THE INCORPORATED OWNERS OF CHUNGKING MANSIONS v. SHAMDASANI, MURLI PESSUMAL

HCA001056/1988

1988, No.A1056

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H E A D N O T E

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COMMON PARTS OF BUILDING – DEED OF MUTUAL COVENANT – ADVERSED POSSESSION – ACQUIESCENCE – LACHES – WAIVER – ESTOPPEL – TIME FOR COMMENCEMENTOF ADVERSED POSSESSION AND THE INCIDENCE OF POSSESSION BEING ADVERSED WOULD NOT NECESSARILY BE THE SAME AS AGAINST ALL TENANTS INCOMMON – ADVERSED POSSESSION MUST BE ESTABLISHED AGAINST ALL TENANTS IN COMMON DURING PERIOD PRIOR TO THE INCORPORATION OF THE OWNERSUNDER CAP 344 – OUSTING OF CO- OWNERS FROM PARTS OF COMMON AREA OF BUILDING BY DEFENDANT’S PREDECESSOR-IN-TITLE NOT AMOUNTED TO ADVERSEDPOSSESSION WHEN HE ACKNOWLEDGED PUBLICLY THE SUBSISTENCE OF THE RIGHTS OF THE CO- OWNERS IN ASSIGNING SUCH COMMON PARTS TO THE DEFENDANTSUBJECT TO THE RIGHTS AND RESTRICTIONS CONTAINED IN PROVISIONS OF THE DEED OF COVENANT – DEFENCE OF LACHES ONLY AVAILABLE WHERE THEREIS NOT STATUTORY BAR – DEFENDANT NOT MISLED INTO BELIEVING NO ENFORCEMENT OF THE DEED OF COVENANT WOULD BE MADE – DEFENCE OF ESTOPPELAND ACQUIESCENCE FAILED FOR LACK OF RELIANCE ON PLAINTIFF’S CONDUCT – INDULGENCE GRANTED TO DEFENDANT’S PREDECESSOR-IN-TITLE PERSONALLYAS DEVELOPER OF THE BUILDING NOT A GENERAL ABANDONMENT OF RIGHTS UNDER DEED OF COVENANT – NO WAIVER ESTABLISHED

1988, No.A1056

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN
THE INCORPORATED OWNERS OF
CHUNGKING MANSIONS
Plaintiff
AND
SHAMDASANI, MURLI PESSUMAL Defendant

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Coram: Deputy Judge J. Chan in Court

Dates of hearing: 15, 16, 17, 18 and 19 April 1991

Date of delivery of judgment: 31 May 1991

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J U D G M E N T

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1. The plaintiffs are the Incorporated Owners of Chungking Mansions in Nathan Road, Tsim Sha Tsui, Kowloon. The said building was developedby one Jaime Chua Tiampo in 1961. The defendant is the owner of twenty shop units on the ground and first floors of the shoppingarcade, and eleven units in the upper floors and three main roofs in block A of the building. Of the defendant’s units, eight shopunits (“A shops”) and eight upper floor units (“A-10 units”) consist of what are called ‘A’ units. These ‘A’ units do not have anyundivided shares in the land, nor do they appear on the original building plans. They were in fact additional units erected on commonparts of the buildings out of recesses or encroachments in the corridors and lift lobbies. By these proceedings, the plaintiffs seekto enforce their rights as tenants in common of the land and the building thereon pursuant to the covenants in the Deed of Covenantdated 1st May 1962. To this end, the plaintiffs claim for declarations that the ‘A’ units were and still are common parts of thebuilding to be enjoyed by all co-tenants, and for which the defendant is not entitled to let out. An injunction to restrain the defendant’spossession of the ‘A’ units to the exclusion of the other co-tenants, as well as an order for possession are also being sought. Inaddition, the plaintiffs also claim damages.

2. The defendant contends that the plaintiffs’ right of action had been statute barred, by the time they commenced these proceedingsin February 1988, by virtue of the provisions of the Limitation Ordinance Cap.347. Further or alternatively, the defendant relied on estoppel acquiescence, laches and waiver in respect of his breaches ofthe covenants of the Deed of Covenants. The ‘A’ units in question were at all material times and are rented out to tenants, but noneof these tenants has been joined as a party to these proceedings. The defendant also counterclaimed for a declaration for extinctionof the plaintiffs’ interest / title under section 17 of the Limitation Ordinance.

3. Chungking Mansions consist of a total of 549 domestic units in five blocks of buildings over a three-storey shopping complex anda basement, according to the original building plans. The developer was one Jaime Chua Tiampo to whom the occupation permit dated11th November 1961 was issued. The units in question, (save B6 on the seventh floor which was assigned separately) were assignedby Jaime Chua Tiampo to one Maidstone Investment Limited, a Liberian registered company controlled by the Tiampo family, under anassignment dated 26th March 1980. The defendant purchased all his units from Maidstone Investment Limited in 1986 under an assignmentdated 1st July 1986. In both assignments, “the right to exclusive use occupation and enjoyment” of the ‘A’ units was also purportedlyassigned, subject to the Deed of Conventions, together with the other units.

4. It is the defendant’s case that prior to 7th February 1968, i.e. twenty years before the date of the present writ, Jaime Chua Tiampohad already erected the ‘A’ units on the common parts of the buildings. Those units were then let out to tenants over the years.The rents generated had always been kept by him, and subsequently by his son, Antony Tiampo. That the ‘A’ units had effectively beenrendered under the exclusive use of the Tiampos for over 20 years prior to the present proceedings.

5. In support, the defendant said he first came to Hong Kong in October 1968 and stayed for 3 months with his cousin who had an officeon the second floor of Chungking Mansions. He came again in 1971 and worked, and/or operated business, in various shops in ChungkingMansions until 1975. In January 1976, he rented shop 65 from Tiampo and operated his business there. He was successful and subsequentlywished to purchase shop 65, which he considered to have brought him luck. But as Tiampo was only willing to sell all the said unitsin a lot, he had to purchase all of them in 1986. He said during his stay at the place in the early days, he had occasion to seethe shopping arcades as well as the thirteenth to seventeenth floors when he walked about or went for meals. He said the conditionof the place was as it is now with no change. He gave particulars of the business of a few ‘A’ units at that time. He had not beento the other four A-10 units in question on the lower floors.

6. The defendant also called one Panjabi Jethanand Moolchand (D.W.3) as his witness. He said that since 1965 he had often visited ChungkingMansions. He said the condition there was the same as it is. He did not notice any construction or decoration work in progress inthe shopping arcades since that time.

7. Mr. Kevin Leonard Eaton (D.W.2) of the Rating and Valuation Department was called by the defendant. He said rates had been chargedfor the occupation of six of the eight A shops (save shops 25A and 43A on the first floor) as early as in 1962 to 1964. As regardthe A-10 units on the upper floors, he said rates were charged as early as 1963 for five units (on third, eighth, eleventh, twelvethand seventeenth floors), and since 1979 for three units (on thirteenth, fourteenth and fifteenth floors).

8. Reliance is also placed by the defendant on references to “undisturbed possession” and “exclusive possession” for “many years”, andto “quiet enjoyment” in various documents in support of the alleged period of occupation. It has also been contended that the rentaldeposit receipts as well as Tiampo’s rental accounts statement for the ‘A’ units are also evidence of his exclusive occupation. Thedefendant also urged the court to draw the inference of occupation from the fact that from the site visit of the building it is apparentthat all available spaces have been put to full economic use by someone. However, none of the above matters can be of real assistancein establishing the commencement date of the alleged occupation.

9. Mr. Dung (P.W.2) of the plaintiff said that when he purchased his unit in Chungking Mansion in 1970 he had walked around the firstfloor and did not see the ‘A’ units there.

10. When one enters the shopping arcades on the ground and first floors of Chungking Mansions, one would inevitably be dazed by the forayof densely packed small shops. Shops can be found in all recesses and cul-de-sacs in the corridors no matter how negligible the availablespaces are. It is indeed an epitome of the ultimate utilitarian exploitation of commercial land of the most imaginative kind. However,it is impossible for me to say that the same would necessarily have been true prior to February 1968, i.e. within half a year ofthe 1967 riots. I am unable to accept that the witnesses, on both sides, who had no reason at all to pay any special attention tothe existence or non-existence of any particular small shop at any particular shallow recess in any particular corridor when theyhad occasion to pass casually through such corridors, would be able to comment with any degree of reliability on the existence ornon-existence of such shops twenty-three years or more later. Particularly, as to the fact that such shops existed or did not existat a particular point of time. Not only did the alleged recollections of the witnesses sound incredible, the readiness to instantlycome forth with the evidence without the slightest hint of hesitation appear to me to be equally remarkable. They definitely gaveme the impression of giving assumptions based on generalisation, rather than giving me facts founded on actual recollection of particularincidents.

11. The only piece of reliable evidence I can act upon is to be found in the letter dated 11th April 1991 (Exhibit D-4) as explainedby D.W.2, which set out the first dates from which rates were charged on some of the said ‘A’ units. Rates were and are chargableonly on occupied separate tenements. In the premises, I find as a fact that occupation of shops 8A, 9A, 41A, 46A, 80A and 95A commencedon 1.11.1963, 1.8.1962, 1.6.1964, 1.12.1962, 1.9.1963 and 1.6.1964 respectively. As for the A-10 units on the upper floors i.e. 3/F,11/F, 12/F, 13/F, 14/F, 15/F and 17/F, occupation commenced on 1.3.1963, 1.9.1963, 1.9.1963, 1.3.1979, 1.3.1979, 1.1.1979 and 1.9.1963respectively. The said dates would also be the dates when the said units were found by the government inspectors to have been partitionedof as a separate unit. Such partitioning by Jaime Chua Tiampo would effectively have ousted the other co-tenants from the ‘A’ units,and prevented any other co-tenants from exercising any of their rights in respect of the common parts of the building forming thesubject matter of his encroachments.

12. Jaime Chua Tiampo managed Chungking Mansions, presumably as the majority owner of the building, prior to the formation of the plaintiffsin 1972. He maintained his influence in the management of the building until sometime in 1976/1977. Since its incorporation, theplaintiffs have been collecting management fees from the ‘A’ units as well as the other units in the building. The plaintiffs hadalso commenced renting out other shops similar to the A shop (not the subject matter of these proceedings) since the early days ofits incorporation to subsidise the management expenses. It is the intention of the plaintiffs to let out the said A shops for thesame purpose if they are successful in the proceedings. The A-10 units are to be demolished when repossessed.

13. Despite the plaintiffs’ knowledge of the existence of the partitioning of other common parts of the buildings into units similarto the ‘A’ units in question, no legal action was taken against any of the occupants until 1984. Prior to that, one High Court actionand two District Court actions were instituted in 1980 in respect of different nature of encroachments of common parts. The 1984High Court action was instituted against the occupant of shop 80A, for an encroachment of common parts similar to the A shops inquestion, who had alleged to have purchased the shop. Two more High Court actions were commenced in 1984 and 1988 respectively. P.W.2said that the plaintiff was previously labouring under the misapprehension that Jaime Chua Tiampo could lawfully occupy and let outthe ‘A’ units. It was only after the 1984 proceedings did they learn that the developer did not own the common parts of the buildings.P.W.2 said they only became aware of the letting out of the A shops by the developer about “8 to 10 odd years ago”. He said thathad the developer only rented out the ‘A’ units, the plaintiffs would have no objection. They raised objections by these proceedingsbecause the developer had sold the common parts which belonged to all the co-tenants.

14. I find as facts the following matters. That the plaintiffs were aware of the occupation and letting out of the ‘A’ units (save A-10on the twelveth floor which was used by the Tiampos themselves) by the Tiampos since its incorporation. That management fees werecollected by the plaintiffs in respect of the ‘A’ units since its incorporation and prior to the plaintiff’s awareness of the defendant’spurchase. That no objection was raised by the plaintiffs prior to 1984 through their misapprehension of the respective rights ofthemselves and the Tiampos in respect of the ‘A’ units. That no action was taken by the plaintiff since 1984 and until 1988 becausethey had no objection to the letting out of the ‘A’ units by the Tiampos. And objection was raised only when they learnt of the saleof the ‘A’ units by the Tiampos. In all likelihood, they would not be aware of the assignment by Jaime Chua Tiampo to his own companyin 1975 and 1980.

15. Before I individually considered the separate heads of defence, it has become necessary for me to deal with a few questions of lawwhich I have raised with Mr. Neon for the defendant. I am grateful to Mr. Neon for his able assistance in respect of those questions,which came into existence because of the rather unusual factual situation of this case.

16. These unusual facts are:-

(i) That during the initial period of limitation alleged, i.e. prior to the coming into existence of the plaintiffs in 1972, the defendant’spredecessor in title, Jaime Chua Tiampo, was not only the owner of the undivided shares in the building that were ultimately assignedto the defendant, but as the developer could very well have owned a number of other undivided shares that were subsequently assignedto some of the present co-owners for whom the plaintiffs represent. There is no evidence as to the history of the other undividedshares, and the burden is squarely on the defendant to establish limitation.

(ii) That the defendant’s attention was already drawn to the lack of proper legal rights to the ‘A’ units a few months prior to theexecution of the sale and purchase agreement on 14th March, 1986.

17. The defendant’s then solicitors, obviously with a view to protect themselves against any negligence suit, had required from him awritten confirmation dated 14th March 1986 as to the advice given to him. The confirmation he signed stated, inter alia, that-

“I refer to my instruction to you to put through an Agreement under which I will agree to purchase the above property for $13,500,000,00from Maidstone Investment Ltd., the present owner. I acknowledge that you have explained to me and advised me as follows:-

1. The present owner and the present owner’s predecessor in title have for many years been in undisturbed possession of certain unitsincluded in the sale and purchase namely shop No.9A on the ground floor and shops 8A, 25A, 41A, 43A, 46A, 80A and 95A on the firstfloor and units A10 on the 3rd, 8th, 11th, 12th, 13th, 14th, 15th and 17th floors of the building but the right to the exclusiveuse of the said units has not been reserved by or granted to the present owner or the present owner’s predecessor in title underthe Deed of Covenant of the building or any other deed or document and the present owner’s title to the said units is defective andin the Agreement for Sale and Purchase I will be required to agree to accept such title as the present owner has.

3. Shop No.99 on the ground floor is now used as the transformer room of the building and I will be required to covenant at all timeshereafter to permit such use and to permit access thereto.”

18. The Sale and Purchase Agreement of the same date reproduced the above terms as the basis upon which the said units were purchased.The Tiampos (via Maidstone Investment Ltd.) expressly covenanted in the assignment of the said units that the terms and conditionsof the Deed of Covenant had been observed and performed by them up to the date of the assignment. In return the defendant covenantedtherein that he will “observe and perform all the covenants terms and conditions therein contained” and will keep the vendor indemnifiedagainst all claims for his non-performance of the same. The bank who financed the defendant’s purchase expressly informed him ina letter dated 28th December 1985, long before he had contracted to purchase the units, that their solicitors had advised them thatthe developer had no right to assign the exclusive right to use the ‘A’ units in the absence of further documentary evidence to showthat the developer had such a right. Indeed, in the subsequent mortgage the ‘A’ units were all excluded. Finance was only providedon the basis of the value of the said units less the ‘A’ units. Against all these undisputable documentary evidence, the defendantmounted a desperate pathetic attempt to explain that he was not aware and did not really understand the defects stated and explainedto him. His evidence as to when he first came to know of the fact that the ‘A’ units were on common parts of the building is infestedwith flaws and inconsistencies. He said he only showed the bank’s letter to Anthony Tiampo and was apparently not troubled when Tiamposaid and did nothing to prove his rights in respond thereto. He said he only asked Tiampo about the problem after all documents inrespect of the purchase had been signed, and he was reassured that there would be no trouble and his use could not be disturbed.He was, however, shown a list of rentals for the said units by Tiampo. In the list the ‘A’ units were grouped separately from theother units. The calculations contained therein was apparently an attempt to show that the ‘A’ units would bring in a total rentalof $48,700 per month being 22.78% of the total income of the said units. The other units would generate $163,735.00 (or 77.22%).Clearly a distinction was drawn. Probably that was used in the consideration of financing the purchase. Without hesitation, I amabsolutely convinced that the defendant had been totally untruthful about his lack of knowledge and awareness of the true positionregarding the right to use the ‘A’ units. I have no doubt at all that he knew about the defects in the alleged title and rights overthe ‘A’ units. The bank had valued the said units, without the ‘A’ units, in the sum of approximately $12.9 million. Substantialrental, almost sufficient to cover the mortgage instalments plus interest at the rate prevailing at the time of the purchase, couldhe generated without taking into account the ‘A’ units. It is apparent that the defendant saw it as an investment worthwhile evenwith the risk that he may loose the benefit of the ‘A’ units in future. Afterall, as Tiampo told him, he has as his trump card thethreat to repossess shop no.99 (which is being used as the transformer room) if the plaintiffs cause him any trouble with the ‘A’units. I am satisfied that the defendant was at all material times well aware of the defects in his rights, as confirmed by him inwriting in the various documents. He was never misled into believing that the plaintiffs would not one day enforce the covenantsagainst him to evict him from the ‘A’ units. Such risk was acceptable to him as the other units would, on a banker’s valuation (whichoften tends to err on the conservative side), be worth $12.9 million out of the $13.5 million total consideration. I accept the evidenceof the valuer called by the plaintiffs (P.W.1) that $13.5 million was a fair market price at the relevant time for the said unitswithout taking into account the ‘A’ units. He could also not have been misled by the plaintiffs’ use of the other ‘A’ units as the plaintiffs were letting them out in the exerciseof the rights of all co-owners jointly.

19. The questions of law thus raised are:-

(a) Is it possible for Jamie Chua Tiampo, as predecessor in title of the undivided shares held by the defendant as well as other assigneesfor whom the plaintiffs represent, to have possession of the ‘A’ units in one capacity adversed to himself in another capacity?

(b) Is it necessary for the defendant to establish adversed possession against all other co-tenants in common during the period beforethe plaintiffs were incorporated in 1972?

(c) For the period after the plaintiffs were incorporated do they have the lawful right to grant permission or licence to one of thetenants in common (or a stranger) to use the common parts to the exclusion of other co-tenants?

(d) The effect of (i) the title and interest of the defendant being made expressly subject to the rights of the other co-tenants underthe Deed of Covenant, and (ii) his awareness of the defects in his title and rights in respect of the ‘A’ units; on the various headsof his defence?

20. I shall deal with these in the context of the individual heads of defence as and when they occur, hereinafter.

Limitation

21. The Defendant contends that his predecessor in title Jaime Chus Tiampo, had ousted the other co-tenants from the ‘A’ units priorto 8th February 1968, and that such adversed possession had thereafter continued for over twenty years prior to the institution ofthe present proceedings on 8th February 1988. That as the right of action of the plaintiffs first accrued more than twenty yearsbefore the date of the present writ, the cause of action is statute barred under section 7(2) of the Limitation Ordinance, Cap.347. And, consequently, the “right and title” of the plaintiffs to the ‘A’ units have been extinguished by section 17 of the Ordinance.

22. Section 18 of the Ordinance provides that the right of action shall be deemed to have accrued on the date when the plaintiffs weredispossessed of the land. The dispossession relied upon by the defendant was the ousting of the other co-tenants from the ‘A’ unitsby virtue of the partitioning and leasing of the same to tenants to the exclusion of the said co-tenants.

23. The plaintiffs are bringing these proceedings in the right of all the co-tenants of Chungking Mansions as the Incorporated Ownersunder the Multi-storey Buildings (Owners Incorporation) Ordinance Cap.344. Pursuant to section 16, all the “rights, powers (and)privileges” of the co-tenants shall be exercised by the plaintiffs to the exclusion of the owners, subject only to the provisionof the Ordinance. Section 18 sets out the duties and powers of the plaintiffs, and stipulated that the plaintiffs “shall do all thingsreasonably necessary for the enforcement of the obligations contained in the deed of mutual covenant (if any) for the control, managementand administration of building.” (s.18(1) (c)). The right of a co-tenant to use the common parts of the building for the purposeof access and egress would undoubtedly bring about a corresponding obligation by the other co-tenants to permit him to do so. Regulatingand making provisions for the manner the co-tenants could and should exercise their right to jointly possess and use the common partsof the building pursuant to clause 2 of the Deed of Covenants, clearly come, in my view, within the ambit of acts reasonably necessaryfor the control and management of the buildings in the enforcement of the obligations contained in the Deed. There is, therefore,no doubt in my mind that upon the incorporation of the plaintiffs, all such said right of action under the Deed would accrue in theirfavour to the exclusion of the individual co-tenants.

24. It is, thus, not necessary to establish adversed possession independently against the plaintiffs for twenty years after its incorporation.The plaintiffs do not have an independent right of action under the Ordinance. They are merely vested with the exclusive right toexercise the rights of the co-tenants, i.e. a tool of the co-tenants. Therefore, it is sufficient if adversed possession commencedagainst the co-tenants and continued after the incorporation of the plaintiffs for a total period of twenty years. Cap.344 was onlyenacted in June 1970, and the plaintiffs were only incorporated thereunder in 1972. Therefore, though adversed possession againstthe plaintiffs is sufficient without proof of adversed possession against each and every individual co-tenant after the incorporationof the plaintiffs, what would the position be prior to their incorporation? For the period between 1968 and 1972, would adversedpossession have to be established against all the co-tenants individually?

25. The defendant submitted that once there existed an infringement of the right to joint possession, i.e. a breach of the unity of possession,a cause of action would accrue. And time would commence to run in favour of the defendant. The defendant submits that there can onlybe one date for the commencement of running of time. It is said that there cannot be different periods of limitation against differentco-tenants as the Ordinance was designed to promote certainty and not uncertainty. It would follow, it is submitted, that as longas time runs as against one of the co-tenants it would ensue to the benefit of the defendant against all the co-tenants. It is alsosubmitted that it is not possible for one of the co-tenants to grant a licence to the defendant to possess exclusively the ‘A’ units,as this would be in contravention of clause 2 of the Deed of Covenants. It is submitted no single co-tenant could have any legalright to grant such a licence in respect of the common areas. Thus, the defendant says, it is not necessary to establish the commencementof the running of time against each and every co-tenant individually.

26. I am unable to accept the defendant’s submissions. Firstly, one essential feature of a tenancy in common is that apart from the unityof possession the interest of each is separate and distinct. It is generally open to a tenant in common to deal in whatever way hedesires with his own undivided share. He can lease his share or dispose of his right to possession to a stranger as he likes. “Andif tenants in common all joined in one lease, it operated as a lease by each of his respective shares, and a confirmation by eachas to the shares of the others” (see Woodfall on Landlord and Tenant, vol.1, p.58, para.1-0134). Likewise, each tenant in commonis entitled to enforce his interest in the land on his own without joining the other co-tenants. Thus, a tenant in common, beingentitled to possession of the entirety of the land, can maintain an action for trespass on his own against a trespasser. A tenantin common is entitled likewise to enforce his legal rights against another co-tenant without joining all other co-tenants. He isentitled to sue on his own one of several co-tenants who had ousted him from the land. Or, in days prior to Cap.344, to sue on hisown one of several co-tenants who had breached a covenant in a Deed of Mutual Covenants.

27. Secondly, the scheme under the Limitation Ordinance is to prohibit the bringing of action by a person in whose favour a right of action had accrued before the limitation period. Andthe extinction of his title and interest in land under section 17 is predicated upon his lost of such a right to bring an action to enforce his said title or interest. Under the former Statutes ofLimitation, only the remedy and not the right was barred (see Incorporated Society v. Richards (1888) 7 Dr. & W. 258 at 289). The right only became barred by virtue of section 17 of the Limitation Act 1980 which replacedsection 16 of the 1939 Act. The Ordinance only regulates the relationship between the person being dispossessed and the person dispossessinghim, and no others. Usually this would suffice for the one claiming the benefit of the statute. But in some cases, it would not beso. Thus where a lessee’s rights in respect of the land have been statute-barred as against a third party, his estate vis-a-vis thelessor would still survive. It would be possible for that lessee to surrender his estate in the remainder of his term to the lessor,and the third party would not be able to claim any benefit of limitation as against the lessor, unless the lessor’s rights on thereversion are also statute barred (see St. Marylebone Property Co. Ltd. v. Fairweather (1963) A.C. 510). This personal characteristic of the operation of the statute perpetrates throughout the various provisions of the Ordinance. Section7(2) speaks of the accrual of a right of action “to him” and not “to him and any one having parallel right or interest as him.” Itis necessary to provide expressly in the same section that “if it first accrued to some person through whom he claims, to that person.”An examination of other provisions, such as the saving of a barred trustee’s rights if the beneficiary’s rights have not been barred(section 10), and the necessity to provide for deeming provisions to deal with the various situations where there exist more thanone mortgagor or mortgagee in an acknowledgement (section 25), highlighted this personal characteristic inherent in the barring ofright of action.

28. Since the interest of tenants in common are separate and distinct, and the operation of limitation is to bar the right of actionpersonally as against the one whose particular right has been infringed, it must necessarily follow that: (a) it is possible fortime to run as from different dates as against different tenants in common, and (b) it is possible for possession to be adversedto some but not all of the tenants in common.

“If it be the case that one only of such occupiers authorised a third person to come onto the land. Then plainly the third personis, vis-a-vis that occupier, a lawful visitor. But he may not be a lawful visitor vis-a-vis the other occupiers.” (per Lord Goffin Ferguson v. Welsh (1987) 3 ALL ER 777 at 785, H.L.). Whether the third person is a lawful visitor vis-a-vis the other occupiers would depend on the circumstances as towhether the authorising occupier has authority (express, implied, ostensible or usual) to give the permission to the third partyon behalf of the other occupiers. Thus, where a tenant in common without the concurrence of his co-tenants purports to authorisea stranger to have exclusive possession of the land, he could have no cause of action against the stranger for tresspass, thoughthat stranger remains a trespasser vis-a-vis the other co-tenants who could maintain an action for possession against him. It hadbeen suggested in Robson-Paul v. Farrugia (1969) 113 Sol. Jo. 346, C.A., that a licence granted by one of two tenants in common without the concurrence of the other could be terminated by that otherco-tenant. As against the stranger the authorising tenant in common cannot be heard to dispute the right of the stranger to exclusivepossession. An estoppel will lie as against that tenant in common in favour of the stranger. The fact that the other co-tenants maynot be bound by his purported permission, and may be entitled to enforce their separate and distinct rights against the stranger,cannot affect the personal position between the authorising tenant in common and the stranger as regard the right of action.

29. It is trite law that a person who enters upon land under a licence cannot claim to be in possession adversed to the granter of sucha licence. It is not necessary for such licence to be in writing to operate to defeat limitation. In Wallis Cayton Bay Holiday Camp Ltd. v. Shell-Mex and B.P. Ltd. (1975) Q.B. 94, the Master of the Rolls said:

“when the true owner of land intends to use it for a particular purpose in the future, but meanwhile has no immediate use for it,and so leaves it unoccupied, he does not lose his title to it simply because some other person enters on it and uses it for sometemporary purpose…. The reason is not because the user does not amount to actual possession. The line between acts of user andacts of possession is too fine for words. The reason behind the decision is because it does not lie in that other person’s mouthto assert that he used the land of his own wrong as a trespasser. Rather his user is to be ascribed to the licence or permissionof the true owner. By using the land, knowing that it does not belong to him, he impliedly assumes that the owner would permit it:and the owner, by not turning him off, impliedly gives permission. And it has been held many times in this court that acts done underlicence or permitted by the owner do not give a licence a title under the Limitation Act 1939.”

30. In the premises, if a tenant in common authorises or permits, albeit impliedly, the occupation by a stranger of a common part ofa building to the exclusion of the other co-tenants, no right of action could accrue to him in respect of such occupation by thestranger. Likewise, if a tenant in common permits or waives, albeit impliedly, the breach by one of the co-tenants of the covenantgoverning the use of the common parts of a building, no right of action could accrue to him in respect of such breach. It is notnecessary to consider whether the first tenant in common could in law validly or lawfully confer a right to exclusive possessionon the offending co-tenant, whether in contravention of a deed or otherwise. The issue here is not solely the consideration of whetherthere has been a valid and effective creation of a legal right. If such a legal right exists, there can, of course, be no questionof any adversed possession. But short of that, there can be a middle ground. The consideration could also be whether the first tenantin common can maintain an action against the offending co-tenant, which does not necessarily depend on the existence of a valid andeffective legal right good against all co-tenants of the building being created. It can rest solely on a personal defence availableonly as against the first tenant in common and no others. It follows, therefore, the time for commencement of adversed possessionand the incidence of possession being adversed would not necessarily be the same as against all tenants in common of land. Normally,this problem would rarely arise. But in the present case, it does.

31. The defendant must, for the period prior to the incorporation of the plaintiffs, establish adversed possession against each and everyholder of the other undivided shares in the land and building not assigned to him. No evidence has been called to establish the historyin respect of the titles of the co-owners of Chungking Mansions save in respect of the undivided shares of the defendant and P.W.2.P.W.2 purchased from the Tiampos in 1970. Thus presumably for the period 1968 to 1970, his undivided share would have been vestedin the Tiampos. P.W.2 is entitled to succeed to all the rights of the Tiampos in respect of the property that could be transmittedto him in law. Likewise, he is burdened with all encumbrances and defects that runs with the land. Would it not be opened to P.W.2to contend that his predecessor in title, i.e. the Tiampos, could have no right of action against the defendant’s predecessor intitle, also the Tiampos, during that period between 1968 and 1970 as one cannot claim adversed possession against oneself? he mustbe able to do so. The logic is obvious. Firstly, the law cannot assume one to act adversely to one’s own interest. Thus, consent,in his capacity as P.W.2’s predecessor in title, must necessarily be implied to the breach of the covenant and the ouster by himself,as predecessor in title of the defendant. A not too dissimilar illustration can be found in Re Hobbs (1887) 36 Ch.D. 553, where a father’s claim for limitation failed as it was held that he must be taken to have received his infant son’s share of therent, for land held in tenancy in common by him and his son, as bailiff for his son. Secondly, the predecessor in title of P.W.2never, in fact, lost possession as he was one and the same person as the predecessor in title of the defendant.

32. Though no defence of a written acknowledgement under section 23 of Cap.347 has been raised in the Re-Amended Defence and Counterclaim,it should be noted that in both assignments of the said units in question, from Jaime Chua Tiampo to Maidstone Investment Ltd. andthereafter to the defendant, the same was made subject to the Deed of Covenant and the rights reserved unto the other co-tenants.It may be arguable that the said acknowledgements of the rights of the other co-tenants under the Deed of Covenant were not “madeto” the other co-tenants in accordance with section 24(2), they were nevertheless undoubtedly an acknowledgement of the other co-tenant’srights which would affect the character of the possession. The Agreement for Sale and Purchase dated 14th March 1986 expressly declared,in clause 11, that no right to exclusive possession was granted to Maidstone Investment Ltd. or its predecessor in title in respectof the A-units though there had been undisturbed possession by them for “many years”. In the assignment by Maidstone Investment Ltd.to the defendant, the former had expressly covenanted that the Deed of Covenant was good valid and subsisting and that the covenantsterms and conditions therein contained and the payments thereunder had been paid observed and performed up to the date of the Assignment.The matters set out above would clearly indicate that at the same time when the defendant’s predecessors-in-title were ousting theother co-tenants, they were also recognising and declaring publicly that they have no legal right to do so and that the rights ofthe other co-tenants still subsist and that they are holding and assigning the A-units subject to clause 2 of the Deed of Covenant.It can hardly be said that an ousting of the other co-tenants under such circumstance can acquire sufficient character to amountto adverse possession.

33. The plaintiffs had been collecting management fees from the defendant’s predecessors-in-title for the ‘A’ units. The defendant saysthis would not amount to a licence to occupy as the plaintiffs had no right or authority to grant such a licence in contraventionof clause 2 of the Deed of Covenant. I do not accept that the owners incorporation of a building does not have the authority to letout any common part of the building under the provisions of Cap.347 as examined before. The co-owners’ rights in respect thereofare to be exercised by the owners incorporation, which would be vested with all the rights and powers of all the owners jointly.If all the owners jointly can let the common parts out, as the defendant conceded, so can the owners incorporation. The collectionof management fees for the ‘A’ units is an unequivocal act of permission to occupy from the owners incorporation, albeit they werethey labouring under a mistake of law, and perhaps of facts as well. In any event, I do not see any infringement of clause 2 of theDeed in the present case. Clause 2 provides for a “right to use for the purpose of access to and egress from the part of the saidbuilding so allocated to each of them” the common parts of the said building. If none of the said ‘A’ units would in fact preventor obstruct in any way such access to and egress from the other units in the buildings, there would be no encroachment on the owner’scommon rights under clause 2. In the present case, all the ‘A’ units are erected on recesses or cul-de-sacs and would not in anymanner be in the way of anyone accessing to or egressing from his unit.

34. Finally, on the finding of facts there is, in any event, less than twenty years of possession in respect of Shops 25A and 43A, andthe A-10 units on the thirteenth, fourteenth and fifteenth floors. Thus, no limitation of action can be raised against those unitsat all.

35. For the reasons set out above, the defence of limitation of action as raised by the defendant fails.

Estoppel/Acquiescence/Waiver

36. No reliance has been placed by the defendant on the doctrine of “proprietary estoppel” to give rise to what would be effectivelya perpetual licence as in Plimmer v. Mayor of Wellington (1884) 9 A.C. 699. And though laches has been mentioned en passant during the defendant’s submission, it is clear that “the defence of laches, however,is only allowed where there is no statutory bar. If there is a statutory bar, operating either expressly or by way of analogy, theplaintiff is entitled to the full statutory period before his claim becomes unenforceable; and an injunction in aid of a legal rightis not barred until the legal right is barred, although laches may be a bar to an interlocutory injunction.” (see para.1476, p.998,vol.16 Halsbury’s Laws of Enland).

37. It is useful to remind ourselves the basic elements of estoppel and acquiescences. The summary in Halsbury’s Laws of England, inpara.1473 at p.994, is a helpful one:-

“The term “acquiescence” is used where a person refrains from seeking redress when there is brought to his notice a violation of hisrights of which he did not know at the time, and in that sense acquiescence is an element in laches. Subject to this, a person whoserights have been infringed without any knowledge or assent on his part has vested in him a right of action which, as a general rule,cannot be divested without accord and satisfaction or release under seal.

The term is, however, properly used where a person having a right, and seeing another person about to commit or in the course of committingan act infringing upon the right, stands by in such a manner as really to induce the person committing the act, and who might otherwisehave abstained from it, to believe that he assents to its being committed; a person so standing by cannot afterwards be heard tocomplain of the act. In that sense the doctrine of acquiescence may be defined as quiescence under such circumstances that assentmay be reasonably inferred from it, and is no more than an instance of the law of estoppel by words or conduct, the principle ofestoppel by representation applying both at law and in equity, although its application to acquiescence is equitable. The estoppelrests upon the circumstances that the person standing by in effect makes a his own title: a mere statement that he intends to dosomething, for example to abandon his right, is not enough.”

38. The defendant contends that the plaintiffs’ the building gives rise to an estoppel and/or acquiescence that would prevent them fromcomplaining against the defendant’s use of the ‘A’ units. It was said that the plaintiffs had known about the said use of the ‘A’units by the Tiampos and the defendant for a very substantial period of time. That the plaintiffs had, and still has, let out othercommon parts of the building in similar manner. That management fees had been collected from the ‘A’ units. That the defendant reliedon the said conduct of the plaintiffs which had misled him to believe that the defendant’s said use of the ‘A’ units would not beobjected to by the plaintiffs or the co-owners they represent. That the defendant had acted to his detriment in purchasing the ‘A’units together with the other units from the Tiampos on the strength of such belief.

39. It is not disputed that the plaintiffs were aware, at all material times, of the said use of the ‘A’ units by the Tiampos and thedefendant. It is accepted also that the plaintiffs had been, and is still, doing the same with some other portions of the commonparts of the building. Management fees had always been collected from the ‘A’ units. However, that is not sufficient per se to raisean estoppel and/or acquiescence without the defendant being misled as to the true position in reliance on such acts of the plaintiffs.The question is: Had the defendant been misled into believing that either he had acquired a legal right to use the ‘A’ units in thesaid manner or that the plaintiffs had assented to such use or that such use would not be disturbed? I do not believe he was. Hewas legally represented at all material times by solicitors in his purchase of the units in the building. His attention was drawnto the lack of proper legal rights to the ‘A’ units as early as in December 1985 and to the execution of the Sale and Purchase Agreement.I would refer to the findings I made at (ii) of the unusual facts (pages 10 to 14 supra).

40. It was held in Dyer v. Dyer (1682) 2 Cas. in Ch.108 that ignorance on the part of the person standing by of his title could prevent an estoppel from being raisedagainst him. However, this would not affect the present case as the evidence disclosed that the plaintiffs were aware of their rightssince the 1984 High Court action. And had thereafter tolerated the continuation of the offending use of the ‘A’ units by the Tiampos.

41. It is contended by the plaintiffs that there was no detriment suffered by the defendant. I cannot agree with that submission. Evenwith the value of the said units less the ‘A’ units standing at $13.5 million, the defendant had undertaken a substantial financialundertaking on the strength that the rental income from the ‘A’ units could go towards subsidy of the mortgage repayments. The rentalfrom the other units would not be sufficient at that time to cover fully the mortgage payments. Interest may further rise in thefuture. It was a commercial decision to the defendant whether the risk should be accepted; and the rental factor must have come intohis decision to purchase.

42. The estoppel and acquiescence plea fails as I do not accept that the defendant had been misled into believing that the plaintiffswould not enforce the Deed of Covenant in respect of the ‘A’ units against him. He never placed any reliance on the plaintiffs’ saidacts to give rise to any belief as he alleged in his defence. He clearly knew what he was doing and made a commercial decision inaccepting such risks. I do not accept he ever took the plaintiffs’ said acts to be an assent not to enforce the Deed of Covenanteither. Nor did the plaintiffs in fact assent to the same. By his conduct, he clearly demonstrated that he understood the plaintiffs’acts to be no more that no action had been taken by the plaintiffs against the Tiampos up to that stage to enforce such convenants.He clearly realised that such right subsisted and were not barred, nor had become irreversibly lost to the plaintiffs.

43. The plea of waiver appears in paragraph 18(c) of the Re-amended Defence in a casual manner as a sort of by-product of his plea inlaches in equity. It reads “In the premises, the plaintiff by its conduct waived its right, which is denied, to claim the reliefprayed for or any relief against the defendant in that it is inequitable and unjust to grant the plaintiff the relief prayed foror any relief.”

44. Waiver is a defence which is often based on estoppel and acquiescence, but not necessarily so. In this case the plea of waiver hasbeen put on the basis that it would be inequitable and unjust to grant the relief, with reliance being placed on the particularsgiven in the acquiescence plea.

45. In Cheung Yuet & Another v. The Incorporated Owners of Oriental Gardens (1979) HKLR 536, a mandatory injunction granted by the trial judge to compel the removal of unauthorised extensions in the sitting rooms by 2 flatowners was discharged by the Court of Appeal. It was an important consideration in that case that the building was literally litteredwith numerous similar unauthorised extensions. The respondent was held to have acquiesced in such breaches of the covenants of theDeed of Mutual Covenants. The decision of the Court of Appeal was based on 2 grounds. Firstly, the breaches of covenant committedby other owners in adding rooms were no less grave than the breaches committed by the appellants and could reasonably have been consideredby the appellants as a representation that the addition of a room of equivalent size would be tolerated. Secondly, the respondenthad acquiesced in the particular kinds of breach which the appellants had committed and it would be inequitable to compel the appellantsto remove their extensions at the instance of the respondent. The first ground, i.e. a representation of tolerance, could not haveexisted in the present case on the findings already made. The defendant has never understood the acts of the plaintiffs to amountto such a representation. Indeed, the employees of the plaintiffs expressly told the defendant the ‘A’ units could not be sold tohim by the Tiampos when they became aware of the sale. Furthermore, it is the defendant’s own evidence that he had not gone to viewthe said units before he purchased them. He even went to the extent of saying in examination in chief that he had not gone to seethe said units up to the trial. No representation as in the Court of Appeal case can be found in the case before me. The second groundof the Court of Appeal decision was based on equity. A common thread runs through all three separate judgments delivered. Huggins,J.A. said at p.540,

“It does not follow that the owner of the unextended flat (on the other floor) would be at liberty to build out as and where he chose,but merely that he could not be prevented from doing what others have been allowed to do.”

Similarly, Leonard, J. said at p.541, “The basis of the appellants’ claim is the Deed of Mutual Covenant. Its essence is mutualityand it cannot be enforced by mandatory injunction capriciously against one to the exclusion of other.”

Finally, Cons, J., as he then was, said at the same page, “In my view the appellants have gone no further than many others and theyought not therefore to be required to remove their extensions on this side.”

46. The equity is that the appellants should not be singled out for enforcement of a covenant which had been flagrantly breached by manyothers without any complaint by the respondent. There exists no such inequity in the present case. Two District Court and one HighCourt actions had been taken out to enforce the Deed of Covenant against encroachment on common parts adjacent to shops by the occupantsof the shops in 1980. In 1984, a High Court Action was taken out against an occupant/purchaser of a A unit shop (shop no.80A on theground floor) for relief similar to the present case. P.W.2 said the A-10 units on some floors were demolished by the plaintiffs.He said they learnt from the 1984 proceedings that, contrary to their previous misapprehension, the Tiampos did not and could nothave owned the said common parts comprising the ‘A’ units. However, the plaintiffs were contended to let the Tiampos to continueto let out those ‘A’ units. But when it comes to selling the ‘A’ units, the plaintiffs did raise objection, e.g. in the 1984 actionwhen shop no.80A was allegedly purchased by one Mr. Moorjani. It is apparent that the indulgence granted to the Tiampos were to bepersonal to them and not to be transferable. Thus, when the plaintiffs became aware of the defendant’s purchase of the ‘A’ units,a solicitors letter dated 28th October 1987 (three months after the assignment) was sent to the defendant raising the complaintsin the present proceedings. In the premises, the plaintiffs could not be guilty of any unfair or inequitable bias against the defendant.No reliance can be placed on the use of other ‘A’ units by the plaintiffs as they were in occupation in the joint rights of all co-owners,and the rents from the let out ‘A’ units accrue to the benefit of all co-owners. There is no evidence there were other ‘A’ unitsused by any person other than the Tiampos that had been tolerated by the plaintiffs. The indulgence to the Tiampos can readily beunderstood in view of his capacity as developer and the long history of tolerance and indulgence granted, albeit as a result of theplaintiffs’ misapprehension. I do not find it inequitable for such indulgence to be withheld to any persons other than the Tiampos.Especially when such a person had been in receipt of proper legal advice and were fully aware of his lack of legal entitlement toassert such ‘rights’ at the time when he purchased the ‘A’ units.

47. It is to be borne in mind that “Acquiescene, or failure to insist on one’s rights, ought not to be held to amount to waiver of, orrelease from, a covenant without regard to the facts” (per Singleton L.J., Re Lower Ouibury Farm (1955) 2QB 298, at p.319).

48. In Re Lower Ouibury Farm, supra, a tenancy was granted to 2 joint tenants for a lease of a farm which contained a clause (clause 15) that the tenants mustnot sublet or assign the farm and would have to personally occupied the same in order to look after it. The joint tenants died oneafter the other prior to the expiry of the lease. Only one of the executors of one of the joint tenants took up occupation of thefarm, with the knowledge of the landlords. Waiver of the covenant by acquiescence was raised by the executors against an action bythe landlords for enforcement. Singleton L.J., went on to observe at pages 319-320.

“It is not right to say on a covenant of this kind that the landlords, by reason of the fact that only one of two trustees lived onthe premises, waived for all times the right to insist on the tenant, or, at least, on one of the joint tenants, personally inhabitingthe farmhouse. To decide otherwise would mean in effect that the tenant could avoid the covenant against assignment, and could puton to the farm someone of no farming experience against the wishes of the landlords.”

Morris L.J. likewise observed at page 326,

“On the admitted facts I cannot see that any implication arises that the landlord agreed that they would never again insist on fullperformance of clause 15. It may well be that if they accepted rent with knowledge they waived breaches of covenant from time totime, but I can see no reason why they should be prevented from demanding proper compliance as from the date they required it. Theremay be conduct from which can be implied the waiver or abandonment of a right. I do not think the landlords so conducted themselvesthat they could not assert that clause 15 should be honoured.”

It is clear that an indulgence or tolerance against a breach of a continuing obligation founded on the existence of attributes peculiarto a particular person cannot be, and should not be, interpreted to amount to a general abandonment of contractual rights in respectof persons without such personal attributes.

49. No implication can arise from the history of the plaintiffs’ conduct that the indulgence or tolerance extended to the Tiampo’s offendinguse of the ‘A’ units was to be extended to any one but the Tiampos (or their corporations) personally. By their conduct they hadclearly demonstrated that no similar indulgence or tolerance was to be granted to others, by the various legal proceedings they commenced,prior to the defendants purchase in 1986/1987 and, during a time when the defendant was a tenant at shop no.65. The 1984 action putsit beyond any doubt that no one but the Tiampos was to have the privilege of exclusive possession of common parts. In the premises,the waiver of the covenant in the Deed of Covenant by the plaintiffs was a limited one and not intended to extend to the defendant.Furthermore, the defendant has never been labouring under any illusion that the benefit would devolve to him, as found supra.

50. In the premises, no laches, estoppel, acquiescence or waiver could be effectively raised as alleged or at all against the plaintiffsto preclude them from enforcing clause 2 of the Deed of Covenant against the defendant.

Relief

51. Following from the reasoning set out above, there will be a declaration for the co-owners’ joint rights in respect of the ‘A’ unitsas per paragraphs (2) and (3) of the prayers sought. There is no question that the ‘A’ units are anything but common parts of thesaid building and a declaration for the same is granted as per paragraph (1) of the prayer. As the defendant is entitled, as oneof the co-owners, to joint possession of the ‘A’ units, it would be appropriate to grant an injunction only to restrain the defendantfrom exclusive occupation of the ‘A’ units to the exclusion of the other co-owners in manner amended in paragraph (4) of the prayer.In view of the defendant’s right to joint possession of the ‘A’ units, no order for possession can be made against him as per paragraph(3) of the prayer and such claim is dismissed.

52. As for damages, a list of rental income from the ‘A’ units was produced by agreement of the parties (“D-5”). The plaintiffs, representingthe joint rights of all co-owners, have always intended to let out the A shops and to demolish the A-10 units. Despite the lack ofan intention to let out the A-10 units for pecuniary gain, the co-owners have nevertheless been deprived of the use of the spaceand are entitled to damages. Trespass has been claimed. Damages for trespass should not only be confined to actual loss to the ownerof the land, but also include benefit accrued to the trespasser, see Pernarth Dock Engineering Co. v. Pounds (1963) 1 Lloyd’s Rep. 359. In the premises, damages to the plaintiffs are assessed on the basis of rental income of the ‘A’ units as from the date of the letterof complaint, i.e. 28th October 1987, when the co-owner’s rights are expressly asserted, to the date of cessation of exclusive possessionby the defendant, at the rates set out in the said list.

Counterclaim

53. The counterclaim is founded on the establishment of a valid defence of limitation and must fall to the wayside along with the collapseof such a defence. Furthermore, it is misconceived to seek a declaration that the ‘title’ of the other co-tenants to the ‘A’ unitshas been extinguished by section 17 of the Ordinance in proceedings where only the Incorporated owners, and not the individual owners,were the party. The title of the owners in the building, as fixture to the land, vests not in the incorporated owners but in themselvesas tenants in common. The incorporated owners as an entity are only concerned with the rights amongst the co-owners regarding theiruse of the common parts thereof. It would not be possible to make declaration of title against the individual owners who have notbeen joined in the proceedings. The counterclaim is thus dismissed.

54. As counsel have been excused from attendance on the delivery of judgment, there will be an order nisi for costs of the action andthe counterclaim to the plaintiffs. Dated the 3rd day of May 1991.

(Jerome Chan)
Judge of the High Court

Representation:

Mr. Warren C.H. Chan, instructed by Woo, Kwan, Lee & Lo, for Plaintiff

Mr. Anthony F. Neon, Q.C., leading Mr. Andrew Chung, instructed by Y.T. Chan & Co., for Defendant