The Incorporated Owners of Westlands Garden v. Oey Chiou Ling and Another

CACV 155/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 155 OF 2010

(ON APPEAL FROM LDBM NO. 159 OF 2009)

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BETWEEN

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Before: Hon Tang Ag CJHC, Cheung JA and Yuen JA in Court

Date of Hearing: 7 January 2011

Date of Written Submission on: 7 February 2011

Date of Judgment: 21 February 2011

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JUDGMENT

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Hon Tang Ag CJHC (giving the judgment of the Court):

Introduction

1.The Applicant is the incorporated owners of Westlands Garden (“the Building”). The Respondents are the registered owners of Flat E1803 of Westlands Garden.  The first named Respondent is the registered owner of Flat E1801.  Flats E1801 and E1803 are adjoining flats separated by a partition wall, which was 4 inches thick and made of reinforced concrete.  In or about August 2008, the Respondents caused the partition wall to be removed and converted the two flats into one.  Because the Respondents refused to reinstate the partition wall, the Applicant applied to the Lands Tribunal, inter alia, for an order that the Respondents reinstate the partition wall.

2.On 18 May 2010, District Judge Wong, Presiding Officer, Lands Tribunal, gave judgment in favour of the Applicant.  He accepted the Applicant’s submission that the partition wall was common parts under the Deed of Mutual Covenant (“DMC”) and/or the Building Management Ordinance, Cap. 344 (“the Ordinance”), and that its removal constituted a breach of clause 4 in Schedule 2 of the DMC as well as section 34I(1)(a) of the Ordinance.

3.This is the Respondent’s appeal.  Leave to appeal was granted by the learned Presiding Officer.

Westlands Gardens

4.Westlands Gardens comprises six 26-storey buildings over a ground floor podium, a lower ground floor and a sub-lower ground floor. The six 26-storey buildings are known as Blocks A, B, C, D, E and F with 104 domestic flats in each Block (4 flats on each floor from the 1^st to 26^th floors). It also comprises 442 Car Parking Spaces, 21 Shops or other non-domestic units on the ground floor, lower ground floor and sub-lower ground floor.

5.Westlands Gardens was notionally divided into 6,952 equal undivided shares whereof 1 such share was allocated to each Car Parking Space, a total of 258 such shares between the Shops (each Shop having different number of shares), 10 such shares to each flat and 2 such shares to the Roof of each Block.

First Assignment

6.The First Assignment was executed on 28 June 1974 (“the First Assignment”). 

7.By the 1^st Assignment, Westlands Estates Limited (“the Developer”) as vendor assigned 41/6,952^nd undivided shares together with exclusive possession of Shop G1 on the Ground Floor and the Lower Ground Floor of Westlands Gardens to the Hong Kong and Shanghai Banking Corporation (“the First Purchaser”), but:

“… EXCEPTING AND RESERVING unto the Vendor and its assigns (i) the right to the exclusive use occupation and enjoyment of all the shops flats flat roofs main roofs open yards and car parking spaces of and in the said buildings [Westlands Gardens] and the said land [the Remaining Portion of Quarry Bay Inland Lot No.15] other than the said premises [Shop G1] hereby specifically assigned ...”

DMC

8.On the same date the Developer, the First Purchaser and Goodyear Property Management Limited also executed the DMC.

9.Clauses 1 and 2 of the DMC provided that the First Purchaser was entitled to the exclusive possession of Shop G1 and the Developer all the shops, flats and car parking spaces other than Shop G1.

10.The DMC went on to provide that:

“3. Each undivided share … shall be held by the person or persons from time to time entitled thereto subject to and with the benefit of the easements, rights, privileges and obligations set out in the First Schedule hereto.”

11.The common parts are not defined in the DMC.  However, paras. 1 and 2 under para. A in the First Schedule to the DMC, though not exhaustive, refer to some of the common parts, for example:

“1. … the entrances, approach road, staircases, landings, passages, arcades, lobbies and lifts on the said land and any buildings thereon for all purposes connected with the proper use and enjoyment thereof.

2.         … the recreation and other common areas within the said land for the purposes for which they are designed.”

Assignment of E1801 and E1803

12.By an assignment dated 27 March 1975, the Developer conveyed, to Poon Wai Man and Yan Wai Har as joint tenants, Flat E1801 as shown coloured pink on the Floor Plan annexed thereto and together with a free and uninterrupted right in common with the Developer and the owner or owners for the time being of the other undivided shares in Westlands Gardens and all persons authorized by them, inter alia, to use the recreation and other common areas for the purposes for which they are designed.  The grant was subject to and with the benefit of the DMC.  By the same Assignment, the Developer excepted and reserved to itself and other owners of undivided shares for the time being, inter alia, the right to the exclusive use occupation and enjoyment of all the shops flats main roofs open yards and car parking spaces of and in Westlands Gardens other than Flat E 1801.

13.By an assignment dated 27 March 1975, Flat E1803 as shown coloured pink on the Floor Plan annexed thereto was similarly conveyed to Wong Bo Chi

14.Flats E1801 and E1803 have devolved onto the Respondents as noted above.

The Building Management Ordinance

15.Multi-storey Buildings (Owners Incorporation) Ordinance (Cap 344) (“MB(OI)O”), the predecessor of the Building Management Ordinance (Cap 344) (“BMO”), was enacted on 19 June 1970 before the DMC was executed.

16.The definition of common parts in section 2 of MB(OI)O has been preserved in the BMO.  Section 2 and Schedule 1 to the BMO are applicable to the present case.

Common parts under BMO

17.Section 2 defines common parts as follows:

“ (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 Schedule 1.”

18.As we understand para. (a), unless a part has been specified or designated in an instrument … as being for the exclusive use … of an owner, it is common parts. 

19.Essentially, it is a matter of construction whether a part has been “specified or designated … as being for the exclusive use of an owner”. 

20.What then is the effect of para. (b)?  It may be that Schedule 1 serves as a non-exhaustive pointer to what might commonly be regarded as common parts, such that, for example, if a part has been “specified in Schedule 1”, the court will require stronger indication before it would come to the view that it has been “specified or designated … as being for the exclusive use … of an owner”.

21.Mr Alan Ng Man Sang, leading Ms Catherine KK Wong, appearing for the Applicant, submitted that the partition wall has been specified in the BMO Schedule 1. 

BMO Schedule 1

22.BMO Schedule 1 consists of 15 paragraphs.  Paras. 1, 2, 4 and 15 refer to walls. 

(i) Para. 1:

“External walls and load bearing walls, foundations, columns, beams and other structural supports.”

(ii) Para. 2 :

“Walls enclosing passage ways, corridors and staircases.”

(iii) Para. 4:

“Parapet walls, fences and boundary walls.”

(iv) Para. 15:

“… retaining walls including sea walls …”

23.Mr Ambrose Ho, SC (with Ms Maggie Wong), appearing for the Respondents, submitted that none of these paragraphs relates to an internal non-structural partition wall dividing two adjoining units.

24.Mr Ng submitted that a partition wall comes under para. 4 because it is a boundary wall.  The Presiding Officer did not so hold, and there is no Respondent’s notice. 

25.Be that as it may, after the hearing of the appeal, Deputy High Court Judge Au-Yeung’s decision in Tam Sze Man and Another v. The Incorporated Owners of Shan Tsui Court (HCA 989/2010) was handed down.  Tam Sze Man was also concerned with an internal partition wall between two flats.  The learned judge, on an O. 14A and O. 14 application held that the partition wall falls within the common parts, because it was a boundary wall, and hence specified in Schedule 1 to BMO and relying on Elite Garden, that it was structural in the sense that it was part of the fabric of the building.  On the invitation of the Court, both Mr Ho and Mr Ng made further (written) submission. 

26.With respect, we do not believe that the expression “boundary wall” covers an internal partition wall.  Rather we believe it refers to a wall at a boundary of a relevant site or development.  The Chinese version of “boundary wall” in BMO Schedule 1 is “邊界牆” which supports this view.  Moreover given the provisions in paras. 1 and 2, we believe, if an internal partition wall was intended to be included, there would have been an express reference to it.  We do not believe the draftsman would have been content to let it be inferred from the expression “boundary wall”.

27.In our opinion, partition wall has not been specified in Schedule 1 of the Ordinance. 

Section 2(a)

28.Whether the partition wall has been “specified or designated … for the exclusive use … for an owner” is a question of construction.

29.In Jumbo King Ltd v Faithful Properties Ltd & Others (1999) 2 HKCFAR 279, one of the issues was whether a utility room in the building was a common area. The utility room was not specifically identified in the DMC as an area of exclusive use, and so (it was argued) it fell within “the common parts”. 

30.Lord Hoffmann described the argument thus:

“… The Schedule says he took the ‘Shop Spaces’ on the ground and first floors, the ‘Offices’ on the second third and fourth floors and flat roof on the 10^th floor level. The right to occupy these areas was to be attributed to 482 of his 719 undivided shares. But the ground to fourth floors included more space than could literally be described as ‘shop spaces’ and ‘offices’. There were corridors, lobbies, lavatories, machine rooms, lift shafts, staircases and the ‘utility rooms’ of which some are in issue in this appeal. To whom did the DMC allocate these? The judge said that they were not allocated to anyone. The DMC said Mr Hotung took shop spaces and offices. The utility rooms were not shop spaces or offices and that was that. …”

31.Lord Hoffmann rejected the argument and said at page 297H:

“… the words (for example) ‘offices on the second floor’ must be understood to mean the whole floor and the reference to offices merely describes its general use. I quite agree that this is not the normal meaning of the words. It is sloppy draftsmanship. But having regard to all the surrounding circumstances, I have no doubt that it is what the parties intended the words to mean.”

32.Lord Hoffmann further explained:

“The factual background to the DMC was, as its third schedule said, that the building was new and consisted of two self-contained parts. The upper floors were flats (the domestic portion) and the lower floors shops and offices (the commercial portion). Each had their own staircases and lifts. If, therefore, rooms in the commercial portion were left unallocated, Mr Cheng would continue to enjoy joint rights of occupation. He would be entitled to occupy the utility rooms and so forth. Mr Hotung would not have been entitled to let them or re-arrange the partitioning of the commercial floors without Mr Cheng’s consent. This makes no practical sense. Why should the parties have intended that Mr Cheng in his flat on the sixth floor should have rights of occupation in the commercial portion of the building?” at 296J.

33.Under the 1^st Assignment in the present appeal, the whole of the areas designated as flats were reserved to the developer. There was nothing in the 1^st Assignment to suggest that the partition walls in the domestic portion were common areas.  Since the 1^st Purchaser was a purchaser only of the G-1 shop, it must be asked what possible interest would the 1^st Purchaser have in making the non-structural partition walls on the domestic portion of the building “common areas” at all?  Also, if Mr Ng is correct, it would mean that as soon as the first assignment and DMC were made, although it appears from those documents that Westland Gardens were still in the course of development, the developers would not be able to change the size or configuration of any of the domestic flats.  It is difficult to see why it should be so. 

34.We agree with Mr Ho that the areas occupied by “the flats” in the building - including the partition walls - were designated under the DMC and the 1^st Assignment “for the exclusive use, occupation or enjoyment of the owners” of the flats concerned. It follows that the wall in the present case falls outwith the first limb of the definition of “common parts” under the BMO (i.e. paragraph (a) of the definition).

35.Metro City Management Limited v Tsui Fee Hung Vincent and Lam Wai Fun (CACV 328/2005 / HCA 4327/2003) supports this view.  There, Recorder Edward Chan SC was asked to determine whether the wall over a roof to which the impugned canopies were anchored was part of the “Residential Common Areas”. The learned Recorder noted that the description of the property in the assignment did not make express reference to the wall in question (paragraph 45). In coming to the conclusion that the wall was not part of the “Residential Common Areas”, he said:

“50. In the circumstances of this case, while it may well be argued forcefully that the wall in question may be regarded as an external of Tower 4, I do not think it right to regard it as an external wall of the Defendants’ property. The idea of having a common area within one’s property is an unattractive one. Given that either side of the wall is occupied exclusively by the Defendants it is difficult to see how any other owners of Metro City may properly enjoy and make use of the wall. Hence I am of the view that the wall in question is not part of the Residential Common Areas.”

36.On appeal, Rogers VP agreed with the conclusion of the learned Recorder and said:

“16. In my view the opening words of that clause are clear. The whole of the flat and the flat roof which appertain thereto has been assigned for the exclusive use of the defendants. Whereas the other external walls of the Tower no doubt come within the term Residential Common Areas the clause should be read as excluding that for the purpose of considering the common areas. As the judge pointed out, it would almost be absurd to consider that any of the other owners should have a right of access to that part of the wall which was otherwise clearly bounded by the defendants’ property.”

37.Yuen JA also noted that-

“61. In theory I would agree with the learned Recorder that it would be an unattractive proposition to have a commonly-owned wall between areas exclusively occupied by the same owner as one unit. However the unattractiveness in this case is more theoretical than real. As the Recorder noted, it is difficult to see how any other owners could enjoy and make use of the walls in question (para. 50). In contrast, the Defendants would stand to benefit from maintenance of the external walls as a common area at the cost of the co-owners.”

38.Here, for all intents and purposes, the partition wall is for the sole use and benefit of the owners of Flats E1801 and E1803.  To that extent, it is indistinguishable from Metro City Management Limited.  There, as in the present case, there was no specific reference to the wall.  There, as in this case, although the assignment plan was coloured, the actual wall itself had not been coloured over.  We attach no particular significance to that.

The DMC

39.The Applicant also relied on Clause 4 of Schedule 2 of the DMC which required an owner:

“Not to make any structural alteration to any shop, roof, flat or car parking space of which he is the owner which may damage, or affect or interfere with the use and enjoyment of any other part of any building on the said land whether in separate or common occupation or use, nor cut, injure, damage, alter or interfere with any part or part of any building in common use …”

40.At trial, initially, it was also the Applicant’s case that the partition wall was structural because it was a load-bearing wall. That was not maintained when both the Applicant’s and the Respondents’ experts agreed that the partition wall was not a load-bearing wall.

41.However, on the basis (which we respectfully consider to be erroneous) that the partition wall was common parts, the learned District Judge held that the Respondents had breached clause 4 of Schedule 2. 

42.On appeal, Mr Ng sought to argue, relying we think on the first limb of Clause 4 of Schedule 2, that the partition wall was structural in that it was part of the fabric of the building.

43.In Incorporated Owners of Elite Garden, this Court (Rogers VP, Le Pichon and Yeung JJA) was of the view that an external wall was part of the fabric of a first floor unit of a building.  There, the Respondent had opened windows (i.e. made holes in the exterior walls and installed windows in the first floor unit of a building), the Applicant Incorporated Owners relied on a clause in the DMC under which the owners were:

“(d) Not to make any structural alteration to any unit of which he is the owner [the first limb] nor … alter or interfere with any … parts of the … Building … [the second limb]”

44.This Court, affirming the learned trial judge, held that both limbs had been breached.  The leading judgment was delivered by Le Pichon JA who relied on:

“7. … Pearlman v Keepers and the Governors of Harrow School [1979] 1 QB 56 in construing the expression ‘structural alteration’ in Schedule VIII to the Housing Act 1974, (where) Geoffrey Lane LJ observed (at 72G):

‘“Structural” in this context means, I believe, something which involves the fabric of the house as opposed to the provision merely of a piece of equipment. It matters not whether the fabric in question is load-bearing or otherwise, if there is any substantial alteration, extension or addition to the fabric of the house the words of the schedule are satisfied.’”

45.Le Pichon JA went on to say:

“11. For my part, I am not persuaded that the exterior walls of the building are ‘owned’ by the owners of the unit bounded by such exterior wall or walls. … The exterior walls are plainly an integral part of the building for the purposes of the second limb and the opening of windows was plainly a breach of that part of the covenant.”

46.We do not believe Elite Garden has any relevance to an internal partition wall.  Unlike an external wall, it could not be said, in the words of Le Pichon JA to be “an integral part of the building”.  In this context we do not believe an internal partition wall is different from an internal partition wall making a bedroom.

Surface only

47.Mr Ng further submitted that the Respondents are only entitled to use the surface of the partition walls.  He relied on Nation Group Development Ltd v New Pacific Properties Ltd (2000) 3 HKCFAR 427

48.In Nation Group, the purchaser agreed to buy “the entire first floor and its canopy” of a commercial building from vendor.  The canopy was a cantilevered concrete structure at the level of the first floor concrete slab, on three sides of the building, which extended beyond the boundaries of the lot.  The purchaser raised a requisition concerning unauthorised structure attached to the underside (soffit) of the canopy.  The vendor responded that it had only contracted to sell rights to the top surface; the rest of the canopy constituted common parts of the building; and thus the unauthorized structures were irrelevant.  At issue was whether the property contracted to be sold included the soffit.  The decision turned on the construction of the Sale and Purchase Agreement and the DMC. 

49.Ribeiro PJ said at 436D:

“… The correct approach again depends on the proper construction of the agreement. To take the first purchaser as an example, what Madam Chow acquired was one equal undivided 228^th share in the Lot together with the right to the exclusive use of ‘Flat A1 on [the] Seventh Floor’. The reason why no one would suggest that Madam Chow thereby acquired any right to use the underside of the floor slab is because the words ‘Flat A1 on the Seventh Floor’ (or even merely the word ‘flat’) do not, as a matter of construction, encompass the underside of the 7th floor slab. It may be different if the agreement had been to grant her exclusive use of ‘the concrete floor slab’, but that is not what the contract was about.

The same is true of exclusive use of the ‘entire first floor’ which the purchaser contracted to acquire in the present case. As Godfrey JA pointed out in the Court of Appeal, the parties must be taken to have intended that the purchaser was to be given ‘the right to the exclusive use of the floor and ceiling surfaces of the First Floor and of the air space between them,’ in other words, of the entire volume of the first floor space, but not use of the underside of the concrete slab.

However, a grant of exclusive enjoyment of the canopy stands on a very different footing.  ‘The canopy’ is a structure which protrudes outwards from the external walls of the building and so, unlike ‘flats’ or ‘shops’, does not form part of its internal volume.  No constraint involving any downstairs neighbour arises.  The agreement grants exclusive use of ‘the canopy’ as a specific, named structure, without limitation or qualification.  Accordingly, giving the words their natural meaning, the grant should be construed as comprehending the entire canopy.” 

50.Nation Group was not concerned with the ownership of a partition wall.  It drew an analogy with a floor slab.  It was sufficient for the purpose of Nation Group, for illustrative purpose, to refer to the surface of the floor slab without going on to consider the ownership of the floor slab.  Indeed, it is clear from passages quoted above that Ribeiro PJ’s emphasis was that an assignment of a flat on the 7^th floor:

“… do not, as a matter of construction, encompass the underside of the 7th floor slab. …” [Emphasis added]

Central Management

51.Central Management Ltd v Light Field Investment Ltd & Others, CACV 30/2010 (unreported, 15 December 2010) concerns No. 41D Stubbs Road, Hong Kong, an extremely tall residential building known as the Highcliff.  The defendants are the registered owners of two adjoining flats, namely, Flats 53A and 53B on the 53^rd floor of Highcliff.  In that case, there is no dispute that as the owners of the two adjoining flats, the defendants were entitled to remove a designated part of the partition wall (“the designated part”) constructed between the two units so as to connect the two flats internally.  The designated part is made of bricks and is non-structural in nature.  The Building Authority had given consent to the defendants to demolish part of the partition wall to create a larger opening between the two units.  And the defendants created an opening which extended beyond the permitted opening. 

52.In the plan annexed to the 1^st Assignment, in respect of the non-designated part of the partition wall, the following legend appeared:

“Structural or other elements of construction shall not be removed/altered unless and until it is approved by the Building Authority”.

53.The issue in that case was whether one could read from this legend that the entire partition wall had been assigned to the defendants so that it could be removed if they had the approval of the Building Authority.  As a matter of construction, Cheung JA (with the agreement of the other members of the Court) did not regard that the legend showed that the developer had chosen not to reserve the partition wall to itself and had, instead, assigned the same to the defendants.  It was not the decision of the Court that the partition wall was common parts.  It is of interest to note that the partition wall was assigned by the developer to the plaintiff as part of the Common Areas and Facilities.  See para. 17(1).

54.Moreover, Central Management Ltd shows that flats are sometimes designed so that they could be combined into a single flat by the removal of a, or part of a, partition wall.  We believe it is not uncommon for a person to buy 2 adjoining flats intending to make them into one by removing a non-structural partition wall.

Who owns the partition wall?

55.Now if the partition wall was not common parts and had been reserved by the Developer, who are the owners of the partition wall now?  Since the Applicant does not claim to have obtained title to the partition wall from the Developer, it probably does not matter who owns the partition wall.  However, we agree with Mr Ho that the partition wall is owned by the owners of E1801 and E1803 by operation of section 17 of the Conveyancing and Property Ordinance, Cap. 219 (“CPO”) which provides:

“Unless the contrary intention is expressed in the assignment, an assignment shall operate to assign all the estate, right and interest in the land assigned which the assignor has in that land and which he has the power to assign.”

56.Thus, whatever interest the Developer had in the partition wall has been conveyed to the owners of Flats E1801 and 1803.  Thus, by analogy with the law on coownership of the dividing wall as between adjoining land owners, the partition wall is “co-owned by” the owner of the two adjoining flats.  The Law of Real Property (by Robert Megarry and Sir William Wade, 7^th edn.) 30-41.

Disposition

57.For the above reasons, the Applicant’s claim must fail.  We would allow the appeal, set aside the order of the learned District Judge and make an order nisi that the Respondents (the Appellants) are to have the costs both here and below to be taxed unless agreed.

Mr. Ambrose Ho, SC & Ms Maggie Wong instructed by Messrs Ho & Wong for the Respondents/Appellants

Mr. Ng Man Sang, Alan & Ms Catherine KK Wong instructed by Messrs Chung & Kwan for the Applicant/Respondent