Pointpiper Investment Ltd V.The Sun's Property Management Ltd

DCCJ 3512/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3512 OF 2006

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BETWEEN

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Coram  :  His Honour Judge Chow in Chambers

Date of hearing  :  6^th December, 2006

Date of handing down Decision  :  22^nd December, 2006

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DECISION

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1.This is the Defendant’s application to set aside a default Judgment (“the Judgment”) entered on 14.9.2006.

2.On 18.7.2006 the Plaintiff issued the Writ of Summons, which was served on 19.7.2006.  On 31.7.2006, the Notice of Intention to defend was filed.

3.On 3.8.2006, Messrs. Richards Butler, solicitors for the Plaintiff filed the Notice of Intention (“the Notice”) to enter judgment.  On 7.8.2006 Messrs. Winnie Leung & Co., solicitors for the Defendant, wrote to the Plaintiff, asking for an extension of time for 21 days to file a defence.

4.On 8.8.2006, Messrs. Richards Butler replied by a fax, stating that the Plaintiff was willing to grant to the Defendant a 14 day extension of time for filing of its defence, provided that the extension of time was embodied in a Consent Summons and asked for a draft Consent Summons for the Plaintiff’s approval.

5.On 21.8.2006, Messrs. Winnie Leung sent a draft Consent Summons for Messrs. Richards Butler’s approval.  Messrs. Richards Butler made no response to the draft Consent Summons.

6.On 7.9.2006, Messrs. Winnie Leung wrote to ascertain Messrs. Richards Butler’s position on the draft Consent Summons.  Messrs. Richards Butler made no response.

7.On 11.9.2006, Miss Veronica Lee, a trainee solicitor of Messrs. Winnie Leung, called Mrs. Alice Hutchens (a partner of Messrs. Richards Butler) to ascertain the position of the Consent Summons of Messrs. Winnie Leung.  Mrs. Alice Hutchens told Miss Veronica Lee that she had no instruction to respond to the said letters.  At Miss Lee’s request, she agreed to obtain the Plaintiff’s further instruction on the draft Consent Summons.

8.Unknown to the Defendant, on 15.8.2006 Messrs. Richards Butler filed an application for default judgment.  On 14.9.2006, interlocutory judgment was entered by default, and on 18.9.2006 the interlocutory judgment was served on the Defendant.

9.When Messrs. Richards Butler made its reply by fax on 8.8.2006, it made an offer of extension of time of 14 days on the condition that the time extension was embodied in a Consent Summons to be approved by it.  The Defendant was never informed at the material time that the Plaintiff would apply for judgment by default on 15.8.2006.  On 11.9.2006, when Mrs. Alice Hutchens agreed to seek the Plaintiff’s further instruction on the draft consent summons, the Defendant must be given the impression that the offer made on 8.8.2006 was still being alive, and the possibility of an extension of time to be granted still existed.  When Mrs. Alice Hutchens agreed to take further instruction Messrs. Richards Butler made an implied representation that the Notice would be suspended from operation until further instruction from the Plaintiff was sought and the Defendant was informed of the outcome.  Hence the requirement under O.19 r.8A of the Rules of the District Court was not been complied with.

10.When Messrs. Richards Butler made the application for default judgment, on 15.8.2006 it did not inform the Court that on 8.8.2006 it had agreed that it made an offer to the Plaintiff on that day.  On 23.8.2006 the Court sought a confirmation from the Plaintiff as to whether the requisite notice to enter judgment had been duly served.  The Plaintiff simply filed an affirmation of service in respect of the Notice on 6.9.2006, without disclosing to the Court that it had made the said offer, and that Mrs. Alice Hutchens had agreed to take further instruction from the Plaintiff on the draft Consent Summons on 11.9.2006.  The Court was obviously misled by the non-disclosure of these matters into thinking that the Defendant was made aware by the Notice that the Plaintiff would enter judgment in default of a defence and yet chose not to file a defence and allowed the default judgment to be entered.

11.The Plaintiff submits that the Judgment is not an irregular judgment and that the Defendant has failed to make an application to set it aside by reason of the absence of any alleged irregularity as is required under Order 2 rule 2 of the Rules of the District Court (“RDC”).  But according to O.2 r.1(2), such an irregularity does not nullify the proceedings.  The reasons for setting aside the Judgment have been particularized in the affirmation of Veronica Lee.  Hence the Plaintiff has not been prejudiced by such irregularity.

12.By reason of the matters above-said, the Judgment is an irregular judgment, and I set it aside.

13.Even if the Judgment is a regular judgment, it must be set aside.  The Plaintiff’s claim is for damages caused by certain materials detached from the External Wall of the building known as Sun’s Group Centre, located at 200 Gloucester Road, Wanchai, Hong Kong (“the Building”).  The flat roof, 4^th Floor, roof and upper roof and external walls of the Building were assigned to Proper Investment Group Limited (“Proper Investment”) by an assignment dated 30.3.2004.  The assignment expressly refers to “Together with the exclusive right and privilege to hold use occupy and enjoy FIRST ALL THOSE the external walls of the Building but not limited to the full and exclusive right to use, occupy and enjoy the external walls ……………. for advertising purposes …….”; hence Proper Investment enjoyed the exclusive right to use, occupy and enjoy the External Walls.  By virtue of Clause 7(a) of Section F of the Deed of Mutual Covenant of the Building the owner of the External Walls is under a duty to maintain and repair the External Wall.  Clause 7(a) provides:-

“7.   (a)       Each Owner of the Commercial Tower, at his own expense, shall keep each Unit of which he is for the time being the Owner and of any other part of the Development the exclusive use, occupation and enjoyment of which has been assigned to him, and the doors and windows including but not limited to the curtain wall pertaining (where applicable) to each particular Unit and erected at the external wall of the Building thereof, and all the fixtures and fittings, plumbing, electrical and other installations therein or in connection therewith which are solely for the exclusive use and benefit of such Unit in good and substantial repair and condition and shall preserve and maintain the same in a manner consistent with the preservation of the Land and the Development as a first class commercial building.”

14.The Plaintiff argues that Clause 7(a) does not apply to Proper Investment because the user granted to Proper Investment is not unconditionally exclusive, but restricted to the right to advertise.  This argument is misconceived.  Proper Investment does have ownership of the External Walls as evidenced by the terms of the assignment.  It also has the exclusive right to use and enjoy the external walls of the Ground, 1^st, 2^nd, 3^rd and 4^th floors of the Building for advertising purposes.  The right to use the External Walls for advertising purposes does not change the fact that Proper Investment owns the External Walls.

15.The Plaintiff submits that Clause 7(a) only applies to owners of “Units” and owners of other parts of the “Development” the “exclusive use, occupation and enjoyment of which has been assigned to him.”  Neither the definition of “Unit” or “Development” includes the External Walls.  Under the Deed of Mutual Covenant of the Building,  “Development” means “the Building with the Common Areas and the Building Common Services and Facilities, Commercial Common Services and Facilities and Garage Common Services and Facilities”.  The phrase “the exclusive use, occupation and enjoyment of which (any other part of the Development) has been assigned to him indicates that “any other part of the Development” is owned by someone.  Hence, the phrase “any other part of the Development” must mean any other part of the Building not having the Common Areas and the Building Common Services and Facilities, Commercial Common Services and Facilities and Garage Common Services and Facilities.  This “any other part of the Development” does not include common areas or common facilities.  It must be owned by someone.  So the whole clause “any other part of the Development the exclusive use, occupation and enjoyment of which has been assigned to him ….” makes sense and is logical; “any other part of the Development” means any other part of the Building (not being common areas or common facilities) the exclusive use, occupation and enjoyment of which has been assigned to an owner.  The External Walls is covered by this category.  The exclusive right and privilege to hold use occupy and enjoy the External Walls of the Building has been assigned to Proper Investment, and the Defendant is not the owner of the External Walls.  Therefore according to Clause 7(a) the Defendant does not have the responsibility to maintain the Outer Walls in good condition.

16.Even if Clause 7(a) of the Deed of Mutual Covenant of the Building is inapplicable in this case, as submitted by the Plaintiff, section 34H of the Building Management Ordinance applies.  That section provides: -

“        (1)    Where a person who owns any part of a building, has the right to the exclusive possession of any part of the building or has the exclusive right to the use, occupation or enjoyment of that part, as the case may be, but the deed of mutual covenant in respect of the building does not impose an obligation on that person to maintain the part in good repair and condition, that person shall maintain that part in good repair and condition.

(2)    The obligation in subsection (1) shall be deemed to be an obligation owed to all owners of the building under the deed of mutual covenant.”

17.The Plaintiff alleges that the Defendant has such responsibility because of Clause 1(b)(vii) of Section L of the Deed of Mutual Covenant of the Building.  Clause 1(b)(vii) reads:-

“(b)    …………………..the Manager shall have the following powers and duties, namely:-

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(vii) To repair, maintain, clean, paint or otherwise treat or decorate or renovate as appropriate or as circumstances shall require, the structure and fabric of any buildings and other structures erected on or in the Land and the Development and the external elevations and roofs thereof, and to replace any glass that may be broken in any doors on windows therein, the responsibility for doing any of which is not, under the terms of this Deed, allocated to any Owner.”

(Underlines provided)

18.According to 7(a), the owner of the External Walls, namely, Proper Investment, shall keep the External Walls in good substantial repair and condition.  The Defendant was not under such an obligation to do so when the alleged incident happened on 17.5.2006.  It has a real prospect of success in its defence.

19.The Plaintiff alleges that the Defendant does not disclose any factual basis to support its purported defence.  But in the affirmation of Veronica Lee she referred to the Deed of Mutual Covenant of the Building.  Although she did not make specific reference to particular clauses in the Deed of Mutual Covenant, that does not preclude the Defendant from relying on the relevant clauses in the Deed of Mutual Covenant to support its contentions.

20.For the reasons above-said, I set aside the Judgment.  I make an order nisi, to be made absolute in 14 days’ time, that the Plaintiff do pay costs to the Defendant, with certificate for Counsel, to be taxed, if not agreed.

The Plaintiff :  represented by Mrs. Alice Hutchens of M/S. Richards Butler, Solicitors.

The Defendant :  represented by Mr. Kent Yee, instructed by M/S. Winnie Leung & Co., Solicitors.