LLAW3105 Land Law III DMC and Building Management Christopher Chan

LLAW3105 Land Law III (Conveyancing)

Deeds of mutual covenant and building management

Nature of ownership of units in multi-storey building

(1) Tenancy in common with other co-owners

(2) Exclusive use of unit
(3) Common parts
Co-owners have implied right to pass along the common parts
Chiu Shu Choi v Merrilong Dyeing Works Ltd [1990] 1 HKLR 385
- Facts
o Lift access to the industrial building for the first to eighth floors and a staircase for
the first to ninth floors; the occupier of the ninth floor could use the lift to the eighth
floor and the staircase to the ninth floor
o Such arrangement was not acceptable to the Fire Services Department and the
plaintiff found that the premises was only accessible by climbing nine flights of stairs
o The plaintiff had equal undivided share in the land and the building as a whole
- Judgment
o Owner cannot have easement over his own land, so the rights of the plaintiff were
on other basis. The rights were derived from the DMC
o Ninth floor was constructed to be used as a factory. It would be virtually unusable as
such without recourse to the lift
o Plaintiff had express right to use the lift in the Third Schedule of the DMC
o True construction of DMC implied a right of passage by necessary implication

Silver Triumph Holdings Ltd v Guardian Property Management Ltd [2012] 3 HKC 391
- Facts
o The applicant was the manager (the Manager) of a Kowloon City estate and the
respondent was the registered owner (the Owner) of the public and private car parks
in the estate, which used a mechanical parking system
o To gain access to the machine room for maintenance and repairs to the car-lifting
machines, it was necessary for the Owner to pass through the refuse storage chamber,
which was part of the common area and was always locked for security reasons by
the Manager, and to climb up a cat ladder
o The Owner was provided with a key when access to the machine room was required
and would return it after use
o Unsatisfied with this arrangement, the Owner obtained an order from the Lands
Tribunal that it should be provided with a duplicate key to enable it to have free and
direct access to the machine room
o Owner relied on Clause 7 of DMC: “Every Owner shall have the full right and
liberty (in common with the Manager and others having like rights) for all purposes
connected with the proper use and enjoyment of his part of the Building to go pass
and repass over and along and to use the Common Areas and Facilities
PROVIDED THAT only the residents/tenants of the Flats and their visitors of the
Residential Part shall have the right to use and enjoy the podium garden, clubhouse
and recreational area located in the Third Floor of the Build-ing and SUBJECT
ALWAYS TO the provisions herein, the rights of the Manager and the House Rules
relating thereto”
o Manager relied on “full and unrestricted authority” to manage the common area and
facilities under Clauses 31 and 33 of DMC
- Judgment

1
LLAW3105 Land Law III DMC and Building Management Christopher Chan

o Owner's access via the Refuse Storage Chamber to carry out repairs and maintenance
of the equipment in the Machine Room is clearly connected with its proper use and
enjoyment of the public car park
o Owner's right is subject to the Manager's right in Clause 31 of DMC
o Manager’s right of control over common areas and facilities shall be construed
consistently with other provisions in DMC. Clause 33 that any rules, regulations or
conditions made by the Manager regulating the use of the common areas and facilities
shall not conflict with the provisions in the DMC, including provisions relating to the
rights of owners
o The rights of parties under a deed of mutual covenant are not absolute and must as
a matter of construction be subject to an element of reasonableness and also must
coexist with other provisions in the DMC unless specifically excluded
o In providing a duplicate key to the Owner, the Owner's right to access the Machine
Room via the Refuse Storage Chamber and cat ladder would not be interfered with.
The Manager's right of control over the common areas and facilities would not be
affected as security would not be compromised. Refusal to provide a duplicate key to
the Owner was unreasonable in the circumstances

Whether IO can hold undivided shares and the common part and sell them
IO of Lee Hang Industrial v Billion Development & Project Management Ltd (2008) HCMP
2243/2007
- Judgment
o Ownership of property is constituted by a bundle of rights which includes the power
to sell or dispose of the property owned. Unless there is some express provision to
the contrary, the power to sell one’s property must be implicit in the power to own.
There being no statutory or contractual provision limiting the Incorporated Owners’
right to sell, it must follow that they have the right to sell the property which they
own in the Building
o Nothing in the BMO “shall prevent an owner from selling, assigning, mortgaging,
charging, leasing or otherwise disposing of or dealing with his share.” The provision
thus recognises that the power to own undivided shares in a building acknowledged in
s. 8(2)(aa) brings along with it the power to sell. IO are owners for the purpose of
BMO. Hence IO can own undivided shares in a building and sell it
o All owners in the Building (including the Incorporated Owners) have agreed to sell
their undivided shares and interests in the Building to Champion for the purposes of
re-development

Developer does not own common parts and cannot use them exclusively or assign them to
individual owners
Chow Sai Ping v Chan Yam King [2013] 2 HKLRD 280
- Facts
o P and D, the owners of adjacent residential units (the Flats) in a multi-storey building,
disputed ownership of a corridor area in which D had erected a metal gate at the
doorway of her flat
o In 1965, the developer agreed to sell the Flats to X (the Agreement). An annexed
floor plan showed that the Agreement did NOT include the disputed area. Under Sch.
1 of a deed of mutual covenant of 1966 (DMC), the developer retained exclusive
possession and use of inter alia the Flats described in the Agreement.
o Later in the same year, the developer assigned the Flats to X (the Assignment), but
the annexed plan showed the property apparently assigned also INCLUDED the
disputed area.
o The Flats were then sold separately until P and D acquired them.
o P brought proceedings against D, claiming the disputed area belonged to him since it
had been assigned to his predecessor-in-title. D maintained that: the disputed area was

2
LLAW3105 Land Law III DMC and Building Management Christopher Chan

a common area of the building given the reference in the DMC to the Agreement,
thereby incorporating by reference the annexed plan; and relied on the building plan
annexed to the Agreement (which predated the DMC); and no regard should be had to
the plan annexed to the Assignment, since this post-dated the DMC and thus could
not assist in determining what were the common parts. T
o he Deputy Judge found that the disputed area was part of P's premises. D appealed.
- Judgment
o The designation of parts of the Building as common parts, to which all owners of
units in the Building had rights of access (and thus not in the exclusive possession of
any owner), was effected by the DMC
o It is evident from the First Schedule to the DMC that the Developer's reservation of
rights of exclusive possession in respect of Nos.23 and 25 on the Fifth Floor did
NOT extend to the disputed area [Quaere: what if DMC did reserve the right of
exclusive possession to the common area to the developer?]
o This is because the First Schedule stated that Nos.23 and 25 on the Fifth Floor (of
which exclusive possession was reserved to the Developer) were as described in the
Agreement, from which it was clear that the disputed area was not part of those
units, or either of them
o The disputed area was thus a common area of the Building, over which all owners of
shares in the Building had rights of access, and the fact that the Developer had
purported subsequently to assign the disputed area to the first plaintiff's predecessor-
in-title can make no difference, for the Developer could not thereby convey
something which he did not own

No one shall convert common parts for their own use

Building Management Ordinance s.34I
(1) No person may-
(a) convert any part of the common parts of a building to his own use unless such
conversion is approved by a resolution of the owners' committee (if any);
(b) use or permit to be used the common parts of a building in such a manner as-
(i) unreasonably to interfere with the use and enjoyment of those parts by any
owner or occupier of the building; or
(ii) to cause a nuisance or hazard to any person lawfully in the building.
(2) Any person who contravenes subsection (1) shall be deemed to be in breach of an
obligation imposed on him by the deed of mutual covenant in respect of the building.

NB Application of BMO s.34I irrespective of effective date and content of DMC

Building Management Ordinance s.34C
(1) This Part, except where otherwise expressly provided, applies only to a building in respect
of which a deed of mutual covenant is in force whether that deed came into force before or
after the material date.
(2) In the event of any inconsistency between this Part and the terms of a deed of mutual
covenant or any other agreement, this Part shall prevail.

Gallium Development Ltd v Len Tong Holdings Ltd (2004) CACV No 186/2003
- Facts
o The Building comprises a shopping arcade on the two basement floors, ground floor
and the 1st, 2nd and 3rd floors (“the shopping arcade”), the 4th to 8th floors used for
various restaurants and offices on the 9th to 26th floors
o The applicants were owners of some but not all of the office units. The 2nd
respondent (“R2”) was the owner of the shopping arcade, ie the basement to the 3rd
floor. The 1st respondent (“R1”) was the building manager of the Building.

3
LLAW3105 Land Law III DMC and Building Management Christopher Chan

o Air handling unit room on the 2nd floor of the Building was converted into a shop,
and a large vending machine on the corridor of the common area of the 3rd floor of
the Building was installed for the benefit of R2
o The applicants complained that R2 converted portions of common parts of shopping
arcade for its own occupation, enjoyment and use
- Judgment
o Breach of covenant implied by BMO s.34I
o There was no owner’s committee and so could not take advantage of BMO s.34I(1)
(a) to allow the conversion by resolution passed by the owners’ committee

(4) Developers reserving rights to parts of a building

Incorporated Owners of Cheong Wang and Cheong Wai Mansion v HKSAR [2001] 1 HKC 57
- Facts
o The proceedings concerned two blocks of flats that were completed in 1978
o The developer reserved to itself exclusive rights in relation to the right to fix notices
to the outside walls of the building and the right to occupy and use the yard on the
ground floor between the blocks. All the units were then sold, none being retained by
the developer
o In 1982, the shareholders of the developer resolved that the company be wound up
and the company was eventually dissolved
o The plaintiff argued that under s 292 of the Companies Ordinance (Cap 32) all
property and rights vested in or held on trust for a company immediately before its
dissolution were deemed to be bona vacantia and belonged to the Government. They
maintained that the rights granted by the deed of mutual covenant (DMC) were still
held by the developer prior to its dissolution and sought a declaration that this was the
case so that the Government could assign the rights in those parts of the building to
them to manage. The plaintiff argued that the rights were in the nature of easements,
or 'quasi-easements'.
o The defendant's case was that once all units of the building were sold, the developer
no longer owned any part of the equal undivided shares and any rights they had
reserved under the DMC were extinguished and reverted to the common owners of
the buildings
- Issue
o To whom did the rights reserved by the developer devolve either before or following
its dissolution, no assignment of them having been made prior to that
- Judgment
o The whole building is owned by those to whom shares have been allocated, including
the common areas, but with exclusive rights to occupy and use the unit to which those
shares relate, and there can be no right to any exclusive use except as an incident to
the ownership of an undivided share in the land
o It is this joint ownership of the whole property which prevents any right to use a
particular part being an easement, as one cannot have an easement over one's own
property, but such a right was considered by Lord Hoffmann to be in the nature of an
easement, and thus his description of it as a quasi-easement
o It follows that the developer, while still owning units in the building, may well have
held the rights set out in the DMC as quasi-easements, but once they had alienated
all those units and had no further proprietorial rights in any part of the building,
any rights in the nature of an easement attached to their ownership of the units
must have been extinguished. The view that an exclusive right of the use of land
can exist only as an incident to the ownership of a share in the land, whether as a
quasi-easement or otherwise
o There was no transfer of any of the rights reserved to the developer upon assignment
of the shares that they still held, and it must follow that such rights fell away as being

4
LLAW3105 Land Law III DMC and Building Management Christopher Chan

incapable of existence other than as an incident to the ownership of any of such

shares

Silver Carnival Ltd v Longbase Investments Ltd [2005] 2 HKC 681

- Facts
o In June 1979, the original parties to the Deed of Mutual Covenant (the DMC) agreed
to the allotment of shares of the building to be completed. Clause 11 provided that
none of the parties would cut or damage any of the main walls of the building.
Clause 19 provided that exclusive right to hold use occupy and enjoy the external
wall of the Building was reserved for the first and second owners and their
successors and assigns. There was no allocation of any shares to the external walls
of the building
o Over the years there were a number of assignments of the different flats in the
building. The result had been that the second owner did not own any part of the
building. The last assignment by the second owner was dated 30 August 1990 when it
assigned to the defendant's landlord its remaining equal undivided parts or shares of
the building together with the exclusive right to use, occupation and enjoyment of a
shop on the ground floor including a yard
o The plaintiff commenced the present proceedings seeking a declaration that it was
entitled to the exclusive right to use and enjoy the external wall of the building and
an injunction to require the defendant to remove the advertising sign for which it
was responsible on the external wall. It was the plaintiff's case that because the
second owner never purported to assign the right to use the external wall of the
building, the rights which the second owner had under cl 19 of the DMC ceased to
exist; in those circumstances, the sign which had been put up by the defendant on the
wall was in contravention of the plaintiff's rights
o The judge below concluded that the defendant's landlord did have the right to use the
external wall under the DMC
- Issue
o Whether it was at least arguable that the right to the exclusive use of the external wall
had been assigned to the defendant's landlord by the second owner by the assignment
dated 30 August 1990
- Judgment
o All conveyances by the second owner carried with them the consequence that there
was an assignment of the benefit of the interest held by the second owner in the
external wall (see CPO s.16(1): assignment operates to assign all rights, interests and
privileges)

Adverse possession

Ousting all other co-owners entirely from possession of the whole of the land
Tang Tak Sum v Tang Kai Fong [2015] 1 HKLRD 286
- Facts
o X, who died in 1965, had four sons, including P1-2's father (TYL), who headed their
own fongs.
o In 1939, by a Division of Family (DF), X divided certain land and houses equally
amongst the four fongs; designated the remaining land for ancestral worship after his
and his wife's deaths; and assigned the collection of rental income from agricultural
land in the New Territories (the Land) to D's father, TYS, who was then head of the
first fong, to pay for the ancestral worship of the family. In 1976, the heads of the
fongs succeeded to the land under the DF including the Land as tenants in common
each having a quarter undivided share (Share), and were registered as such.

5
LLAW3105 Land Law III DMC and Building Management Christopher Chan

o Ps currently held one Share, while D held three Shares and had rented out the Land as
a car park which was an unauthorised use.
o Ps brought proceedings against D seeking, inter alia, an account of the income and
expenditure of the Land.
o The Judge dismissed Ps' claim. She gave judgment to D on his counterclaim for
adverse possession of Ps' Share on the basis that D and TYS had been collecting rent
for their own use and benefit without accounting to anyone since 1978 (for 20
years) and that there was "presumed actual ouster" of Ps and TYL from possession
of the Land as a co-owner
- Judgment
o Appeal was allowed
o The starting point is that the possession of one tenant in common "A", in his capacity
as tenant in common, can never bar the other co-tenant "B", because such possession
is not adverse to B's rights, but in support of their common title. By paying B his
share, A acknowledges B as co-tenant. A's refusal to pay B his share is not by itself
sufficient, without denying his title
o In order to claim adverse possession, co-owner would have to establish actual ouster
or dispossession, and an intention to possess

IO of San Po Kong Mansion v Shine Empire (2007) 10 HKCFAR 588

- Facts
o Under the DMC, P was entitled to exclusive possession of the roof. The IO granted
licences to telecommunications companies to install equipment on the roof in return
for substantial fees.
o In August 2001, P brought proceedings against the IO claiming possession of the roof
and licence fees collected. The IO counter-claimed that it had dispossessed P for the
requisite period of 20 years under ss.7(2) and 17 of the Limitation Ordinance
(Cap.347) relying on, inter alia, alleged acts of dispossession which occurred before
August 1981: (a) individual flat owners dried clothes and bedding on the roof; and (b)
owners installed television aerials on the roof's parapet walls
o CA found that the acts were not actual dispossession: (a) comprised individual
owners' temporary and trivial acts of trespass; and (b) exhibited an individual owner's
intention to exclude other owners from that spot occupied by his antenna and to serve
his own purposes, not the common benefit
o On appeal to the CFA, the IO argued that the individual owners by their respective
acts were asserting their right to joint possession to what they treated as a common
area for the benefit of themselves as co-owners, and so for the benefit of the IO
- Judgment
o To dispossess the respondent the owners would have to establish possession by an
appropriate degree of physical control and the requisite intention to possess ie an "
intention, in one's own name and on one's own behalf, to exclude the world at large,
including the owner. If they were to succeed in doing so, then they would establish
possession for themselves and not for the corporation
o The alleged acts plainly did not constitute or demonstrate the necessary factual
possession or requisite intention to possess

Cf. Foremost Hill Ltd v Bank of China (HK) Ltd HCA 2555/2013
- Facts
o P was the registered owner of Shop 4. D2 was the mortgagee bank of another Shop 6.
The two shops sat next to each other
o The partition wall dividing the two shops moved and part of the rear of Shop 6 was
physically included as part of the rear of P’s shop

6
LLAW3105 Land Law III DMC and Building Management Christopher Chan

o D2 argued that there was no ouster: there was no evidence that the IO of the subject
building, and the other co-owners, have all been ousted by the plaintiff (“the co-
ownership argument”)
- Judgment
o Factual proof of dispossession: (1) demands for rents and rates regarding P’s shop
and the subject area (supported by a letter issued by the Rating and Valuation
Department; (2) exclusive possession of the subject area during different periods
o The subject area was originally part of D1’s shop (and never formed part of the
common parts of the subject building). Neither the DMC nor the general law has
conferred any title to the IO the subject area. There is no suggestion the IO have
asserted any exclusive rights over the subject area. The same observations apply to
the other co-owners of the subject building
o One co-owner could assert adverse possession of another co-owner’s exclusive use
area

Cf. Strangers/Trespassers
Yeung Mau Cheung v IO of Ka Ming Court, Castle Peak Road [2013] 4 HKLRD 211
- Facts
o From about October 1969, P1 and his mother had exclusive possession of two
portions of the common parts on the ground floor of the building, on which they ran a
refreshments shop which had its own water and electricity supply and used a storage
area. Both suit portions were enclosed by wooden boards and later by metal gates
o In or about 1983, P2 took over from P1's mother in running the shop. In about 2009,
D, the incorporated owners (IO) of the building, began to take action against Ps over
the suit portions, when the ground floor of the building was converted into a large
shopping arcade. Ps then claimed a possessory title by reason of their adverse
possession of the suit portions
- Issue
o Whether the plaintiffs, who were not owners of the Building or privy to the DMC
would be bound by the DMC and/or s.34I of the Building Management Ordinance
(Cap.344) (the BMO)?
- Judgment
o The 1st plaintiff, his mother and the 2nd plaintiff were never co-owners of the
Building. They had never covenanted to use the common part namely, the Suit
Portions only in common with the owners of the Building
o The purpose of s.34I of the BMO is to incorporate into every DMC a provision to
enable the IO to regulate the use of common parts where there are no express
provisions in the DMC. It would be surprising if by a side-wind, the legislation has
resulted in a change in the law with the the subject property having been designated a
common part, there could not be adverse possession at all, whether by a co-owner or
a stranger to the DMC
o BMO s.34I(2) does not create a new statutory cause of action which overrides a
possessory title obtained by adverse possession just because the land happens to have
been held by incorporated co-owners
o The owners of the Building had covenanted only with one another to possess the
Lane in common and not exclusively. P was not a party to the DMC. P’s intention
was to exclude all the owners (and the IO) of the Building. Accordingly at the end of
the relevant period under the Limitation Ordinance, the plaintiff extinguished the title
to the Lane which was adverse to his own, ie the title of all the owners of the Building
(and the IO). By then it did not matter what were the restrictions imposed on the use
of the Lane by the owners under the express provision in a DMC, or by the IO under
the incorporated provision of s.34I of the BMO. Once their title to the Lane was
extinguished, the owners (and the IO) no longer had any right to it which they could
enforce against the plaintiff

7
LLAW3105 Land Law III DMC and Building Management Christopher Chan

Further division of shares

New co-owners under sub-DMC are liable to observe the covenants in the head DMC
Incorporated Owners of San Po Kong Mansion v Island Management Services Ltd [2007] 1 HKC 206
- Facts
- Judgment

Owners of other parts and manager have no right to interfere with matters solely concerning
the property which is the subject of sub-DMC
Incorporated Owners of Po Lok Building v Leung Koon [2006] 3 HKLRD 876
- Facts
o Po Lok Building (the Building) was a mixed commercial and residential building,
with the commercial portion on the ground to third floors. The DMC provided that
the Building was made up of 330 equal undivided shares, 87 of which were owned by
the commercial portion.
o In 1981, the sole owner of the commercial portion converted it into a commercial
centre that consisted of more than 100 shop premises and some "common" areas
o As the shop premises were sold to different people, they also entered into a sub-DMC
in order to regulate the "common" areas within the commercial centre. The sub-DMC
converted those 87 shares into 2,313 shares and distributed them among the owners
of the commercial centre. The sub-DMC had nothing to do with the residential
portion.
o Subsequently, the IO was established for the Building pursuant to the DMC, and at
the same time, an owners' committee (the OC) was set up pursuant to the sub-DMC.
The OC appointed a manager to assist in managing the "common" areas in the
commercial centre.
o The IO sought declarations that: (a) the OC and the manager be discharged from
managing the commercial centre; and (b) only the IO be entitled to manage the
commercial centre including its "common" areas
- Judgment
o The owners of the shop premises at the BCC (except Shop No.4 on the Ground Floor)
are jointly and severally bound by both the DMC and the sub-DMC
o The owners of the BCC enjoy the right and freedom of association. They have the
right to enter into the sub-DMC and establish the Committee in accordance with
the sub-DMC. They also have to perform their contractual obligations as set out in
the sub-DMC, including the obligation to pay the relevant management fees
o As a matter of contract, the sub-DMC arrangement only concerns the owners of the
BCC and has nothing to do with the other owners of the Building. As long as the
owners of the BCC as a whole perform their obligations under the DMC, the
Corporation has no right to interfere with whatever arrangements they may make
pursuant to the sub-DMC
o However, the owners of the BCC are subject to the provision in the DMC that the
sub-DMC that they enter into cannot contravene the terms of the DMC, or they will
be in breach of the DMC. In fact, a number of provisions in the sub-DMC (cls.1, 9,
14, 15(18)) make express reference to the DMC and provide that the owners of the
BCC must comply with the terms of the DMC
o The 2,313 shares include the shared areas and facilities at the BCC. It follows that
the "common" areas and facilities at the BCC are "specified or designated in an
instrument registered in the Land Registry as being for the exclusive use,
occupation or enjoyment of an owner" and hence are not common parts of the
Building
o The shared areas and facilities at the BCC as derived from the "sub-DMC" are to be
used, occupied and enjoyed exclusively by the owners of the shop premises at the

8
LLAW3105 Land Law III DMC and Building Management Christopher Chan

BCC. Although those areas and facilities are jointly enjoyed by the owners, they do
not form the common parts of the Building
o In respect of the "shared" areas and facilities at the BCC as derived from the "sub-
DMC", their use and management fall within the domain of the whole body of
owners of the shop premises at the BCC and have nothing to do with the other owners
of the Building. The Corporation has no right or duty to deal with such use and
management, which are not governed by the DMC

Contents of typical deed of mutual covenant

(1) Express terms
Covenant that reserves all other units to developer can be implied
Goodtex Land Co Ltd v Lung Kwong Emporium Co Ltd [1993] 1 HKC 645
- Facts
o The original owner of a six-storey building sold the property floor by floor between
the late 1950s and the early 1960s. All the conveyances on sale contained identical
terms which included the rights of the purchasers to the exclusive use of the floors
which they bought. But the owner did not expressly reserve to himself the right to
exclude the first purchaser from the use of the remaining floors. Nor was there a
deed of mutual covenant setting out the rights and obligations of the owners in the
building inter se
o These omissions greatly concerned the plaintiff who agreed to buy two floors of the
building. The plaintiff took out a vendor and purchaser summons asking the court to
declare whether the defendant's title was defective
- Judgment
o Declaration in favour of title
o Would it not also give to the first purchaser the right to use all the other floors in
common with the assignor since the right to exclude the first purchaser from the use
of those other floors is not reserved expressly to the assignor? If the first conveyance
on sale operated in this way, subsequent conveyances of other floors would always be
subject to the right of the first purchaser (and, perhaps, other subsequent purchasers)
to use the other floors
o It is quite true that no such reservation or exclusion is expressed, but I have no
doubt that as a matter of commercial necessity, it does have to be implied. The
conveyances on sale could not be made to work without such an implied reservation.
Even if that be wrong, it is to be observed that the properties (so far as the evidence
goes) have been enjoyed in accordance with the title for upwards of 30 years, with-
out any such problem as that which is now said to exist ever having reared its head. I
am of the opinion that, although there is a theoretical risk that the argument for
the purchaser might just possibly be correct, the risk of it being success-fully
asserted is fanciful. It ought, accordingly, to be ignored. The purchaser will, no
doubt, be stuck with the property it agreed to purchase, notwithstanding that there is
no deed of mutual covenant to regulate its rights and the rights of the other owners of
no 83 Chung On Street inter se. That is unfortunate; but I do not believe that it is
enough to justify my holding that the title is, in any way, defective. The law will
provide, as and when necessary, for what is to be done when any problem arises as
between the co-owners. No question of a defect in title arises

Cf. Silver Pioneer International Ltd v Good Onwards Co Ltd [2004] 4 HKC 253
- Facts
o The plaintiff purchaser and the defendant vendor entered into a provisional S&P for a
ground floor shop in Kowloon (Shop 5)
o The original owner of the whole of the ground floor partitioned the floor into seven
shops and allocated the undivided shares it held in respect of the floor separately to

9
LLAW3105 Land Law III DMC and Building Management Christopher Chan

the various shops. On 17 May 1990, the original owner assigned the relevant portion
of the shares in respect of Shops 1 and 2 of the partitioned floor to Hillgem Ltd and
entered into a (Sub-DMC)
o D subsequently acquired Shop 5 which was subdivided into five shops. A cockloft
was constructed in two of the five shops covering the whole area of the respective
shops. Beneath the ground floor was a basement. The sub-division and the cocklofts
were not shown in the approved building plans of the building.
o The plaintiff raised two requisitions. The first requisition questioned the validity of
the Sub-DMC which was duly executed by Hillgem by sealing the common seal and
signed by a person identified as one of the directors. The plaintiff sought the
production of the board resolution of Hillgem but the defendant's solicitors rejected
the request arguing that the production of the board resolution was not necessary
because the Sub-DMC was not a necessary document to prove title. Alternatively, the
defendant relied on s 23A of the Conveyancing and Property Ordinance (Cap 219) as
to the pro-priety of the execution of the Sub-DMC by Hillgem, even though s 23A
took effect on 9 May 2003, two weeks after the date of the agreement. In the event,
no board resolution was produced before completion
- Judgment
o In respect of the clauses ensuring exclusive possession, he argues on the authority of
Goodtex Land Co Ltd that no problem of exclusive possession would arise even if the
Sub-DMC was never executed because the assignment of the Property itself provides
for exclusive possession of the Property and that such right could as a matter of
commercial necessity be implied under the principle in Goodtex Land Co Ltd. With
respect, I do not agree. The facts in Goodtex Land Co Ltd is peculiar in that the
property in question was a six-storey building which composed of a small number
of units. On such peculiar facts and thirty years quiet enjoyment, the reservation
could be readily implied. In Polyson Jewellery Co Ltd & Anor, there were more than
eighty different flats in the building concerned. Hang Shun Building in the present
case is a modern high rise building composed of many more units. Such covenant
as regards exclusive possession could not be readily implied in the present case.
o It should also be noted that what Godfrey J did in Goodtex Land Co Ltd was to imply
into the conveyances on sale a reservation of the right to exclusive possession, which
is an item usually to be found in a deed of mutual covenant. I do not think the case
established any principle of law that in the absence of a DMC, the court will
necessarily imply such a right of exclusive possession binding on all the owners.
Even if such a right could be implied, the defendant never relied on that in their
answer to the purchaser's requisition. What the court has to consider in this case is not
whether the vendor had a good title but whether he has sufficiently answered the
purchaser's requisition and showed a good title

(2) Implied terms

BMO s.34E
(1) Subject to subsection (4), the provisions in Schedule 7 shall be impliedly incorporated-
(a) into every deed of mutual covenant made on or after the material date; and
(b) as from the material date, into every deed of mutual covenant made before that
date.
(2) The provisions incorporated into a deed of mutual covenant by virtue of this section shall-
(a) bind the owners and manager of the building; and
(b) prevail over any other provision in the deed that is inconsistent with them.
…
(4) The Authority may-
(a) subject to subsection (5), upon application by the manager of the building or any
other person having an interest in the management of the building; or

10
LLAW3105 Land Law III DMC and Building Management Christopher Chan

(b) in the case of an exempt estate, upon the application of the person ("the single
manager") who for the time being is, for the purpose of the deed of mutual covenant
in respect of the buildings or groups of buildings comprising the estate, managing that
estate,
from time to time by notice in the Gazette, exclude the application to the building, or to the
buildings or groups of buildings comprising the exempt estate, as the case may be, of
paragraph 7 of Schedule 7 for a period not exceeding 3 years and subject to such conditions
(if any) as he sees fit.
(5) The Authority shall NOT exclude the application to the building of paragraph 7 of
Schedule 7 under subsection (4)(a) if the Authority receives a number of notices of objection
from the owners of not less than 50% of the shares in aggregate in respect of that building,
such notices opposing the application under that subsection.

(3) Construction of DMC

Jumbo King Ltd v Faithful Properties Ltd [1999] 3 HKLRD 707
- Facts
o The appellant purchaser (the purchaser) agreed to buy from the respondent vendors
(the vendors) various units in a multi-storey building; the purchaser rescinded the
agreement on the ground that the vendors were unable to show good title to certain
parts of the property
o The building comprised both domestic and commercial portions. When the developer
first sold the property, shares were allocated to specific units in the building, but
none were allocated to any of the utility rooms or the flat roofs. The purchaser had
contracted to buy, inter alia, four utility rooms and two flat roofs, and raised a
requisition as to the vendors' rights to assign those parts of the property which were
not allotted undivided shares
o It objected to title on the ground that the utility rooms were common areas and the
vendors did not have the right to exclusive possession of such areas. The purchaser
commenced legal action for the return of its deposit.
- Judgment

Rights and duties of co-owners

(1) Rights of co-owners
(2) Duties of co-owners

Liability for acts of prior owners

House rules
Tsang Chi Ming v Broadway-Nassau Investments Ltd [2008] 6 HKC 19
- Facts
o The Plaintiff (P) was a tenant of a flat in a private housing estate, Stage VII of Mei
Foo Estate. He also kept a dog at his flat, in regard to which the dispute arose. The
first Defendant (D1) was the management company responsible for the management
of the estate
o D1 repeatedly demanded that P remove the dog from the flat. The second Defendant
(D2), the incorporated owners of the estate, also demanded that P remove the dog
from the flat stating that keeping the dog in the flat was in breach of the House Rules
of the estate made by D1 for the management and upkeep of the estate
o P refused to comply with D1's demand and commenced legal proceedings for
declaratory relief
o DMC contained no provision prohibiting the keeping of dogs
- Judgment
o DMC delegated the power of making House Rules only to D1, the appointed manager
of the private housing estate. It did not delegate that power to any other entity,

11
LLAW3105 Land Law III DMC and Building Management Christopher Chan

management committee or to the Incorporated Owners. Further DMC did not qualify
the power delegated to D1 by any requirement for approval or consent there from
o The covenant requiring owners to com-ply with the House Rules, which might be
made from time to time by D1, related to land and was enforceable against
subsequent owners by virtue of s 39(1) of CPO
o There was no need for the House Rules to be registered with the Land Registry and
failure to do so would not affect their validity. DMC, which was registered, expressly
referred to the House Rules and any owner having obtained a copy of DMC would
and should have realised the existence of the House Rules, that he could obtain them
from D1 as the manager and would accordingly have also had knowledge of the
existence of the power of the manager to make rules under DMC and their obligation
to be bound by the rules
o The basis for enforcement of the House Rules was the express power under DMC for
the manager and the Incorporated Owners to enforce a covenant in the deed itself,
namely the express covenant requiring owners to comply with the House Rules.
However, the House Rules were legally subsidiaries of the deed of mutual covenant
and were inherently inferior to the deed. It followed that any House Rule(s) that
contradicted terms set out in the deed should be invalidated to allow the deed to
take preference (paras 48, 53)
o Rule 3 of the House Rules, which purported to prohibit the keeping and/or raising of
dogs in the private housing estate (including the owner's unit), was made by D1
acting ultra vires its authority under the deed of mutual covenant, which was limited
to rules relating to the use of common parts and access areas. Further, rule 3 of
the House Rules was inconsistent with the clause in the deed guaranteeing owners
the full right and privilege to the exclusive use, occupation, and enjoyment of
their unit and the clause guaranteeing the full right and liberty of owners to pass
and repass and have reasonable access and usage of the common parts of the
estate and was therefore invalid

If rules are part of the DMC, they are in effect covenants and must be read in the context of the
DMC as a whole
IO of Hang Tsui Court v Ho Fu [2011] 6 HKC 40
- Facts
o In 2009, the applicant, the IO of Hang Tsui Court, successfully obtained an injunction
against each of the 10 respondents who were owners of various flats of Hang Tsui
Court from bringing dogs into the Estate or keeping them there, in breach of an
express House Rule contained in the Third Schedule to the Deed of Mutual Covenant
(DMC)
o Five of the respondents appealed and on 16 September 2011, their appeal was
dismissed with costs
- Judgment
o The DMC gave the Manager the power and function to 'make revoke and amend
House Rules ... The House Rules set out in the Third Schedule hereto shall come into
force on the date of these presents and shall remain in force until re-voked or
amended ... ' and para (15)(a) to the Third Schedule provided that 'No dog may be
brought or kept upon any part of the Estate or the Common Areas of any building
therein'
o Para (15)(a) was part of the Third Schedule which was contained in the DMC itself.
There was but one document. One should therefore read the document as a whole to
see if para (15)(a) was reconcilable with cl 1(b) of the DMC which provided for the
First Purchaser to have 'the sole and ex-clusive right and privilege to hold use occupy
and enjoy to the exclusion of the Authority [the Hong Kong Housing Authority] All
That the First Purchaser's Flat ... '

12
LLAW3105 Land Law III DMC and Building Management Christopher Chan

o If they were reconcilable, it mattered not whether the House Rules were subsidiary,
and it would be immaterial to consider metaphysical notions such as whether the
Deed 'gave life' to the Third Schedule
o Paragraph (15)(a) and cl 1(b) were clearly reconcilable. Whilst cl 1(b) gave each
owner the general right to exclusive occupation of his flat, his enjoyment was
qualified by more specific provisions set out in the House Rules of which para (15)(a)
was one. Given that the residents of the Estate live in flats in close proximity, and
even the best trained dogs occasionally bark, it was clear that the intention of the
DMC was to sacrifice what might be regarded as the right of a resident to keep a dog
to the need to preserve peace and quiet for other residents. Once the two provisions
were reconcilable, that was the end of the matter
o Paragraph (15)(a) was an express House Rule and the House Rules were binding on
the respondents
- Obiter
o Regarding the argument in relation to the Manager's power to make, amend or revoke
House Rules, it was clear that the owners had delegated this power to the Manager
and he could make, amend or revoke House Rules, subject always to the provision
that they were not inconsistent with the provisions contained in the DMC regulating
the use operation maintenance and management of the Estate
o As for the Tsang Chi Ming case, it was clear that the ratio of that judgment was that
the DMC only authorised the manager to make House Rules regarding the use of the
common parts and the access area. The manager however issued a House Rule
purporting to cover the whole of the estate, including individual units. According the
judge found the manager had acted ultra vires. No question of ultra vires had been
raised in this case

Owners’ Corporation (IO)

(1) Duties of IO
(2) Powers of management committee on behalf of IO
(3) Budget of management committee
(4) Financial records and statements; insurance
(5) Dissolution of management committee

Action for breach of DMC

(1) Injunction
(2) Damages
(3) Imposition of charge
(4) Right of manager to redirect rent from tenant to owner

(5) Acquiescence
Incorporated Owners of Hoi Luen Industrial Centre v Ohashi Chemical Industries (Hong Kong) Ltd
[1995] 2 HKC 11
- Facts
o The IO and manager of the building (P), obtained a mandatory injunction compelling
the owner of one of the units in the building (D), to demolish and remove an air-
conditioning cooling tower which it erected in breach of DMC
o The judge found that the defendant had not proved that the plaintiffs acquiesced in its
erection of the cooling tower
o D appealed, alleging that it was unfair and unjust that it should be singled out and
ordered to remove its cooling tower while other owners had done the same and had
not been called on or compelled to remove their cooling tower
- Judgment
o IO were placed under a statutory duty to do all things reasonably necessary for the
enforcement of the obligations contained in the DMC. When the IO found that there

13
LLAW3105 Land Law III DMC and Building Management Christopher Chan

was a breach of covenant being perpetrated by one of the owners, it was not only
their right but their duty to seek to enforce the covenant
o It followed that in the instant case the plaintiffs were not only entitled but bound to
take proceedings for the enforcement of these covenants. It also followed that they
could not have granted expressly to the defendant or any other owner of any unit in
the building the right to act in contravention of the deed of mutual covenant as the
defendant had done
o Although equity would sometimes restrain a plaintiff in the exercise of his legal rights
because it would be inequitable and unjust in all circumstances to allow him so to
exercise those legal rights, equity would not hold him bound by acquiescence to
allow something which he could not have allowed by express grant
o There was no good ground why in the exercise of the judge's discretion he ought to
refuse the injunction the plaintiffs claimed in order to secure compliance on the part
of the defendant with the negative covenants contained in the DMC. If the judge had
erred in principle, or had gone plainly wrong because he had made a faulty
assessment of the factors which it was his duty to take into account, then, no doubt, it
was the right and duty of the Court of Appeal to interfere. Here, the judge found that
the defendant had not proved that the plaintiffs had acquiesced in its erection of the
cooling tower and it would not be unfair to the defendant to grant the injunction
sought. No question of injustice or unfairness arose at all and no case for the
intervention of equity could be established

Cf. Hollywood Shopping Centre Owners Committee Ltd v IO of Wing Wah Building Mongkok
Kowloon (2011) CACV 185/2010

(6) Liability of owners’ corporation for injuries suffered by third parties

14