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Property, International / offshoreWednesday 27 March 2024

Court of Final Appeal judgment on Proper role of the first assignment in delineating common parts

In Donora Company Limited v The Incorporated Owners of Tsuen Kam Centre [2024] HKCFA 3, a judgment handed down on 8 February 2024, the Hong Kong Court of Final Appeal allowed the appeal and held that, on the proper construction of the deed of mutual covenants (DMC), the external walls are common parts in that multi-storey building.

The Court examined the significance of a first assignment in deciding whether the external walls are common parts. The Court held that a reservation clause (reserving the right to exclusive use of the external walls to the developer) in the first assignment at most only amounts to a covenant by the first purchaser to restrict the exercise of his right of possession regarding the external walls. There is no covenant by the developer as to how the external walls were to be used and the reservation clause in the first assignment could not be construed as a covenant excluding the possibility of the external walls being demarcated as common parts in the DMC.

Instead, it is the DMC that demarcates the common areas and facilities and these covenants are mutual covenants by every co-owner to other co-owners on common areas and facilities.

Therefore, the relevant character of the external walls is to be determined by reference to the DMC, though the first assignment may be referred to as an aid to construction in case of ambiguity in the DMC.

James Man acted for the appellant and was instructed, in his capacity as a barrister at Temple Chambers, by Mayer Brown. James Man and Jonathan Ng (Temple Chambers) were led by Benjamin Yu SC.

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