WIDE POWER CORPORATION LTD v. THE INCORPORATED OWNERS OF MANHATTAN COURT

HCA 1485/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1485 of 2013

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J U D G M E N T

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1.  The plaintiff in this action was the owner of apartment 8F on the 7th floor of a building known as Manhattan Court, 1 Alnwick Road, Kowloon, Hong Kong.

2.  It purchased the property in April 2010.  At that time, according to the opening written submissions of the plaintiff’s counsel, there were already on the roof above the plaintiff’s apartment some railings and airconditioning units which were allegedly illegal structures.  They extended over much of the roof and, on the face of it, have obviously been tolerated by the Incorporated Owners of the block, as managers of the building.

3.  More importantly as far as this action is concerned, there was serious leakage of water into the apartment and the internal signs of this must have been apparent at the time of its purchase by the plaintiff.

4.  The plaintiff sues the Incorporated Owners, the defendants, as the entity responsible for this defect and the internal damage and consequential financial losses suffered by the plaintiff.

5.  The plaintiff sold the apartment, it is alleged, at a loss caused by the aforesaid defect and its consequences, in August 2014.

6.  It commenced this action in August 2013.  By then, according to its case, the plaintiff had had to carry out the necessary remedial work on the roof, though of course such work was confined to the plaintiff’s own area of the roof above its apartment.

7.  Before I consider the case as pleaded and identified in the submissions of the parties’ respective counsel, I need to state a number of matters which require immediate attention.

8.  This case was called on for trial before me on Monday, 18 July 2016 with an estimate of five days duration.  The date of trial had been fixed as long ago as November 2015.

9.  It was clear from my perusal of the papers that there was no agreed chronology.  Both counsel had submitted their own versions of a chronology. That is unhelpful.

10.  Secondly, there was no agreed statement of facts.  That is a singular omission.  Its purpose is to reduce unnecessary conflict, evidence and consideration for the judge.  It clears the decks in a contest.

11.  Thirdly there is no statement of agreed issues.  The purpose of this is to enable all minds to concentrate on what is relevant and to be argued.

12.  All these matters are part and partial of essential preparation. They also reduce unnecessary costs.  They concentrate the mind of counsel. They enable a judge to approach the trial with a concentration on the material matters.

13.  It does not require a court, in its interlocutory perambulations as parties gnaw over a bare bone, to make specific directions to these ends.  They should be done as a matter of common sense and professional obligation.

14.  A fourth matter emerged in a different context and has been illustrated in so many cases.  Solicitors for either or both parties, having lodged bundles for trial, persist in sending additional statements, affidavits, and documents to be unserted into the bundles.  Judges’ clerks are not to be misused to compensate for the inadequacies of solicitors.  Nor should a judge be expected to do that also.

15.  I suspect that where solicitors indulge in such lazy practices and rely on court staff to do this work for them, they nonetheless include costings in their bills as if they had done the work themselves.  In future as far as I am concerned the papers will remain as left by them for the solicitors or their clerks to do the work themselves.

16.  The consequence of all these omissions is that I adjourned the case for all the steps to be taken properly.  That meant that a whole day was lost.  The trial in effect commenced on the second day shortly before 11 am.

The plaintiff’s case as pleaded

17.  The plaintiff relies upon an alleged breach of the Deed of Mutual Covenant in that the manager of the building failed “to keep in good repair and condition the main structure and fabric of the building its equipment, apparatus, services and common areas and when necessary to replace any part or parts thereof which require replacement” [Clause 9(c)4] and failed “to keep in good repair and condition all water pumps, wells (if any) tanks, pipes, sewers, drains, etc. in the said building which are for the common use of the occupiers of the said building”.

18.  Under the Building Management Ordinance (Cap 344) section 18(1)(c) the defendants as the corporation (the Incorporated Owners) were obliged to:

“do all things reasonably necessary for the enforcement of the obligations contained in the Deed of Mutual Covenant for the control, management and administration of the building.”

19.  The nature of the management’s duty has been considered in a number of cases over the years and is conveniently encapsulated in the Court of Appeal’s decision in Ho Yuk Chu v Hang Yick Properties Management Ltd [1996] 4 HKC p.278:

“The overall duty imposed on the respondent [Incorporated Owners] by The Deed of Mutual Covenant is one of proper management. Such management entails doing all that is reasonably required of a manager in the circumstances.”

20.  Both in that decision and in Lau Chun Wing Rod v The Incorporated Owners of Po On Building CACV 20/2007 The Court of Appeal made it clear that the Incorporated Owners do not assume absolute liability as if it were an insurer if any part of the building becomes in disrepair, or where for example a drain becomes obstructed through no failure on its part to act reasonably as a manager should.  The operative words are underlined for emphasis.

21.  The court’s decision went on to state — as a matter of straightforward law and common sense‑ :

“liability may arise if there is fault. It also arises if, having been made aware of a defect which requires remedy, the Incorporated Owners fail to take appropriate steps.”

22.  There was consideration of the term “wilful default” in the 19^th century decision of Re Young & Harston’s Contract (1886) 31 Ch D 168 (at page 174‑175) by Bowen L J:

“The term …… is not a term of art …… default, is a purely relative term, just like ‘negligence’. It means nothing more, nothing less, than not doing what is reasonable under the circumstances ……”

“[wilful] amounts to nothing more than this. That he knows what he is doing, and intends to do what he is doing, and is ‘a free agent’.”

23.  In short the plaintiff asserts that the water damage was caused by water leaking through the roof and in particular the waterproof (as it was intended to be) membrane, on the roof.  That membrane covered, or was intended to cover the whole roof, not just the common parts.  The leakage therefore resulted from a failure to maintain that overall protection which existed for the benefit of all owners of individual units, and was so intended to exist when it was installed.  That is also a matter of common sense.

24.  In Incorporated Owners of Hong Leong Industrial Complex v HL Resources Ltd [2010] 4 HKC 46 the Court of Appeal upheld Sakhrani, J’s decision at first instance to the effect that the waterproof layer or membrane was a fixture used in connection with the enjoyment of any other flat or other portion of the building within the meaning of item 11 in Schedule 1 of the Ordinance.  The roof is a common part identified in item 3 of the same Schedule.

25.  It was of course a finding of fact by the trial judge but equally so, on the facts before me, supported by the expert evidence on both sides, the concrete roof was an integral unit covering the full extent of the roof.  It was not a series of separate roofs.  Similarly the waterproof membrane was laid as an integral unit or layer over the whole of the roof and was not divided up into separate units.  If that had been the case it would have a multiplicity of weaknesses at every join which would call for separate treatment to ensure the essential degree of waterproofness.  It would not make sense in the construction of the roof and the need for overall complete protection, for there to be separate membranes over the roof area of each individually owned unit.  Regulation 48 of the Building (Construction) Regulations (Cap 123) provides that every roof shall be waterproof.  There is only one roof embracing a building unit.

26.  It was not suggested by the defendant, in the case before me, to the experts (Architects) that there were separate concrete roof units with separate waterproof membranes above the individual property unit.  Indeed it would have been surprising if it had been suggested and I am confident that the respective architects would have found it astonishing.

27.  The fact that Regulation 48 did not specify whether a waterproof layer or membrane in a roof slab was a common part is immaterial. For a roof to be waterproof as provided for in the regulation, it would require waterproofing treatment either by way of a membrane or a layer or some other form of treatment.  It was therefore an integral common part, however composed or described.  The alternative is to indulge in meaningless semantics.

28.  I also adopt the conclusion of Godfrey Lam, J. in Wing Ming GarmentFactory Ltd v Wing Ming Industrial Centre [10] [2014] 4 HKLRD 52 (at page 74) that:

“If the waterproofing membrane is situated in the floor slab and the floor slab is to be regarded as a common part, then equally the membrane is a common part. It is one continuous layer serving the whole of the floor below [i.e. beneath it] including common areas on that floor ……”

29.  The waterproofing membrane is a common part and the Incorporated Owners have the duty under section 18(1)(a) of the Building Management Ordinance:

“to maintain the common parts and the property of the corporation in a state of good and serviceable repair and clean condition.”

30.  It is common ground in this case that the roof slab covers the whole of the roof and the waterproof membrane likewise.  They are common parts.  The duty on the management of the Incorporated Owners is clear under section 18(1)(a).

31.  The defendant’s case as extracted from the excess verbiage of its defence and counterclaim can be summarised as follows:

(1)  The owner is not to make any structural alteration to the building.

(2)  he area of roofing above the plaintiff’s unit is the plaintiff’s own responsibility.  The defendant does not owe a duty of care with regard to it.

(3)  If the water seepage was caused by damage to the common parts by the plaintiff or his predecessor‑in‑title there is no duty of care owed by the defendant.

32.  It goes on to complain of the installation of railings, air‑conditioning compressor, an air‑hose to the compressor/ air‑conditioner, drainage pipe and a spotlight.  Interestingly it does not complain about the installation of what appear to be lamplights at various points on the roof.

33.  All these are alleged to be illegal structures or unlawful building works carried out by the plaintiff or his predecessor in title.  I shall deal with this collection of so‑called illegal structures in due course.

The plaintiff’s evidence

34.  This is straightforward and the experience of Mr Kwan and his colleagues must have been consistently frustrating.

35.  After initial remedial work internally, which it was hoped would solve the problem, a tenant was acquired in or about June 2010, but because of the recurring problem of water seepage, dripping with resultant damage to furniture and fittings the tenant terminated his letting by agreement in February 2011.

36.  Thereafter followed a catalogue of complaints both oral and written which the defendant either ignored, or failed to deal with properly or so delayed any action that drastic measures were eventually required.  As this juncture I make it clear that I found Mr Kwan, the plaintiff’s shareholder and director, a wholly credible and indeed reasonable witness whose evidence I accept in its entirety.

37.  After the departure of the tenant the plaintiff was unable to let the flat but that prospect was scarcely feasible in view of the persistence of the water seepage problem and consequent damage to the interior.  Telephone calls to the management did not produce any satisfactory result and another attempt to engage a constructor to do remedial work was unsuccessful.

38.  So in November 2011 written and e‑mail contact was made with the management office which obtained some positive reaction though no positive achievement.

39.  A letter of 18 November 2011 succinctly set out the history of the problem ending with the plea — “Please the Management Office can deal with the issue and soon as possible”.  This was e‑mailed on the same day.  There was also telephone contact.  It seemed to suggest that this was the first occasion on which the management had been alerted to the problem.

40.  On 23 November 2011 the plaintiff sent a follow‑up letter which included reference to water seeping out of the roof‑top fresh water tank constantly, defective water‑pipes in the common areas, ageing tiles, cracking between the tiles and the roof‑top surface, and the belief that the water‑proof coating of some parts of the building had already broken down …… “we hope that the Management Office and Incorporated Owners of Manhattan Court paid utmost attention to them and do whatever is necessary …… as soon as possible …… so as to avoid any extensive damage caused”.

41.  The need for urgent and effective action was clearly spelt out as was the fact that the problem had persisted for sometime despite measures taken by the plaintiff as flat owner.  A photograph of water seepage was sent with the e‑email.

42.  Five days later, on 28 November 2011 a reply was sent by the Management Office saying:

“We take this opportunity to confirm that we have taken necessary action concerning the wet floor near the water tank on the roof.”

43.  The photographs were enclosed allegedly “showing the floor is very dry now.  Kindly take note of it”.

44.  No detail was given of what was meant by necessary action.  There was no suggestion that the plaintiff was or might be in any way responsible. Nor was there any mention of any structures, unlawful or otherwise, on the roof, which the plaintiff was required to remove.

45.  As became apparent there was no record in the management documentation of any work having been carried out by it between the 23 and 28 November as declared in the e‑mail to which I have referred.

46.  In the course of this trial the defendants have not produced any record of any meeting by the management or its committee if such existed.  No minute or record of any complaint, no record of any remedial work carried out, or payment made to any contractor so employed, no note of any telephone call by or on behalf of the plaintiff, nor copy of any letter sent to the plaintiff complaining of any failure in any regard in relation to the roof or any structures on it have been produced.  This topic will be dealt with separately under a discrete heading.

47.  Matters drifted on unresolved with further complaints from the plaintiff as a result of the problem continuing until solicitors acting for the plaintiff wrote to the defendant on 20 August 2012.  That letter set out the history of the problem since April 2010 when the plaintiff purchased the apartment including reference to the e‑mail contact of November 2011.  The effect of the typhoon on 23 July 2012 seems to have been the catalyst.

48.  The failures of the Incorporated Owners were set out.  Photographs of the current state on the roof were sent.  Urgency was stressed.  A site visit on or before 23 August by the defendant was requested amongst other steps.

49.  It was informed that the plaintiff was already conducting renovation and repair work but it was presently suspended to give the defendant the opportunity to investigate and carry out remedial work.  The plaintiff would resume his work if the defendant failed to respond.

50.  There was a follow up letter on 22 August with an increasing sense of urgency with a deadline of 27 August for action by the defendant.

51.  The next day another letter was sent by the plaintiff’s solicitors stating that the plaintiff would now proceed to carry out the necessary repair and replacement.

52.  Eventually by letter of 5 September the defendant responded.  In the meantime the plaintiff had proceeded with the work in accordance with the notice given by its solicitors in their letters.

53.  The defendant said that it had never received “any letter or notification” from the plaintiff prior to 20 August 2012.  In other words they had no record of any contact from the plaintiff regarding the water problem over the period since its purchase in April 2010.

54.  It raised the possibility of water leaking to the common area from the cement/sand layer causing damage to the tiles which have “popped up”.  It also suggested that the metal balustrade (seemingly the railing or metal fencing barrier) might have been built on the common area after the waterproofing work.

55.  The defendant failed to take up the opportunity either to carry out the necessary work itself or to monitor or supervise the plaintiff’s contractors as it carried out the work.

56.  It transpired that the problem was solved — at least for the time being.  The roof slab incorporating the new waterproof membrane above the plaintiff’s apartment was somewhat thicker than the original and the defendant, who could have done the work itself or at least overseen that aspect, nonetheless complained about it later.  Later when I review the expert evidence I will deal with this.  The plaintiff’s contractor finished its work in November 2012 so there was ample opportunity for the defendant’s management to intervene if it wished to or thought it necessary.

57.  One other matter became apparent and that was the lack of connection to the sea‑water supply pipe.  Each flat had its own link to the supply but the plaintiff’s was missing and that was found to be so in November 2012 at the time of the work being carried out for the plaintiff by his contractor.  Until the short‑term tenant moved out the supply was in order but the flat was empty from February 2011 until the works of August‑November 2012. The maintenance of the vertical feeder pipe was the responsibility of the defendant as was the horizontal pipe which led to the exterior of the flat. Somehow there had been disconnection and the plaintiff made it clear in his evidence that he was not responsible.  I think it far more likely that the management was responsible by act or omission for its removal since it was responsible for the maintenance of the external part of the building which included the feeder pipe and individual links which were made available to the tenants.

58.  The plaintiff had not received any satisfactory response from the defendant to the claims it made through its solicitors and proceedings were commenced in August 2013.

The Expert Evidence

59.  Both sides called an Architect in support of their cases although it was apparent from their reports and the joint report that there was insiginificant difference between them.

60.  Mr Wong Man Hong was a forthright witness whom I found refreshingly practical, and helpful.

61.  His first report of 3 September 2012, completed before the work carried out by the plaintiff’s contractor, gave an important picture of the state of affairs.  I will extract the essential findings.

62.  His assessment of the internal damage caused by the water seepage noted the cracks and spalling concrete on the whole of the ceiling.  The water‑proof membrane had been damaged thus leading to water penetration.  Any delay in remedial work on the roof area, and particularly in respect of the waterproof membrane, might induce even more serious problems.

63.  In reviewing the replacement slab of membrane on the roof above the flat he considered that two layers were not necessary but conceded that in view of the nature of the problem and the plaintiff’s concerns, it was not unreasonable to use two layers even though this added to the weight.  The photographs taken by him fully illustrated the extent of the internal problem. It indicated to his expert eyes substantial and widespread failure of the membrane.

64.  He produced a plan of the roof area of the plaintiff’s flat on which was recorded that the membrane was composed of rock asphalt when applied at the time when the building was first finished off, some 30 odd years ago.  At that time, membrane of this material was considered to have a life expectancy of up to 15 years.

65.  In a later report he expressed his view that since the railings (or balustrade), and the air conditioner and its pipe work were positioned on a concrete plinth and not directly on to the waterproofed roof floor slab, those installations would not damage the membrane itself and so not cause any degradation of the membrane. Once the new membrane had been applied in late 2012, the seepage had ceased though the items on the roof remained in situ.  Therefore those items were not causative.

66.  After the defendant’s Architect Mr Christopher Chiu had made an inspection in 20 June 2015, the two architects provided a joint report.  Before I come to that it is important to note that Mr Chiu’s site inspection lasted about one hour and was carried out well after the plaintiff's contractor had completed the work begun in late 2012 and well after the defendant had had their own work carried out in 2014.  It was also disadvantaged by the fact that Mr Wong’s inspection in 2012 had noted the situation before the remedial work.

67.  They jointly concluded that the water seepage had been through the defective waterproofing membrane on the roof above the plaintiff’s flat.  The removal of alleged unauthorised building works on the roof was not relevant to the water seepage, nor was the additional (or rather, enhanced) slab relevant.

68.  They disagreed in the following respects.  Mr Wong considered that cause of the seepage was “normal dilapidation of the waterproofed membrane”. The seepage was scattered in various locations on the roof.  There was no evidence that the two metal bars (from a lamp unit, or a spotlight or the railings/barriers) had pierced the membrane.

69.  On the other hand Mr Chiu considered that the bars had pierced the membrane when originally fixed, and thus allowed seepage through crevices spreading through the concrete slab above the roof of the flat of the plaintiff.

70.  I prefer the evidence of Mr Wong for a number of reasons.  He had had a much earlier opportunity of seeing the situation in 2012 than had Mr Chiu.

71.  He carefully considered the nature of the structures vis-à-vis the roof surface and found evidence to suggest that waterproof material had cladded (my word) the base of the pole so as to prevent water seeping through at the point where the poles/or posts entered the roof slab.  There were also signs of rust or corrosion, well above that base level so as to indicate that there had been protection, or insulation significantly above the upper surface of the roof itself.  Mr Wong had been able to view an overall picture at a much earlier stage than had Mr Chiu.

72.  It may have been a situation where there were two causes — degradation of the waterproof material itself allied to the odd area where the membrane had been weakened by extraneous forces — the tiles or cement and sand have been loosened and broken in a number of areas as a consequence of weather conditions, a circumstance with which both experts agreed, and, possibly the weakening of the waterproof material cladding the lower part of the poles or posts.

73.  Mr Chiu’s estimate of the effective life on the original membrane at 30 to 40 years is somewhat optimistic.  Hong Kong’s testing weather conditions with sub‑tropical rainstorms, periods of intense humidity and temperature variations, and typhoons, would put exposed materials to the limit of their durability.  In any event this membrane, applied in the mid to late 1970’s, was at the end of its life on even Mr Chiu’s estimate.  There is no evidence that it was replaced, improved, enhanced or repaired at any time since installation.  There are no records of its history since installation.  As Mr Wong pointed out the quality, composition and durability of modern materials have improved considerably over the intervening years.

74.  One aspect of Mr Chiu’s evidence was of particular interest.  Although he appears to have given the rest of the roof area no more than a casual glance, and acknowledged that there were other railings/barriers and lamplights (as I call them) — they are shown on the photographs, he was able to say that although they may have been regarded as illegal structures in the past, the lighting since 1998, after the cessation of Kai Tak as Hong Kong’s airport, would probably not be regarded as such.  The railings, or steel barriers, whatever description one adopts seem to have existed as safety barriers to protect persons from falling from the roof area.  Whatever their status the management of the defendant appears not to have taken any steps to require their removal by any co‑owner and certainly not by the plaintiff.

The defendant’s evidence

75.  Mr Eddy Chui has been the Chairman of the Incorporated Owners since 2013.  He was a committee member in 2011.  The e‑mails, and letters associated with them, of November 2011 had never come to the notice of the Incorporated Owners.  There was a form of management at that time in the hands of a Mr Chow.  The defendants had not been able to trace any letters, notes, minutes, reports or memoranda relating to the management’s activities prior to the letter of 20 August 2012 from the plaintiff’s solicitors.

76.  It was clear from this that the defendants were in considerable difficulty.  If there existed any real management over the years in relation to the roof, its maintenance, any objectionable structures on it, there was a complete absence of evidence to that effect.  But of course, as Mr Chui has to accept, the designated Management, however constituted, was the servant or agent of the Incorporated Owners who were liable for its shortcomings — its acts or omissions.

77.  He conceded that the structures on the roof appeared to have been there for a long time.  They seemed to be of a reasonable height so he was not alerted to any problem.  They were cleared away in 2015, he said, though it is not apparent what remain, if any.

78.  The work involved in 2015 was the renovation of the entire roof of the building. By that time the plaintiff had ceased to own the flat in question so any question of payment for this work was not relevant.  Moreover the invitation to the plaintiff to be involved in inspecting what was revealed and the nature of the work to be carried out, could not be taken up, by reason of there being a new owner, and the defendants did not take the necessary steps to provide the plaintiff with the opportunity to inspect.

The illegal unauthorised structures

79.  I will deal with those allegations as identified in the pleadings although some are clearly unsustainable.

The railings

80.  These are not confined to the area immediately above the plaintiff’s unit.  They appear from the photographs to be on some areas throughout the roof.  There is an obvious sensible purpose.  They help to act as a barrier against any person falling from the roof.  At the time of their original erection they were of the same type and height indicating some collective direction or concerted action.  It is alleged that the plaintiff erected them over other units.  Why it should have done so, save with the agreement of them all, is not entirely understood.

The air conditioning units

81.  There are several of these, again seemingly identical.  They are all mounted as far as I can see, on concrete plinths perhaps with some form of bolting into that plinth to fix them safely.  Their need is clearly understood.  They required electrical linkage as well as compressor units.

The lamp standards with lights

82.  Some form of illumination must have been required in the event of maintenance activity at night.  Not all rooftop problems occur in daylight. Once again the number of them indicates a pattern of collective activity in their installation.  It is difficult to see how any of this activity could have escaped the notice of the management.  As in the case of the spot lamps on a pole stand, electrical connections must have been required.

83.  I am satisfied that all these structures were on the roof long before the plaintiff purchased the flat.  He did not erect any.  There are similar structures on other areas of the roof above other flat units.

84.  It is possible that some were erected with the approval of the management.  It is equally possible that the management was itself responsible for their installation.  There was no effort by the defendants, their servants or agents, to remove them, or cause them to be removed, or to complain to any occupiers about their existence until at the earliest in 2012 and even then it was a tentative and far from positive suggestion to the plaintiff’s solicitors.  The plaintiff was not responsible for any of these structures or their maintenance.  Over the years there had, at the very least, been an attitude of acquiescence by the defendant in their existence and continuation.

Conclusions

85.  The water causing damage to the plaintiff’s flat seeped through the formerly waterproof membrane which formed an integral part of the roof slab.

86.  The membrane, an integral part of the roof, was a common part and therefore to be maintained by the Incorporated Owners in accordance with the Deed of Mutual Covenant and the Buildings Management Ordinance.

87.  The cause of the seepage was the failure of the defendants to maintain the roof properly by ensuring that the membrane achieved its purpose, ie. waterproofing the roof.

88.  Over years the membrane had aged and degraded, in the prevailing climatic conditions and had not been replaced or repaired or otherwise properly been maintained.

89.  The water had seeped directly through the membrane as a result of wear and tear, which I find to be the case on the balance of probabilities, and was aggravated by the degradation in the sand and cement screed and tiles which were positioned on top of the said screed to afford some seal or protection or insulation for the membrane against damaging weather conditions.

90.  Alternatively or additionally, waterproof membrane cladding or extensions around the base of metal poles supporting lamps and/or spotlights and/or railings, had so degraded through lack of maintenance appropriate to prevailing weather conditions that water was able to permeate through the base of the poles beneath the membrane.

91.  The latter cause, though more minor, would simply have caused an addition to the water already seeping through the degraded, unrepaired, unmaintained membrane.

92.  The alleged illegal structures in the form of such posts, poles, railings and lamp posts had been in situ either long before the plaintiff became the owner of the unit in question and was not responsible for their installation maintenance or continuation.  He had never been asked to remove them.

93.  These structures were entirely the responsibility of the defendants, and were attached to or on the common parts.  The defendants had no effective management committee or manager and had no system or proper system of maintenance and repair and failed to comply with its obligations under the Deed of Mutual Covenant and the Buildings Ordinance.

94.  It failed to pay any or sufficient attention to a long term problem having been given many reminders and complaints.

95.  The plaintiff was to no extent responsible for the cause or the results of the water seepage and fulfilled its responsibility to notify the defendants of the nature and extent of the problem and reasonably carried out necessary attempts to identify and cure the problem.

Damages

96.  I will follow the sequence of the claims according to the Statement of Claim.

Costs of renovation work

97.  This total sum to include all the necessary work is HK$601,110.  I am satisfied that there should be no deduction on the basis of the use of two layers of waterproofing material instead of one.  The plaintiff and his contractor is not to be criticised for being extra cautious.  The long‑standing problem had been neglected by the defendants for a substantial period of time and they failed to use the opportunity afforded to them of either doing the work themselves or monitoring and/or supervising the work done by the plaintiff’s contractor who had to be particularly careful to confine the area of work to that section of the roof above the plaintiff’s unit.

98.  All the work was necessarily carried out and was the direct result of the defendant’s failure and neglect, and the amount is entirely reasonable.

The loss of rental income

99.  The water seepage had caused the tenant to terminate his tenancy by agreement with the plaintiff.  That was foreseeable.

100.  Equally, whilst the problem persisted, it was foreseeable that the flat could not be let.  That state of affairs was the direct result of the defendant’s failure.  The plaintiff has reasonably confined the period of loss claimed to that from January 2011 until August 2012 when the remedial work was commenced.  I allow it in full in the sum of HK$560,000.

The loss of the sea‑water feeder pipe

101.  I have accepted the plaintiff’s evidence.  He was not responsible for its disconnection and disappearance.  The only reasonable explanation for its disappearance between February 2011 and August 2012 is that the defendants’ management failed in yet another respect in its maintenance of the common parts and facilities.  It may have deliberately disconnected and misplaced the unit, having become aware, as it must have done at some stage, that the flat was unoccupied.  There are no records to assist on this and no evidence from anyone in the management office over the material time.

102.  I allow it at HK$18,120.  The plaintiff does not pursue claims for loss of amenity, and inconvenience; the latter must have been substantial for this period of time.  Nor does it pursue damages for the registration of the “lis pendens” which was unarguably wrong.

103.  The total claim allowed is therefore HK$1,179,230.

Judgment

104.  There will be judgment for the plaintiff for HK$1,179,230 together with costs to be taxed if not agreed.

105.  The defendant’s counterclaim fails and is dismissed with costs to the plaintiff.  There was no basis for the alleged breaches by the plaintiff as I have made clear in the course of this judgment.  There is therefore no entitlement to any injunction in any event since the defendants claim to have removed all the structures and the plaintiff ceased to be an owner sometime ago.  Lest there be any misunderstanding concerning my findings, the defendants were themselves responsible for any of the structures of which they complain; alternatively they acquiesced in the installation, and continuation of such and failed to exercise any proper and reasonable maintenance of the roof and its appurtenances.

HCA 1485/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1485 of 2013

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D E C I S I O N

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1.  This is an application by the plaintiff for leave to appeal against my order made on 6 May 2016. My order gave leave to the defendant to adduce two more witness statements and a supplemental expert report. I also gave leave to the plaintiff to file witness statements and a supplemental expert report in response.

2.  This is a water leakage case.  The defendant’s application and my reasons for making the order are in my decision dated 6 May 2016.  I would not repeat them.

3.  The plaintiff seeks the following order in this application:

(1)  Leave to the plaintiff to appeal against my order of 6 May 2016.

(2)  The trial days, commencing from 19 July 2016 for five days, be vacated for another day pending the determination of the appeal by the Court of Appeal.

(3)  Costs of the application be in the appeal.

4.  The plaintiff has made a number of grounds in support of the application which can be found in the draft Notice of Appeal.

5.  I will first consider the issues of relevance, probative value and the expense and time involved.  I think the result of the consideration of these factors is in favour of allowing the defendant’s application, as I did in my order.

6.  Mr Cheung, counsel for the plaintiff, emphasised the need for fairness.  He, in particular, complained about lateness.  But I would consider whether lateness would cause any prejudice.

7.  In view of the chronology of the development of the defendant’s application that will be referred to below, I do not think there is any prejudice.  I should not punish the defendant by refusing this application simply because of the delay as one of the objectives of the CJR is to ensure fairness between the parties.

8.  If the delay –– though not properly explained –– does not cause any prejudice that cannot be compensated by costs, then fairness would require the application to be allowed as this would ensure the fair disposal of the dispute ultimately.

9.  The plaintiff also complains that its expert has found it impossible to make a supplemental expert report in a professionally responsible way.  The expert has suggested that it would be professionally irresponsible to make such a report.

10.  I would ask myself the question of whether the experts will be provided with the same basic facts for their opinion in the supplemental report. If there is a handicap for one expert, is there the same handicap for the other?

11.  Though the defendant’s factual witnesses had sight of the primary evidence of the roof when it was dug open, the defendant’s expert is in the same position as the plaintiff’s expert. It is wrong for the plaintiff’s expert to say that it is professionally irresponsible to give a supplemental report by relying on the evidence of photographs and factual statements by the defendant’s witnesses.  The expert is expected to try his best, and it is not professionally irresponsible for one to try one’s best, particularly when the materials to be worked on, or on which the opinion is to be based, is far from being ideal.

12.  Even though the plaintiff was not at the scene when the roof was dug open, it does not mean that the defendant cannot rely on this evidence.  The employer of a driver is seldom at the scene of the traffic accident that involved the driver, but that does not prevent the employer from being sued by someone injured in the accident, or the injured person from referring to the evidence of the accident which the employer did not witness.

13.  Mr Cheung also complained that I have put the burden of proof wrongly as I had placed it on the plaintiff.  That is not a correct way of reading my decision of 6 May.  The burden of proof on the facts is, of course, on the defendant.  What I meant was that the plaintiff will be at liberty to challenge the facts at the trial. It will be at liberty to say that the facts now adduced by the defendant are merely fabrications if the circumstances should justify such an attack.

14.  The plaintiff also complained that there was no proper explanation on why the roof was dug up, but I note that the defendant has already said that this was done in the course of a refurbishment exercise.

15.  The plaintiff also alleged that the defendant had gained the advantage of concealing the availability of the opening up of the roof. The plaintiff was the owner of the premises since 9 April 2010.  The writ was issued by it on 13 August 2013.  Its sale of the premises in question was only completed on 17 October 2014.  The plaintiff could have dug up the roof in these years prior to a completion of the sale of the premises.

16.  The plaintiff also complained about the timetable being too tight.  The chronology shows that the hearing of the defendant’s application took place on 21 April 2016.  It was adjourned to 6 May 2016 for the plaintiff to consult its expert.  The adjournment was given on the understanding that if the defendant’s application should be allowed, the time for the plaintiff to prepare its response would count from that date.

17.  However, when the application was allowed on 6 May 2016, I acceded to the request of Mr Anthony Cheung (who then appeared for the plaintiff) for 42 days for the plaintiff to file reply witness statements and a supplemental expert report, and for this period to count not from 21 April but from 6 May 2016.  That period will end on 17 June 2016, but the five‑day trial will only commence on 18 July 2016.  There is thus ample time for the plaintiff to conduct its investigation, if any, and to put in its witness statements and a supplemental expert report in response.  I do not think the timetable is tight by any standard as the issue now brought in by the defendant’s additional witness statements and supplemental expert report is a very short one.

18.  I think the plaintiff’s real complaint is not lateness or the timetable being tight, but the fact that it was not invited to witness the digging up of the roof or the result of the digging up.  That, alone, should not deprive the defendant the opportunity to present such evidence as such is germane to the ultimate disposal of the dispute.

19.  The defendant has also referred me to paragraph 59/0/55 of the Hong Kong Civil Procedure 2016, which is a commentary on appeals against case management decisions.  The editors referred to the case of Cheung Yee Mong v So Kwok Yan [1996] 2 HKLR 48 at 51 where Bokhary JA (as he then was) said:

“Case management is pre‑eminently within the province of the trial judge. And it is only in wholly exceptional circumstances that [the Court of Appeal] will interfere.”

20.  The editors also cited Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 where the court observed that in respect of case management decisions, the appellant faces a very high hurdle and has to show that the judge had gone clearly wrong and made orders which clearly involved an injustice or an inability for the trial court to carry out its task or had erred in principle or that his order was irrational.

21.  Finally, the editors said that:

“Steps taken by the judge to accommodate might not have been perfect from the appellant’s point of view, but the Appellate court would only interfere with the trial judge’s case management decision if it was plainly wrong, and had caused significant injustice or prevented a fair trial of the issues (Howard v. Howard-Lawson [2013] E.W.C.A. Civ 654).”

22.  I would repeat that my decision would not cause any significant injustice or prevent a fair trial of the issues, but will instead enhance the fairness of the disposal of the issues in dispute.

23.  I also refer to section 14AA(4) of the High Court Ordinance.  I do not think that there is any reasonable prospect of success of the plaintiff’s proposed appeal, or that there is any reason in the interests of justice on why the appeal should be heard.

24.  I therefore dismiss the application for leave to appeal with costs be to the defendant to be taxed and paid forthwith. These costs will be taxed summarily by me.

25.  The defendant’s solicitors shall file and serve a draft bill of costs within seven days from today.  The plaintiff’s solicitors shall file and serve their objections, if any, within 14 days thereafter.  The court will then proceed to assess the costs summarily on paper.

HCA 1485/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1485 OF 2013

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D E C I S I O N
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1.  This case is a dispute on water leakage on a roof of a property formerly owned by the plaintiff. The parties have already filed their joint expert report in September 2015. The trial has been scheduled to commence on 18 July 2016 and it will last for five days.

2.  The defendant issued a summons on 14 April 2016 returnable on 21 April 2016 seeking leave to adduce two more witness statements and a supplemental expert report.  The witness statements are to say that the defendant had in early November 2015 opened up an unauthorised platform slab on the roof in question with a view to make a new waterproof membrane thereon.  The defendant then discovered that there were nine steel posts that had their top parts severed but their bottom parts still connected to steel plates that were bolted to the concrete slab on the roof.  The steel posts had been buried in the platform slab and were not visible hitherto.  Photographs were then taken and a sketch made to show the locations of the posts and their lengths.  The defendant also engaged a registered structural engineer, Mr Yuen to have an inspection of the things in situ.  Mr Yuen then made a report which is being produced as an attachment to one of the witness statements. 

3.  However, as a result of my dialogue with Mr Yeung, counsel for the defendant, this attachment would not be adduced as part of the evidence.  The plaintiff’s expert, Mr Chow then made a supplemental expert report on the basis of the photographs and sketch.  He also tried to clarify certain ambiguity in his first report.

4.  The plaintiff objected to the application on 21 April mainly on the ground of delay.  Mr Cheung, counsel for the plaintiff also emphasised the fact that the roof after being opened up has already been repaired, and the subject matter is no longer there and the plaintiff cannot witness the thing in situ.  I adjourned the application to today for the plaintiff to seek the views of its expert Mr Wong on why he cannot prepare a supplemental report based on the same materials that were available to the defendant’s expert.

5.  Mr Wong said that it was impossible and professionally irresponsible to comment on the evidence in the defendant’s further witness statement.

6.  His reasons are:

“1. The quality of the photos blurred the truth. The photos were taken not in a satisfactory condition and were blurred. I could see the difference in colour, but could not differentiate the materials and the condition. I cannot comment on the location of the said fixing as I had not witness.

2. I am not able to comment on the location of the said fixing as I had not witnessed the alleged process.

3. ust on steel post is not unreasonable as I consider it is on the waterproofing membrane.

4. The water seepage scattered on the whole ceiling of the immediate unit below. That does not match the localized fixing location.

5. Regarding the supplementary condition survey report of April 2016 by Mr Chow Yuen Kit Christopher, the section as attached in Sketch A may not correct and not in scale while the photo record does not show the real and true condition. In usual practice regarding a roof, there is a layer of protection on top of the waterproofing membrane, insulation layer, a dead load layer on the insulation and the protection and finishes layer.

6. The photos showed only a part of the overall condition, so that I am not able to analyze the whole picture with first hand, reliable and truthful information.  It is impossible to make a objective finding and to give a responsible professional opinion.”

7.  I do not think the quality of the photos are really so bad.  They show the steel posts clearly, but this is a matter for the trial judge. 

8.  Regarding the location and size of the steel posts, the plaintiff will be at liberty to challenge them as a matter of fact. Leave to the defendant to adduce the evidence does not mean that the evidence will be accepted by the court as truthful.  The expert can however give his comment on the assumption that the evidence will be accepted.  He may also assist the court by advising the court why the evidence is not truthful.  That is what Mr Wong has said in point no. 5.  But that is not a reason for not giving a supplemental expert report.  To do the best that one can in order to give a meaningful supplemental expert report is not professionally irresponsible.

9.  Points nos. 3 and 4 and the first half  of point no. 6 are already Mr Wong’s professional opinion and he can incorporate them into a supplemental expert report. 

10.  Mr Cheung for the plaintiff at this hearing again reiterated the lateness of the application.  There is also the further delay after the discovery of the steel posts in November 2015 as this application was only made on 14 April 2016.  However, there is no prejudice to the plaintiff if I allow the application because the trial will only commence on 18 July and there is still enough time for the plaintiff to prepare a supplemental expert report to answer the defendant’s report.  The plaintiff’s expert Mr Wong is also familiar with the facts of the case and should not have much difficulty in coming up with a supplemental report.  If for any reason he cannot come to any particular view, he can of course say so, the court can then take his evidence into consideration when considering the defendant’s expert evidence including the defendant’s supplemental expert report.

11.  I therefore allow the application.

12.  I grant leave to the plaintiff to file further witness statements to response to the defendant’s additional witness statements and also a supplemental expert report all to be filed and served on or before Friday , 17 June 2016. 

Costs

13.  On the question of costs, I order that the costs of an incidental to the summons including the costs of the last hearing be paid by the defendant to the plaintiff to be taxed and paid upon taxation. Regarding today’s costs, I order that the plaintiff shall pay the same to the defendant again to be taxed and paid upon taxation.

HCA 1485/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1485 OF 2013

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DECISION
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1.  This is the plaintiff’s appeal against the dismissal by Master Leong on 20 February 2015 of its summons filed on 22 September 2014. The plaintiff’s summons asked for an order to vacate from the Land Registry the defence and counterclaim in this action (“the Counterclaim”) as registered by the defendant against the property known as Apartment 8/F, 7/F (with a portion of the roof above) Manhattan Court, No. 1 Alnwick Road, Kowloon, Hong Kong (“Apartment 8/F”).

2.  The plaintiff used to be the owner of Apartment 8/F. It brought a claim against the defendant for various reliefs.  The defendant file the Counterclaim alleging that the plaintiff and/or its predecessor-in-title had undertaken among other things, unauthorized building works (“UBWs”) within Apartment 8/F.  The defendant counterclaims a mandatory injunction requiring the plaintiff to remove the UBWs and restore the apartment to its previous condition.  It also seeks an injunction enjoining repetition by the plaintiff of the matters it complains of.  It registered the Counterclaim as a lis pendens at the Land Registry against Apartment 8/F on 16 October 2013.

3.  The plaintiff issued the summons to vacate the registration of the Counterclaim on 22 September 2014.  About two months after the issuance of the summons and before it was heard before Master Leong on 25 February 2015, the plaintiff sold Apartment 8/F to a third party who is not named in the action.

4.  The defendant is at all material times the incorporated owners of Manhattan Court (“IO”).

5.  The Counterclaim is based on alleged breaches by the plaintiff and/or its predecessor of clauses in the DMC that enjoin the owners of Manhattan Court from constructing certain alternations or illegal structures to their premises.  The DMC also empowers the manager to remove the UBWs and to enforce due observance of the DMC by the owners.  The Counterclaim also refers to section 34I of the Building Management Ordinance, Cap 344 which prohibits any owner from converting any common part of a building to his own use without the approval of the owners’ committee or from using the common parts unreasonably to interfere with the use and enjoyment of the same by other owners or occupiers.

6.  The plaintiff has removed the UBWs in May and June 2014.  It then issued the summons on 22 September 2014 under section 19 of the Land Registration Ordinance, Cap 128 and the inherent jurisdiction of the court to vacate the Counterclaim from the Registry.  The IO, however, procured an expert report saying that the plaintiff had not removed all UBWs.

The plaintiff’s submissions

7.  In this appeal, Mr Cheung, counsel for the plaintiff framed the issues of the appeal as follows:

“(a) Whether the Counterclaim ‘relates to land or any interest or charge on land’, thus a lis pendens within the definition of s. 1A of LRO.

(b) If the answer to the first issue is affirmative, whether the Master was correct to hold that there was no good cause to vacate the registration despite the fact that the remedy sought in the Counterclaim can no longer be enforced against the Plaintiff.”

8.  Mr Cheung submitted that the Counterclaim is not registrable as a lis pendens.  He further submitted that in order to be registrable, an action should have a claim to land or assert some interest in land or that it should be a claim of right of or to charge some specific real property.

9.  The first case Mr Cheung relied on is Thian’s Plastics Industrial Co Ltd & Ors (No. 2) v Tin’s Chemical Industrial Co Ltd & Anor [1971] HKLR 249, 252-254.  It is a decision of the Full Court on appeal from a decision of Blair-Kerr J in Thian’s Plastics Industrial Co Ltd & Ors v Tin’s Chemical Industrial Co Ltd & Anor [1970] HKLR 498.  Briggs J said in the decision at 252 to 253 as follows:

“In order to succeed in this appeal the appellants must show that the lis pendens is registrable under the Land Registration Ordinance (Cap. 128).

For our present purposes the only lites pendentes which are registrable are those which “affect” land. …

The learned Judge in the court below had this to say: -

‘Before a plaintiff registers an action as a lis pendens it is his bounden duty to ensure that it is an action in which a claim to land or some interest in land is asserted: that there is a claim of right or a claim to charge some specific property. In other words that the landed property mentioned in the memorial is (in the words of section 19) ‘in litigation’’.

…

I do not think that the above quotation from the learned Judge’s judgment in the court below is wrong. The expression “affects” is not a term of art. It can have a very wide meaning. In one sense any judgment given against a person who owns land may affect that land. For the successful litigant may only be able to recover any damages awarded to him by the sale of such land. However it has not been suggested that any proposed action can be registered as a lis pendens simply because the intended defendant owns landed property. Various authorities were quoted from other branches of the law in an effort to arrive at a more exact definition of the word “affects” but I did not derive any help therefrom.

That the doctrine of lis pendens does not apply to personal property other than chattel interests in lands is settled law:  See Wigram v. Buckley. In In re Barned’s Banking Company ex parte Thornton, Cairns L.J. said that a lis pendens “always implied a claim of right, or a claim to charge some specific property.  That was always a necessary ingredient in a lis pendens…”

I adopt these words and accept the words I have quoted from the judgment of the court below as being a correct statement of the law.”

10.  The next case relied on by Mr Cheung is the decision of Liu J in Kwan Sec Wah v Mei Fung Co Ltd & Ors (HCA 2747/1980, unreported 18 July 1980). 

11.  The plaintiff in that case claimed damages against the 2nd to 4th defendants for their alleged fraudulent or negligent management of the 1st defendant, their breach of fiduciary duty owed to the plaintiff, their oppression of minority shareholders, and for the purchase by the 1st to 4th defendants of the plaintiff’s shareholding and other relief of rendering of account and payment of profits.  There is also a claim for an injunction to restrain the 1st defendant from further charging, encumbering, disposing or parting with possession of any of its properties in particular the premises listed in the schedule of the endorsement of claim.  The endorsement was then registered at the Land Registry as a lis pendens against the premises in question.  Liu J (as he then was) ordered the vacation of the registration on the following ground on p 3 of the judgment:

“An injunction is claimed in this case as a remedy in aid of enforcement of a cause of action successfully prosecuted. An injunction constitutes no independent cause of action, and it is not a subject-matter in litigation on its own. It seems plain that there have been disputes within the Company. In my view, no part of the general endorsement on writ is or may be taken as a lis affecting land. There has been no quarrel over ownership for the property in question. There has been no proprietary claim to any land or any interest therein; nor has there been any endeavour to charge it. None of the matters contained in the general endorsement affects land, and following the decision in the case of Thian’s, in my judgment, the writ in this action is not registrable.”

12.  The third case relied on by Mr Cheung is Chow Chiu Tai v Chan Tak Ming [1994] 1 HKLR 274.  In this case, the defendant owned factory premises one floor above the plaintiff’s premises.  The plaintiff alleged leakage of oil from the defendant’s premises.  The plaintiff brought an action against the defendant in nuisance, with alternative claims based on Rylands v Fletcher, negligence, and breach of the DMC.  The defendant gave undertakings to cease the nuisance.  The action proceeded for damages only.  The action was registered by the plaintiff as a lis pendens at the Land Registry against the defendant’s premises.

13.  Section 1A of the Ordinance defined a lis pendens as “any action or proceedings pending in a court or tribunal that relates to land or any interest in or charge on land”.  The defendant contended that the registration of the lis pendens should not have been made as the action did not fall within that definition.

14.  Counsel for the defendant in that case relied on Thian’s Plastics Industrial Co Ltd (No. 2) v Tin’s Chemical Industrial Co Ltd [1971] HKLRD 249, In re an Application by Lo Ling Leung-chai [1980] HKLR 910, Regan and Blackburn Ltd v Rogers [1985] 1 WLR 870, Heywood v BDC Properties Ltd (No. 2) [1964] 1 WLR 267 and Calgary and Edmonton Land Co Ltd v Dobinson [1974] 1 Ch 102.

15.  Counsel for the plaintiff in that case however contended that the nature of the action was as such to affect the defendant’s use of his land and thus related to the defendant’s land.

16.  P Chan J (as he then was) said at p 276 line 10 to line 38 as follows:

“Counsel for the plaintiff agreed that the action was based on nuisance, negligence and breach of the DMC. It was however argued that the writ also related to the defendant’s land within the meaning of s. 1A of the Ordinance in that it sought a court order to restrict the defendant’s way of using or enjoying his own property. … It was submitted that in the absence of a registration of the action against the premises, a purchaser would not be bound by any order or judgment which the court might give in the present action and that this was something which the court should also take into consideration.

The definition of lis pendens in s. 1A of the Land Registration Ordinance was only added in 1992.  Prior to that, there was no statutory definition and a lis pendens would be registrable in the same manner as a judgment by which land in Hong Kong might be affected (see s. 14 of the Ordinance).  This was dealt with by the Full Court in 1971 in the Thian’s case.  Briggs, J. (as he then was) adopted the dictum of Cairns, L.J. in In re Barned’s Banking Company, ex parte Thornton, (1867) 2 Ch App C 171, at 178 which said that a lis pendens, “always implied a claim of right, or a claim to charge some specific property. That was always a necessary ingredient in a lis pendens.”

Lis pendens is now defined is s. 1A of the Ordinance as “any action or proceedings pending in a court or tribunal that relates to land or any interest in or charge on land”. It is in more or less the same terms as “pending action” as defined in s. 2 of the Land Charges Act 1929 and the more modern term of “pending land action” as defined in s. 17(1) of the Land Charges Act 1972. The English cases on these terms are therefore relevant in the interpretation of lis pendens under the Hong Kong Ordinance. The keywords are “relating to land”. In Heywood v. B.C.D. Properties Limited (No. 2), Plowman, J. was of the opinion that:

‘The words relating to land in s. 2(1) of the Land Charges Act are confined to or referred to an action in which a claim to land or an interest in land is asserted.’”

17.  P Chan, J further said at p 278 line 15 to p 279 line 40:

“In Greenhi Builders Limited v. Allen, Browne-Wilkinson, J. (as he then was) went further to explain on this.  In that case, the owners of some houses situated at the top of a slope alleged that the owners of the houses at the bottom of the slope had withdrawn the support to the houses at the top and brought an action claiming inter alia an easement of support, damages, injunctions, and an order that the loss of support be made good. The action was registered under the provisions of the 1972 Act.  The court held that the claim for an easement over land was an action relating to an interest in that land within the definition of a “pending land action” under the 1972 Act. The learned judge said at p. 159:

‘It is consistent with the scheme of the Act that an action which makes a claim to a right over the land, which affects the title to that land and which will operate as an incumbrance (in a loose sense) on the land against which it is registered is a pending land action.

Stamp, L.J.’s judgment (in Whittingham v. Whittingham [1978] 2 WLR 936 at 948) says that it is material to take into account whether, in the absence of the registration of the pending action, a third party acquiring the land before judgment in the action without notice will take free of the plaintiff’s claim. In this case, a purchaser from the company would not take free of the easement which is claimed if the cautioners succeeded in establishing such an easement for the easement claimed is a legal easement and it would take effect under the Land Registration Act without registration as an overriding interest.  But it is on this aspect of the matter that, in my judgment, the claim for a mandatory injunction in the pleadings in the action becomes material.  If the company retained the land until judgment, there can be no reason why, if other considerations are satisfied, the court should not specifically order the company to restore the support which has been allegedly wrongly removed.  If, on the other hand, the land has in the interim cease to belong to the company and has come into the hands of third parties who have no notice of the claim and no notice of the claim to the easement, there may be very substantial difficulties in getting mandatory relief against the persons who are the owners at the date of judgment.  It is, in my view, exactly for this type of purpose that the registration of pending land actions was introduced so as to ensure that anybody taking the land during the pendency of a land action should know that the action was going on and should be on notice as to the relief claimed in it. Having taken with notice of the relief being claimed, it would present very formidable difficulties in a purchaser to resist an order under which the cautioners’ rights were enforced specifically by a mandatory injunction.’ (my emphasis)

…

I now turn to the Land Registration Ordinance.  Lis pendens is defined is s. 1A in the same terms as “pending land action” in the Land Charges Act 1972.  It is somehow not expressly included in s. 2 as one of the various documents (which include judgments) that are registrable under the Ordinance.  Section 14, however, provides that “the provisions of this Ordinance relating to judgment (subject to the provisions hereinafter contained) shall extend to lites pendentes”. So an action or proceeding which falls within the definition of lis pendens is registrable in the same manner as a judgment.  But not every judgment is registrable under the Ordinance; only those by which “any parcels of ground, tenements, or premises in Hong Kong may be affected may be registered at the Land Office” (see s. 2).  It follows that not every lis pendens falling within s. 1A is registrable; only those by which land may be affected are.  In other words, not every action or proceeding pending in a court that relates to land or any interest in or charge on land is registrable unless it affects the land or any interest therein.

One of the main purposes of the Ordinance is to confer priority on an interest in land over another interest in the same piece of land by means of a system of registration at the Land Office of the documents affecting these respective interests.  Under s. 16, a regisrable lis pendens which is not registered “shall not bind any purchaser or mortgagee of the estate intended to be thereby affected”.  In my view, the consideration formulated by Stamp, L.J. in the Whittingham’s case and followed by Browne-Wilkinson, J. in the Greenhi’s case is equally appropriate in the Hong Kong context.  A lis pendens, to be registrable, must be one which affects an interest in land so that if it is not registered or registered in time, the interest affected by it may lose priority to some other interest in the same land if the document relating to that other interest is registered.  In other words, the question to be answered is: will the interest which is to be affected by the action or proceeding be adversely affected by or deferred to some other interest in the land if the action or proceeding is not registered or registered in time?  An action which claims some proprietary right in land, as referred to by Megarry, J., would be registrable as such a lis pendens because in the absence of registration, a subsequent purchaser or mortgagee bona fide and without notice of the action will certainly take free from the proprietary right under claim even if at the end of the day such a claim is upheld by the court.  Similarly an action for the reinstatement of an easement support of land or the maintenance thereof, as in Browne-Wilkinson, J.’s case, will also be registrable under the Ordinance, because if the action is not registered or registered in time, any subsequent purchaser in title of this land will not be affected by any judgment which may be given in the action. (Emphasis added)”

18.  The English Court of Appeal also held in Whittingham v Whittingham [1978] 2 WLR 936 at 949E-G, that an application by the wife in divorce proceedings for transfer of property held by a company in the control of husband was registrable against the property as a pending land action under section 5(1)(a) of the Land Charges Act 1972.

19.  Mr Cheung further relies on Regan & Blackburn Ltd v Rogers & Ors [1985] 1 WLR 870.  In that case, the landlords of a building were under an obligation contained in the leases of the flats in the building to keep in repair some steps from the roadway to the fields.  The leasees had easements entitling them to use these steps.  The lessees commenced proceedings against the landlords in the county court seeking a mandatory order for repair to the steps by the landlords.  The lessees then entered a caution at the Land Registry in respect of the action as a “pending land action”.  The landlords applied as plaintiffs against the lessees as defendants to have the caution vacated.

20.  Scott J said at 874B-G:

“… In the county court proceedings with which I am concerned, there is no claim by the defendants to an interest over the steps. Their entitlement to their easement is not in dispute and is not an issue in the county court action at all. In the action the defendants are relying, so far as the steps are concerned, on their contractual right to have the landlord, for the time being, carry out the requisite repairs.

… The contractual obligation to repair the steps is an obligation which lies on the landlord for the time being. If, when the county court case comes to judgment, the present landlords are still the landlords, then if the case of non-repair is established no doubt the defendants can obtain a mandatory order against them requiring them to carry out their repairing obligation. If the plaintiffs are not the landlords at the time the case comes to judgment then it does not seem to me that a mandatory order that the repairs should be done could be made against them. On the other hand, if the case of non-repair is a good one, it does not seem to me that the defendants would have any more difficulty in obtaining a mandatory order against a successor in title than they would have against the present landlords. …

21.  The learned Judge further said at 875C-D:

“But, in the present case, there is no relevant claim to an interest in the relevant land—i.e., the steps. The obligations sought to be enforced in the action are the landlord’s contractual obligations of repair contained in the leases. The caution is not in any real sense, in my view, effective or necessary to protect any interest of the defendants. I have already explained the reasoning by which I come to that conclusion. Accordingly, in my view, the action in the Brighton County Court is not in relation to the steps a pending land action.”

22.  Mr Cheung then submitted that the cause of action in the Counterclaim is the alleged breach by the plaintiff of the DMC.  The Counterclaim is for enforcing the provisions of the DMC as referred to above.  It is an action inpersonam against the plaintiff only.  It is not claiming any interest in the property.  It does not affect any interest in or the title of the property. Furthermore, no subsequent purchaser or mortgagee will take a title in the land free of the obligation of the DMC or that the DMC would lose priority if the action is not registered.  The DMC has been registered on 24 September 1982.  The plaintiff’s successor is undoubtedly bound by it.  Hence, the Counterclaim is not regisrable as a lis pendens.

23.  I also wish to refer to Re Lo Ling Leung Chai & Ors [1980] HKLR 910, a decision of Mr Commissioner Litton QC.  The facts of the case is summarized in the headnote:

“During his lifetime Lo Sum carried on a shipyard business in equal partnership with his brother Lo To and Law Tsoi. The three brothers used partnership funds to form a number of companies. They also used partnership funds to purchase several properties, some in the name of such companies and others in the name of individual members of the family. After the death of Lo Sum in October 1970 the surviving partners continued to carry on the business for their own benefit. Lo Sum’s son, the sole beneficiary and executor of his will, instituted proceedings (High Court action No. 2015 of 1980) against Lo To and Law Tsoi for an account of the deceased’s share. His solicitors effected registration of the statement of claim filed in the action as a “lis pendens” against each of the properties which it was alleged had been purchased with partnership funds. The registered owners of such properties applied for an order that the “lis pendens” be vacated.”

24.  One of the grounds relied on by the owners is that:

“(iii) The plaintiff’s claim in Action No. 2015, when properly examined, does not amount to a claim to land or an interest in land and it is therefore in any case not registrable as a lis pendens under Cap. 128.”

25.  At the material time of this case, the definition of lis pendens had not yet been enacted in section 1A of the Ordinance. However, I do not think the meaning of lis pendens as enacted later in section 1A is any different from the meaning as referred to in Thian’s Plastics or in cases like Wigram v Buckley and In re Barned’s Banking Company ex parte Thornton as referred to in Thian’s Plastics.  

26.  Counsel for the plaintiff in Re Lo Ling Leung Chai accepted that the only lites pendentes which are registrable are those which “affect land”.

27.  The learned Commissioner held that upon the dissolution of the partnership, the partnership properties had become personal properties. The learned Commissioner further said (p 919 lines 10-19):

“I find it unnecessary in this judgment to go into the history of lites pendentes, although interesting and helpful arguments have been advanced before me by counsel on the point. In the more recent English Statutes the expression “lis pendens” has given way to the term “pending land action” but it is clear from the judgment of Megarry, J. in Calgary Land Company v. Dobinson that in scope and concept there has been no change. Megarry, J. in his judgment (p. 107) refers to the old cases such as Bellamy v. Sabine, in re Barned’s Banking Co. and Wigram v. Buckley from which it is clear that the doctrine of lis pendens applies not to every suit, but to a suit the object of which is to recover or assert title to specific property.”

28.  Since the plaintiff’s claims were for a share of the personal properties, the registrations of the claims were vacated from the Land Registry.

The IO’s submissions

29.  Mr Yeung disagreed with Mr Cheung.  He relied on Re Ching Yue Chong (Deceased) [1997] 3 HKC 548. 

30.  The 3rd defendants in this case were the tenants in common of a 3-storey village house erected on a lot in the New Territories. The first named 3rd defendant had the exclusive right to occupy the groundand 1st floors while the 2nd named 3rd defendant had the exclusive right to occupy the 2nd floor.  The plaintiff was the owner of an adjacent lot. 

31.  The plaintiff brought an action against the 3rd defendants for trespass because of the presence of certain illegal structures on the plaintiff’s lot.  The writ was registered against the 3rd defendants’ lot and the building thereon. The parties later entered into a consent order which was also registered against the 3rd defendants’ properties.  The illegal structures were removed save one item, i.e. an external staircase which served as the sole access to the 2nd floor of the 3rd defendants’ building.

32.  The first named 3rd defendant then applied to vacate the registrations.  Le Pichon J (as she then was) crystallized the issue as whether the removal of the staircase is an encumbrance against the 3rd defendants’ lot and the building thereon so as to render the registrations of the writ and the consent order proper (p 551C-D) or whether the writ and/or consent order are properly registrable as lis pendens (p 552D).

33.  The learned Judge referred to the judgment in Chow Chiu Tai and quoted various parts from it including the parts I quoted above. The learned Judge emphasised the part that I underlined on p 279 of the judgment. The learned Judge then concluded as a matter of principle at p 555C-F as follows:

“It is clear from the judgment in Chow Chiu Tai that an action may nevertheless qualify as a lis pendens without there being any direct or express claim to a proprietary interest in land. The critical issue is whether the judgment or order to be given affects the land in question. What the learned judge appeared to have in mind were situations where the complaint can only be properly addressed through something being done to the land against which the action is registered particularly where a mandatory injunction is sought. It is implicit from the judgment that registration in those circumstances would be proper. On the facts of that case, the nuisance had already been addressed and so the registration could no longer be sustained. In the present case, the cause of action is trespass. But if the trespass can only be removed by work being carried out to the land in question, it falls squarely within the parameters set out in Chow Chiu Tai. Here the complaint has not been satisfactorily addressed in as much as the staircase has yet to be removed. Applying the principles set out in Chow Chiu Tai (with which I agree), both the writ and the order are registrable and I so hold.”

34.  Mr Yeung further referred to Fairview Park Property Management Limited v Top Express Development Ltd [1999] 3 HKC 625.  The plaintiff there was the manager of the estate Fairview Park in Yuen Long.  The defendant was the owner of a property in the estate.  The plaintiff brought the action against the defendant to enforce the terms of the DMC and Estates Rules.

35.  The writ was registered against the defendant's property as a lis pendens. The defendant applied to vacate the registration. The Master allowed the application. The plaintiff appealed.  Cheung J (as he then was) considered whether the writ was registrable as a lis pendens within section 2(1) of the Ordinance read in conjunction with section 14.

36.  The learned Judge said (627C-628E):

“The meaning of lis pendens had been extensively considered by Patrick Chan J. (as he then was) in Chow Chiu-tai and Chan Tak-ming [1994] 1 HKLR 274 and by Le Pichon J. in Re Ching Yue Chong (Deceased) [1997] CPR 237. It is not necessary for me to tread the same grounds that had been extensively covered by the learned judges. I respectfully adopt their approach. In my view, the test to be applied is this: Does the present action which obviously relates to land affects an interest in the land? The requirement as suggested in cases such as Yu Jing Jenn v. Wong Pe Wun & Ors [1986] HKC 624 that some propriety right must be asserted is not the only basis in which a writ can be registered as a lis pendens.

In the present case, the answer to the question I have formulated must be “yes”. The Plaintiff is seeking an order in the nature of a mandatory injunction requiring the Defendant to remove the unauthorised structures and to reinstate the property to its original state. This obviously affects an interest in the land.

Furthermore, the Plaintiff's interest in the land, by reason of its position as the manager of Fairview Park, to enforce the DMC will no doubt be adversely affected against subsequent purchasers from the Defendant if the writ is not registered. In Whittingham v. Whittingham [1978] 2 WLR 936, Stamp L.J. stated that : “Some assistance in answering the question will no doubt be obtained by considering whether in the absence of registration a purchaser or mortgagee might obtain a title to the land as a bona fide purchaser without notice of, and so defeat, the plaintiff’s claim...”

The Defendant argued that as the DMC which expressly provides for the observation of the Estate Rules is already registered against the Defendant’s property, any subsequent purchaser must have notice of the DMC and bound by the provisions of the DMC.

This may be so, but what is more important is to put any subsequent purchaser on notice of the actual breach of the DMC. This is the very purpose for which the registration is intended. A purchaser who buys the property with notice of the Plaintiff’s claim to enforce its right pursuant to the DMC would have great difficulties in resisting the Plaintiff’s claim for mandatory injunction pursuant to the terms of the DMC. This point in fact is covered by Browne-Wilkinson J. in Greenhi Builders Limited v. Allen [1979] 1 WLR 156:

‘… In this case, a purchaser from the company would not take free of the easement which is claimed if the cautioners succeeded in establishing such an easement for the easement claimed is a legal easement and it would take effect under the Land Registration Act without registration as an overriding interest. But it is on this aspect of the matter that, in my judgment, the claim for a mandatory injunction in the pleadings in the action becomes material. If the company retained the land until judgment, there can be no reason why, if other considerations are satisfied, the court should not specifically order the company to restore the support which has been allegedly wrongly removed. If, on the other hand, the land has in the interim ceased to belong to the company and has come into the hands of third parties who have no notice of the claim and no notice of the claim to the easement, there may be very substantial difficulties in getting mandatory relief against the persons who are the owners at the date of judgment. It is, in my view, exactly for this type of purpose that the registration of pending land actions was introduced so as to ensure that anybody taking the land during the pendency of a land action should know that the action was going on and should be on notice as to the relief claimed in it. Having taken with notice of the relief being claimed, it would present very formidable difficulties in a purchaser to resist an order under which the cautioners’ rights were enforced specifically by a mandatory injunction.’

What the learned judge said in that judgment covers the present situation.” (Emphasis added)

37.  Mr Yeung further said in §36 of his submissions that it is trite that a DMC runs with the premises and is binding on a subsequent purchaser or mortgagee.  He is certainly correct on this.  He then submitted that any judgment on the Counterclaim which finds that the UBWs in Apartment 8/F needed to be removed and the roof thereof needed to be reinstated will not only bind the plaintiff, but also the subsequent purchaser of Apartment 8/F.  However, Mr Yeung has not provided any authority directly on the point. 

38.  When asked to support this proposition, he referred to other authorities on the title to real properties in his supplemental submissions.  He referred to Sun Ngai International Investment Ltd v Zhang Su Hua [2009] 1 HKLRD 48, a decision by Deputy Judge Carlson.  This decision is of the same reasoning as in Whittingham v Whittingham.  This case is different from the Counterclaim.

39.  He also referred to Chi Kit Co Ltd v Lucky Health International Enterprises Ltd (2000) 3 HKCFAR 268 at 281 C-I.  This case is on the effect of section 17(1)(b) of the Building Management Ordinance which provides:

“17(1) (b). If a judgment is given or an order is made against a corporation, execution to enforce the judgment or order may issue —

…

(b) with the leave of the tribunal, against any owner.”

40.  The effect of the decision of the CFA is that where a judgment has been obtained against incorporated owners, section 17(1) (b) empowers the Lands Tribunal to grant leave for the judgment to be enforced against the owners of the building at the time of the application for leave.

41.  There is however no similar mechanism to enforce a judgment that may be given in the Counterclaim against a subsequent purchaser or mortgagee of Apartment 8/F.  This decision therefore does not support Mr Yeung’s proposition that any judgment given on the Counterclaim requiring the plaintiff to remove the UBWs and restore the roof will bind the subsequent purchaser or mortgagee of Apartment 8/F.

42.  The next case in Mr Yeung’s supplemental submissions is Modern Sino Ltd v Art Fair Ltd [1999] 3 HKLRD 847.  Yuen J (as she then was) held in the case that the presence of substantial building works not included in the approved plans gave rise to (a) a risk of enforcement by the Building Authority; (b) a risk of re-entry by the Government as lessor; and (c) a risk of action against the owner by co-owners under the DMC.

43.  The risk of enforcement by the Building Authority is because the UBWs constituted an infringement of the Buildings Ordinance, Cap 123.  The risk of re-entry is owing to the contravention of a special condition in the Government lease as caused by the presence of the UBWs.  The risk of action by the co-owners stemmed from the infringement of the DMC.  These risks as stemmed from the existence of UBWs rendered the title of the premises objectionable and the title could not be forced upon a purchaser.  But this case is not an authority to the effect that a judgment in terms of the Counterclaim will bind any purchaser or mortgagee of Apartment 8/F.

44.  The last case in the supplemental submissions is Lo Chi Wai Arthur v Liu Wing Cheung Wilfred [1983] 1 HKC 416.  Mantell J decided in that case that an alienation of the exclusive right to occupy a carpark and part of the undivided shares that together carried the exclusive right to occupy a flat and two carparks (including the one alienated) contrary to the terms of the DMC would create a continuing risk of an action for breach of DMC to be brought by the other parties to the DMC and the real risk that future attempt at assignment of the remaining undivided shares with the flat and the remaining carpark might be blocked by injunction.  This case is also irrelevant to Mr Yeung’s proposition that a judgment in terms of the Counterclaim will bind a subsequent purchaser or mortgagee of Apartment 8/F.

45.  At the end of the supplemental submissions, Mr Yeung made the proposition that the registration of the Counterclaim as a lis pendens can serve to impute notice upon a buyer of the existence of the UBWs and the determination of the lis would create an issue estoppel or cause of action estoppel binding on all assignees or successors in title of Apartment 8/F.  He filed his 2nd supplemental submissions to explain and justify this further proposition. 

46.  He referred to Parakou Shipping Pte Ltd v Jinhui Shipping and Transportation Ltd [2011] 2 HKLRD 1.  In that case, the plaintiff had lost ad hoc arbitration proceedings with G, the disponent owner of a ship that P had entered into a charter party with.  P then commenced an action against G’s holding company the 1st defendant and its associates 2nd to 4th defendants on similar issues.  The action was struck out by Reyes J on the ground of abuse of process because of privity of interest.  However, there is no privity of interest between the plaintiff and the subsequent purchaser or mortgagee of Apartment 8/F in relation to the Counterclaim.

Summary of the positions of the parties

47.  It is Mr Cheung’s case that the Counterclaim is merely a claim in personam.  It is to enforce some covenants in the DMC against the plaintiff.  Though it requires the plaintiff to execute some works on Apartment 8/F, it is not a claim for any proprietary right or interest therein.  It is not a claim of right in or to charge some specific property.  Even if the Counterclaim is not registered, a third party acquiring Apartment 8/F before judgment is given on the Counterclaim will not take Apartment 8/F free of the covenants in the DMC as the DMC has been registered against this property.  The Counterclaim is to enforce some of the covenants of the DMC only.

48.  Mr Yeung however argued that the Counterclaim is an action in rem.  It is an exercise of the rights in the DMC and is independently registrable.  He submitted that despite the fact that it is not claiming any interest in Apartment 8/F, it still affects or relates to the apartment as it seeks a mandatory injunction for the UBWs to be removed and the reinstatement of the apartment to its original state.  I think it is also Mr Yeung’s case that if the Counterclaim is not registered, the position of the IO in enforcing the DMC will be adversely affected as against the subsequent purchaser or mortgagee of Apartment 8/F.  It is thus important to put any potential subsequent purchaser or mortgagee on notice of the breach of the DMC and that is one of the purposes of registration at the Land Registry.

The Land Registration Ordinance

49.  In order to understand the purpose and effect of registering a lis pendens and, hence, what may be registered as a lis pendens, it is necessary to consider the meaning and effect of the key sections of the ordinance that deal with or affect the registration of a lis pendens.   I quote the sections below with the omission of some words that do not relate to a judgment and lis pendens to facilitate easy reading.  The sections are:

“Preamble: WHEREAS it is expedient to prevent secret and fraudulent conveyances, and to provide means whereby the title to real and immovable property may be easily traced and ascertained:

1A. “lis pendens” (待決案件) means-

(a) any action or proceeding pending in a court or tribunal that relates to land or any interest in or charge on land;

…

2. (1) The Land Registry shall be a public office for the registration of deeds, conveyances, and other instruments in writing, and judgments; and … all judgments, by which … judgments, any parcels of ground, tenements, or premises in Hong Kong may be affected, may be entered and registered in the said office in the prescribed manner.

3. (1) Subject to this Ordinance, all such … judgments, made, executed, or obtained, and registered in pursuance hereof, shall have priority one over the other according to the priority of their respective dates of registration, which dates shall be determined in accordance with regulations made under this Ordinance.

(2) All such … judgments, as last aforesaid, which are not registered shall, as against any subsequent bona fide purchaser or mortgagee for valuable consideration of the same parcels of ground, tenements, or premises, be absolutely null and void to all intents and purposes:

Provided that nothing herein contained shall extend to bona fide leases at rack rent for any term not exceeding 3 years.

4. No notice whatsoever, either actual or constructive, of any prior unregistered … judgment, shall affect the priority of any such instrument as aforesaid as is duly registered.

5. All … judgments, which are duly registered within the respective times next mentioned, that is to say, … all judgments which are registered within one month after the entering up or recording thereof, shall severally be in like manner entitled to priority, and shall take effect respectively by relation to the date thereof only in the same manner as if this Ordinance had not been passed.

5A. Notwithstanding section 3 or section 5a … lis pendens which is duly registered shall have priority from the commencement of the day following the date of its registration.

14. The provisions of this Ordinance relating to judgments (subject to the provisions hereinafter contained) shall extend to lites pendentes:

16. No lis pendens shall be registered in the Registry of the High Court, or elsewhere than in the Land Registry; and a lis pendens not registered in the said office shall not bind any purchaser or mortgagee of the estate intended to be thereby affected.

17. The registration of a judgment, order or lis pendens shall cease to haveeffect at the end of 5 years from the date of registration, but the judgment, order or lis pendensmay be re-registered from time to time and, if so re-registered, shall have effect for 5 years from the date of re-registration.

19. the court or judge before whom any property sought to be bound is in litigation, may on the determination of the lis pendens, or during the pendency thereof, where the said court or judge is satisfied that the litigation is not prosecuted bona fide, or for other good cause shown, make an order for the vacating of the registration in the Land Registry of such lis pendens without the consent of the party who registered it, and may direct the party on whose behalf the registration was made to pay all the costs and expenses occasioned by the registration or the vacating thereof, including the costs of the application to vacate, or may make such other order as to such costs or any of them as to the said court or judge may seem just.” (Emphasis supplied)

The IO’s submissions on the Land Registration Ordinance

50.  After the hearing on 2 July 2015, I asked the parties to file further submissions on the effect and applicability of the sections in the ordinance on the registration of the Counterclaim as a lis pendens.  Mr Yeung in response filed his 3rd supplemental submissions.  He referred to the preamble of the Ordinance and emphasised that registration was to facilitate the tracing and ascertaining of title.

51.  He submitted that it was unduly restrictive to confine the meaning of the words “relates to land” in section 1A only to “proprietary claims” or “secured interests”.  He however changed his stance and accepted that the Counterclaim is a claim in personam.  Nevertheless, he maintained that the outcome of the claim for removal of UBWs for breach of the DMC as contained in the Counterclaim would affect Apartment 8/F and hence the nature of its title.

52.  By way of analogy, Mr Yeung referred to non-compliance with land covenants under a government leave.  He said the non-compliance would give rise to a claim in personam by the government against the lessor or his assignee or successor in title.  I do not think this is a correct analogy as a breach of the government lease can give rise to forfeiture of the lease and such is not a claim in personam but a claim in rem.  It is not analogous to a breach of the DMC that prohibits the construction of UBWs.

53.  Mr Yeung also referred to a building order issued under section 24 of the Buildings Ordinance, Cap 123 which is also a claim in personam but registrable under section 24(2C).  Section 24(2C) and (4A) provide as follows:-

“(2C) The Building Authority may, upon the service of an order under subsection (2)(a), (b) or (c)(iii) or (2A), cause the order to be registered in the Land Registry against—

(a) if the order has been served on the owner of any land or premises in accordance with subsection (2)(a) or (c)(iii), the land or premises;

…

(4A) Where the order has been registered with the Land Registry in accordance with subsection (2C), the cost of any demolition or alteration under subsection (3) in relation to the building, building works or street works to which the order relates shall be recoverable from—

(a) if the order had been served on the owner of any land or premises in accordance with subsection (2)(a) or (c)(iii), the person who, as at the date of completion of the demolition or alteration, is the owner of that land or premises;”

54.  It can be seen from section 24(2C) that the building order is made registrable by virtue of that section.  Furthermore, the registration can make the owner of the property at the date of completion of the works liable for the costs of such works as incurred by the Building Authority.  There are however no similar provisions in the Building Management Ordinance to make a claim similar to the Counterclaim registrable and the judgment on the claim binding on the subsequent purchaser or mortgagee. Registration of building orders under section 24(2C) is thus not a proper analogy for registration of the Counterclaim.

55.  Mr Yeung also submitted that prospective purchasers or mortgagees should be entitled to be given full notice of such claims to assess whether title should be accepted.  He said this can fulfil the purposes of the Ordinance as set out in the preamble which is to prevent secret and fraudulent conveyances and allow purchasers to trace and ascertain title.

56.  However, if the Counterclaim is a claim in personam, as Mr Yeung now accepts, the judgment that it may establish will not bind a subsequent bona fide purchaser or mortgagee.  Res judicata does not apply as between the defendant and a subsequent bona fide purchaser or mortgagee of Apartment 8/F.  The judgment is also not a matter of title although it may be evidence of breach by the existing owner of the DMC.  What binds the subsequent purchaser or mortgagee is the DMC which has been registered. Even if the Counterclaim is not registered, no bona fide purchaser or mortgagee of Apartment 8/F can obtain a title to it that is free of the DMC.  It is for the subsequent purchaser or mortgagee to be satisfied if there is any breach of the DMC before completion.  If the owner should have covered up such breaches when conveying the premises to the purchaser, then the purchaser can resort to contractual remedies against the previous owner. 

57.  If the legislature should consider that claims like the Counterclaim should be registrable for the purpose of giving notice of such claims to prospective purchasers and mortgagees, the Building Management Ordinance can be amended to make such claims registrable.  Section 24(2C) of the Buildings Ordinance is an example.

58.  Mr Yeung also submitted that if such claim is not registrable, the owner being sued can avoid his liability upon his sale of the property to another party.  The claimant like the IO in the Counterclaim would have to sue the new owner from a fresh.  But I think the need to start fresh proceedings is because the claim is in personam.  In any event, the new owner would not be bound by the judgment on the claim and fresh proceedings will be necessary in case of dispute by the new owner.  To allow the claim to be registered may force the defendant to the claim to yield if he wants to have a smooth conduct of the sale of the property.  But if the claim is in personam and does not bind the subsequent purchaser or mortgagee, there is no reason why it should be allowed to be registered.

59.  Mr Yeung also relies on the cases of Fung Kan Wai & Anor v Leung Shui Fat & Ors [1998] 2 HKC 115 and Jimmy Investments Ltd v Lam Fong Chun (HCA 18720/1998, 7^th September 1998 by Yeung J).  As pointed out by Mr Cheung, these two cases are different from the Counterclaim.  They are claims for return of deposits paid by purchasers under sale and purchase agreements.  The claims include a declaration of an equitable lien on the property for the repayment.  The claim of an equitable lien is a claim of an interest in the property.  Such claims, if not registered, will be defeated by the purchase of a bona fide purchaser for value and without notice.

60.  Finally, Mr Yeung relies on Lau King Ting Katie v Cheng Miu Har [2008] 4 HKLRD 563 (at §§ 54 to 59).  As pointed out by Mr Cheung, the plaintiff in that action made claims against the transfer of properties and sought a declaration that certain assignments of properties were null and void.  Such claim is of course registrable, otherwise, a subsequent bona fide purchaser or mortgagee will take free from the claim.  The Counterclaim here makes no such claim and is of a different nature.  Its effect depends on the DMC that has been registered.

61.  The reference to these cases therefore does not assist the IO.

Analyses of the key sections

62.  I now consider the provisions of the ordinance. The preamble provides that the ordinance is to prevent secret and fraudulent conveyances, and to provide means for tracing and ascertainment of title to real and immovable property.

63.  Section 14 provides that the provisions of the Ordinance relating to judgments “shall” extend to lites pendentes.

64.  Section 2 provides for the registration of all judgments (and hence lis pendens) by which any parcels of ground, tenements, or premises in Hong Kong may be affected.  Mr Cheung, counsel for the plaintiff in his reply submission referred to Chow Chiu Tai at 270 lines 5-24 where P Chan J said “not every action or proceeding pending in a court that relates to land or any interest in or charge on land is registrable unless it affects the land or any interest therein.”

65.  Section 3(1) provides that all judgments (and lites pendentes) registered at the registry shall have priority one over the other according to their respective dates of registration.  If the purpose of registration of the Counterclaim is to put the subsequent purchaser of Apartment 8/F on notice of actual breaches of the DMC, I cannot see why it is necessary to provide for priority of registration.  I cannot see how the subsequent purchaser can escape from his obligation to perform and comply with the DMC even if his sale and purchase agreement or assignment should have a higher priority than the Counterclaim.  I reiterate that the Counterclaim itself does not give rise to any obligation but is only to enforce the obligation that stems from the DMC.  If the Counterclaim itself does not give rise to any right or obligation in respect of the property, I fail to see any need to consider its priority of registration.

66.  However, if the lis pendens claims a proprietary right or interest or a transfer of property as in Sun Ngai International Investment Ltd or Whittingham, then the question of priority is important.  If its priority should be after an assignment or mortgage of all the interests in the property in question, then it cannot affect the prior purchaser or mortgagee.  But the Counterclaim is not claiming any proprietary interest in or to charge any specific property. It merely seeks an order to compel the plaintiff to comply with the DMC.  Hence, it may not be the lis pendens that section 3(1) is aiming at.

67.  Regarding section 3(2), it says that all judgments (and lites pendentes) which are not registered shall, as against any bona fide purchaser or mortgagee for valuable consideration of the same property, be absolutely null and void to all intents and purposes.  If the Counterclaim should be subject to this provision, then the consequence of its non-registration is the absence of all its effect on a bona fide purchaser or mortgagee for value.

68.  However, the registration of the Counterclaim at the registry will not make the judgment that it may establish binding on the subsequent purchaser or mortgagee.  Now that Apartment 8/F has been sold to a new owner, if the IO should be desirous of enforcing the same obligations against the new owner, it has to issue fresh proceedings against this owner.

69.  In the premises, if the Counterclaim cannot bind the subsequent purchaser (or the current owner) in any event, then it is illogical to say that it will be null and void as against a subsequent bona fide purchaser or mortgagee.  Hence, section 3(2) thus does not appear to aim at the Counterclaim as a lis pendens.

70.  Regarding section 4, it provides that no notice whatsoever of any prior unregistered judgment (or lis pendens) shall affect the priority of any registrable instrument which is duly registered.  My observation under section 3(1) on the issue of priority applies to this section as well. 

71.  There is also the issue of notice.  This section provides that if a judgment (lis pendens) is not registered, then even if the subsequent purchaser should have actual notice of it, the assignment of the subsequent purchaser will still have a higher priority over it.  If the importance of registration lies in the giving of notice of claim to the subsequent purchaser and the claim is not for any proprietary interest of or charge on the property, then there is no reason to limit the mode of giving of notice only to registration at the Land Registry and to compel such registration with the sanction of losing priority. 

72.  There are many ways and means for giving notice of infringement of the DMC to potential purchasers.  To post a copy of the writ on the notice board of the building or estate of which the premises form part can also achieve such purpose.  Hence, section 4 should not be for compelling registration for the mere purpose of giving notice of claims against breaches of DMC to subsequent purchasers, but to compel registration of judgment (or lis pendens) that claims an interest of or charge on the property in question.  This can facilitate the tracing and ascertaining of title.

73.  Sections 5 and 5A are also for regulating priority. My observation under section 3(1) applies to them as well.  These sections therefore are not to provide for the registration of a claim like the Counterclaim as a lis pendens. 

74.  Section 16 restricts the registration of a lis pendens to the Land Registry.  It further provides that a lis pendens not registered will not bind any purchaser or mortgagee.  My observation under section 4 also applies here.  Section 16 therefore also appears to govern a lis pendens that claims an interest of or charge on the property in question and not the Counterclaim under consideration.

75.  Section 17 stipulates the need for re-registration of a lis pendens and judgment once every five years.  If the purpose or one of the main purposes of registration of a lis pendens is to give notice of claim against breaches of DMC like the Counterclaim, then there is no reason why such lis pendens needs to be re-registered once every five years.  I cannot see why a lis pendens can only give notice of its contents for five years after its registration and will no longer give any notice after five years.

76.  To sum up, all the provisions of the ordinance considered above are to provide for and regulate the registration of a lis pendens that claims a proprietary interest or right in a real property.  They also regulate the priority of the claim in the lis.  The need to re-register a lis pendens is to ensure that it is a live claim.  The registration of a lis pendens is not for the purpose of giving notice to a subsequent purchaser or mortgagee of allegations of breaches of DMC committed within a property and the claim for restoration to be executed within the property as in the Counterclaim.

77.  Regarding the words “relates to” in section 1A, I respectfully borrow what Briggs J said in Thian’s Plastics about the word “affects” (p 253 lines 2-12) and apply the same to these words.  The learned Judge was referring to the meaning of the word “affected” as used in sections 2 and 15 of the Ordinance.  Section 15 has been repealed, but section 2 remains.  I would say that the words “relates to” are not a term of art and can have a very wide meaning. But I think their correct meaning should be ascertained by reference to the meaning and effect of the sections in the Ordinance that I have considered above.

78.  Mr Yeung has also sought to argue that notice of a claim of injunction can be given to the subsequent purchaser by registration. The purchaser, having such notice, will find it very difficult to resist such relief being claimed against him.

79.  However, the injunctive relief is merely for enforcing the claim.  If the claim itself is not registrable, the injunctive relief is likewise not registrable as it is not an independent cause of action (see Kwan Sec Wah above).

80.  Furthermore, the incorporated owners or manager of an estate or building has no obligation to notify any potential purchaser or mortgagee of breaches of DMC committed inside any property or of any claim for restoration of the property.  I cannot see how any subsequent purchaser or mortgagee can dispute liability for such claim or to resist any particular kind of relief by alleging that the incorporated owners or building manager has failed to give him notice of such claim or prayer for relief that had been made against his predecessor in title before his purchase.  It is for the purchaser to find out whether there are any UBWs in the property or any existing and unrequited breaches of the DMC before completion.

81.  To allow a lis pendens like the Counterclaim to be registered at the Land Registry may facilitate the enforcement of the covenants in the DMC.  However, this requires new legislation to be enacted preferably in the Building Management Ordinance. 

Decision

82.  Having found for the plaintiff on the question of registrability, I do not think it necessary for me to consider the plaintiff’s 2nd ground; namely that even if the Counterclaim is registrable, there is a good cause to vacate the Counterclaim from the registry.

83.  Regarding the source of the power of the court to vacate the registration of the Counterclaim, I do not think I should rely on section 19 of the Ordinance.  That section gives the court the power to vacate a lis pendens that is registrable as such.  I would instead rely on the inherent jurisdiction of the court and order the vacation of the Counterclaim from the Land Registry (see Thian’s Plastics, p 255 lines 5-16). 

84.  In the premises, I allow the plaintiff’s appeal. I also make a costs order nisi that the IO do pay the plaintiff the costs of the appeal and below.

HCA 1485/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1485 OF 2013

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D E C I S I O N

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1. This is a summons by the plaintiff to vacate a registration of lis pendens under section 19 of Land Registration Ordinance Cap 128.

I.  Background

2. The plaintiff was the owner of a top-floor apartment in a development known as Manhattan Court and the claim against the Incorporated Owners of the Manhattan Court concerned various alleged failures causing, amongst others, water leakages into the apartment.

3. The defence and counterclaim alleged, amongst others, that the water-leakages were caused by illegal structures the plaintiff (or previous owners) erected on the roof of the apartment against the DMC.  The defendant sought, amongst others, an injunction against the plaintiff to remove the illegal structures and reinstate the condition of the roof.

4. Accordingly, the defendant registered a lis pendens against the apartment on 16 October 2013.

5. Around May and June 2014, the plaintiff took steps to remove various alleged illegal structures but the defendant did not vacate the registration.

6. The plaintiff took out this summons on 22 September 2014.

7. In opposing the plaintiff’s application, the defendant has exhibited an expert report stating, in essence, that the removal of illegal structures and reinstating roof condition were incomplete.

8.  In the meantime, before this hearing took place, the plaintiff has sold the apartment to a third party (completion date was 31 October 2014).  Paragraph 36 of the Agreement to Sale and Purchase reads (as translated to English): “…seller shall be responsible to vacate the registration Sealed Copy Defence and Counterclaim (Memorial No. 13101601110054) (that is, the lis pendens in question here), matters related to this registration has no relation with the purchaser, responsibility to vacate this registration and costs of such shall be borne by the seller.”

II.  The relevant ordinance

9. Section 1A of Land Registration Ordinance defines “lis pendens” as “(a) any action or proceedings pending in a court…that relates to land or any interest in or charge on land…”

10. Section 19 of the ordinance states “the court….may on the determination of the lis pendens, or during the pendency thereof, where the said court…is satisfied that the litigation is not prosecuted bona fide, or for other good cause, make an order for vacating of the registration…”

11. Section 20 of the ordinance concerns the “mode of making application” which “may be….by summons in chambers, and may be made by any person interested in the property against which the lis pendens has been registered, whether such person is a party to the lis pendens or not.”

III.  Arguments

12. One argument raised by the plaintiff was that “the litigation was not prosecuted bona fide” because the plaintiff had already remedied the breach but the defendant has not vacated the registration.  Further, the neighbouring apartments also appeared to have illegal structures but no action has been taken by the defendant.

13. I have pointed out that it is not the role of the court in the current application to find whether there are illegal structures still remaining, but since the defendant has expert support that there are, the counterclaim should be considered “bona fide”.  The fact that there may be other illegal structures in neighbouring apartments does not make the counterclaim not bone fide.

14. Mr Yim, counsel for the plaintiff, submitted that he would abandon this argument.  The plaintiff must therefore satisfy the court whether there are “other good cause” to vacate the registration.

15. The other argument was one concerning “locus standi”.

16. This argument was originally raised by the defendant as a preliminary point.  Mr Yeung, counsel for the defendant, submitted that since the plaintiff was no longer the owner of the apartment, it no longer has any interest in the property against which the lis pendens has been registered (section 20).  It was clear that the remedy sought in the counterclaim could no longer be enforced upon the plaintiff.  Thus this summons should be struck out for lack of “locus standi”.

17. However, my view is that section 20 is not drafted “restrictively”, it only stated that “summons…may be made by any person interested in the property against which the lis pendens has been registered…”.  I can envisage situations when, acting upon evidence that satisfied the requirement of section 19, the court may on its own motion order the vacation of a lis pendens.

18. This however raised a new argument, readily adopted by Mr Yim, which was whether, since the remedy of the counterclaim could no longer be enforced upon the plaintiff, this should be a “good cause” to vacate the lis pendens.

19. In deciding this, the court shall consider the purpose of registering a lis pendens.

20. Lis pendens is “any action…pending in a court….that relates to land or any interest or charge on land.”

21. In the current case, the defendant raised a defence and counterclaim, amongst others, alleged that various illegal structures on the roof of the apartment had caused the water-leakages thus the defendant was not responsible.

22. The relevant part of the defence and counterclaim that “relates to land affects an interest in the land” is the allegation of the breach in DMC regarding the illegal structures etc (Fairview Park Property Management Ltd v Top Express Development Ltd [1993] 3 HKC 625).

23. An important purpose of registering the lis pendens is: -

“to put any subsequent purchaser on notice of the actual breach of the DMC. This is the very purpose for which the registration is intended. A purchaser who buys the property with notice of the plaintiff’s claim to enforce its right pursuant to the DMC would have great difficulties in resisting the plaintiff’s claim for mandatory injunction pursuant to the terms of the DMC.”

(Fairview Park Property Management Ltd v Top Express Development Ltd [1993] 3 HKC 625).

24. Therefore, absent of any finding of prosecution being “not bona fide”, the only “good cause” I can think of to vacate the registration in this case is if the issue of the breach of DMC has been resolved: eg if the parties have come to a consensus that all the illegal structures have been removed and the roof has been totally reinstated to its original condition, or if the court, having assessed all evidence at the substantive hearing, found that there is no breach of the DMC.

25. It does not, therefore, matter if the remedy sought in the counterclaim cannot now be enforced upon the plaintiff.  The defendant can enforce its right pursuant to the DMC against the current owner or any subsequent owners and the “very” purpose of the lis pendens is to put them on alert.  So long as the issue of breach of DMC remains unsettled, there seems to be no good cause to vacate the registration.

26. As for paragraph 36 of the Agreement to Sale and Purchase, this is no more than a private agreement between the plaintiff and the purchaser and it cannot discharge the purchaser, the current owner of the apartment, from any liability incurred by a breach of the DMC.  At most, the purchaser may recover against the plaintiff for breach of this agreement.  I understand from Mr Yim that a sum of HK$500,000 is being held at present by the stakeholder pending the resolution of this issue.  Thus it appears that either way, the purchaser has some protection.

27. I will therefore give the following orders: -

(a) The summons be dismissed; and

(b) Cost of the summons be to the defendant to be taxed if not agreed with certificate to counsel.