Tam Sze Man and Another v. The Incorporated Owners of Shan Tsui Court

HCA 989/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 989 OF 2010

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BETWEEN

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Before : Deputy High Court Judge Au-Yeung in Chambers

Date of Hearing : 12 January 2011

Date of Handing Down Decision : 25 January 2011

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DECISION

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1.This Order 14A and Order 14 application concerns the ownership of a partition wall between 2 adjoining flats.

UNDISPUTED FACTS

2.Shan Tsui Court is an estate with multi-storey buildings.  The Hong Kong Housing Authority was its developer. 

3.One Mr. Mok is the sole director and shareholder of the 2^nd plaintiff. He is the husband of the 1^st plaintiff.  The 1^st plaintiff is the registered owner of a property in Shan Tsui Court which I will call “Flat 3”.  The 2^nd plaintiff is the registered owner of the adjoining property which I will call “Flat 4”.  These 2 Flats share a partition wall (“the Partition Wall”) which is not structural in nature. 

4.The defendant is the incorporated owners having power to manage the common parts of the estate in which the Flats are situated.

5.In the course of renovation of the 2 Flats, the plaintiffs sought to demolish the Partition Wall.  The defendant refused to consent despite being shown an architect’s certificate that the Partition Wall was not a structural wall and its alteration would have no structural impact on the building.  Upon inspection, the Housing Authority held the same view as the plaintiffs. 

6.The centre of dispute is whether the Partition Wall is a common part of the estate and whether or not the plaintiffs were in breach of the DMC  in making structural alteration to the Flats.

7.By this summons, the plaintiffs ask for determination of the following question under Order 14A: whether on a true construction of the chain of assignments, title instruments and the DMC, they are the owners of the Partition Wall.  They also ask for judgment under Order 14.

THE ORDER 14A APPLICATION

8.The circumstances relevant to the court’s consideration to allow an application for a determination under Order 14A would be (a) that the question of law or construction was a dominant feature of the case; (b) if the question of construction was dealt with, this might or would enable the parties to avoid the expense of trial and assist them in the efficient disposal of the action.  The court could also take an overall view of the matter to see the context in which the question arose.   If the court was of the view that there would not be a greater saving of time or costs in determining the question, this would be a factor against adopting the issue.  Rockwin Enterprises Ltd. v. Shui Yee Ltd [2003] 3 HKC 174.

9.The core issue here turns on construction of documents.  If it is decided in favour of the plaintiffs, that should be the end of the litigation. If it is decided against them, there will appear to be not much reason for them to defend the counterclaim save in relation to the quantum of damages. Accordingly, it is suitable to proceed under Order 14A and I do so.

THE LEGAL PRINCIPLES

10.The term “common parts” is defined by section 2 of the Building Management Ordinance (Cap. 344) (“BMO”) as,

“(a) the whole of the 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 Schedule 1.”

11.In Schedule 1 of the BMO, common parts include “boundary walls”.

12.These provisions mean that the whole of a building are common parts, and those parts specified in Schedule 1 are common parts as well.  Incorporated Owners of Westlands Garden v. Oey Chiou Ling [2010] 5 HKLRD 150, per Mr Presiding Officer, His Honour Judge Michael Wong.

13.Any part of a multi-storey building which has not been specified or designated in an instrument registered in the Land Registry for the exclusive use, occupation or enjoyment of an owner is a common part. Examples can be found in:

(i)   Incorporated Owners of Summit Court v. Full Surplus Investment Ltd [2007] 3 HKLRD 351, at paras 26 to 33 – involving water pipes that branched out from the water tank; though used by individual flat owners, they still formed common parts;

(ii)   Chi Fu Fa Yuen Ltd v. Cho Wai Man Raymond [2008] 1 HKC 59 – involving a load bearing partition wall;

(iii)   Incorporated Owners of Westlands Garden v. Oey Chiou Ling, above – involving a non-structural partition wall.

14.To determine whether the Partition Wall is a common part it should first be ascertained whether the Partition Wall is part of the building or of the common parts specified in Schedule 1 before it can be decided whether the Partition Wall is a part that has been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner: Incorporated Owners of Westlands Garden v. Oey Chiou Ling, above.

15.The Court will construe the instrument to ascertain what a reasonable person would have understood the parties to mean. In Jumbo King Ltd v. Faithful Properties Ltd & others [1999] 3 HKLRD 757, at page 773F, Lord Hoffman says,

“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. … 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 much prevails.”

WAS THE PARTITION WALL A COMMON PART WITHIN THE MEANING OF BMO?

16.By operation of section 2 (a) and (b) and Schedule 1 of BMO, the Partition Wall is a common part because it is a “boundary wall” that sets apart Flats 3 and 4. 

HAS THE PARTITION WALL BEEN SPECIFIED OR DESIGNATED IN A REGISTERED INSTRUMENT AS BEING FOR THE EXCLUSIVE USE OCCUPATION OR ENJOYMENT OF AN OWNER?

17.The DMC and the first assignments (“the First Assignments”) to the predecessors of the plaintiffs (on which the subsequent assignments to the plaintiffs were based) are the only relevant instruments here.

18.Clause 13(c) of the DMC contains a provision similar to section 2 of BMO:

“For the purposes of this Deed ‘common parts’ means the whole of the Estate except such parts thereof as have been specified or designated in an instrument registered in the Land Office as being for the exclusive use occupation or enjoyment of an owner or owners.”

19.As correctly analyzed by Mr Mak for the plaintiffs, the DMC divided up the premises with exclusive rights and privilege into 3 classes:

(i)   The “full and exclusive right and privilege to hold use occupy and enjoy to the exclusion of the First Purchaser”, i.e. “all those flats car-parking spaces and open bays of and under the buildings within the Estate”: clause 1(a) to the DMC;

(ii)   The “full and exclusive right and privilege to hold use and occupy to the exclusion of the Authority”, i.e. “Flat No. 4 on the 27^th Floor of Block A”: clause 1(b) to the DMC;

(iii)   “The Authority while it is the Manager of the Estate under the provisions of [the DMC] shall have the right to the exclusive use and occupation of any part of any building within the Estate which is designated set aside and intended to be used as caretakers quarters machine rooms pump rooms switch rooms and any other purpose required for the management and serving the Estate as a whole or of any building or part of any building therein”: clause 1(c) to the DMC.

20.The DMC has not specified or designated the Partition Wall as being for the exclusive use, occupation or enjoyment of the owners of Flats 3 and 4. 

21.Neither had the First Assignments.  The First Assignment in respect of Flat 4 assigned to the First Owner,

“All those Ten equal undivided 8,962^nd parts or shares of and in ALL THAT piece or parcel of ground known and registered in the Land Office as CHAI WAN INLAND LOT NO. 92 And of and in all messuages erections and buildings thereon TOGETHER with the sole and exclusive right and privilege to hold use occupy and enjoy ALL THAT FLAT NO. 4 on the 21^ST FLOOR of the said building (which said Flat for the purpose of identification only is shown coloured pink on the Plan annexed hereto and is hereinafter referred to as “the said premises”) … EXCEPT AND RESERVED unto the Vendor and its assigns the exclusive right to hold use occupy and enjoy all other flats and all car-parking spaces open bays management offices and caretakers offices under in and of the said building … AND SUBJECT to and with the benefit of the Deed of Mutual Covenant …”

The First Assignment in respect of Flat 3 was in similar terms save as to the description of the property.

22.Such description merely gives the owner the right to the exclusive use of the floor and ceiling surfaces of the Property and the air space between them, in other words, of the entire volume of the floor space: Nation Group Development Ltd v. New Pacific Properties Ltd [2000] 3 HKCFAR 427, at 436G.

23.The First Assignments reserved to the Housing Authority the exclusive right to other flats, car parking spaces, open bays, management and caretakers’ offices but did not mention anything about common parts as defined in BMO. They, however, specifically subjected the First Owners to the DMC.  There was no express reservation in the textual description of the First Assignments of any exclusive right of the flat owners to the Partition Wall.  By analogy with the case of Nation Group, the exclusive right of the flat owners does not extend beyond the surface of the Partition Wall or any boundary wall.

THE PLANS ANNEXED TO THE FIRST ASSIGNMENTS

24.The plaintiffs, however, point to the pink coloured portions on the Plans to Flat 3 and Flat 4 attached to the First Assignments to claim that the Partition Wall was also assigned to them.  Mr Mak relies on Nation Group Development Ltd v. New Pacific Properties Ltd [2000] 3 HKCFAR 427 in which the Court of Final Appeal relied on a plan to hold that the owner of a canopy also had exclusive use of the vertical and underside of the canopy.  By analogy, it is submitted that the plaintiffs also own that part of the Partition Wall sandwiched between the 2 vertical faces.  Owners of Flats 3 and 4 are “common owners” of that wall.  Mr Mak asks rhetorically: in what way could other owners use the Partition Wall? 

25.I have considered the Plans for both Flats.  Each Plan has coloured pink the whole area representing that Flat and all walls (including, as conceded by the plaintiffs, the structural external walls and a wall attached to the lift well).  One wall (closest to Flat 2 and Flat 5 respectively) is coloured half in pink.

26.I differ from Mr Mak’s view for 3 reasons:

A.   The case of Nation Group is distinguishable on the facts although its principles are applicable to the present case.

B.   In the absence of clear descriptive text in the assignment to grant ownership of the Partition Wall to either or both of the plaintiffs, the Plans cannot take the matter further.

C.   The argument of “common ownership” of a partition wall in a multi-storey building has been rejected before: Incorporated Owners of Westlands Garden v. Oey Chiou Ling [2010] 5 HKLRD 141.

A.   The Nation Group Case

27.In the Nation Group case, the vendor expressly sold the entire first floor “and canopy” to the purchaser and the DMC, to which it was subject, expressly reserved the exclusive right to use the canopy to the developer.  Ribeiro PJ adopted the same approach of ascertaining if there was an instrument which gave the exclusive rights to the property owner :

“In deciding which (if either) of these contentions is correct, the starting-point must be the language of the sale and purchase agreement itself. On its face, the exclusive rights to be given are to the use, occupation and enjoyment of ‘the entire first floor and its canopy’ without qualification. It therefore appears prima facie that the vendor did not seek to restrict such rights of enjoyment to the canopy’s top surface.

“The provisions of the DMC (to which the contract was subject) are to similar effect. They allot 10 shares to the ‘first floor and its canopy and flat roof, with the parties granting to each other the exclusive use of the parts listed. The reference to the canopy as a part so listed is again unqualified, there being nothing to suggest that the covenant’s application is limited to its top surface.

When the developer entered into the DMC as ‘first owner’ with the ‘second owner’ … the developer reserved to himself exclusive use of the ‘first floor and its canopy and flat roof’ indicating that such parts of the building were not intended to form part of the common area.  When in its cl.4(p), the deed lists the areas ‘included’ in the ‘common parts services and facilities’, the canopy is not mentioned.”

28.In that case, the plan referred to was a two-dimensional floor plan. Ribeiro PJ considered the plan as complementing and not cutting down the textual description of the property in the contract.  The word “canopy” was written on the shaded areas representing the canopy, obviously indicating that the plan’s two-dimensional representation was intended to convey the existence of a three-dimensional structure which a canopy (and any other structure) necessarily was.  It was accordingly not the intention of the parties that the purchaser was to be limited to the exclusive use of only ‘the top surface of the areas shown on the plan.  The agreement granted exclusive use of the ‘canopy’ as a specific, named structure, without limitation or qualification.  Giving the words their natural meaning the grant should be construed as comprehending the entire canopy.

29.Nation Group is distinguishable from the present case because the First Assignments here did not expressly assign the Partition Wall to the first owners. 

B.   Absence of Clear Descriptive Text in the Assignments

30.Something as important as the exclusive rights of an owner should be clearly expressed in words and not just in the legend of a plan. 

31.In Central Management Ltd v. Light Field Investment Ltd. & another, CACV 30 of 2010, the dispute was also over an adjoining wall.  The defendants were registered owner of 2 adjoining flats.  They were entitled to remove a designated part of the non-structural partition wall (“the permitted opening”) between the 2 units so as to connect the 2 flats internally.  The defendants, however, created an opening beyond the permitted opening, which was opposed by the manager of the building.  Counsel for the defendants relied on the 3 legends shown on the plan.

(i)   The first was in respect of the area coloured pink and marked as ①.  The description of this part was that ‘elements of construction between different occupancies at odd numbers floors only (except 33/F) shall not be removed/altered unless Flat A and Flat B are in the same occupancy’.

(ii)   The second was in respect of the area coloured yellow and marked as ②. The description of this part was the same as for  ① save that the reference to ‘odd numbers floors’ was replaced by ‘even numbers floors’.

(iii)   The third was in respect of the part marked by thick black lines and the description was that ‘structural or other elements of construction shall not be removed/altered unless and until it is approved by the Building Authority’.

32.The areas marked ① and ② were for permitted openings of respectively odd and even numbered floor.  Counsel argued that the third legend showed that the intention of the developer was to allow the first owner of the unit to remove the partition wall which was a ‘structural or other elements of construction’ if consent of the Building Authority was obtained.  There, the Building Authority had given consent to the defendants to demolish part of the partition wall to create a larger opening between the 2 units.  A similar plan with the same legends was annexed to the assignment of the 2 units in that case. Counsel submitted that the intention of the developer was also to assign the partition wall to the defendants.

33.In dismissing the argument, Cheung JA said (at paragraph 17):

“I do not regard the third legend as an indication by the developer that it had intended to assign the partition wall to the defendants. A more likely interpretation which is more consistent with giving sense to the wording of the assignment, is that it is used to indicate that, apart from the permitted opening represented by areas ① and② which can be opened by the same occupier of the two adjoining flats without further qualification, the rest of the areas shown on the plan as indicated by the thick black lines are the structural parts of Highcliff or consist of elements of construction which can only be altered with the approval of the Building Authority. It is a long way from this description to say that the partition wall was also assigned to defendants and that it can be removed if they have obtained the approval of the Building Authority. It would be most odd if something as important as the rights and obligations of the owners is found on a legend in the plan and not in the body of the assignment and clearly expressed in words. I do not regard the third legend as showing that the developer had chosen not to reserve the partition wall to itself (and subsequently assigned to the plaintiff as part of the Common Areas and Facilities) and had, instead, assigned the same to the defendants. (emphasis added)

Further the third legend on the plan cannot be construed alone.  The whole of the 1^st Assignment (and likewise the Assignments in the present case) together with other documents of title such as the DMC must be considered as well.  Under Clause 1 of the Assignment, the assignment of the property is clearly said to be subject to the DMC which was executed contemporaneously with the 1^st Assignment although the latter might have come into existence first.”

34.Central Management is of course distinguishable from the present case in the sense that the plan there did not colour the wall in issue in pink.  However, the plaintiffs in that and the present case made a common attempt to rely on the plans to give them exclusive rights beyond what was stated expressly in the descriptive text itself.  It was this attempt which did not find favour with Cheung JA there.  I do not see why the reasoning there is not equally applicable to the present case.

COMMON ONWERSHIP OF THE PARTITION WALL BY THE OWNERS OF FLATS 3 AND 4

35.Incorporated Owners of Westlands Garden v. Oey Chiou Ling [2010] 5 HKLRD 141also involved a partition wall.  It was argued before the Lands Tribunal that if the 2 adjoining flats were owned by different owners, the two owners of the partition wall would become tenants-in-common.  When the two flats were owned by the same owner, they would have the absolute right to remove or convert the partition wall.  The learned Presiding Officer, His Honour Judge Michael Wong, rejected this argument.  He held that the 2 flats were not included in the pink-coloured portion of the deed of assignments.  The partition wall could not be regarded as a wall inside the 2 flats, so the developer had not assigned that partition wall to the next buyer.  The respondent owners of the 2 flats might perhaps use the surfaces on both sides of the partition wall, but they did not have the exclusive use of the location where the partition wall was situated.  Nor did they own the structural part of the partition wall.  The respondents only owned that partition wall jointly with other owners in the building who owned undivided shares in the building. (at paragraphs 27-32)

36.It is true that in the Incorporated Owners of Westlands Garden Case, the pink-coloured portion of the plan did not include the partition wall.  However, it made no difference in the present case as I have found that in the absence of clear descriptive text, the Partition Wall had not been assigned to the First Owners and had remained common part.  The reasoning of the learned Presiding Officer is equally apt here.

37.Further, the pink coloured portion in this case also created inherent difficulties.  The Partition Wall was coloured pink on each of the Plans for Flat 3 and Flat 4.  The First Assignment of Flat 4 was earlier in time than that of Flat 3.  Having been assigned Flat 4, could the first owner demolish the Partition Wall, claiming that he had the exclusive right to it?  And if the Housing Authority had already assigned the Partition Wall to the first owner, how could it also assign the same wall to the owner of Flat 3?  It is of course not necessary to resolve this issue here as this is not a vendor and purchaser summons; but it demonstrates that it could not be within the reasonable contemplation of the Housing Authority and the first owners of the 2 Flats for the complete Partition Wall to be assigned to the latter.  It also demonstrates the need for clear descriptive text instead of a coloured plan to define the exclusive rights of an owner.

38.The fact that this Partition Wall is bounded by Flats 3 and 4 so that no owner other than the plaintiffs can have access to it does not take the matter further.   Again, in Central Management Ltd v. Light Field Investment Ltd. & another, CACV 30 of 2010, Cheung JA says (at paragraph 25):

“The fact that the partition wall is situated between the two units which the defendants have exclusive use and possession does not mean that the partition wall is also excluded from the ambit of ‘Common Areas and Facilities’. The partition wall is a structural part of the development as well. Ultimately it is a matter of construction of the terms of the title documents to see whether it is part of the Common Areas and Facilities or not.”

39.On a true construction of the First Assignments and the DMC, I find that neither plaintiff was severally or jointly the owner of the Partition Wall.

STRUCTURAL ALTERATION

40.Assume I am wrong and the plaintiffs do have ownership over the Partition Wall.  The IO claims that the plaintiffs are in breach of clause 3 and paragraph 4 to the Second Schedule of the DMC which prohibit alteration to the structure of a flat.

“Not to make any structural alteration to any flat of which he is the owner [“1^st limb”] nor cut injure damage alter or interfere with any part or parts of the Estate in common use [“2^nd limb”] or any of the sewers drains water-courses conduits pipes cables wiring fixtures equipment apparatus or services of the Estate.” (emphasis added)

41.The first limb of this clause applies where the plaintiffs have ownership of the Partition Wall.  The 2^nd limb applies where the Partition Wall falls within common parts.

42.The term “structural alteration” should be given its ordinary literal meaning.  In Incorporated Owners of Tuen Mun Hung Cheung Industrial Centre (Phase 1) v. United Hong Kong Ltd, HCMP No. 2991 of 1998, Cheung J held (at page 5O-6C),

“In my view, in construing the terms of the DMC, one should take the ordinary literal meaning of the words. After all, the incorporated owners are required to enforce the terms of the DMC. It would be imposing an impossible burden on their task if every time when they see alterations to the building, they have to consult an architect first to ascertain whether the altered part forms part of the structure of a building before they could commence proceedings which very often have to be made on an urgent basis. Chung Kwok Yiu does not support the Defendant’s argument that the opinion of an architect must be obtained first. In the context of the DMC, structural alteration clearly means alteration to the structure of the Building. The external walls which enclose the Building clearly form the structure of the Building.”

43.This was adopted in the Incorporated Owners of Elite Garden v. Profit More Co. Ltd. [2002] 2 HKLRD 518.  The Court of Appeal further stated that the term “alteration” was limited to something which “alters the form or structure of the building”.  The “form” of a building has to do with its appearance or visual aspect.  The addition of the word “structural” did not fundamentally change this meaning.  Nothing in the clause in the DMC in that case (similar to the one in the present case), nor its context, required some special technical meaning to be ascribed to the word “structural”.  The notion that structural alteration must involve the load-bearing fabric of the building was rejected. In the context of the DMC in question, structural alteration must include permanent physical alteration to the fabric of the building, affecting the common interests of the owners. 

44.The architect’s certificate produced by the plaintiffs stating that the Partition Wall was not structural in nature accordingly does not assist.  Specifically, in Chung Kwok Yiu Ringo v. Leung Chi Shing & another, HCMP 2489 of 1995 the partition walls which the architect certified as not affecting the structural stability of the building were all internal walls within the unit and not boundary walls as in the present case.

45.The cases of Incorporated Owners of Tuen Mun Hung Cheung Industrial Centre and Incorporated Owners of Elite Garden, of course, involved alteration to the external wall of a building, whereas the present case involves a partition wall.However, the demolition of the Partition Wall undoubtedly pertains to the framework and structure of Flat 3 and Flat 4 respectively and affects their visual aspect.  It removes one boundary wall of each Flat and thus alters the structure.  The plaintiffs are in breach of the 1^st limb.

46.On the other hand if, as I have held, the Partition Wall falls within the common parts, its demolition is clearly damage, alteration or interference with the Estate in common use in breach of the 2^nd limb.

CONCLUSION

47.On a true construction of the First Assignments and the DMC, the plaintiffs have failed to prove that the Partition Wall is for its exclusive use, occupation and enjoyment.  Under Order 14A, I answer the question posed in the summons in the negative.  Under the Order 14 application, the defendant has raised a truly arguable issue and is entitled to unconditional leave to defend.  The application for judgment is dismissed. 

48.On costs, the rateable value of the Property in question is below $240,000 and hence within the jurisdiction of the District Court. Alternatively, it could have been litigated in the Lands Tribunal.  Prima facie, costs should be on the District Court scale.  However, the defendant has through correspondence rehearsed its arguments now put forth and has invited the plaintiff to litigate in the District Court or Lands Tribunal which was refused by the plaintiffs.  The plaintiffs were of the view that the issue of whether a partition wall belonged to the common parts of the estate and could not be removed was of general and public importance that should be determined by the High Court and serve as a precedent for lower courts.  As can be seen from the above analyses, this case involves application of settled principles.  The plaintiffs have unreasonably declined the defendant’s invitation to litigate in the District Court or Land Tribunal.

49.In the premises, I make an order nisi that costs should be to the defendant to be paid on the High Court scale.  There shall be summary assessment of costs on the papers on 16 February 2011 at 9:30 am.  No attendance is required. The defendant shall file and serve its statement of costs by 8 February 2011.  The plaintiff shall file and serve its grounds in opposition by 15 February 2011.

50.I am most grateful to counsel for their industry and thorough arguments in this case.   Wherever this claim should have been instituted, counsel’s involvement in this summons is thoroughly justified.

Mr Andrew Mak, instructed by Messrs K.B. Chau & Co., for the plaintiffs

Mr Paul K.N. Wu, instructed by Messrs Chung & Kwan, for the defendant

Appeal by the plaintiffs to Court of Appeal allowed. Please refer to CACV30/2011 dated 22 September 2011