IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 27 OF 2008
(ON APPEAL FROM HCA NO. 8805 OF 1993)
||WING MING GARMENT FACTORY LIMITED
||THE INCORPORATED OWNERS OF WING MING INDUSTRIAL CENTRE
||NEW GAS & COMPANY (a firm)
||ESSMAN CONSTRUCTION COMPANY LIMITED
Before: Hon Le Pichon JA, Suffiad and Sakhrani JJ in Court
Date of Hearing: 17-18 June 2008
Date of Judgment: 27 June 2008
J U D G M E N T
Hon Le Pichon JA:
1. This is the plaintiff’s appeal from a judgment dated 20 December 2007 of Reyes J in proceedings between the plaintiff who was the original developer of a building known as Wing Ming Industrial Centre and who still owns several of its units and all the other owners represented by the Incorporated Owners (“the first defendant”). The plaintiff claimed that the first defendant had breached the Deed of Mutual Covenant (“the DMC”) by permitting the second defendant to install a fire services pipe through airspace the plaintiff owned and sought damages. The judge dismissed the plaintiff’s claim against the first defendant, ordered the plaintiff to pay the first defendant the sum of $5,515,254.34 for outstanding management fees up to 30 November 2007 with interest and dismissed the third party’s counterclaim of approximately $1.39 million for “management fees”. The judge also granted a mandatory injunction requiring the plaintiff to demolish the wall currently enclosing the original car parking spaces 2, 3 and 4 and to restore the same to that shown on the car park layout plan.
2. The disputes between the parties have a long history. They first arose in August 1993 with the plaintiff’s objection to a fire services pipe being constructed which, it was claimed, encroached onto its property.
3. The land upon which the building was erected was held under a Crown Lease dated 13 September 1974 and Conditions of Sale governed its development. Of particular relevance to the trespass issue in the present case are special conditions (9) and (10) relating to “the parking, loading and unloading spaces” required to be provided and the requirement of an approved layout car parking plan (“the approved plan”) to be registered at the Land Office. Special condition (10) further stated
“The purchaser shall maintain the parking, loading and unloading spaces in accordance with the said approved plan and shall not alter the layout except with the prior written consent of the Director of Public Works.”
The approved plan which was approved in 1978 showed a container parking space and 11 car parking spaces. The car parks designated on the approved plan are hereafter referred as “the original car parks”.
4. Until 2 March 1991 the plaintiff was the sole owner of the building consisting of 11 storeys. Shortly before 2 March 1991 in anticipation of a sale the building was notionally divided into 1323 shares or parts and a draft of the DMC prepared. By an assignment dated 2 March 1991 (“the first assignment”), the plaintiff assigned 210 equal undivided 1323rd shares or parts together with the sole and exclusive right to the sixth and seventh floors and car parking spaces 6 and 7 on the ground floor “ (shown and coloured Green on the Plans) ” to Super Kind Investment Ltd. (“the second owner”) subject to and with the benefit of the DMC to be executed immediately after the assignment.
5. So, contemporaneously with the assignment, the plaintiff and the second owner executed the DMC with the third party who was appointed manager of the building. By clause 5 of the DMC, there was reserved to the plaintiff (who was the owner of the front portion of the ground floor) the right to construct a loft “over Car Parking Space Nos. 2, 3 and 4” provided those car parking spaces were left with a clear minimum headroom of at least 7’6” and the construction had the relevant Government approval. For practical purposes, the ground floor plan of the building annexed to the first assignment and the DMC are identical.
6. In the DMC, “Vehicle Parking Space(s)” and/or “Car Parking Space(s)” is defined as meaning “all of the spaces in the Building for parking of vehicles (coloured Green on the Ground Floor Plan)”. However the area shown coloured green in the DMC ground floor plan in relation to car parks 2 to 10 (inclusive) not only included the original car parks but also an area immediately adjoining the relevant car park which is shown marked “VOID” on the DMC plan and which lies between each of those car parks and the driveway on the ground floor of the building.
7. In October 1991, the authorised person then acting for the plaintiff submitted general building plans for certain additions and alterations works (the “works”) to the Building Authority. Those works involved, inter alia, the construction of a mezzanine floor to form a loft area, the demolition of an internal wall and the building of a new wall enclosing an area comprising the original car parks 2, 3 and 4. Although approval was obtained on 5 December 1991, the plaintiff did not carry out the works until August 1993 at about the time when, on the instructions of the first defendant, the second defendant installed a fire service pipe which entered into and ran through the airspace of the areas marked “VOID” adjoining car park spaces 2 through 10.
8. In August 1993, the plaintiff wrote to complain of the “the illegal encroachment” of the pipe on the plaintiff’s property. The plaintiff’s complaint was directed at only one section of the pipe, namely, that which ran through the airspace in the areas marked “VOID” adjoining the original car parks 2, 3 and 4. That section is shown coloured red on the plan attached to the judgment below which, for ease of reference, is also attached to this judgment.
9. The plaintiff commenced proceedings for various injunctions and damages for trespass in January 1994 but interim relief was refused both at first instance and on appeal on 13 July 1994. In 1995, on a ‘without prejudice’ basis, the parties reached an agreement for the demolition of the alleged infringing pipe. The action then progressed at what can only be described as a snail’s pace and eventually came on for hearing in December 2007, after an unsuccessful attempt by the defendants in 2005 to strike out the action for want of prosecution.
10. The plaintiff and the third party challenge
(1) the judge’s dismissal of its claim for loss of rental (in respect of the ground floor, the loft and the 11th floor all of which were covered by the works) due to the pipe’s presence in the loft;
(2) the mandatory injunction granted to demolish the enclosing wall and to restore the original car parking spaces 2, 3 and 4;
(3) the order to pay management fees to the first defendant of approximately $5.5 million with interest; and
(4) the dismissal of the third party’s counterclaim against the first defendant of approximately $1.39 million for “management fees”.
Loss of rental -- liability
11. The question of loss of rental involves two issues, liability and quantum. The first matter to consider is that of liability. Unless the areas marked “VOID” adjacent to the original car parks 2, 3 and 4 belonged to the plaintiff so that the pipe that had originally been installed through that space encroached on the plaintiff’s property, no liability for damages could arise. The judge held that those areas constituted the common parts of the building.
12. Mr Mok SC who appeared for the plaintiff submitted that the judge had overlooked the clear terms of the first assignment which are pertinent to the construction of “common areas”. It was said that so far as car parking spaces 6 and 7 were concerned, what was conveyed encompassed the entire area shown coloured green on the plan, namely the original car parks 6 and 7 plus the areas marked “VOID”. Whilst Mr Mok accepted that the owner could only park its cars within the original car parks 6 and 7 and not in the “VOID” areas because of the mutual covenants of the plaintiff and the second owner in the DMC to comply with the conditions of the land grant, he submitted that each of the areas marked “VOID” shown by the dotted lines on the plan plainly had been carved out and therefore is distinguishable from the common areas such as the driveway that runs through the ground floor of the building and must therefore mean something that is distinguishable from the common area. To re-inforce this point, the court was referred to the assignment to Hung Tak (Ko’s) Development Limited (“Hung Tak”) in May 1991 involving, inter alia, car park 10 where the adjoining “VOID” area was not coloured green, apparently because it was adjacent to the switch room which had to be accessible and was obviously part of the common area. I would make two observations: first, the substantive description of what was conveyed was no different from that in the first assignment, i.e. the “car parking space” bearing the relevant number; and second, even if the areas marked “VOID” could have been and were conveyed to the second owner that is not decisive of the question whether the areas marked “VOID” adjacent to original car parks 2, 3 and 4 were capable of being conveyed. That would depend on whether there are circumstances peculiar to those areas.
13. Mr Mok relied on clause A1 of the DMC which reserved to the First Owner (i.e. the plaintiff)
“THE WHOLE OF THE BUILDING (including all the units in therein and the flat roofs held therewith, if any) SAVE AND EXCEPT the Common...