned, I would have thought that it was because the right of access and egress to and from the "parts" allotted to the co-owners, by the use of the common passages, has been impaired or restricted. Furthermore, in each assignment the 1st defendant assigned "all rights, rights of way" etc. and the premises in each case are assignment "subject to the covenants terms and conditions on the part of the vendor in the said Deed of Covenant"; and one of the "terms" of that Deed is clause 2. 160. At one stage of the case, Mr. Zimmern made a submission in law which I regarded as referring to the licencing of the "illegal shops and stalls"; but, from his closing address, I gathered that it related only to the "illegal workshops", which I shall deal with presently (defendants Nos. 76-177). But, in case I misunderstood counsel and that his submission refers to both aspects of the case, I shall record it here and deal with it so far as it relates to the "illegal shops and stalls". 161. Mr. Zimmern's submission was this: The system of conveyancing in Hongkong is (and always has been) such that the developer is never left with the common parts of a multi-storey building; a developer does not sell, or assign flats in the building but a certain number of parts in an undivided whole together with exclusive possession of a certain portion of the building; that the moment a developer signs the Deed of Mutual Covenant and the first assignment (even though he may only assign 1/752 part or share of the whole) the developer is in no better position, qua owner, than the assignee of that one part or share; the assignee holds one undivided share of the whole building, he has exclusive possession of a given portion; and his only right to the passageways and other common parts is for the purpose of giving him ingress and egress to and from the portion over which he has exclusive possession (flat, shop or whatever portion it happens to be); that when a developer has assigned one share of the whole, his rights and liabilities are identical to those of the assignee and all those who take under him are in the same position; that so long as he remains owner of a share or interest in the building the developer takes the benefits and shares the liabilities under the Deed of Mutual Covenant; but the moment he has sold his last share in the building, his liability under the Deed ceases in view of clause 3 of the Deed as read with section 3 of the Law of Property (Enforcement of Covenants) Ordinance, Cap.297; that by 1967 the 1st defendant had sold all shares in the Mirador Mansion and all assignments had been completed except two; that one of them (Ex. B66) was executed but unstamped; that if the 1st defendant received the purchase price, his position, qua owner, at the time of the issue of the writ in April 1967 was that of a bare trustee for the purchasers; that there is nothing before the court to suggest that the beneficial interest in shop 8 1st floor (Ex. B66) and flat F2 12th floor (Ex. B67 has not passed to the purchasers; that, on the evidence, the probabilities are that one of these purchasers could get his assignment by calling for it; and, as regards the other, the assignment which he has in fact executed could be registered by his paying the stamp duty and solicitors fees. 162. True, upon executing the Deed of Mutual Covenant the developer, vis-a-vis his co-owners, is in no different position from any other co-owner, that is to say so far as the benefits and liabilities under the Deed are concerned. But I do not understand how this could let the 1st defendant "off the hook" so far as the licensing of the "illegal shops and stalls" is concerned because all such licensing was done at a time when the 1st defendant was undoubtedly a co-owner. He was also an "owner" as defined in Cap.297 in that his name appeared in Land Office records as such. Indeed it still does as regards 2/752 shares of Mirador Mansion. Therefore there would, in any case, be no question of his getting any benefit from proviso (b) to section 3(1) of Cap.297. 163. Sub-section (2) of section 3 makes it clear that the Ordinance was not intended to nullify the effect of any arrangement which co-owners might make in regard to the limitation of liability as between themselves. But what is the meaning of the words "cease to have any share or interest"? 164. As regards shop 8 1st floor, there is prima facie evidence of receipt of the purchase price on the face of the assignment (Ex. B66). In the case of flat F2 12th floor, clause 2 of the agreement for sale and purchase (Ex. B67) reads:-
Therefore there is prima facie evidence before the court that the 1st defendant has been fully paid for all 752 undivided parts or shares of Mirador Mansion. There is no doubt at all that his position as regards the two undivided shares involving shop 8 1st floor and flat F2 12th floor is that of a bare trustee. 165. But even if, as a result of the provisions of the Deed of Mutual Covenant and the form of assignment used in Hongkong, it could be said that the 1st defendant has now (or at any rate may at any moment) cease to have any "share" in Mirador Mansion, how can it be said that he has no longer any "interest" in the land and building upon which it is built? He is the prospective Crown Lessee. He is under continuing liability to the Crown for the next 17 years to pay $140,995 per annum by way of instalments of premium and he is liable to the Crown for Crown rent for the next 80 years. He expects to be able to recover from co-owners of the building sums which will enable him to discharge his own obligations in the matter of premium and Crown rent. 166. At any rate, so far as the licensing of the "illegal shops and stalls" is concerned, it is not open to the 1st defendant to say: "I am not liable for this because I no longer have any share or interest in Mirador Mansion." 167. I shall now endeavour to summarise the evidence relating to what was referred to during the trial as "the workshops" (defendants Nos.76-177). Paragraphs 10, 22, 24 and 25 of the statement of claim refer. Paragraph 22 reads:-
168. There was not a scrap of evidence called to support the allegation that the 1st defendant sold or let off portions of the building to any person for industrial purposes. There was no evidence that the 2nd plaintiffs objected to the presence of the "workshops"; nor was there any evidence that any co-owner, other than Mr. Paulie and Dr. Wong, did so. When Mr. Paulie was asked whether he knew of any case in which the 1st defendant had "sold or let off" a unit of the building for industrial purposes, his answer was:-
169. Paragraphs 23-25 of the statement of claim read:-
170. The plaintiffs rely on a letter dated 23rd May, 1961 from the Superintendent of Crown Lands and Surveys to a firm of solicitors who had apparently complained on behalf of some client in regard to the use to which certain units in the building were being put. The letter reads:-
It is not known who the client was. There is no evidence that the solicitors supplied the Superintendent with any details; there is no evidence that the Superintendent did any investigation or took any action; and there is no evidence that the Crown is contemplating re-entry. 171. In relation to the workshops, Mr. Paulie said:-
172. While he was giving evidence, Mr. Paulie handed up a bulky typewritten document containing particulars of a large number of units in the building and remarks made by himself concerning those units and as to what action he had taken in regard to them. Counsel agreed that the document was inadmissible; but it was agreed that the plaintiffs' solicitors should extract from this document such items as they considered relevant; and so Ex.L was typed out. 173. It is a document relating to defendants 76-177; and it purports to give particulars relating to a number of "workshops" in the building as at some date in 1967, about the time this action commenced. It reads as follows:-
174. This is a rather peculiar document. It fits in exactly with the statement of claim which alleges that on some date in 1967 defendants Nos. 76-177 (except those against whom the action has been withdrawn) were operating workshops. From an examination of Exs. E and W, most, but not all, of the names appearing on Ex. L are first assignees. One might be tempted to assume that those names which are not on Exs. E and W are either subsequent assignees, or the actual occupiers of the premises in question. But it is not as simple as that. For example, the 81st defendant is shown on Ex. L as "occupying" A.6 3rd floor, A.3 6th floor and F.2 6th floor. In Exs. E and W, he is shown as the registered owner of A.6 3rd floor and in Ex. W, he is shown as the registered owner of A.3 6th floor, but some other person is shown in Ex. E as the registered owner of that flat; and in both Exs. E and W some other person is shown as the registered owner of F.2 6th floor. Yet the 81st defendant is shown on Ex. L as carrying on a tailor's workshop at all those units. 175. He probably does not "occupy" any of the three premises. His address for service on the original writ is 32 Wo Fung Street, 1st floor, Luen Wo Market, Fanling, New Territories. It may be, of course, that the registered owner of F.2 6th floor has assigned the premises to him since the searches in the Land Office which resulted in Exs. E and W and that he has some tenants in all those flats carrying on tailor's workshops. 176. The 83rd defendant is the registered owner of A.15 3rd floor; but he is not the registered owner of A.12 7th floor. Yet, he is shown on Ex.L as carrying on a tailor's workshop at both units. 177. The 130th defendant (Mary Winyard) is shown on Ex.L as carrying on a tailor's workshop at F.3 10th floor. She is the registered owner of F.2 10th floor; but not F.3 on that floor. 178. The 170th defendant is shown on Ex.L as operating a food caterer's business at C.1 15th floor. He is not the registered owner of that unit; but according to Exs. E and W, Chan Pui Kee is the registered owner. Is this the Chan Pui Kee (formerly 12th defendant) in respect of whom proceedings were discontinued after this action commenced? 179. The first name on Ex.L is Au Lock Tung (defendant No.76). When Mr. Paulie was asked about him in examination-in-chief, he said: "He occupies shop No.60 1st floor, shop 51 on ground floor, B.1 16th floor and flat B.2 3rd floor". I do not know what was the purpose of the question. Incidentally, Au Lock Tung was not served with any writ or statement of claim in this action. Ex.L indicates that he occupies B.2 3rd floor. Fung King Man is shown in Ex.E as the registered owner of shop 60 1st floor, shop 51 ground floor and B.2 3rd floor. Au Lock Tung is shown as the registered owner of B.1 16th floor. 180. Paragraph 6 of the report (Ex.O) which was made as a result of a visit to the premises on 14th December, 1964, deals with 18 "unregistered factories using power driving machines". They are as follows:-
Of the above 18 units, only (b), (c), (d), (e), (f), (j) and (k) appear on Ex.L where they appear as items 7, 8, 6, 37, 39, 82 and 16 respectively; that is to say these 7 references in Exs. L and 0 concern defendants Nos. 83, 84, 82, 114, 117, 162 and ...(illegible) However, paragraph 13 of the report states:-
181. I might add here that the plaintiffs called a Mr. Mirchandani who said that he was sole proprietor of Ranees International who are tenants of shop 71, 1st floor. He said:-
A.4 11th floor and A.4 13th floor do not appear either in Ex.L or paragraph 6 of Ex.O. 182. The plaintiffs called an Inspector from the Labour Department (Mr. Stanislaus Tsao). He said that he had inspected Mirador Mansion in 1967; that he found 200 industrial undertakings operating; that he had inspected it again recently and that there were now about 198 such undertakings. These, of course, include the many small tailor's workshops as well as jewellery workshops, etc. Mr. Tsao said that 10 or 11 were registered with the Labour Department; and that about 100 such establishments should be registered but are not registered. He said that the jewellery workshops cause a high risk of fire because they use petrol to fire the torches which they use in the welding of the precious metals. 183. The plaintiffs called a Survey Assistant from the Crown Lands & Survey Office (Lai Chi Keung) who said that on 17th April, 1967, he inspected five factories which were registered provisionally with the Labour Department. They were:-
None of these units appear in paragraph 6 of Ex.O; and only two (F.3 3rd floor and A.9 4th floor) appear in Ex.L as items 77 and 6 respectively, i.e. units owned by defendants Nos. 157 and 82. I do not understand this witness's reference to A.4 on 2nd floor. There are no A units on 2nd floor. On the assumption that I may have misheard him and that he said "7th floor" and not "2nd floor", I have examined Exs. O and L again; but A.4 7th floor is not shown on either document as a workshop. 184. The witness said he inspected two factories on 11th October, 1968, viz:- A.13 and F.2 on 4th floor. One of these (F.2 4th floor) appears as item 42 on Ex.L (defendant No.120). The other (A.13 4th floor) is referred to in paragraph 6 of Ex.O. 185. The plaintiffs then called Mr. Kwok Hon Ming who said he was Acting Chief Health Inspector in the Urban Services Department. He produced what he termed an abstract from the Urban Services Department files (Ex.BB). It reads:-
This witness also produced 5 sheets of paper (Ex. RR1-5) on which were written details of the number of prosecutions undertaken by the Urban Services Department against units in Mirador Mansion for the months January, February and March, 1967, and January and February 1970. They were described as "specimens" from which I gathered that the Urban Services Department undertook prosecutions against units in this building fairly regularly. They appear to be mainly for carrying on unlicensed restaurants and food factories. In January 1967, there were 10 summonses taken out involving 4 units. In February and March 1967, there were 4 summonses during each month. In January 1970 there were 21 summonses involving 7 units, one of which was shop 21, 2nd floor (defendant No.73 in this action). Another was A12, 3rd floor which is item 87 on Ex.L (defendant No.168). A12 3rd floor is not mentioned in paragraph 6 of Ex.O. In February 1970, Ex. RR5 shows that the Urban Services Department took out 24 summonses involving the following premises:-
It will be seen that only 4 of the above 12 units appear on Ex.L. But whereas all the Urban Services Department summonses were in respect of the carrying on of unlicensed restaurants and food factories, D1, 5th floor, is shown on Ex.L as a godown and storeroom for plastic flowers, A6 3rd floor, is shown on Ex.L as a tailor's shop, and D2 and D3 are shown on Ex.L as a tailor's shop. 186. Mr. Bernacchi submitted that the 1st defendant is "liable to ensure" that the Conditions of Regrant are complied with because: (1) He signed the Deed of Mutual Covenant. 187. As regards (2) above, Mr. Bernacchi's submission was that the Crown cares not into how many individual shares the building has been divided; that, so far as the Crown is concerned,
If the plaintiffs' case was that the 1st defendant (vis-a-vis his co-owners) was "liable to ensure" that the Conditions of Regrant was complied with, it is strange that they did not say so in their pleadings instead of alleging that he "sold or let off" portions of the building for industrial purposes. As I have said, he did not sell or let off portions for industrial purposes. He is certainly under continuing liability to the Crown under the Conditions of Regrant; but his liability to the Crown is not an issue in this case. And if some co-owners choose to use their premises for industrial purposes, how can it be said that the 1st defendant is liable to other co-owners because he signed all the assignments? At all material time he has been a co-owner; and, as such, he, like any other co-owner, could have taken action to prevent his fellow co-owners (or some of them) from putting their premises to industrial use; but the fact that he could have done so (as the 2nd plaintiffs in this case are now doing) does not mean that he is and always has been, "liable to ensure" to his co-owners that no part of the building was put to industrial use. 188. However, this is all now of academic interest because on the last day of the trial, Mr. Asome finally sought leave to amend that portion of the statement of claim in which the plaintiffs seek relief against the 1st defendant in regard to the "workshops". The plaintiffs now seek no reliefs against the 1st defendant in respect of their allegations under paragraphs 22 to 25 of the statement of claim. 189. Any co-owners who are using their premises for industrial purposes are, of course, clearly liable for breach of the Conditions of Regrant and of the terms of their assignment which are subject to the Conditions of Regrant. Also, it is no good their saying that they have no personal knowledge of what is going on in the "parts" (i.e. flats etc.) which they have let on a monthly tenancy. The proviso to clause 13 of the Deed of Mutual Covenant provides that:-
and the conditions include clause 11(c) which is a covenant not to use "his part ........ for any illegal, unlawful ........ purposes nor do or permit anything therein ........ which may create unnecessary noise or may be or become a nuisance, annoyance, damage, or inconvenience to the other occupiers ..........". The use of the flats in the upper floor for industrial purposes is contrary to special condition (b) of the Conditions of Regrant and such use is therefore unlawful. 190. In December 1966, Lowe, Bingham & Matthews received instructions from the 1st, 2nd and 3rd defendants to audit their accounts relating to Mirador Mansion for the period 23rd April 1959 (the date of the temporary occupation permit issued by the Building Authority) to 31st March 1967. An experienced member of this firm (Benedict Joseph Young) conducted an investigation of the defendants accounts and records and he submitted Balance Sheets and Profit & Loss Accounts for the 8 years beginning with the year ending 31st March 1960, together with accompanying schedules under cover of his report dated 11th October 1967. This report was, as I have said, disclosed to the plaintiffs long before the trial commenced; and Mr. Zimmern said in court that he had made it perfectly clear to their legal advisers that the books, upon which the auditor's accounts and report were based, were available for inspection and re-audit at any time. The auditor's report was put in as Ex. D at the commencement of the trial; and Mr. Bernacchi relied upon it in opening his case. 191. Although the business of the unlimited company had, in theory, been would up on 31st March 1961 (Ex.B26) upon the incorporation of Tai Cheung Construction Co. Ltd., it is clear from the auditor's report (and from his subsequent evidence in court) that for the whole period 1959/1967, entries relating to Mirador Mansion were made both in the books of the unlimited company and in the books of the 3rd defendants. Indeed, Mr. Young said that he had the greatest difficulty in sorting out the entries which had been made in the books of the unlimited company which ought to have been made in the books of the 3rd defendants. But he said that he was given every assistance by the staff of the 2nd and 3rd defendants; and that he was satisfied, as an auditor, that all relevant books and documents were before him. 192. The auditor said that he had inspected all deposit receipts in respect of sums paid to the Water Authority and the China Light and Power Co. Ltd. The figures shown in the accounts Ex.D are these:-
193. As I understood the evidence, (a) were deposits paid by the unlimited company to the Water Authority; (b) were deposits paid to the China Light & Power Co. Ltd. initially; (c) was paid to the China Light & Power Co. Ltd. at a later date; (d) was expenditure on making chops for 'chopping' the numerous receipts involved (the auditor recommended that this small sum should be written off); and (e) was an additional sum paid by Tai Cheung Construction Co. Ltd. (or the 3rd defendants) in 1965 when 504 individual water meters were installed in the flats on floors 3-16. It was mentioned by the 1st defendant in his letter of 2nd February 1966 to Dr. C.C. Wong (Ex.B23). In 1965, most of the unit holders apparently paid their deposits to the Water Authority direct; but a number did not do so; and the 2nd (or 3rd) defendants paid the Water Authority on their behalf. 194. Mr. Young was asked by Mr. Bernacchi why the company should pay a further deposit of $54,830 to the China Light & Power Co. Ltd. The witness did not have the answer immediately available. But on returning to the witness box a few days later he handed up to counsel the whole bundle of receipts from the China Light & Power Co. Ltd. in respect of deposits required by this Company following the installation of individual meters in each unit. Counsel did not request that the whole bundle of receipts be put in evidence, but he asked that one be admitted in evidence as an example (Ex. CCC). 195. In the defendants' books, the figures $88,506.10, being the total of utility deposits paid on behalf of unit holders, is shown for each year till the year ending 31st March 1965; but for the two years ending March 1966 and March 1967 the figure is $93,796.10 because of the additional payment of $5,290 paid by the defendants to the Water Authority because of the failure, or refusal, on the part of certain unit holders to pay their deposits when individual meters were installed. The same figure ($93,796.10) appears in the balance sheets of the 3rd defendants for the years ending 31st March 1968 and 31st March 1969. (Exs. XX and WW) 196. The installation of separate water meters in 1965 cost the 3rd defendants $84,600. Assuming, as 1st defendant says in his letter of 2nd February, 1966, that the 3rd defendants had obtained the prior approval of the majority of unit holders, it appears reasonable that they should recover what they had spent thereof; and, according to the accounts, the majority of unit holders have repaid the defendants. But a few have not done so. $7,857.30 is apparently outstanding. Again. a certain amount ($4,270) has been over-collected under this heading. How this happened was not gone into during the trial; but, apparently, part of the over-collection has already been refunded. The $84,600 appears on the assets side of the balance sheets under the heading "temporary payments"; and on the liabilities side, the net amount which had been recovered as at 31st March, 1967, was $81,012.50. 197. Turning to the profit and loss accounts forming part of Ex.D, the two biggest items of expenditure in the Profit and Loss accounts are salaries and wages, and light and power. There was no challenge to the latter item; but there was a certain amount of cross-examination in regard to salaries and wages. In his report, however, Mr. Young said:-
198. As far as money spent by the 1st, 2nd and 3rd defendants on repairs and maintenance is concerned, for the years 1960/69 the Profit and Loss accounts (Exs. D, WW and XX) show the following:-
It was suggested to the defence witness (Lo Shung Wing) that as soon as this action was instituted in 1967, the 3rd defendants began to spend on repairs what they ought to have spent in previous years. The witness had no details in front of him; but he thought that the main reason for the increase in 1968 and 1969 was that much of the electrical wiring had to be replaced. He said that with the increase in the number of air conditioning and other electrical installations, the original wiring in the building was quite inadequate. 199. As regards income, Mr. Young said that so far as he could ascertain from the books, management fees were charged on all the 504 units on floors 3 - 16; but the number of shops paying management fees appeared to vary from time to time. In 1959, 208 shops (ground, 1st and 2nd floors) were paying management fees; but in 1963 this figure was reduced to 184. It remained about 190 till August 1968 when the number of shops paying management fees increased again to 203. As I have said, he produced notes of his researches on this point (Ex.KKK) 200. What is referred to as "management fees" in the profit and loss accounts represent what the 1st, 2nd or 3rd defendants actually received (not what they should have received) from co-owners as their contribution to the month-to-month outlays involved under the items enumerated in clauses 4, 5, 6, and 7 of the Deed of Mutual Covenant, with the exception of sub-clause (d) and maintaining the electric pumps under sub-clause (f) of clause 4 (which items the co-owners paid for direct to Chan Kin, the 5th defendant). The expenses involved under all items enumerated in clause 4 (with the 2 exceptions I have mentioned) should have been borne equally by all co-owners including those with exclusive use of portions of the basement, the sharing being based on a "unit" (i.e. shop or flat) basis, the basement for this purpose being "deemed to consist" of 36 units. 201. The expenses under clause 5 of the Deed were supposed to be shared on a unit basis by the "owners" of shops on the 1st and 2nd floors. The expenses under clause 6 were supposed to be shared on a unit basis by the "owners of flats and units on all floors from the 3rd to 16th floors"; and the expenses under clause 7 were supposed to be shared on a unit basis by the "owners of shops and units on the basement, ground, 1st and 2nd floors". 202. The document (Ex.G) of which so much was said by counsel for the plaintiffs reads as follows:-
MIRADOR MANSION - BASEMENT
The first thing which strikes me about this document is that it does not purport to cover all items mentioned in clauses 4, 5, 6, and 7 of the Deed. Except for the cost of a few bulbs and two small amounts in respect of miscellaneous expenses, no mention is made of expenditures for repairs and maintenance (sub-clause (b) of clause 4 of the Deed) although it is clear from the profit and loss account for the year March 1968/March 1969 (Ex. XX) $61,173.15 was spent on this item. Of course, one would not expect to see any reference to sub-clause (d) of clause 4 because this was Chan Kin's responsibility; but there is no mention of water charges under clauses 6 and 7 of the Deed - presumably because Government's debit notes for such items are issued quarterly or half-yearly and not monthly. 203. The apportionment of expenses does not follow strictly clauses 4, 5, 6 and 7 of the Deed in that there is no statement of what, according to clause 4, should be shared equally by all co-owners from the basement upwards. This would include the items mentioned in sub-clauses (c), (e) and (f) of clause 4. There are 18 floors in the whole building, including the ground floor and basement; but in Ex. G in apportioning the expenditure among unit holders the building has been regarded as of 17 floors. 204. Clauses 4 - 7 of the Deed clearly contemplate that the co-owners in the basement would pay considerably less than other co-owners. Clauses 5 and 6 do not apply to them. But, according to clause 4, the basement should contribute to the wages of the general caretaker and watchmen employed for the entire building, electricity charges and other expenses for the lighting of all parts of the building in common use and electricity charges wages and other expenses of operating the pumps for supplying flushing water. 205. If Ex. G is typical of all statements of monthly expenses issued by the 1st defendant or his companies, either he has not chosen to charge the basement owners a proportion of these expenses, or they have objected to being charged for items which they may well have regarded as of no concern to them. Of what concern is it to them whether the flushing system in the upper floors is working? What do they care about the state of the lighting in the common passageways on, say, the 2nd floor? Neither Mr. Harilela (the 1st named of the 2nd plaintiffs) nor any of the other co-owners in the basement have come to court to testify on this. In the face of clear evidence from Huen and Lo (which I accept) that a very considerable number of co-owners have consistently refused to pay their share of management fees, why should I assume (as the plaintiffs ask me to do) that the basement was simply not charged by the 1st defendant (for reasons best known to himself) rather than that the co-owners in the basement regarded themselves as in a class by themselves and refused to pay according to clause 4? In any event Ex. G is nothing more than a statement of expenses for one month. From the very nature of the figures on that document, it could not have been issued by the 1st defendant every month. In other words, it simply cannot be the case that from 1965, or 1967, onwards co-owners were asked to pay a fixed charge of $17.50 per month. 206. However, the question of apportionment does not affect the fact that in February 1969, the 1st defendant or his companies spent, according to Ex.G $10,970 in management expenses. In fact they spent more than that. This did not include anything for Crown rent or repairs under clauses 4(b) and 6(a), or for water charges under clauses 6(d) and 7; and, of course, it did not look at the whole question of management as the auditor has done in his profit and loss account (Ex. XX). For example, the auditor has made allowance for property tax for which the 1st defendant is liable in respect of the income from the rents of the "illegal shops", (income which according to Exs. D, WW and XX, was vital to the carrying on of the management.). $10,970 can therefore be taken as a minimum figure for one month. (The Chinese New Year gratuity does not affect the position to any material extent). Therefore on this basis, the 1st defendant would appear to have expected the co-owners to contribute $131,640 ($10,970 x 12) during the year 1968/69. In fact during that year the total of all management fees paid by the co-owners was $76,850 (Ex. XX - profit and loss account). 207. Going back to the early years (Ex. D - profit and loss accounts) during the year 1959/60 the 1st defendant and his company spent $75,115.86 in managing Mirador Mansion. The co-owners contributed a mere $36,377.70. The cost of management during the year 1960/61 rose to $134,168.48. During that year the co-owners contributed $75,380.15 towards the cost of management during that year plus $9,807.95 arrears of management fees in respect of the year 1959/60, making a total of $85,188.10. The profit and loss accounts tell the same story for every year up to the present with the exception of the years 1963/64 and 1964/65. For these two years there was more income than expenditures. The reason is obvious from the accounts. During those 2 years the co-owners paid $16,556.90 and $13,945.30 arrears of management fees which more than offsets the $6,615.14 and $10,090.75 "profit". Mr. Young, the auditor, said that only management fees which had actually been paid were brought into his accounts. Although a very considerable number of co-owners had paid no management fees for years, he said that there was no point in showing arrears as an asset as the chance of recovery was nil. 208. Below the profit and loss accounts there is a statement showing excess of expenditure on income for the 8 years 1959/67. By 31st March 1967, according to the accounts, the 1st defendant had spent $104,896.45 of his own money in the management of Mirador Mansion. 209. But this figure takes account of the rental income from the "illegal shops". In respect of the 8 years 1959/67, the income from these structures was as follows:-
In other words, if the 1st defendant had not received this $243,518.73 his loss in the management of Mirador Mansion, according to the profit and loss accounts, would have been $348,515.18 ($104,896.45 plus $243,518.73). From the accounts for the 2 years 1967/1969 (Exs. WW and XX), it appears that the 1st defendant is still losing heavily; but his losses were less than what they would otherwise be because he has received $51,123.07 and $50,780 rental income from the "illegal shops" during those 2 years. 210. I do not see how the 1st defendant could have carried on the management of this building without this source of income. During the very first year of management (1959/60) there was a loss of $22,609.03. He received only $3,905.83 in rental income during that year. It would appear that most of these "illegal" structures were established between 1962/1964 because there was a very considerable increase in rental income between 1963/65. But, there was a loss in the management for every year except the years 1963/65. The following shows the position year by year:-
211. The major losses were incurred in the early years 1959/62. 212. The Profit and Loss Accounts for the years 1967/68 and 1968/69 (Exs. WW and XX) also show that the 3rd defendants are making a loss. The figure for 1967/68 is $27,601.30 and for 1968/69 it is $55,815.98. 213. The balance sheet for 1968/69 (Ex.XX) shows that the 3rd defendants owe the Tai Cheung Construction Co. $93,648.95. 214. Many unit holders have failed to honour their obligations under their assignments in regard to the payment of proportion of premium. As I already said, until a few days before this trial commenced Mr. Paulie had paid no premiums since 1965. As at the 31st March, 1967, the total amount which unit holders owed the 1st defendant in respect of premiums was $125,750.51. By 28th February, 1970, this figure had increased to $159,215.75. Of course, payments of premium have nothing to do with the expenses of managing the building. 215. Mr. Young was asked this question by Mr. Zimmern:-
Mr. Young's answer was:- "$336,390.15". Mr. Young arrived at this figure in this way: he took the losses for the first two years as per the Profit and Loss Accounts for 1959/60 and 1960/61 (Ex. D) namely $22,609.03 and $40,514.88. He then apportioned the loss for the year 1961/62 because the 3rd defendants had been incorporated on 2nd February 1962; and instead of taking the full figure of $24,255.89 as loss for the year 1961/62, he took $20,401.54 being the proportion for the period 1st April 1961 to 2nd February 1962. The total of the three figures $22,609.03, $40,514.88 and $20,401.54 is $83,525.45. To this he added the $93,648.95 owing by 3rd defendants to the 2nd defendants as per the 1968/69 balance sheet; and the $159,215.75 owing to the 1st defendant personally in respect of premium. The total is $336,390.15. 216. There was no means of attacking those figures. All counsel for the plaintiffs could say was that it might be that the defendants' books did not contain all relevant entries. As I have said, if that was to be the plaintiffs' line it was up to them to call for the books and have them re-audited long before the case came on for trial. Nothing came out of the cross-examination of the auditor to justify re-opening the whole question of the accuracy of the books at this stage. 217. I find it very surprising therefore that the plaintiffs proceeded with paragraph 17 of the statement of claim. This paragraph as amended up to the time when the trial began, read:-
Halfway through the trial the two amounts ($150,000 and $100,000) were amended to read $127,000 and $95,000 respectively. 218. The allegations in paragraph 17 refer to the sums received in response to the letter of 1st May 1959 (Ex.B2). As I have said, if every unit had paid the amounts demanded in Ex. B2, the unlimited company should have received $127,880. In the letter (Ex.B2) the unlimited company clearly indicated to each addressee that the sums which each purchaser was required to pay included "a reserve fund for management"; and, pursuant thereto, they allocated $30 per unit in their books. Sums so allocated are shown in the balance sheets as "Management fee deposits received". According to a schedule attached to Mr. Young's accounts (Ex.D p.14) this management fee deposit appears to have been worked out on the basis of 719 units because the figures shown as what they ought to have received under this heading is $21,570. (719 x $30) Again, a number of unit holders appear to have objected to paying this sum because from year to year the schedules show sums under the heading "amount still not yet received". As at the 31st March, 1967, the total amount held by the defendants under the heading 'management fee deposits' was $20,700. 219. The plaintiffs first submission was that the letter Ex.B2 was superseded by the Deed of Mutual Covenant, and that because the Deed makes no reference to a reserse deposit in respect of management fees, the reserve deposits should have been returned to unit holders immediately. I do not agree. When the Deed was signed a year later, it did not say that the letter (Ex.B2) would be treated as of no effect and that all deposits paid under Ex.B2 would be refunded to the co-owners. One must therefore ask oneself whether the phrases "other expense for the lighting" and "other expenses of operating" in paragraphs (e) and (f) of Clause 4 of the Deed were intended to refer to any deposits already paid. I do not think that this could have been the intention. 220. One of the documents in the agreed bundle is a deposit receipt (Ex.B3). During the cross-examination of the auditor, counsel for the plaintiffs put to the witness the original of another such deposit receipt (Ex.FFF) in favour of the 81st defendant (who did not give evidence herself). It reads:-
The argument put forward on behalf of the plaintiffs was that this deposit receipt (Ex. FFF) did not have the numeral "4" opposite "Basic Fund for management of the Mansion"; therefore these words must mean the initial deposits under items 1, 2 and 3. 221. I do not accept this submission. If one looks at the original of Ex. FFF, one sees that the receipt, as originally printed, did contain 3 items and the 4th item ("Basic fund for management of the Mansion") has been stamped on in the place where one would normally expect to find a 4th item. I do not think there can be any doubt but that the receipt followed the terms of the letter of 1st May 1959. Quite obviously each co-owner who paid the initial sums demanded did so with his eyes open that a proportion of the sum paid would be allocated as a reserve fund for management. 222. The Schedule (p.13 of Ex.D) is a summary of the position as disclosed in the books of account of the 1st, 2nd and 3rd defendants in regard to utility deposits. It deals with each year from the year 1959/60 to the year 1966/67. The details in regard to two years namely 1960/61 and 1966/67 are as follows:-
223. The schedule (p14 of Ex.D) is a summary of the position as disclosed in the books of account of the 1st, 2nd, and 3rd defendants in regard to management fee deposits:- The figures in regard to the years 1960/61 and 1966/67 are as follows:-
224. In his final address Mr. Bernacchi at first admitted that the defendants paid the China Light and Power Co. Ltd. the $54,830 deposit out of the total sums received in response to their letter of 1st May 1959; and although he did not ask to amend paragraph 17 of the Statement of Claim any further, he said that he was confining his allegations of fraud to the $21,570 "unilaterally allocated" to management fee deposit and the $20,489.30 "over collected from certain unit holders" (vide schedule p.13 of Ex.D), that is to say that $42,059.30 had been fraudulently converted by the defendants to their own use, alternatively that they had wrongfully detained this amount. 225. Later in his submission, Mr. Bernacchi said that he was making no admission in regard to the $54,830 allegedly paid to the China Light and Power Co. Ltd. on behalf of unit holders. Certain deposit receipts (Ex.CCC) were put in evidence; and Mr. Bernacchi said that these receipts were in the name of unit holders and he made no admission as to how the defendants came into possession of these receipts. But counsel did not amend the figure $42,059.30. He submitted that on the evidence there was prima facie evidence of fraud bearing in mind that the standard of proof was balance of probabilities. 226. In my view the plaintiffs have not even begun to prove fraud or wrongful detention. Owing to the fact that the plaintiffs did not call for any books of account (despite Mr. Zimmern's repeated offer to produce them) the defendants' system of bookkeeping was not investigated by the Court; but Lowe, Bingham & Mathews did a very thorough investigation; and although Mr. Young said that he had very great difficulty indeed in straightening out the various entries in the books of account belonging to the 3rd defendants and the unlimited company, there is nothing in the auditor's evidence to suggest for one moment that he suspected fraud. Indeed, he said that the 3rd defendants kept a register showing what deposits had been paid on behalf of each unit holder and what each unit holder had paid to the defendants, and he said that the amounts over-collected could be refunded whenever application was made therefor. 227. Mr. Zimmern said he regarded paragraph 17 of the statement of claim as irresponsible pleading. He pointed out that not one plaintiff had come forward to say that he had over-paid anything, or that he had requested a refund, or that a request for a refund had been refused; and that, anyway, the amount over-collected had nothing to do with the 2nd plaintiffs. 228. It is sufficient for me to say that in my view no case of fraud or wrongful detention of $42059.30 or any other sum has been made out. The 1st defendant was not called upon for any explanation on the evidence before the court. It is extraordinary that the plaintiffs did not even call for the register of deposits. They seemed to think that more suspicion could be thrown on the 1st defendant by concentrating on the form of wording used on deposit receipt Ex. FFF. Out of the numerous unit holders of the 752 units, surely someone could have been found to say something in support of the plaintiffs' allegation in paragraph 17. I cannot disregard this aspect of the case, especially when I read the wild allegations which were disseminated by Dr. Wong and Mr. Paulie in Ex. PPP which I shall come to presently. 229. I now consider the plaintiffs' right to sue. Despite the pre-trial rulings of Huggins, J. in chambers, Mr. Bernacchi maintained that the 1st plaintiff association was entitled to sue in a representative capacity "on behalf of themselves and all co-owners of Mirador Mansion except the 1st defendant and the other defendants who are co-owners". The only oral evidence called by the plaintiffs on this question was that of Mr. Paulie; and at this stage I think it is desirable to quote verbatim portions of various letters which he and Dr. Wong wrote to the 1st or 2nd defendants, the 1st defendant's replies thereto and the substance of Mr. Paulie's oral evidence in regard to the circumstances in which the 1st plaintiff association came to be formed. 230. On 3rd September, 1962, Paulie wrote to the 2nd defendants as follows (Ex. B.15):-
No reply was received to this letter. On 18th November 1965 Mr. Paulie wrote to the 1st defendant personally as follows (Ex. B.17):- "................. by selling flats and shops to people living in Shanghai Street and Wanchai could only result in complications for yourselves and other respectable owners, as these types of people are only interested in collecting rent and would not care two hoots as to who their tenants are, what purpose their flat or shop is put to. Needless to say the type of tenant occupying a unit which is owned by the lesser educated owner is an uneducated person who has no consideration whatsoever for the other occupants of the building, because he litters the passages with rubbish, damages the flooring and the walls, refuses to pay dues, and makes life in general most uncomfortable for other respectable occupants. Now this problem ............. was not created by me, but by the lack of thought and foresight on the part of your good-selves when you undertook selling units in this building to these types of owners. However, as the manager of this building you could still have protected the interests of respectable owners by engaging a suitable manager or handed over the management to proper real estate agents such as Harrimans. No, Mr. Chan, you wanted to eat your cake and still have it, so you decided to appoint your own concern Messrs. Tai Cheung Construction Co. who had no previous experience of managing buildings to undertake the task of managing one of the biggest buildings in the Colony, and, quite naturally, the result was that within a few months of mismanagement this building has earned for itself the name of being the most filthy building in the Colony. .................... 231. The 1st defendant replied to this letter by a letter of 29th November, 1965 (Ex. P.18) in which he said:-
In evidence, Mr. Paulie said:-
On 6th December, 1965, another letter (Ex. B.20) was sent to the 1st defendant. It read:-
Eight signatures appear immediately below the letter; but attached to it there are 13 pages of signatures. There was no evidence given in this court as to who signed the document, or under what circumstances each signatory came to attach his signature thereto. All Mr. Paulie said about it was:-
232. Mr. Paulie identified a letter dated 15th April, 1965 (Ex. B.61) from the 2nd defendants to a Mr. Sedick (18th named of the 2nd plaintiffs). It read:- "We write to advise that it has been several years since we have completed erection of Mirador Mansion ........................ the management and maintenance of which building have been and still is undertaken by the Mirador Mansion Management Ltd. 233. According to Mr. Paulie, he did not receive a copy of this letter; but, as Mr. Sadick showed him the letter, he accompanied Mr. Sadick to the meeting. According to Mr. Paulie, only about 30 people received the letter; about 20 co-owners attended; some persons attended who were not co-owners. He said:-
234. He admitted receiving a circular notice dated 31st December, 1965 in Chinese and English from the 2nd defendants asking him to attend a meeting on 7th January, 1966 for the following purposes:- "(1) To discuss the draft regulations and articles of the proposed Building Owners Welfare Association of Mirador Mansion The English version of the notice did not mention him by name. However he is described in the Chinese version as:-
In evidence he said nothing about being a member of any Preparatory Committee. This is relevant when considering the evidence of Lo Shung Wing. 235. Mr. Paulie identified a letter dated 28th January, 1966 (Ex.B.22) signed by Dr. C.C. Wong as chairman of the 1st plaintiff association which was addressed to 1st defendant (with copies to the Colonial Secretary, Mr. A. de O. Sales, and Mr. Hilton Cheong-Leen). It reads:-
236. In his reply to Dr. Wong dated 2nd February, 1966, (Ex.B.23) 1st defendant said:- "............. we have passed all your letters to them" (i.e. the 3rd defendants) "for their necessary action in the matter. 237. The 1st plaintiff association was incorporated on 10th March, 1966. The subscribers of the memorandum (Ex. B.5) were D.A. Paulie, Dr. Wong, T.K. Wood, J.G. Sakhrani (4th named of the 2nd plaintiffs), A.B. de Carvalho (17th named of the 2nd plaintiffs), N.C. Malik, Bernice M. Wood and H. Sadick (18th named of the 2nd plaintiffs). 238. The objects of the association are set out in part in paragraph 1 of the statement of claim which reads:-
239. Paragraph 1 of the defence of the 1st, 2nd and 3rd defendants reads in part:-
240. Paulie said remarkably little about what mandate, if any, he and a few others had from the great body of co-owners and occupiers of Mirador Mansion to form the 1st plaintiff association. After all any small group of persons can register a company. No inference can be drawn from the mere fact of registration. It does not create any prima facie presumption. 241. I was given very little information from Mr. Paulie about the meeting on 3rd November 1965; and he did not say who signed the letter of 6th December, 1965 or describe the circumstances in which the signatories came to append their signatures to this document. My note of his evidence reads:-
But what happened at this meeting? Who attended it? Have there been any other meetings? And who are the members? Mr. Paulie said he kept a membership receipt book, a "legal action" receipt book, and a minute book. None of these things were shown to me. A question arose during the trial as to whether I should be supplied with a list of members. Mr. Zimmern also wanted a list of those persons who had contributed to the so-called "Legal Action Fund", that is, as I understood the position, a fund started by Dr. Wong and Paulie to pay legal expenses in connection with the prosecution of this action. Mr. Bernacchi advised Mr. Paulie not to produce the latter. Why, I do not know. Anyway Mr. Zimmern wanted both documents produced. But I am not concerned with disputes between counsel as to what should or should not be produced. I told Mr. Bernacchi at the time that so far as I was concerned, it was up to the plaintiffs to prove their case. It was for then to produce evidence to satisfy me that the 1st plaintiffs represent the great body of co-owners and occupants of Mirador Mansion. I am certainly not prepared to accept a bald assertion from Mr. Paulie that this is so, nor a general assertion from the Bar that this is so. 242. It was not until Lo Shung Wing gave evidence that I had some idea of what efforts were being made in 1965 towards forming a representative association. He said that owing to the large number of units, it was impossible to hold one meeting and that he had therefore called 5 meetings in April 1965. The notice calling the meetings appears to have been the circular Ex. B.61. It had a two-fold purpose:- "(1) to elect representatives of landowners from each section of the building to organise the landowners welfare association Of course, the installation of separate meters concerned the upper floors only; but the formation of an association concerned everyone in the building. 243. Mr. Lo said that he gave instructions that the circular letter should be sent to every unit holder; and it is obvious from Ex. B.61 that the date of the particular meeting and the name of the addressee was filled in after the letter had been typed, or more probably "Roneo-ed". 244. Lo said he dealt with the building in sections; that the first four meetings concerned floors 3 - 16 and that the fifth meeting concerned the owners of the shops on the ground, 1st and 2nd floors. He said that 26 persons out of about 100 persons addressed attended the first meeting on 8th April, 1965; that 27 persons out of about 100 attended the second meeting on the 13th April, 1965; that 14 out of 100 addressees attended the third meeting on 15th April, 1965 that 33 attended the fourth meeting; and that 23 attended the fifth meeting; that the first four meetings approved of the installation of separate meters for the upper floors; that the first meeting elected 8 representatives to serve on a "preparatory committee" but that none of the 2nd plaintiffs were elected; that the second meeting elected 7 representatives, one of whom was Dr. Wong; that the third meeting elected 6 representatives, one of whom was Ip Ling Sheung (the 26th named of the 2nd plaintiffs); and that the fourth meeting elected 11 representatives, (none of the 2nd plaintiffs were elected). 245. My note of Mr. Lo's description of what happened at the 5th meeting reads:-
This is a very different picture from the one painted by Mr. Paulie. From Lo's evidence it would appear that it was Dr. Wong and Mr. Paulie who obstructed the business of the meeting. I accepted Lo's evidence. He seemed a truthful witness. 246. Lo said that they managed to elect 7 representatives, two of whom were Mr. Paulie and Mr. Wong Shoot Yan (6th named of the 2nd plaintiffs). 247. As a result of these 5 meetings, 39 persons were elected representatives of the preparatory committee. 248. There is no doubt at all that these five meetings were held. Lo took minutes of the proceedings and he had his minute book beside him when he gave his evidence. He had obtained the signatures of all persons attending these meetings including that of Mr. Paulie. 249. Lo said he called a meeting of the 39 representatives on 11th May, 1965; that 26 persons attended including Mr. Paulie, Ip Ling Sheung and Dr. C.C. Wong (not Wong Shoot Yan). Lo said that there was trouble at this meeting because "Paulie scolded Chan Pui Kee" (formerly 12 defendant, against whom the plaintiffs withdrew at the commencement of the trial). 250. The purpose of the meeting, Lo said, was to appoint a sub-committee to draft regulations for the proposed association; and that a sub-committee of 11 persons was elected. These were:-
These 11 persons elected Chan Pui Kee as convenor of the draft committee. 251. Lo said that the sub-committee drafted regulations; that on 1st July, 1965, Chan Pui Kee called a meeting of the preparatory committee; and that he (Lo) attended. My note of Lo's description of the proceedings reads:-
Lo took no further action towards calling a meeting of the 39 representatives till 31st December, 1965 when he issued his notice (Ex. B.62/B.63) calling a meeting for 7th January, 1966. He said that 21 persons attended including Mr. Paulie, Dr. C.C. Wong and Ip Ling Sheung; that Wong Shoot Yan was not present. The purpose of the meeting was to pass the regulations, and elect a committee for the association. Lo said that the regulations were unanimously passed; that the meeting elected the following committee:-
Lo said that both Dr. C.C. Wong and Mr. Paulie were present at this meeting; but that neither of them were elected to the committee; that Lo & Lo were subsequently instructed to deal with the incorporation of what was to be known as "Mirador Mansion Owners Association Ltd." (Ex. MMM); but that it was found that in the meantime the 1st plaintiffs had been incorporated on 19th March 1966, and that it was therefore not possible to register the Mirador Mansion Owners Association Ltd. 252. Lo's version of the various meetings was not put to Paulie. Nonetheless I find it quite extraordinary that Paulie should have said nothing in evidence about the 2nd defendants' efforts to form an association and of the fact that he was elected as a member of a preparatory committee. Clearly, after the meetings of April, May and July 1965, Paulie made efforts to form another association (described by Mr. Bernacchi, in my view very accurately, as a "rival association"); and it developed into a race as to which association was registered first. 253. Lo said that he knew that Paulie had convened a meeting in the passageway of the 2nd floor for 3rd November 1965; that he was not invited to attend but that a Mr. Ma Man Fai had written to him suggesting that he should attend; that he did so; and that Mrs. Elsie Elliott and Mr. Ma Man Fai made speeches. 254. Mr. Zimmern had some caustic comments to make about Paulie's tactics in inviting a member of the Urban Council and a person associated with some organisation called the United Nations Association of Hongkong to attend this meeting. Of course, what matters to me as a trial judge is not whether Mrs. Elliott or Mr. Ma Man Fai attended the meeting. What I am interested in is: How many of the co-owners of Mirador Mansion attended that meeting? The evidence on this was left extremely vague. Lo could not remember how many attended. He was not in the chair and he kept no minutes. If the meeting was called pursuant to clause 15 of the Deed of Mutual Covenant, a record "of the persons present at the meeting and the proceedings thereof" should have been kept by the chairman in accordance with clause 15(f); but no such record was produced by Paulie. Lo said that many of the workers in the tailors workshops attended "out of curiosity". But what, if anything, was decided is not known to this court. 255. The plaintiffs left me completely in the dark as to the number of co-owners actually living in Mirador Mansion. One would have thought that having chosen to allege nuisance they would at least have given me some indication of that. There is no means of knowing whether any of the 2nd plaintiffs live in the building; but, as regards the defendants, the addresses for service endorsed on the original writ of summons may offer some guidance. Indeed it is very revealing. The addresses for service of 39 out of the 54 defendants (Nos. 6-59 inclusive) are not addresses in Mirador Mansion. The addresses for service of 75 out of the 100 defendants (Nos.75-174 inclusive) are not addresses in Mirador Mansion. It may be that that could be taken as some slight indication that 74% of all the co-owners do not live in Mirador Mansion. Certainly the plaintiffs have not done or said anything to suggest otherwise. 256. And if it is true to say that 74% of all the co-owners do not live in Mirador Mansion, just how many co-owners attended that meeting on 3rd November 1965? It is impossible to say; but on the material before me, it would appear that not many attended. 257. During the cross-examination of Lo, the circular letter dated 28th October 1965 (Ex. NNN) calling the meeting of 3rd November 1965 was put in by consent. It reads:- "In view of the worsening condition of the building (Mirador Mansion) and the irresponsibility on the part of the present management, we Owners and Tenants feel that we shall have to suffer serious damage through the sharp dropping of our property value and the flats becoming gradually no longer livable. 258. The 1st, 2nd, 5th and 7th named signatories of this letter are the 12th defendant, 26th named of the 2nd plaintiffs, 13th defendant, and 77th defendant respectively. According to Ex.E,K.G. Sakhrani is a co-assignee of certain property in Mirador Mansion together with J.G. Sakhrani (4th named of the 2nd plaintiffs). 259. As I have said, the original writ was dated 5th May 1967. On 6th October 1966, Dr. C.C. Wong, writing as chairman of the 1st plaintiffs, issued a circular letter (Ex. PPP1) stating that "........... this committee has sought legal advice and as our chances of succeeding are most favourable, it has been decided to bring about an action against the developer, the present management, the cleaning contractor, and a few uncooperative co-owners. 260. On 18th November 1966, Dr. Wong issued another circular letter (Ex. PPP2) which reads in part:- "................... the developer and his employees have amassed a fortune on the initial deposits received from the co-owners, illegal rental on shops and spaces, and Crown Rent and premium, little or nothing has been done to improve living and working conditions in this building. These miserable conditions have resulted in a considerable loss of revenue to both the co-owners and tenants over a period of years. 261. On 1st July 1967, Mr. Paulie, who had taken over as chairman of the 1st plaintiffs, issued a circular letter (Ex. PPP3) which began:-
Towards the end of the letter he said:- "(a). ............. $97,960 of our initial water and electricity deposit is yet to be accounted for (b) a discrepancy of $45,248.21 in Crown Rent and Premium over the past 7 years (c) the 12 units which are still in Mr. Chan's name do not and have not paid Crown Rent or Premium, nor do the additional 14 units and (d) approximately $460,000 illegal rental collected on the additional units during the past 5 1/2 years ..... 262. Mr. Zimmern did not mince his words when commenting on Exs. NNN and PPP. He said that many, who apparently have contributed to the 'Legal Action Fund' in the belief that they were on to a good thing, were grossly misled (1) by being told a pack of lies about the 1st defendant by a handful of malicious or badly-advised individuals and (2) that the majority of those who paid, did so under threat of being made a defendant if they did not pay. He drew attention particularly to the passage in Ex. NNN reading:-
He also drew attention to the fact that the 7 signatories of the letter Ex. NNN had thought fit to add the letters "U.N.A." to the name of their committee. 263. I agree with Mr. Zimmern that, on the evidence which has been placed before me, I can not possibly put the matter any higher than to say that the 1st plaintiffs are the agents of some of the co-owners or tenants. As to how many, I simply do not know; but there is no solid foundation in evidence for the belief that they represent more than a handful of the co-owners. 264. Assuming that they are agents for some of the co-owners, this does not entitle them to sue in a representative capacity. London Association of Shopowners and Brokers Ltd. and another v. London and India Docks Joint Committee and another(2) appears to be clear authority on this point. 265. But paragraph 1 of the statement of claim was amended so as to read "............ owners and/or occupiers of the building ........"; and it is argued that the 1st plaintiffs are occupiers, presumably so as to entitle them to sue in nuisance. 266. They are not a party to the Deed of Mutual Covenant. They are not assignees of any share in the building. But Mr. Paulie said that their registered office is his shop and that one of his staff does a certain amount of work (presumably clerical) for the association and receives some payment for doing so. There was no independent evidence about this. I am quite satisfied that Mr. Paulie works extremely hard in the name of the 1st plaintiff association; but I am very doubtful indeed as to whether anyone else does. 267. On this slender evidence, I suppose I can say that the 1st plaintiff association is a licencee in Mirador Mansion; but this does not give it any proprietary right to shop 60, 2nd floor; and in view of the decision in Malone v. Laskey and another(3), I do not see how it can be argued that the 1st plaintiff association can sue in nuisance. At page 305 Gorell Barnes P. said:-
It is true that the ratio decidendi of Malone(3) was over-ruled in Billings & Sons Ltd. v. Redin(4) so far as actions in negligence are concerned; but, as the editors of Clerk & Lindsell on Tort (12th Ed.) say at page 645 note 76, Billings(4) does not affect the authority of Malone(3) so far as concerns actions in nuisance. Mr. Bernacchi argued that the law relating to contractual licences has developed considerably over the last 20 years, and he cited Errington v. Errington(5); but the law appears to be clearly stated by Clerk & Lindsell at paragraph 1283 where the learned authors say:-
268. Having had all the evidence placed before me I entirely agree with the view expressed by Huggins J. upon the interlocutory application to strike out the writ as disclosing no cause of action. The writ in its original form was a nullity; and if it had come before me in its original form unquestionably I would have struck it out as disclosing no cause of action against any of the defendants. In my view the 1st plaintiffs have no standing to sue either in a representative capacity or as an occupier of the building. 269. In his closing address, Mr. Bernacchi said that there was "no difference" between the 1st plaintiff association and the 2nd plaintiffs. If, by this statement, counsel meant that the 1st plaintiff association consisted of the 41 named 2nd plaintiffs there is no evidence of this. In their statement of defence, the 1st, 2nd and 3rd defendants say:-
The defendants did not have the opportunity of referring to sale and purchase agreements and deeds of assignment relating to the 2nd plaintiffs as co-owners because the latter neither produced their titles to any share in the building nor gave evidence. From an examination of Exs. E, W, HHH and III, I find that all the named 2nd plaintiffs are co-owners of shares in Mirador Mansion with the exception of Nos. 10, 15, 17, 20, 28 and 29. Of course, shares in the building may have been transferred to these 6 plaintiffs recently. Also, it is not easy to identify a number of names as the romanized spelling on Exs. E and W varies. However, Mr. Zimmern did not make an issue of this; and he was prepared to accept that the 2nd plaintiffs were all unit holders. Indeed, Huen Kwok Chai produced two extracts from the books of the 3rd defendants. The first (Ex. HHH) is a list of 16 of the 2nd plaintiffs who are in arrears with the payment of management fees! The record (Ex. III) is a list of 10 of the 2nd plaintiffs who are now putting their units to industrial use! Ex. HHH reads:-
It will be seen that of these 16 plaintiffs, 10 stopped paying management fees as from April 1967, the month in which these proceedings were instituted. 270. Ex. III reads:-
271. Defendants Nos. 1 - 5, 60 - 75, and 178 and 179 are clearly not, and defendants Nos. 77 - 177 may, or may not, be owners of shares in Mirador Mansion. From an examination of Ex. W it would appear that 33 of the 2nd plaintiffs and 113 defendants are, between them, the "owners" of 258 units in Mirador Mansion. Deducting 258 from 752 leaves 494. This would tend to indicate that about 250 persons who own shares in Mirador Mansion are neither plaintiffs nor defendants; and I have no means of knowing what their views are in relation to the 2nd plaintiffs' purporting to represent them. 272. In submitting that the 2nd plaintiffs could sue in a representative capacity, Mr. Bernacchi relied on The Duke of Bedford v. Ellis (6), in particular upon the following passage from the judgment of Lord Macnaghten at pp 7/8:-
273. Of course the vital factor is common interest. Is the relief sought in its nature beneficial to all whom the 2nd plaintiffs propose to represent? Undoubtedly the original building scheme was: a shopping arcade on the ground, 1st and 2nd floors, residential flats on floors Nos. 3 - 16 with a carport in the basement. The developer certainly altered that scheme by letting out the basement for purposes other than as a carport for the use of residents in the upper floors of the building. But there has been no complaint about that during the 10 years that the building has been in existence; and it is not an issue in this case. 274. As I have said, the 1st defendant did not assign any portion of the building for industrial use; but I have no doubt that he was well aware that a very considerable number of the co-owners of units on floors Nos. 3 - 16 were using the flats for industrial purposes. As a co-owner (certainly till 1967 if not up till the present) he took no action to put a stop to such unlawful user; and neither did any of the other co-owners do so until the institution of this action. 275. What has been the general attitude of the great body of co-owners involved in this unlawful user of the building? One of the most significant pieces of evidence in this case emanated from the lips of a Mr. Advaney who was called by the plaintiffs. He said that he managed all the property in Hong Kong owned by the Sitlanis (2nd and 3rd named of the 2nd plaintiffs). The Sitlanis own the following units in Mirador Mansion:-
Another witness called by the plaintiffs said that in 1964/65 she rented shop 25 on the 1st floor from the Sitlani's at $600 or $700 per month i.e. $7,200 or $8,400 per year. Mr. Advaney said that shop 35 on the ground floor is now rented out at $3,400 per month i.e. $40,800 per year; and that the present rent of flat F.4 8th floor was $700. Considering the purchase price of these units, the Sitlanis have, of course, made a magnificont investment. Mr. Advaney was being cross-examined about the fact that the Sitlanis appeared to be making a handsome profit out of the letting of flat F.4 on the 8th floor, having purchased the flat for $52,160 and renting it out for $8,400 per year! He said (as if by way of justification) :-
How many of the "absentee" 74% of the co-owners of Mirador Mansion are collecting and for years have been collecting, rents of this order by letting out their units for industrial purposes? I visited the premises. I have no reason to disagree with the estimate of 200 units being used for industrial purposes. How many of the 200 shops in the ground, 1st and 2nd floors heartily approve of having cutting establishments and jewellery repair workshops near to their retail establishments? Mr. Mirchandani frankly admitted that it suited his purpose. None of these co-owners could have come into this court and justified such breaches of the Conditions of Regrant and the assignments. But I am considering common interest and mutual benefit at the moment. 276. The impression I have got in this case is that the great majority of the co-owners wish things to remain as they are; they would not welcome losing a lucrative sourse of revenue from the industrial lettings; but there is a minority who, for various reasons, wish to put the clock back to 1959 and to make the 1st defendant pay for it. 277. All co-owners hold their shares in the building subject to the Conditions of Regrant which prohibit industrial user. Under Clause 11(c) of the Deed of Mutual Covenant, each party covenanted not to use "his part" for any unlawful purpose. But, in my view, a very large number of the owners of units on the upper floors (who do not live in the building themselves) have, in breach of special condition (b) of the Conditions of Regrant permitted industrial user of those units; and this user very probably has the tacit approval of the co-owners or tenants of many of the shops on the ground, 1st and 2nd floors. If the truth were known, probably a comparatively small number of co-owners disapprove of such user. 278. I am well aware that in a representative action, the representatives do not need to have the consent of those whom they purport to represent. But in view of the apparent attitude of the great body of co-owners so far as that has been disclosed to me by the meagre evidence called, I am not prepared to permit the 2nd plaintiffs to sue in a representative capacity. But, of course, as co-owners, they are quite entitled to sue each on his own behalf. 279. But, how many defendants have these plaintiffs succeeded in bringing before the court? Mr. Bernacchi submitted that in February 1969 Huggins J. did not give conditional leave to amend the statement of claim; that he gave leave to amend and then proceeded to order that the amended writ and re-amended statement of claim should be re-served on all defendants; that the fact that this order was not carried out simply means that the defendants have disobeyed the judge's order; but that it does not affect my jurisdiction to give judgment against 77 defendants; that it is in the discretion of this court to do so; and that having regard to the fact that all the major amendments to the writ affected the first three defendants only and that the plaintiffs' case against the occupiers of illegal structures and co-owners and tenants using their premises for industrial purposes was not materially changed, that no injustice would be done if reliefs were granted against all 77 defendants although only 25 were served with the re-amended statement of claim. 280. Of course, it has to be remembered that the figures 77 and 25 include several defendants in the group 6 - 59; and the only apparent reason for joining this group of defendants was the fact that they did not join with the plaintiffs in the institution of this action (paragraph 7 of the statement of claim). In February 1968, Hastings & Co., representing the 7th, 14th and 39th defendants wrote to the plaintiffs' solicitors (Ex.C12) requesting particulars of the allegation that their clients were liable to the plaintiffs for damages in tort. On 29th February 1968, the plaintiffs solicitors replied as follows:-
Chan Pui Kee (12th defendant till the beginning of this action) received a similar letter. Edmund Cheung & Young (acting for the 28th defendant) received this letter dated 4th April 1968 from the plaintiffs' solicitors (Ex.C16):-
If that is so, one wonders why the other 250 co-owners were not made defendants or plaintiffs. Be that as it may, why these solicitors did not apply to have the names of their clients struck out of the writ long ago, I do not know. Anyway, I shall not grant any reliefs against defendants 6 - 59. 281. In Jamaica Railway Co. v. Colonial Bank(7) Stirling LJ said:-
Huggins J. had no reason to suspect that the original writ had only been served on 91 defendants. No doubt he thought that it had been served on all 174. Admittedly he did not say in the order that he was granting leave upon condition that the re-amended writ would be re-served; but clearly this was his intention. It certainly would have been my intention if I had been in his position. Not only was the very much amended writ of June 1968 not served on any of the defendants; but on the re-amended writ of February 1969 there was an entirely new group of plaintiffs. 282. No relief is sought against defendant No. 75. The action has been discontinued against a number of other defendants; and, apart from defendants Nos. 1 - 5, this action now concerns 51 defendants as follows:-
The 77 defendants served with either the original writ or the re-amended writ and re-amended statement of claim include the above 51 defendants 283. The 25 defendants served with the re-amended writ and re-amended statement of claim include 16 defendants as follows:-
284. Therefore so far as the reliefs claimed against the defendants concerned with the "illegal shops and stalls" and "workshops" are concerned the question is whether 16 or 5 ...(illegible) defendants were served - not whether 25 or 77 were served. The latter two figures include a number of those in the group 6 - 59. 285. But it would appear that the total number of defendants before the court may be less than 25. Mr. Zimmern drew the attention of the court to 0.13 r.7(1) which states:-
Of the defendants who, it is thought, were served with the re-amended writ, paragraph (b) of rule 7(1) applies to the 60th, 62nd, 63rd, 64th and 66th defendants. There is an endorsement by Lo and Lo on the re-amended writ that they accepted service on behalf of these 5 defendants. As regards the remainder, no difficulty arises in regard to Nos. 1, 2 and 3 who were represented by Mr. Zimmern at the trial. The 95th and 143rd defendants appeared in person and gave evidence. There is an endorsement by Stewart & Co. on the re-amended writ to the effect that substituted service, as ordered, was effected on defendants numbers 5, 20, 21, 28, 37, 77 and 143. The 144th defendant filed a defence on 2rd April 1969 i.e. six weeks after the order of 21st February 1969. But no affidavit of service of the re-amended writ on the 41st, 141st(1st named), 145th 146th, 167th, 177th, 178th, or 179th defendants has been filed. 286. Therefore I suppose that, in strictness, the only defendants against whom any reliefs could be granted are Nos. 1, 2, 3, 5, 20, 21, 28, 37, 60, 62, 63, 64, 66, 77, 95, 143, and 144 (Total 17). 287. How on earth all this was not spotted upon the hearing of the Summons for Directions passes my comprehension. How can it be said that a case in which relief is sought against 179 defendants is ready for trial when, at best, service of the writ has been effected on only 25 defendants? 288. Of course, the plaintiffs were concerned only with obtaining relief against the 1st defendant. Nothing else seemed to matter to them. 289. The statement of claim in this case was very badly drafted in the first place. It would have been far better to have redrafted it entirely in 1968 instead of attempting to amend it. This process of amendment continued till the very last day of the trial; and I say, without hesitation, that the statement of claim is one of the most confusing pleadings I have ever had the misfortune to have to deal with. 290. The reliefs claimed occupy some 8 pages (pages 12-20). Quite a number of the prayers were framed in such broad terms that no one could say with certainty to which allegations they referred. On the last day of the trial, Mr. Asome clarified the plaintiffs' attitude considerably. A number of reliefs were struck out altogether and others were explained. 291. Even now there appears to be a great deal of repetition; and instead of dealing with each subject (for example "the workshops") in one section, there are groups of prayers pertaining to particular groups of defendants. Some confusion appears to have resulted from the plaintiffs' fear at the commencement of the proceedings in 1967 that the 1st defendant might endeavour to throw the blame on the 2nd and 3rd defendants. In fact he did nothing of the kind. His attitude throughout was that the 2nd and 3rd defendant companies are entirely under his control. I do not propose to say any more than that. It is quite unnecessary to make formal declarations as sought in prayer (a) "as against the 2nd defendants" and prayer (b) "as against the 3rd defendants" on the lower half of p.17 of the statement of claim. 292. For the same reason, it is pointless to consider further prayer (d) at the top of page 18; and all the reliefs set out on pages 12-16 can be taken together. 293. The first prayer (a) on pages 12/13 is for a declaration that the appointment by the 1st defendant of the 2nd defendants to the management of Mirador Mansion was wrongful. The plaintiffs say it was wrongful because they were not consulted and because they were shown "the out-of-date schedule" attached to the Deed of Mutual Covenant. I have already dealt with paragraph 11 of the statement of claim; and I do not propose to elaborate further here. I see nothing wrongful in the fact that the 2nd defendants were appointed to carry on the management until the co-owners themselves chose to put clause 15 of the Deed of Mutual Covenant into operation. I refuse to make the declaration sought. 294. The next prayer (b) at the top of page 13 is for
From the summary attached to page 1 of Ex.W and page 11 of Ex.D, it is clear that the premium collected by the 1st defendant is $512.95 in excess of the $140,995 which he was obliged to pay annually to Government under the Conditions of Regrant. 295. The next prayer (c) on page 13 reads:-
What purpose would an order for accounts serve? From Exs. D and W it is abundantly clear how the premium has been apportioned and what sums have been collected in excess of those demanded by Government. Prayer (c) is quite unnecessary and it is refused. 296. Prayer (d) on page 13 reads:-
The plaintiffs, in my view, do not represent anyone except themselves. Not one of the plaintiffs have even come forward to say that he paid the amount which he covenanted to pay under his assignment. For all I know it may be the plaintiffs who owe the 1st defendant over $150,000 arrears of premium but, in any event, for reasons which I have already given none of the co-owners are entitled to any refund. 297. Prayer (f) on page 13 reads:-
I see no reason at all for re-opening this question. Each assignee covenanted to pay the amount stated in his assignment; and for the reasons I have already given, no relief is granted under this prayer. 298. Prayer (g), as finally amended, reads:-
There is prima facie evidence on the face of the Land Office memorial Ex.HH to the effect that the proportion of premium for Garage D was fixed at $130. The auditor was not even asked to check whether the books of the defendants showed the annual receipt of this sum. And no evidence was called to rebut the prima facie presumption created by the production of Ex.HH by the plaintiffs themselves. 299. As regards flat F2 12th floor, the purchaser (Mrs. Alegria R. Sibal) has not called for her assignment. On the other hand, it would appear from page 16 of Ex.W (which was put in as an agreed document) that the proportion of premium for flat F2 12th floor has been fixed on the same basis as in all the other cases viz. $65 per $10,000 of consideration. In view of this prayer, one might have expected that the auditor would have been asked to check whether Mrs. Sibal had paid any premium since 1960. But I do not see how it could be otherwise. The total premium receivable annually by the 1st defendant under the assignments is $141,507.95 (Ex.W); and this is the figure shown in the books of the 1st defendant (Ex. D p.11). 300. I might add that this prayer is framed in rather unusual terms. I am being asked to order that "premises" contribute. Furthermore Mrs. Sibal has not been made a party to this action. But, even if she had been a party, I would not have made any order in respect of flat F2 12th floor. 301. For the above reasons, I do not propose to examine further prayer (h) at the top of page 14. 302. Prayer (i) on page 14 reads:- "(i) An order that the 2nd defendants' purported appointment to be the management of the said building be revoked." For one thing, the management of the building was transferred to the 3rd defendants in February 1962; but I do not see how it could possibly be in the interests of the co-owners at this juncture to revoke the appointment of the 2nd or 3rd defendants as managers, and leave the building without any managerial organisation. As soon as the owners temselves invoke clause 15 of the Deed of Mutual Covenant, the 1st, 2nd, or 3rd defendants will be duty bound to hand over the management to whatever body has been legally appointed. They shall have no choice in the matter. But to revoke the appointment now would be crass stupidity. 303. Prayer (j) on page 14 reads:-
For the reasons which I have already given I see no point in ordering that the defendants accounts be examined afresh. If the plaintiffs had wished to challenge the books of account they had ample opportunity for having them re-audited before the trial of this action began. There is nothing in the auditor's report and in Mr. Young's cross-examination which could justify any court acceding to this prayer. It is refused; and it follows that no orders are called for in regard to prayers (k) and (1) on page 14. 304. Prayer (m) reads:-
I had no idea what this referred to until Mr. Asome in his closing address said that this claim was limited to the alleged fraudulent collection of over $42,000 referred to in paragraph 17 of the statement of claim. In that case, it is easily disposed of. There was no fraudulent collection as alleged in paragraph 17 and I therefore refuse the declaration sought both under prayers (m) and (p). 305. Mr. Asome did not ask for an order under prayer (q) on page 14; and he abandoned prayer (r). 306. At the foot of page 16 the plaintiffs seek: "(q) An order revoking the purported appointment of 4th defendants as cleaning contractors of the said building." The reliefs sought under paragraphs (a) and (b) were abandoned by Mr. Asome on the last day of the trial. 307. At the top of page 18, there is a further prayer for relief against the 4th defendants which reads:- "(a) A declaration that their appointment as cleaners of the said building is invalid or otherwise null and void." Prayers (b) and (d) on page 18 were abandoned by Mr. Asome; and prayer (c) appears to be a duplication of prayer (c) on page 16. 308. Further claims for relief "as against the 1st, 2nd, 3rd and 4th defendants or any one of them" appear at the foot of p.18. The prayers read:-
309. I see no reason why I should grant any of these reliefs. The co-owners clearly approved of the appointment of Chan Kin as their cleaning contractor and they dealt with him direct for 10 years. The defendants charged him $12,000 for putting the cleaning contract in his way; but according to the auditor, the money was spent on the building and they have accounted satisfactorily for it. If the co-owners are dissatisfied with Chan Kin's work they can terminate his services at any time. It is up to them to hold meetings and pass the necessary resolutions. The remedy lies in their own hands. 310. These co-owners paid Chan Kin only $8 per month to do all the cleaning and removal of garbage. It is unthinkable that any court would, after 10 years, order that his accounts be investigated. What did these co-owners expect for $8 per month? 311. The next group of reliefs with which I shall now deal concern the "workshops"; and, as I have said, this does not now concern the 1st defendant because on the last day of the trial, upon the application of Mr. Asome, the third line from the bottom of page 16 was amended by the deletion of the words "1st defendant". The reliefs therefore concern only defendants 76-78, 80-96, 98-115, 117-124, 126-132, and 134-177. 312. If there is any merit in this largely misconceived and badly-drafted statement of claim, it lies in the reliefs sought against the "workshops". At the invitation of counsel for the plaintiffs I visited Mirador Mansion at the commencement of the trial. It is really an awful "shambles". I see no reason to doubt the evidence of Mr. Paulie or the statements he has made in letters over the years in regard to the state of the building. The general impression one gets is that a fair proportion of the flats on the upper floors are being used for industrial purposes - many tailor's cutting establishments with large numbers of sewing machines in operation; jewellery workshops involving the constant use of small hammers and blowlamps or such-like instruments; large numbers of fokis employed by each workshop, many of whom live as well as work in the flats, sometimes sleeping in the passageways in hot weather and sometimes cooking there. I saw 2 units which were clearly brothels. Quite a number of restaurants of a kind are operated in the passageways to provide meals for this mass of working humanity. The passageways and stairs are damaged and the walls are tawdry as a result of the sheer volume of traffic - industrial traffic, trolleys etc. - to and from units used as godowns and workshops. The toilet facilities were never designed to cope with this mass of humanity. 313. Industrial user of this sort results in far more refuse than domestic user - tailor's cuttings, refuse from the restaurants, and so on. I do not see how any cleaning contractor could have kept the stairs and passageways in a condition such as one would expect for say middle class domestic user - certainly not for $8 per month; and if $250,000 were to be spent now on a general clean-up, the condition of the building would be as bad as it is now in 3 months time if industrial user on the present scale were permitted. 314. In my view, all Mr. Paulie's troubles, or the majority of them, stem from the fact that a large number of "absentee" co-owners let their units for industrial use. What do these absentees care if they can continue to draw fat rents every month? After all, the purchase prices of the majority of the flats were very low - a magnificent investment for these co-owners; and, of course, it suits the shops in the arcade to have jewellery and tailors' cutting establishments upstairs, so conveniently situated to their retail shops. No wonder none of these people have come to court to complain. 315. Mr. Zimmern submits that this court should do nothing about the "workshops". He says that this building supplied a very real need in the Tsim Sha Tsui area during the period 1959 to date, and that it still does with tourism increasing; that Mr. Paulie and a few people whom he has managed to get to support him are in a small minority and that the wishes of the vast majority of the co-owners are that the status quo should remain undisturbed. 316. Mr. Bernacchi endeavoured to give me the impression that the Crown were about to re-enter at any moment because the co-owners were in breach of special condition (b) of the Conditions of Regrant. I do not think that there was any evidence to support this. The only scintilla of evidence to which the plaintiffs could point was the routine letter dated 23rd May, 1961 from the Crown lands & Surveys Office (Ex.C1). The fact that the Labour Department have registered a number of "factories" does not indicate that the Crown are about to descend upon the co-owners at any moment. But, in any event, I am not concerned with what the Crown intends to do vis-a-vis the 1st defendant; and the 1st defendant can not be held responsible to his co-owners for all this industrial user. As a co-owner he could have taken action to enforce the Conditions of Regrant; but as a co-owner his right to do so was no greater than that of any other co-owner; and the fact that he declined to take any action at the invitation of Mr. Paulie is neither here nor there. In any event, the plaintiffs themselves, at the end of the day, now acknowledge that the 1st defendant can not be held responsible for all this industrial user. The fault lies in the great body of co-owners themselves. 317. On the other thand, this does not preclude the plaintiffs from coming to court and asking for injunctions to prevent the continued breach of special condition (b); and the fact that some of the plaintiffs themselves do not come into court with clean hands, should not prejudice the claims of the others. Furthermore, I do not see why an injunction should not issue against "absentees", who are clearly liable for the acts of their tenants under the proviso to clause 13 of the Deed of Mutual Covenant. 318. The first group of prayers for relief against "the workshops" appear at (a) (b) (c) (d) and (e) on the top half of page 17 of the statement of claim:-
Prayer (f) was abandoned by Mr. Asome. A further group of prayers for relief against the same group of defendants appear as (a) and (b) at the foot of page 19 and (c) and (d) at the top of page 20. They are as follows:-
319. I do not understand prayer (c) at the top of p.20. In regard to prayer (d) at the top of p.20 and prayer (e) in the middle of page 17, the plaintiffs do not represent anyone but themselves. Mr. Asome said in regard to each prayer:
So far as the evidence goes the damage to the plaintiffs is nil; and I do not propose to make the declaration sought in prayer (e) or to make any order under prayer (d) above. 320. I suppose it was because it was realised that prayers (a) (b) (c) and (d) on page 17 were so badly drafted that it was decided to add prayers (a) and (b) at the foot of page 19. No court makes general declarations or grants omnibus injunctions of the kind sought by the prayers on page 17. The plaintiffs are entitled to a declaration in terms of prayer (a) and injunctions in terms of prayer (b) at the foot of page 19. 321. But against whom are these reliefs to be granted? Firstly I do not like Ex.L at all. Apart from the peculiarities to which I have drawn attention, surely the plaintiffs could, at least, have called a witness to say: "I walked round the building yesterday, and I noted down all the units which are still being operated as tailors workshops, jewellery workshops" and so on; I would then have had an up-to-date picture of the state of the building. It is perfectly obvious that a large number of units are being used for industrial purposes; but can I be sure that all the units mentioned on Ex.L are now being so used? The evidence which the 95th and 143rd defendants gave is such that I do not think that the plaintiffs have proved anything against them. 322. Therefore if 17 defendants are before the court, relief may be granted against Nos. 77 and 144 only! If 25 defendants are before the court, relief may be granted against Nos. 77, 141 (1st named), 144, 145, 146, 167, and 177. (Total 7). If 77 defendants are before the court, relief may be granted against:
The evidence was that in fact about 200 units are being used as "workshops"; and I find it quite extraordinary that those presenting the plaintiffs' case have found it impossible to serve those responsible for operating the 200 establishments or to call a scintilla of reliable up-to-date evidence to the effect that the occupants of the 200 units were operating "workshops" at the date of the writ and are still so operating. But, as I say, all that mattered to these plaintiffs was that as much mud as possible should be flung at the 1st defendant; and they went to trial alleging that he had "sold or let off" portions of the building for industrial purposes (paragraph 22) well knowing that they did not have a scrap of evidence to support this allegation. Indeed their one and only witness (Paulie) gave evidence contrary to this allegation. 323. I propose to take a rather unusual course. I grant final reliefs as sought in prayers (a) and (b) at the foot of page 19 against defendants 77, 141 (1st named), 144, 145, 146, 167 and 177. I shall also regard these whole proceedings as an ex parte application for injunctions in terms of prayer (b) at the foot of page 19 against the following defendants:-
If, upon handing down this judgment, the plaintiffs choose to apply ex parte for similar injunctions against those defendants named in the writ as operating "workshops" but who have not been served with any writ of summons, I shall grant any such application. The defendants concerned are:-
324. I shall hear further submissions as to the precise terms of the injunctions. In view of the unsatisfactory nature of the evidence called by the plaintiffs, I must insist on personal service of each of the 87 named defendants. But it seems to me that the occupiers of the premises should also be served; and I should have thought that posting a copy of this order upon the door of each of the units concerned would be sufficient service upon the occupiers of those units. 325. Subject to counsel's further submissions, the appropriate order may be that these defendants are called upon within, say, 28 days to show cause why injunctions should not issue. 326. Turning now to the reliefs claimed against the "illegal shops and stalls", prayers (n) on page 14 and (s), (t), (u) and (v) on page 15 of the statement of claim read:-
These prayers are "as against the 1st, 2nd and 3rd defendants ". 327. There are two further claims for relief against the 1st, 2nd, 3rd, 4th and 5th defendants. The first one appears at the top of page 19. It reads:- "(b) A declaration that their conduct constitutes a nuisance to the plaintiffs including the co-owners whom they represent." The other appears at the foot of page 20. It reads:-
Mr. Asome said that he confined prayer (b) to the letting out of the illegal shops, blocking of the fire escapes, the failure to clean the walls of the building, permitting metal trolleys to damage the floors, and the 4th and 5th defendants' failure to keep the floors clean 328. Further reliefs are claimed against defendants Nos. 60 - 74, and 178 and 179 in the middle of page 19. The prayers read:-
329. On page 20 there is a further claim for relief against defendants 60 - 74 and 178 and 179:-
Mr. Asome put his claim under this heading on the footing that the stall holders were occupying portions of the common parts of the building where they had no right to be. 330. The mere fact that these "illegal shops and stalls" have been erected on parts of the common passageways must mean that the co-owners' rights of ingress and egress have been impaired to some extent in the sense that the co-owners have a right to use all the common passageways and there are small areas of those passageways near escalators, etc. on which they are unable to walk. Of course, no one has suggested that the co-owners are obstructed in the use of the escalators and lifts etc. All we know is that certain small areas have been built upon; and the architect has given the exact measurements of the structures, which I have quoted above. 331. In deciding whether to make the orders sought by the plaintiffs, I have to consider the history of this building; that a large number of co-owners began, illegally, to use their premises for industrial purposes; that, as a result, conditions deteriorated, and many co-owners refused, and still refuse, to pay a cent in management fees, that until these workshops disappear and perhaps new tenants take over, the building has to be managed somehow; the accounts show clearly that the management is costing the 1st defendant a very considerable sum of money; if he did not get the $50,000 or $60,000 rent from the "illegal shops and stalls" he would presumably stop managing the building immediately because clearly he could not carry on without losing money very heavily; and he is not under contract to manage Mirador Mansion. At most, he is nothing more than collecting agent for the co-owners in respect of various amounts under clauses 4, 5, 6 and 7 of the Deed of Mutual Covenant. If the co-owners will not pay so as to enable him to manage this building satisfactorily, there is no obligation upon him, legally or morally, to carry on. 332. It is also of the greatest importance to remember that not one plaintiff or any co-owner other than Mr. Paulie has come to say that he was inconvenienced or obstructed in getting to the lifts or escalators or that he could not walk up or down the stairs at any time of the day or night. 333. I do not think it would be right for me at this stage to order that these "illegal" structures be demolished. This does not mean that the matter is res judicata. In any future proceedings, the facts might be quite different. Certainly I would hope that any tribunal that may be seized of the issue would be better served in the matter of evidence than I have been in this case. 334. As regards the potential obstruction of the 4 fire escapes, I am content to leave this aspect to the appropriate Government department concerned. If at any time the condition of these staircases is such as to constitute a fire risk, it is the duty of Government, upon a proper complaint, to take appropriate action. Surely there is a simpler procedure than rushing to the Supreme Court for an injunction. 335. At page 15, there is a prayer (w) for relief against the 1st, 2nd and 3rd defendants which reads:- "(w) Injunctions against the permitting of obstructions in the common passageways and corridors of the said building." I refuse to grant this prayer. The 1st defendant and his companies are merely the agents of the co-owners for certain purposes. They are under no duty to see to it that the common passageways are not obstructed. 336. The final claims appear at page 20. They are "as against all defendants":-
For reasons I have already given, I have really no idea how the 1st plaintiff association came into being or what mandate they have from the general body of co-owners to manage Mirador Mansion. But in any event no court could or would make orders such as are sought. If the co-owners hold the appropriate meetings under clause 15 of the Deed of Mutual Covenant and a simple majority vote that the building be managed by the 1st plaintiff association no order of court appointing the association as managers is called for, and the court will grant immediate relief if the 1st, 2nd or 3rd defendants should refuse to co-operate in the handing over. The prayers for relief under (a), (b) and (c) above are refused.
Representation: Bernacchi, Q.C. & M. Asome instructed by Messrs. Brutton and Stewart for the 1st & 2nd Plaintiffs. A. Zimmern & Martin Lee instructed by Messrs. Lo & Lo for the 1st, 2nd & 3rd Defendants. (1) (1962) 1 W.L.R. p.832. (2) (1891/4) A.E.R. Reprint p.462 (3) (1904/7) A.E.R. Reprint p.304. (4) (1958) A.C. p.240. (5) (1952) 1 A.E.R. p.149. (6) (1901) A.C. p.1. (7) (1905) 1 Ch. p.677 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other judgments that cite this case