The Incorporated Owners of Odeon Building and Others v. Sky Field Development Ltd

HCA 217/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 217 OF 2005

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BETWEEN

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Before : Hon Fung J in Court

Date of Hearing : 26-29 June 2007

Date of Handing Down Judgment : 28 August 2007

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J U D G M E N T

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1.The 1^st plaintiff sought:

(1)	an injunction against the defendant from interfering with the use of the lavatories on the First Basement in certain commercial premises by the owners of the Ground Floor and the Second Basement, their tenants, tenant’s staff and customers;
(2)	an order that the defendant do reinstate the lavatories in accordance with the building plans approved by the Building Authority.

2.Alternatively, the 2^nd plaintiff sought:

(1)	an injunction against the defendant from interfering with the use of those lavatories by the 2nd plaintiff, their tenants, tenant’s staff and customers;
(2)	an order that the defendant do reinstate the lavatories in accordance with the building plans approved by the Building Authority.

3.The claim of damages of loss of use is abandoned.

Background

4.The 1^st plaintiff is the Incorporated Owners of Odeon Building at 28 Shu Kuk Street, Hong Kong.  The Building comprises of the commercial and residential portions.  The two portions have separate entrances.  The commercial portion comprises of 6 floors, starting from the lowest: Second Basement (“B2”), First Basement (“B1”), Ground Floor and 1^st to 3^rd Floors.  The present case is concerned with the provision and use of sanitary facilities for G/F, B1 and B2.

5.Until recently, all the named parties of the 2^nd plaintiff were registered owners of Shop No.1 on G/F (“Shop G1”), since 15 February 1994.  At present, only Mr Chan Yick Kwok and Miss Chu Sui Yuk of the 2^nd plaintiff remain the registered owners.

6.The defendant is the registered owner of B1 since 10 November 2003.

7.The Occupation Permit for Odeon Building was issued by the Building Authority on 6 June 1985.

8.According to the building plans approved by the Building Authority on 31 May 1985, there was a male lavatory (“Original Male Lavatory”) and a female lavatory (“Original Female Lavatory”) on B1 (collectively “Original Lavatories”).  There is no lavatory on either B2 or G/F.  There are also lavatories on each of 1/F to 3/F.

9.On 1 August 1985, the developer Jolica Limited entered into a Deed of Mutual Covenant (“DMC”) with Ms Cheung Mee Chun, the first assignee of a residential unit in the building.  The DMC covered the entire building.  At that stage, Jolica retained all the 6 floors of the commercial portion.

10.In about 1992, Jolica sub-divided G/F into a number of shops for the purpose of sale.  A Sub-DMC dated 16 December 1992 was entered into between Jolica and the first purchaser of a shop unit on G/F.

11.On 16 March 1993, the Building Authority approved a Building (Alterations and Additions) Plan which showed a caretaker’s room on the G/F was converted into a single toilet (“G/F Lavatory”).

12.On a date unknown but prior to the 2^nd plaintiff becoming the owner of Shop G1 (i.e. 15 February 1994), the Original Male Lavatory was demolished, and the Original Female Lavatory was converted into a male lavatory and a female lavatory (“the Converted Lavatories”).

13.Until 17 December 2004, the owners, tenants, staff and customers of the shops on G/F were permitted to use the Converted Lavatories.

14.On 17 September 1999, Jolica assigned B2, B1, 1/F to 3/F to Expressland Limited subject to the DMC.  Under the assignment, Jolica gave to Expressland the sole and exclusive right and privilege to hold use occupy and enjoy, inter alia, the whole of B1 as identified by the area coloured pink of the annexed plan.  The pink area included the space for the Original Lavatories (i.e. the demolished Original Male Lavatory and also the Converted Lavatories).

15.On 30 April 2002, Expressland assigned 2/F and 3/F to Falcome Limited, an associated company of the defendant.

16.On 10 November 2003, Expressland assigned to the defendant the whole of B1 (including the Original Lavatories) as identified by the same plan.

17.Since 17 December 2004, the defendant had locked up the Converted Lavatories, and excluded the owners, tenants, staff and customers of G/F from using them.  The only sanitary facilities available to the users from G/F is the G/F Lavatory built in the caretaker’s room.

The issues

18.The issues are:

(1)	Whether Joilca was entitled to include the Original Lavatories in the assignment to Expressland as area reserved for its exclusive use under the DMC, or whether the Original Lavatories were common parts of the building;
(2)	Alternatively, whether the DMC is subject to an implied covenant by necessity that the successive owners of B1 do grant to the owners, tenants, staff and customers of G/F and B2 the use of the Original Lavatories.
(3)	If either issue (1) or (2) were resolved in the 1st or 2nd plaintiff’s favour, whether the defendant, not being the party in breach of the DMC but as a successor in title, is liable for the demolition and conversion and be compelled to reinstate the Original Lavatories.

19.The 1^st plaintiff is suing to enforce the rights of the owners in relation to common parts of the building vested in the owners incorporation under s. 16 of the Building Management Ordinance (Cap. 344).

20.If the Original Lavatories were not common parts of the building, then the 2^nd plaintiff sued for the alleged implied covenant in the DMC.

Plaintiffs’ evidence

21.Miss Tang Kam Ling is the manager of the management company.  It was only discovered in 2002 that demolition and conversion of the Original Lavatories when an architect was engaged for overhaul of the building.  Since then, the management committee has asked Expressland to reinstate the Original Lavatories.  The representative of Falcome, Mr Ng Tse-ho, was present at the meetings when the right to use the Converted Lavatories was discussed.  Mr Ng was also a representative of the defendant when it became an owner.

22.The management company engaged a cleaning company to service the Converted Lavatories and the G/F Lavatory.  The expenses came out of the general management charges paid by all the owners in the building.

23.Mr Ngai Hok-Yan of Troika Engineering Ltd. is the expert witness for the plaintiffs.  Mr Ngai is a Registered Structural Engineer and an Authorized Person.  He explained the statutory requirements and actual provision of sanitary fitments for G/F, B1 and B2.

24.The requirements of sanitary fitments (i.e. water closets, urinals and lavatory basins) for offices, industrial undertakings and other places of works are set out in regulation 5 of the Building (Standards of Sanitary Fitments, Pluming, Drainage Works and Latrines) Regulations (Cap. 123-I).  The requirements for shops and department stores are further set out in Practice Note (“PN”) 41 made under regulation 5(5)(a).  The relevant requirements are calculated according to the usable floor area, population density of 15 m² per person, and the ratio of 1 male to 1 female.

25.Under regulation 5 and PN 41, the requirements as calculated according to the individual usable floor areas of G/F, B1 and B2 were as follows:

Floor	Female Lavatory (As required)		Male Lavatory (As required)
	Water closet	Basin	Water closet	Urinal	Basin
G/F	2	1	1	1	1
B1	2	1	1	1	1
B2	2	1	1	1	1
Total	6	3	3	3	3

26.Alternatively, the calculation for sanitary fitments may be made on the basis of the combined usable floor areas of G/F, B1 and B2:

Floor	Female Lavatory (As required)		Male Lavatory (As required)
	Water closet	Basin	Water closet	Urinal	Basin
Combined G/F+B1+B2	3	2	2	1	2

27.As can be seen, there is a saving in the total requirement calculated on the combined floor area basis.

28.In the approved building plans approved by the Building Authority, the actual provision as per the Original Lavatories was made on an combined G/F, B1 and B2 basis, but being more generous.  However, it is less than the requirements as per the separate G/F, B1 and B2 basis:

Floor	Original Female Lavatory (Actual)		Original Male Lavatory (Actual)
	Water closet	Basin	Water closet	Urinal	Basin
B1	4	3	3	3	3

29.Mr Ngan said that according to the approved plans, the sanitary fitment provided at B1 was allocated to serve G/F and B2 as well.

30.With the demolition of the Original Male Lavatory and the conversion of the Original Female Lavatory, even taking into account the G/F Lavatory (in the caretaker’s room), the total number of sanitary fitments was less than the statutory requirements on a combined G/F, B1 and B2 basis:

Floor	Female Lavatory (As present)		Male Lavatory (As present)
	Water closet	Basin	Water closet	Urinal	Basin
G/F	1	1	0	0	0
B1	2	2	1	2	1
Total	3	2	1	2	1

31.Hence, the present provision of sanitary fitments is in breach of Regulation 5 and PN 41.

32.In the sales brochure of the building issued in 1985, the developer offered for sale of the floors of the commercial portion of the building as well as the domestic units.

Defendant’s evidence

33.Mr Alex Ng of Alex Ng & Partners Limited is the expert witness for the defendant.  Mr Ng is a Registered Architect and an Authorized Person.  Mr Ng agreed that in looking at the approved building plans, the Authorized Person at the time designated B2, B1 and G/F as one section for the purposes of sanitary fitments calculations.  He agreed that the present sanitary fitments are inadequate when compared with the statutory requirement.

Relevant principles

34.The plaintiff’s arguments relate to the construction of the DMC.  It is convenient to set out the relevant principles on construction.

35.In Westacott v. Hahn [1918] KB 495, 511-512, Scrutton LJ said:

“

A flood of authorities in and since the seventeenth century were poured out upon the Court, in which somewhat similar words to this covenant had received a construction from the Courts.  In my view, however, the first thing to be done is to endeavour to ascertain from the words the parties have used in this case their actual intention.  If they have used words which by a settled course of authority have acquired a technical meaning, the Court will give effect to those authorities; but, unless this is so, it appears to me very unprofitable to consider what Courts have thought that other words in other documents meant and to see which reported case has the least differences from the present.”

36.In Investors Compensation Scheme Ltd. v. West Bromwich Building Society [1998] 1 WLR 896, 912F –913F, Lord Hoffman said:

“	… I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prenn v. Simmonds [1971] 1 WLR 1381, 1384-1386 and Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen [1976] 1 WLR 989, is always sufficiently appreciated.  The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life.  Almost all the old intellectual baggage of ‘legal’ interpretation has been discarded.  The principles may be summarised as follows.
	(1)	Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
	(2)	The background was famously referred to by Lord Wilberforce as the ‘matrix of fact,’ but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
	(3)	The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent.  They are admissible only in an action for rectification.  The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
	(4)	The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words.  The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.  The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd.  [1997] AC 749.
	(5)	The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents.  On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had.  Lord Diplock made this point more vigorously when he said in AntaiosCompania Naviera S.A. v. Salen Rederierna A.B. [1985] AC 191, 201:
		‘	if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.’”

37.And in Jumbo King Ltd. v. Faithful Properties Ltd. & ors. [1999] 3 HKLRD 757, 773F-774A, Lord Hoffman also said:

“

The construction of a document is not a game with words.  It is an attempt to discover what a reasonable person would have understood the parties to mean.  And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve.  Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well.  Their language may sometimes be careless and they may have said things which, if taken literally, mean something different from what they obviously intended.  In ordinary life people often express themselves infelicitously without leaving any doubt about what they meant.  Of course in serious utterances such as legal documents, in which people may be supposed to have chosen their words with care, one does not readily accept that they have used the wrong words.  If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other.  The court is not privy to the negotiation of the agreement - evidence of such negotiations is inadmissible - and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession.  Or one of the parties may simply have made a bad bargain.  The only escape from the language is an action for rectification, in which the previous negotiations can be examined. But the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean.  Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail.”

38.Hence, I approach the construction of the DMC not as a matter of semantics and labels, but having regard to the relevant factual and legal matrix of the transaction and the practical objects intended to be achieved, excluding the previous negotiations of the parties, arriving at a construction that will give the most commercial sense in the eyes of a reasonable beholder.

Common parts

39.Miss Wong SC, for the plaintiffs, submitted that her primary argument is the 1^st plaintiff’s case that the Original Lavatories form the common parts of the building.  The 2^nd plaintiff’s case of implied covenant is the alternative case.

40.Under s. 2 of the Building Management Ordinance (Cap. 344) (“BMO”), “common parts” of the building are defined to mean:

“	(a)	the whole of a building, except such parts as have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner; and
	(b)	unless so specified or designated, those parts specified in the First Schedule.”

41.Under para. 7 of the First Schedule to BMO, commons parts include the caretaker’s flat, toilets and water closets (unless specified under para. (a) of the definition of common parts under s. 2).

42.Clause 1 and the First Schedule of the DMC deal with the reservation of exclusive use, occupation and enjoyment for a particular owner.

43.Clause 1 states:

“

Each of the parties hereto for himself and his executors administrators and assigns hereby grant unto each of the other parties hereto their or his respective executors administrators and assigns the full right and privilege to the exclusive use occupation and enjoyment and the rents and profits of the part of the [building] and the said premises as 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 and the rents and profits of the part of the [building] and the said premises so set out opposite to his name aforesaid.”

44.The effect of clause 1 is to designate only those parts of the building set out in the Second Column of the First Schedule as for the exclusive use, occupation and enjoyment of an owner, i.e. Joilica at the relevant time.

45.In the First Schedule to the DMC, undivided shares in the land are allotted to “Shops on the Second Basement”, “Shops on the First Basement” and “Shops on the Ground Floor” respectively.  The DMC does not contain any definition of the word “shop” or “shops”, nor plan on which the “Shops on the First Basement” are identified.

46.Miss Wong submitted that the words “Shops on the First Basement” do not include lavatories because:

(1)	The parties to the DMC have used the words “Shops on the First Basement” instead of simply “First Basement”.
(2)	Each of the floors in the commercial portion was allocated individual undivided shares under the DMC, which indicated it was foreseen that those floors might eventually end up in different and separate owners.
(3)	The use of the plural “shops” suggests that it was foreseen that the floor might eventually be partitioned into more than one shop (as in the case of G/F) and end up in multiple ownership.
(4)	The words “shop” or “shops” have a clear natural and ordinary meaning which is unambiguous and clearly does not include lavatories.
(5)	Such natural and ordinary meaning makes perfect sense when having regard to the fact that the Original Lavatories were intended to serve not just B1 on which they were located, but also G/F and B2.

47.Miss Wong submitted that having accepted that combined usable area of G/F, B1 and B2 were treated as one unit in the calculation of sanitary fitments, it is difficult to see how the defendant could deny that the Original Lavatories were not intended to serve also G/F and B2.

48.Mr Chow SC, for the defendant, submitted that for the purpose of construction of the DMC (in both the primary and alternative cases), it is not permissible to take into account the approved building plans, in particular the provision of sanitary fitments in those plans.  The DMC is a bilateral contract between Jolica (the developer) and Madam Cheung (the first purchaser of a residential unit), albeit that through the operation of law relating to the running of covenants, subsequent owners become entitled to the rights and subject to the burdens therein contained.  It cannot seriously be argued that the approved plans were documents reasonable available to Cheung at the time of the contract.

49.Mr Chow also submitted that conduct subsequent to the formation of the contract are not admissible to interpret a written contract.  Hence, the provision of maintenance by the management company at the expenses of all the owners is not relevant.  With this I agree.

50.Mr Chow referred to the Jumbo King case, both the Court of Final Appeal judgment (ob. cit.) and the Court of appeal judgment ([1999] 2 HKC 507), not so much as comparing like with like, but as an illustration of the approach of the judges on construction of the DMC.

51.In Jumbo King, the vendors agreed to sell various units in the commercial portion of the Hankow Centre to the purchaser.  The building had a domestic and commercial portion.  The sale included four “utility rooms” on the G/F, 3/F and 4/F.  The issue was whether the utility rooms were common parts or areas reserved to the exclusive use of the developer for it own use.  In the DMC, the areas reserved to the developer were stated to be “Shop Spaces” on the G/F and 1/F, and “Offices” on 2/F to 4/F. 

52.In the Court of Appeal, Godfrey JA (as he then was) said that the utility rooms were never designated as common areas and that was sufficient to dispose of the issue (see p. 522I).

53.Rogers JA (as he then was) said that even if a utility room was not an office or part of an office, it was ancillary to the offices, or more accurately the non-domestic floors of which the offices were the only relevant part.  In effect, as between the parties to the DMC, the original developer enjoyed the right to exclusive use and occupation of, inter alia, the utilities rooms.

54.In the Court of Final Appeal, Litton PJ said description of “Shop Spaces” and “Offices” in the DMC were just descriptions.  The allocation of space within the commercial portion was of no conceivable interest to the first purchaser of a domestic unit.  It would be farfetched to suggest that the parties to the DMC intended that the right to occupy those spaces in the commercial portion (which the utility rooms were situated) should be shared as between the developer and the first purchaser of a domestic unit.

55.Lord Hoffman NPJ said that it made no practical sense why the parties should have intended the first purchaser in his flat on the sixth floor should have rights of occupation in the commercial portion of the building.

56.Mr Chow pointed out the Original Lavatories fell outside the definition of “common areas” under Clause 3 of the DMC, which states that:

“	Each owner shall hold his part of the said building and the said premises subject to and with the benefit of the following rights privileges and obligations namely:-
	(a)	Full right and liberty to go pass and repass over and along the public passages, public staircases, entrances, staircases, landing, passages, lifts and escalators in the said building and the roads and footpaths (if any) within the said premises (hereinafter referred to as “the Common Areas”) for all purposes connected with the proper use and enjoyment thereof.
	(b)	Full right and liberty to use the open yards gardens and grounds (if any) of the said premises (except any part thereof, the exclusive use and enjoyment of which has been allocated to any owner) for the purposes of recreation only.”

57.Mr Chow submitted that upon the true construction of the DMC, the Original Lavatories (and consequently the Converted Lavatories) were not common parts of the building, but reserved to the exclusive use of Jolica and its successors-in-title because:

(1)	the Original Lavatories were never designated as Common areas in the DMC.
(2)	The Original Lavatories were ancillary to the Shops on B1.
(3)	It makes no practical sense if the Original Lavatories and/or Converted Lavatories were common parts of the building, it would mean that all the co-owners, whether of the commercial or residential portion, would be entitled to the use thereof by reason of the unity of possession (see Lai Wai-ho v. Chan Siu-fong [1993] 1 HKLR 319, 323-324, per Godfrey J).
(4)	By the same token, the lavatories on 1/F to 3/F would also be common parts as under the DMC, the treatment of all the floors of the commercial portion was the same.
(5)	Had the parties intended the Original Lavatories to be common parts, it would have been most natural and obvious to make express reference to them in the provision for “common areas” in Clause 3.

58.Miss Wong sought to draw distinction between Jumbo King and the present case:

(1)	Undivided shares were allocated to the 5 floors of the commercial portion as one unit in Jumbo King,but shares were allocated to each floor of the commercial potion here with the intention of the commercial floors ending up in separate ownership prospectively and those floors were put on the market by the developer together with the domestic units.
(2)	There was no evidence as to intended use of the “utilities rooms” in Jumbo King, but the Original Lavatories were provided for G/F, B1 and B2 as a matter of law, and with a net saving in sanitary fitments than otherwise separately provided for on each floor.

59.The key issue to the construction is whether the manner in which the sanitary fitments are provided for G/F, B1 and B2 is relevant in the construction of the DMC.  I hold that it is.

60.Although Ms Cheung, the first assignee of a domestic unit, might not have access to the approved building plans, there can be no doubt that the parties to the DMC in dealing with the issues of exclusive possession of designated parts and the management of common parts as between co-owners of a multi-storey building must have intended that the building comply with all statutory requirements, including regulation 5 of the Building (Standards of Sanitary Fitments, Pluming, Drainage Works and Latrines) Regulations.  The occupation permit was issued before the sale could take place.  The developer must have sought to comply with the building regulations through the architect as its agent.  The first purchaser must have assumed such compliance by the developer.

61.Further, in looking at the DMC, it could not be said that Ms Chueng would have no concern with the affairs of  B1, as Clause 11(b) of the Third Schedule stipulated that the owner for the time being of B1 shall allow the developer of its agent reasonable access to service the common facilities on B1:

“

The owners for the time being of the First Basement and the Second Basement shall allow the said Jolica Limited and/or the Agent or any person or persons authorized by the said Jolica Limited and/or the Agent to pass and repass at all reasonable times over and upon the said First Basement and the Second Basement for the purpose of inspecting and servicing the switch room, lift machine room and other common facilities on the said First Basement and Second Basement.”

62.Having decided that the statutory requirement and manner of provision of sanitary fitments for B1 are relevant to the construction of the DMC, and taking into account the allocation of undivided shares to individual floors of the commercial portion with a view to prospective sales separately, the arguments of Miss Wong make perfect practical sense. 

63.In the premises, I hold that the Original Lavatories were common parts of the building.

Implied covenant

64.The court will only imply a term into the contract: (1) where it is necessary to give the transaction such efficacy as both the parties must have intended that in all event it should have (see The Moorcock (1889) 14 PD 64, 68 per Bowen LJ); or (2) where the term implied represents the obvious, but unexpressed, intention of the parties, so that while the parties were making their bargain, if an officious bystander were to suggest some express provision for it in the agreement, both parties would, as reasonable men, have agreed to it as a matter of course (see Chitty on Contract (29^th Ed., 2004) Vo1. 1, paras. 13-004 to 13-007).

65.Miss Wong submitted that as at the date of the DMC, it was necessary for the owners, tenants, staff and customers of G/F and B2 to be allowed access and use of the Original Lavatories because:

(1)	G/F and B2, by design, did not include any sanitary fitments;
(2)	The Original Lavatories were to serve all G/F, B1 and B2.

66.Miss Wong referred to Chiu Shu-choi v. Merrilong Dyeing Works Ltd. [1990] 1 HKLR 385 as an instance where a covenant was implied into a DMC by necessity.

67.In the Merrilong case, the William Chandler Factory Building was a flatted factory of 10 floors, G/F to 9/F.  All the floors were served by 2 staircases, but the large goods lift went only up to 8/F.  The lift shaft at 8/F opened directly into 8/F, and one need to access the staircase to 9/F through the working part of the 8/F.  8/F and 9/F were originally owned by the same owner.  After the two floors were sold to separate owners, the 8/F owner erected a roller shutter, so that effectively there was no way from the lift to the staircase, unless the roller shutter happened to be open.  And the workers and the goods had to climb nine flights of stairs.  The trial judge found that the 9/F was constructed to be used as a factory and was “virtually unusable  as such without recourse to the lift”.  The Court of Appeal agreed, observing that the 9/F floor owner was expressly entitled to use the lift and was liable for the expenses of operating and maintaining the lift under the DMC.  Hence, a right of way was implied.

68.Mr Chow submitted that the approved building plans and calculation of sanitary fitments are equally inadmissible in implying covenants in the DMC.  The proposed implied covenant is not necessary to make the DMC work even if (which was not the position) G/F, B1 and B2 were under separate ownership as at the date of the DMC.  It could not be said that G/F and B2 would be “virtually unusable” as there is no reason why the owners on G/F cold not use the lavatories on other floors on the commercial portion.

69.Mr Chow also sought to distinguish the Merrilong case:

(1)	The right of way on the 8/F was no more than ancillary to the express right of the 9/F owner to use the lift.
(2)	The developer in the Merrilong case disposed of 6/F to 9/F to one single purchaser by 4 separate assignments and at the same time.
(3)	The 9/F owner was required to pay for the operating costs of the lift under the DMC, but there is no express provision requiring the owner of G/F, B1 and B2 (but not the other owners) to pay for the costs of maintaining the Original Lavatories.

70.I consider that the Merrilong case was decided on the basis that the right of way was implied ancillary right to the express right to use the lift.  There is no such incidence of express right for an ancillary right to be implied.  Be that as it may, there is an implied convenant arising from necessity in the present case.

71.Such as in the case of common parts, I find that the provision of sanitary fitments under the relevant building regulation relevant to the factual and legal matrix.  It is necessary for the Original Lavatories to serve all G/F and B2 as well as G/F and B2 since G/F, by design, did not include any sanitary fitments.  The argument that the owners, etc. on G/F could use the lavatories on other floors on the commercial portion is fallible as the same argument could be relied on by the owners of the other floors to exclude their use, and the situation becomes circuitous.

72.Hence, I hold that the DMC is subject to an implied covenant by necessity that the successive owners of B1 do grant to the owners, tenants, staff and customers of G/F and B2 the use of the Original Lavatories. 

Liability of the defendant as successor in title

73.As a general rule, a covenant runs with the land and not the breach thereof.  Hence, an assignee is not liable for the breach of covenant incurred before the assignment which he never committed (see Grescot v. Green (1699) 1 Salk 199; 91 ER 179 and Churchwardens of St. Saviour’s , Southwark v. Smith(1762) 3 Burr 1271; 97 ER 827).

74.In Discovery Bay Services Management Ltd. v. D. Buxham [1995] HKDCLR 7, Downey DJ said at p. 11, lines 1 to 8:

“

A lessee or occupier will not be liable to the covenantee or his successors in title for breach of a positive covenant merely because he is a lessee or occupier at the material time.  There has to be something more than occupation to make him liable, such as a covenant contained in his lease or licence.  It is not enough that there is a covenant in a Deed of Mutual Covenant binding on the lessor or licensor.  See Nield, The Hong Kong Conveyancing and Property Ordinance (1988 Butterworths) at 122.  Nor in my view, is it sufficient to show that he is a successor in title at the time when the proceedings when the proceedings are commenced.  It is the covenant that runs with the land; not the breach thereof.”

75.Miss Wong referred to Sihombing and Wilkinson’s Hong Kong Conveyancing Law and Practice Vol. 1(A) at p. 157B XII [377.1] (Issue 39) on the liability of the present owner for “continuing breach” by the predecessor in title:

“

… Secondly, if the breach committed by the predecessor in title was a continuing breach, the present owner would remain liable.  Such would be the case, for example, if an unauthorized structure had been built on the premises or there had been a breach of covenant not to make structural alterations.”

76.Mr Chow did not disagree with the proposition in Sihombing and Wilkinson, but pointed out there is no evidence as to whether the demolition and the conversion of the Original Lavatories involved any structural or unauthorized alterations.  Miss Wong accepted that there was no such evidence, but liked the examples to the demolition and conversion of the Original Lavatories.

77.The topic of “continuing breach” has received closer attention in Scamell’s Land Covenants (1996) at p. 216-7:

“	4.	Whether the present owner or occupier of the burdened land is liable in respect of the acts or omissions of an earlier owner or occupier
		Unlike the position in the case of the original covenantor, there is no privity of contract between the covenantee and subsequent owners and occupiers of the burdened land and accordingly any liability of such owners and occupiers under the doctrine in Tulk v Moxhay is confined to the period of the ownership or occupation.  As a matter of principle, it follows from this that the present owner (or occupier) of land is liable for breach of covenant only if his own acts amount to a breach and, with one important exception, he cannot be liable merely by reason of a breach committed by his predecessor.  But the question arises whether the fact of a previous breach by a predecessor is relevant in deciding whether the present owner has committed a breach.  It is considered that the answer is in the affirmative only in the following circumstances:
		(1)	if, applying the terms of the covenant to the present owner, there is an independent breach consisting of a repetition (loosely called a continuance) by him of the predecessor’s breach;
		(2)	if the present owner either participated in the previous breach or subsequently adopted the breach as his own.”

78.The exception referred to by Scamell is where proceedings for a breach were commenced, or an order affecting the land was made, against the predecessor before the present owner acquired or was contractually committed to acquiring title to the property, and in the case of a subsequent sale to the purchaser, certain conditions are satisfied in that the purchaser either had express notice of the pending action by or prior to the purchase the proceedings had been registered as a pending action. 

79.The above exception has no application in the present case.  Although the defendant had notice of the dispute on the use of the Converted Lavatories through its associated company Falcome, it only affects the discretion in the grant of the injunction, not the founding of liability.

80.Scamell gave an example of independent “continuing” breach at p.217:

“

The clearest example of such a breach arises in connection with covenants restricting land to a particular use.  Thus, if A commits a breach of the covenant not to use a dwelling house as a shop and then sells the premises to B, B will commit a repetition of the breach every day he uses the premises as a shop.  However, it is not the case of B being liable for A’s continuing breach but of his being liable for his own independent breach in continuing the use which constitutes a breach.  On the other hand, if the covenant is one restricting the erection of buildings to dwelling houses, then if A erects shop premises (and uses them as such) and then sells them to B who continues the use, it cannot be said of B that he has erected a prohibited building.  The act of erecting a shop was complete once the building was complete and it became established that it was a shop.  Accordingly, since B cannot be liable for A’s breach, whether B is liable for continuing to use the building as a shop will depend upon whether the continued use of the building as a shop will itself amount to a breach.  This is a pure question of construction of the term of the particular covenant…”

81.Scammel cited Gaskin v Balls (1897) 13 Ch D 324, where the purchaser of a plot comprised in a building scheme covenanted not to erect any buildings beyond a certain line.  The covenantor erected a bakehouse beyond the building line.  Later, the defendant purchased the residue of term in the plot and erected a stable also beyond the building line.  The plaintiff (entitled to the benefit of the covenant in the building scheme) sought an injunction against the defendant to remove both buildings.  The Court of Appeal upheld the injunction in respect of the stable but refused an junction in respect of the bakehouse as the defendant had not erected the bakehouse.  Baggallay said at p. 329:

“

The erection of the bakehouse was a breach of covenant by the Defendant’s predecessor in title, but the covenants is only personally binding in respect of acts done during ownership.  It would be going further than any decided case to enforce the covenant against the Defendant in respect of acts done before he became owner, and even as against the party who erected the bakehouse there could be no remedy after such acquiescence.”

82.As to participation of the breach, Scamell gave the example that a successor being a party to the breach by the predecessor, as in the case of a contract for sale to a purchaser with a term that the vendor doing some act (e.g. erecting a building) which constituted a breach of covenant.

83.As to adoption of the breach, Scamell gave the example of the lessee erecting a building without submitting the plan for approval before commencement of erection under the term of the covenant and left it unfinished upon surrendering the lease, and the lessor completing it upon regaining possession.  Although the lessor would not be it breach as the erection had commenced, his acts would amount to adoption of the lessee’s breach so as to make him liable.

84.Participation and adoption of the breach are not relevant in the present case.

85.Miss Wong submitted that the common parts in question were not just vacant spots, but communal lavatories (or originally so).  The breach committed by the defendant’s successor in title resulted in the reduction of lavatory facilities.  The state of reduced facilities continues up to the present date.  Hence, the breach in question was a continuing breach, for which the defendant as successor-in-title would be liable.

86.The demolition of the Original Male Lavatory and the conversion of the Original Female Lavatory were made by the defendant’s predecessor in title.   What the defendant did was to continue occupying the space of the Original Male Lavatory, and to exclude the use by others the Converted Lavatories.  According to Gaskin v Balls and the analysis of Scamell, the demolition and conversion were acts once and for all completed before the assignment to the defendant.  The defendant is not liable for those breaches, and cannot be compelled to reinstate the Original Lavatories. 

87.Looking at it from another angle, supposing the demolition and conversion were done by party other than the defendant’s predecessor in title, and the defendant occupied the relevant parts of the premises since becoming owner.  Would the defendant’s liable for the demolition and conversion?  I say not because they were not breaches of the defendant.  And the position would be the same if the party in breach were the predecessor in title.

88.On the other hand, the defendant is liable for its possession of the space of the Original Male lavatory and the Converted Lavatory to the exclusion of others notwithstanding they are common parts of the building.  Hence, it must yield the possession thereof to the 1^st plaintiff.

89.Looking at the relevant covenant in the DMC delineating common parts and parts subject to exclusive possession by an owner, I do not find any basis for ordering reinstatement. 

90.I have invited submissions on Chi Kit Co Ltd & anor v. Lucky Health International Enterprises Ltd [2000] 2 HKLRD 503 (CFA) as to possible argument in interpreting “owner” as “owner for the time being” under the rubrics of the Building Management Ordinance (Cap. 344).  Both Miss Wong and Mr Chow submitted that the reasoning in Chi Kit has no relevance to the presence case.

91.I do not find the result necessarily unjust, as after all, the 1^st plaintiff should have the duty of care and management of the common parts in the first place.

Conclusion

92.In the premises, I find that the Original Lavatories, i.e. presently the space of the Original Male Lavatory and the Converted Lavatories, are common parts of the building.  The 1^st plaintiff succeeds on the negative injunction against interference of access to the space of the Original Male Lavatory and the use of the Converted Lavatories by the owners, tenants, staff and customers of G/F and B2.  However, it fails on the mandatory injunction for the reinstatement of the Original Lavatories.

93.Mr Chow has raised the concern for possible argument in future as to what may amount to interference of the use of the Converted Lavatories as they are situated inside the premises of the defendant.  May I invite the parties to settle on a practical solution and come up with the appropriate draft form of order.

Costs

94.I also invite the parties to make submissions on the appropriate order for costs, with suggested apportionment, if seen fit.

95.I thank counsel for their helpful submissions.

Miss Liza Wong, SC, instructed by Messrs S.T. Cheng & Co., for the Plaintiffs

Mr. Anderson Chow, SC, instructed by Messrs. Fan & Fan, for the Defendant