The Incorporated Owners of Hoi Deen Courtv. Fulton Corporation Ltd

DCCJ 3863/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3863 OF 2004

------------------------

BETWEEN

------------------------

Coram:  Deputy District Judge Anthony Chow in Court

Dates of Hearing:  11^th and 12^th September 2006

Date of Handing down Judgment:  19^th September 2006

------------------------

JUDGMENT

------------------------

1.This is a claim by an Incorporated Owners against the developer of a building for declaratory relieves in respect of the rights to the roof of the building.

Background:

2.The defendant was the developer of Hoi Deen Court, a multi-storey building with seven shops on the ground floor, eight residential flats on each of 1^st to 10^th floors, seven flats on each of 11^th to 14^th floors and six flats from 15^th to 17^th floors.

3.The land and building was notionally divided into 133 equal and undivided shares with each shop and flat assigned one share.

4.Starting from 16/4/1964, the defendant gradually sold off the shops and flats of the building and by 25/11/1970, the defendant had sold all shops and flats and assigned all of the undivided shares in the land and building.

5.In the Deed of Mutual Covenant (the “DMC”) and the assignments, the defendant reserved upon itself the exclusive right to use, occupy and enjoy the roof of the building. The roof was not allocated any share and the defendant did not assign the exclusive right to use, occupy and to enjoy the roof to anyone.

The Claim:

6.The plaintiff said that since the roof was not allocated any undivided share, when the defendant sold the last unit and disposed of the last of the undivided share in the land and building, without assigning the exclusive right to use, occupy and enjoy the roof, any proprietary and/or other rights the defendant had on the roof had been extinguished in law.

7.In the alternative, the plaintiff had been in continued and exclusive possession of the roof since about 1977 and the defendant’s right has been extinguished due to sections 7 and 17 of the Limitation Ordinance Cap 347.

8.After a late amendment, the plaintiff prayed for the following:

(1) A declaration that the proprietary and/or other rights in relation to the Roof Floor of the Building were incidental to the ownership of the undivided shares held by the Defendant in the Land and the Building and such proprietary and/or other rights had been extinguished.

(2) A declaration that the Roof Floor of the Building has been common areas under the ownership of all the owners of the undivided shares in the Land and the Building and is under the management of the Plaintiff.

(3) Alternative to (1) and (2), a declaration that the Plaintiff has acquired a possessory title to the Roof Floor of the Building and that the title of the Defendant to the same has been extinguished.

The Defence:

9.Although the defendant admitted that the roof was not allocated any undivided share, it pleaded in the Statement of Defence that in the DMC of the building, it had specifically reserved the right to use, occupation and enjoyment of the roof of the building to the exclusion of all other co-owners.      

10.The defendant also stated it had been in continuous possession of the roof since it disposed of all units in the building.

11.The defendant counterclaimed against the plaintiff for the following:

(1) An injunction to the servant or agent of the Plaintiff to remove an illegal structure on the Roof Floor;

(2) Damages for trespass to be assessed.

The Issues:

12.There are two issues in this matter: First, did the defendant retain any “proprietary and/or other rights” in the roof after it disposed of all of the undivided shares in the land and building? Second, if the defendant did, was that right extinguished by operation of sections 7 and 17 of the Limitation Ordinance?

13.I will deal with the first issue in two parts: First, whether the defendant retained any proprietary interest in the roof after it disposed of all of the undivided shares? Second, did the defendant retain any other rights in relation to the roof?

Whether the defendant retained any proprietary interest?

The Law:

14.In respect of whether one can retain proprietary rights without owning any undivided shares in the land, Justice Litton in Jumbo King Ltd. V. Faithful Properties Ltd. & Others [1999] 3 HKLRD 757, stated:

“…(T)the proprietary right of a co-owner in a multi-storied building is the right to an undivided share of the land and building: prima facie the owner is entitled to exert rights of possession to every part of the building, in common with his co-owners. This is what is meant by the expression ‘unity of possession’ … the true analysis is that an undivided share may ‘carry’ a right to exclusive possession of a defined space. Not the other way around. Here, so long as the vendors were owners of undivided share in the land and building, deriving title from the developer, they were entitled to assert rights of exclusive possession to parts of the building, such as the utility rooms and the roof space. …” Emphasis added.

Analysis:

15.This part of Justice Litton’s judgment was adopted in two subsequent High Court decisions.

16.In Modern Sino v. Art Fair Co. Ltd. HCMP 5731/1998, a vendor and purchaser summons concerning two requisitions. The second requisition related to certain car parks. 3 undivided shares in the land together with the exclusive right to occupy a house were assigned to X by the developer. The exclusive right to use the relevant car parks, together with 3 undivided shares and the exclusive right to possess another house was assigned to Y. X assigned the 3 undivided shares and the right to occupy the first house to Z (a predecessor-in-title of the vendor) and Y later assigned the exclusive right to use the car parks without any of the undivided shares to Z. The question was whether Z acquired any proprietary interest in the car parks?

17.Adopting Justice Litton’s judgment in Jumbo King, Yuen J. held:

“ … (T)hat a right to exclusive use of land (as an incident in land) can be created only as an incident to the ownership of an undivided share in the land….

In Jumbo King Ltd. v. Faithful Properties Ltd. & Others, no share were allocated to certain parts (eg the flat roofs), but the developer had reserved exclusive possession to himself at a time when he still had shares in the land together with exclusive possession of certain units. When the developer assigned his shares, he gave exclusive possession to the purchaser of, not only those units, but also the flat roofs. That was valid under the law as the exclusive possession of the flat roofs was being passed as an incident to the ownership of shares in the land.”

18.In The Incorporated Owners of Cheong Wang and Cheong Wai Mansion v. The Government of the Hong Kong Special Administrative Region HCMP 3230/2000, in the DMC of a building, the developer reserved to itself the exclusive rights to the outside walls of the building and the yard on the ground floor between blocks. The developer was wounded up after it sold all of the units in the buildings and assigned all of the undivided shares.

19.In holding that the rights reserved by the developer were extinguished, Deputy High Court Judge Woolley (as he then was) held:

“ The view that an exclusive right of the use of land can exist only as an incident to the ownership of a share in the land, whether as a quasi-easement or otherwise, was confirmed by Yuen J. in Modern Sino Ltd. V Art Fair Co. Ltd. [1999] 3 HKLRD 847 …

(after quoting from Modern Sino)

Here there was no transfer of any of the rights reserved to Loong Kee upon assignment of the shares that they still held, and it must follow that such right fell away as being incapable of existence other tha(n) as an incident to the ownership of any of such shares.” Emphasis added.

20.Accordingly, when the defendant sold the last unit in the building and transferred away the last undivided share, all proprietary interest it had in the land and the building also ceased to exist.

Did the defendant retain any other rights in relation to the roof?

21.Although the defendant’s proprietary interest in the roof ceased to exist when the last undivided share was transferred, could there be other nonproprietary interest left?

22.In The Incorporated Owners of Cheong Wang, Deputy High Court Judge Woolley rejected describing that interest as an easement, he stated:

“ However, an easement must necessary be owned by a dominant property over a servient property, and cannot exist in limbo, nor be owned by a party who has no interest in a dominant property. It follows that Loong Kee, while still owning units in the building, may well have held the rights set out in the DMC as quasi-easement, but once they had alienated all those units and had no further proprietorial rights in any part of the building, any right in the nature of an easement attached to their ownership of the units must have been extinguished.”     

23.In Modern Sino Ltd., when Y owned both undivided shares in the land and the exclusive right to use the car parks, transferred the exclusive right to use the car parks to Z without any undivided shares in the land,Yuen J. described the nature of the right transferred as: “ …at best a licence which was personal to (Z)…”.

24.In The Incorporated Owners of Cheong Wang, Deputy High Court Judge Woolley analysis the developer’s right to affix notices on the external wall and the right to exclusive use of the ground floor yard separately. Of the right to affix notices to the external wall, Deputy Judge Woolley held: “(It) cannot be more than a personal licence to use the wall for displace purposes, there being no suggestion of ownership throughout, …”.

25.As to the exclusive use of the ground floor yard, Deputy High Court Judge Woolley held when the developer failed to transfer any of the rights reserved to use the ground floor yard upon assignment of all of the undivided shares in the land and “it must followed that such rights fell away as being incapable of existence other tha(n) as an incident to the ownership of any of such shares.”

26.As the defendant did not transfer it’s rights on the roof before it assigned the last of its undivided shares in the land and building, the facts of this case is clearly different from those in Modern Sino Ltd.

27.The defendant’s right on the roof was more akin to the developer’s right to the exclusive use of the ground floor yard than it’s right to affix notices on the external wall in The Incorporated Owners of Cheong Wang. Accordingly, I hold that all of the defendant’s rights over the roof had “fell away as being incapable of existence”. The first declaration in the plaintiff’s prayer is therefore granted.

28.As to the second declaration, I have already held all of the defendant’s rights on the roof has been extinguished and therefore it follows that ownership of the roof falls on all of the co-owners of the land and building; however this does not follow that the roof is “common area”.

29.Common area is defined either under the DMC or as “common parts” in section 2 of the Building Management Ordinance Cap 344 (the “BMO”). Clause 2 of the DMC specified the areas in the building that all co-owners have right of access:

“ Each of the parties hereto and his licensees shall in common with his co-owners of the whole of the said premises and their tenants and licensees have access to and be entitled to use the lifts the entrance-hall staircases and landings and the common passages of and in the said building for all purposes connected with the proper use and enjoyment of the shops on the ground floor and the block and roof on the upper floors in the said building of which he is entitled to the exclusive use occupation and enjoyment and for the purpose of engress to and egress from such shops on the ground floor and the blocks and roof on the upper floors of the said building.”

30.The roof was specified as being part of the areas entitled to exclusive use occupation and enjoyment, it was clearly not included in the common areas under the DMC.

31.As to application of the BMO, the relevant DMC was dated 16/4/1964, which predated the BMO. In Shine Empire Limited v. The Incorporated Owners of San Po Kong Mansion and Others, HCA 3444/2001, Deputy High Court Judge Mayo held that when the DMC of a building predates the effective date of the BMO, the DMC is not bound by the BMO. Accordingly, I cannot apply the definition of the BMO in interpreting whether the roof is “common parts”.

32.Whether the roof is common parts or common area is a decision best left to the co-owners of the land and building; perhaps by resolution in a general meeting of the owners. I am however not prepared to grant the second declaration in the plaintiff’s prayer.

33.As to the alternative claim for adverse possession, I have already held that all of the defendant’s rights had been extinguished, there is no need for me to consider this issue.

Order:

Representation:

Mr. Andrew Mak, instructed by Messrs T.Y. Lam & Co., for the Plaintiff

Mr Kenneth Chan, instructed by Messrs Hon & Co., for the Defendant