The Incorporated Owners of Kingley Industrial Building v. Wan Fai Ping

CACV 180/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 180 OF 2010

(ON APPEAL FROM LDBM NO. 324 OF 2009)

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BETWEEN

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Before: Hon Tang Ag CJHC, Kwan JA and Chu J in Court

Date of Hearing: 29 March 2011

Date of Judgment: 12 May 2011

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JUDGMENT

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

1.Kingley Industrial Building (“the Building”) comprises two blocks of factories with a carpark on the 4^th Floor, and was erected on Aberdeen Inland Lot No. 396 (“the Land”).

2.The Deed of Mutual Covenant dated 19 September 1983 (“DMC”) provides that:

“(3) For the purpose of sale the said land and the said building are notionally divided into 9,970 equal undivided parts or shares the allocation whereof are as shown on the Second Schedule hereto.” Recital (3)

3.Different parts of Block I have been allotted shares under Schedule 2, including Units A to T on the Roof.  I will refer to these units as the Roof Units.  The Second Schedule where relevant, reads as follows:

“25^thFloor

Factories Q and R (9 shares each) 18

Factories A and P (6 shares each) 12

Factories B, C, D, E, F, G, H, I, J,

K, L, M, N and O (5 shares each) 70

Roofs A, B, C, D, E, F, G, H, I, J,

K, L, M, N, O, P, Q, R, S and T

(2 shares each) 40

Stores 3, 4, 5 and 6 (3 shares each) 12 ”

4.The Respondent is the registered owner of Factory H on 25^th Floor (the “top floor”) of Block I.  He also owns Roof Unit H which is part of the roof above the 25^th Floor.

5.The Applicant is the incorporated owners of the Building and claimed against the Respondent for $11,389 being the Respondent’s share of contribution towards the renovation cost incurred for the Building.

6.On 12 March 2010, at the Lands Tribunal, Judge M. Wong (the Presiding Officer) decided against the Applicant on the basis that the DMC did not expressly require the Respondent to pay any contribution for any renovation cost for Roof Unit H.  On review, on 29 April 2010, the learned Presiding Officer confirmed his earlier decision.

7.The charging provisions are Clauses 6 and 7 of the DMC.  They provide that:

“6. (i) The owner of each unit shall pay to the Manager a due proportion hereinafter mentioned of the costs and expenses incurred for or in connection with the management of the said land and the said building its equipment apparatus and services as hereinbefore defined and shall include the remuneration of any Manager such due proportion being payable as hereinafter mentioned.

(ii) The Manager hereinafter referred to shall from time to time determine the amount of a monthly management fee payable in respect of each unit in the said land and the said building reasonably estimated to be sufficient to cover the cost of the following items :-

(a) the crown rent and taxes ...

……

(o) the electricity charges for the lighting of and the cost of repairing and maintaining the lighting installation and equipment in the staircases passages and common parts of the said building;

……

The owners of the said building shall pay the following monthly management fees or such other sums as from time to time be determined by the Manager:-

(1)   each unit on 1st Floor to 25th Floor inclusive of the said building, which saleable areas are respectively set out in the Sixth Schedule hereto annexed	$0.40 for each saleable square foot allotted to the Unit
(2)   each unit on the ground floor of the said building, which saleable areas are respectively set out in the said Sixth Schedule	$0.30 for each saleable square foot allotted to the Unit.
(3)   each private car parking space	$40.00
(4)   each lorry parking space	$50.00
(5)   each container parking space	$70.00

……

7. (d) In addition to the monthly management fee, each owner shall pay to the Manager on demand a sum, such sum shall be in such proportion as provided in Clause 6(ii) hereof, to cover the cost of all major repairs, replacements and renovations not covered by the monthly management fee and all other costs and expenses incurred in respect of the management of the said land and the said building its equipment, apparatus or services or which may otherwise become payable by the owners collectively under the terms of this Deed.”

8.The Sixth Schedule where relevant provides:

“23rdto 25thFloors
Factories A and P	285 each
Factories B and O	276 each
Factories C, D, E, F, K, L,
M and N 254 each
Factories G and J	261 each
Factories H and I	271 each
Factories Q and R	468 each
Stores 3 and 4	181 each
Store 5	188
Store 6	169
Roof
A and P	297 each
B and O	288 each
C, D, E, F, K, L, M and N	266 each
G and J	273 each
H and I	283 each
Q and R	309 each
S and T	285 each”

9.The learned Presiding Officer, after considering the above clauses, concluded that the DMC did not require the owners to pay management fees.  Nor any renovation expenses.  Basically, he took that view because in Schedule 6 the Roof Units were dealt with separately from the 25^th Floor, and “25^th Floor” in Clause 6(ii)(1) did not include any of the Roof Units.

10.It will be remembered that for the purpose of sale the Land and the Building were notionally divided into 9,970 equal undivided parts or shares.  Such allocations are shown in Schedule 2.  When one looks at the relevant part of Schedule 2 quoted in para. 3 above, one sees that Factories A to R, Roof Units A to T and Stores 3, 4, 5 and 6, all came under the rubric of 25^th Floor.

11.However, as can be seen from para. 8 above, in Schedule 6, the 23^rd to 25^th Floors were grouped together with the Stores 3, 4, 5 and 6 on those floors.  The Roof Units, however, were dealt with separately under its own rubric.

12.The issue on appeal is one of construction and the question is whether having regard to the language of Clause 6(ii)(1) the Roof Units are expressly exempted from payment because Clause 6(ii)(1) referred only to:

“(1) each unit on 1^st Floor to 25^th Floor inclusive of the said building, which saleable areas are respectively set out in the Sixth Schedule hereto annexed”

13.Schedules 2 and 6 serve different functions.  Schedule 2 allocates interests in land.  Schedule 6 provides a statement of saleable areas for the purpose of calculation of contribution of management fee and renovation expenses.

14.Mr Ernest Koo, for the Incorporated Owners, submitted that the learned Presiding Officer had given Clause 6(ii)(1) too literal a construction and failed to ascertain the parties’ intention from the entire DMC.

15.In Jumbo King Ltd v. Faithful Properties Ltd and Ors (1999) 2 HKCFAR 279 where Lord Hoffmann NPJ said at page 296:

“… 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. … 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.”

16.Indeed, I am not sure that a literal reading of “25^th floor” in Clause 6(ii)(1) would necessarily exclude the Roof Units.  I do not believe Schedule 6 was intended to provide a definition of “25^th floor” for the purpose of Clauses 6 or 7.  As noted, in Schedule 2, the Roof Units were treated as part of the 25^th Floor.

17.I do not believe these words in Clause 6(ii)(1),

“… which saleable areas are respectively set out in the Sixth Schedule ...”

necessarily mean that the reference to the 25^th Floor in clause 6(ii)(1) was meant to exclude the Roof Units.

18.It is also important to note that, in Schedule 6, each of the Roof Units has been allotted saleable areas for the purpose of Clause 6(ii).  If the Roof Units were not liable for any contribution, why was that done?

19.I believe the proper way to construe “25^th floor” in Clause 6(ii)(1) is to have regard to the fact that the Roof Units were treated in Schedule 2 as part of the 25^th Floor and to read the 25^th Floor to comprise the Roof Units as well.  I can see no reason why the Roof Units have been given saleable areas under Schedule 6, which would have been meaningless, unless the Roof Units were intended to bear their due proportion of the management fees and renovation expenses.

20.The Respondent objected to payment on the basis that it is unfair to him. He complained that Roof Unit H, which is virtually useless to him, has been allocated a saleable area of 283 square feet for the purpose of contribution when Factory H, was only assigned 271 square feet of saleable area.  That may seem odd.  But the Respondent became the owner of the Factory Unit H as well as Roof H of his own volition.

21.The Respondent also pointed to the fact that, in relation to, for example, the flat roofs on the 21^st Floor, they were not separately dealt with from the factory units of which they formed part.  When one looks at Schedule 6, one sees, for example, on the 1^st Floor as well as on the 21^st Floor, there were flat roofs.  I give two examples.  On the 1^st Floor, Factories A, B and C (including their respective flat roofs) were assigned 399 square feet of saleable areas.  On the 21^st Floor, Factories A and P (including their respective flat roofs thereof), 478 each.  A simple answer to the Respondent’s submission is that it appears that these flat roofs were assigned as part of their respective factories.  Indeed, when one looks at Schedule 2, one sees that unlike the Roof Units the flat roofs have not been allocated separate shares for the purpose of sale.

22.So, for the above reasons, I would allow the appeal, and order the Respondent to pay the Applicant the sum of HK$11,389 with interest thereon at the rate of 1.5% per each period of 30 days from 1 September 2008 until payment (as provided by Clause 13(d)(i) of the DMC); and that the Respondent pays the Applicant’s costs here and below, to be taxed unless agreed.

Mr Ernest Koo, instructed by Messrs Huen & Partners, for the Applicant

The Respondent, in person, present