BIJAK UTAMA SDN BHD V. ADWIN SDN BHD

CONTRACT - sale and purchase - breach of restrictive covenants - application for declaratory relief and injunction

ALASAN PENGHAKIMAN

The plaintiff is the developer of a housing complex, of the type which is popularly referred to as a  condominium, called "Palm Gardens on Mariamah", Johor Bahru and the defendant is a locally incorporated company. Vide two sale and purchase agreements dated 7 July 1993 and 17 July 1993 respectively (and hereafter referred to as 'the said agreement'), the defendant purchased two parcels, viz., apartment units, in a multi-storey building located within the  condominium from the plaintiff. Both parcels, referred to as "Type A"and "Type B" and numbered #3-01 and #3-02 (and subsequently re-numbered as #5-01 and #5-02), were located on the same floor - there are only two apartments per floor.

The said agreements were in the form prescribed in Schedule H of the Housing Developers (Control and Licensing) Regulations 1989 vide regulation 11(1) and as required, copies of the floor plan, storey plan and site plan as certified by the vendor's architect were annexed in the First Schedule to the agreements. The Second Schedule to the said agreements describes the common facilities serving the  condominium and the services provided. Regulation 11(1) reads

"Every contract of sale for the sale and purchase of a housing accommodation together with the subdivisional portion of land appurtenant thereto shall be in the form prescribed in Schedule G and where the contract of sale is for the sale and purchase of a housing accommodation in a subdivided building, it shall be in the form prescribed in Schedule H."

Upon the execution of the said agreements on their respective dates, both parties simultaneously executed a document known as a "Deed of Mutual Covenants" (hereafter referred to as "the Deed") the purpose of which, according to paragraph D found therein, is "to make further covenants and agreements supplementary to the Sale Agreement in respect of the beneficial use and peaceful enjoyment of the said Parcel, the said Building, the said Land and the common property comprised therein for the benefits of the Purchaser in common with the Developer and all other purchasers of parcels in the said Project (hereinafter collectively called "the Other Purchasers") who have entered/will enter into agreements with the Developer similar to the Sale Agreement and to this Deed".

Sometime in 1996 the plaintiff discovered that the defendant had affixed metal gates to the entrance lobbies leading to the apartments. By a letter dated 23 May 1996 the plaintiff informed the defendant that this act of affixing metal gates was not a permissible practice within the contemplation of clause 3(i) of the Deed and as such requested them to remove those metal gates within 14 days. The said clause 3(i) reads -

"3. RESTRICTIVE COVENANTS.

The Purchaser shall:

(i) not affix any grills or place any form of obstructions on the windows, balconies, stairways and common property of the said Building and shall not affix any form of material or cladding onto the external surface of any windows, doors or walls so as to cause an alteration to the external appearance of the said Parcel or the said Building in any way whatsoever and the Developer shall be entitled to remove at the cost of the Purchaser any such obstructions alteration or additions made or caused to be made by the Purchaser;".

By a letter dated 27 May 1996 the defendant replied that they have duly noted the contents of the plaintiff's letter but explained that they affixed the metal gates as additional security for the occupants of the two apartments. According to the defendant, there has been an increase in the crime rate and furthermore, the security provided by the plaintiff for the condominium leaves much to be desired. They also insisted that -

(a) the design of the metal gates "is to blend into the environment, and to provide an aesthetic Architectural feature in the surroundings";

(b) the metal gates are located internally and cannot be seen from the floors below;

(c) a sum of RM9,000.00 had been spent to design and erect those metal gates;

(d) the other occupants of the  condominium have no business to be on that floor as both apartments were occupied by the defendant;

(e) the installation of the metal gates do not affect the strength of the building structure in any form and "they are very common in every unit of Household in this Country".

For the abovesaid reasons the defendant insisted that "your Company should consider not to exercise the provision, due to the fact that installation of these Security Grilles do not change or affect the Elevation and the Design of the Building".

Consequently the plaintiff wrote to the defendant explaining, inter alia, the do's and don'ts of living in a  condominium and insisting that the fact that the latter owned the two apartments on that floor do not automatically entitle them to the exclusive use to the common areas of the building. There were further correspondence between the parties but seeing that the defendant have their own approach and ideas as to what an owner of an apartment in a  condominium can or cannot do, the plaintiff filed a writ against them on 28 June 1996 claiming for the following reliefs, namely -

(a) a declaration that the defendant has breached the provisions of the Deed by placing those metal gates on common property, i.e., the entrance lobbies;

(b) a mandatory injunction for the removal of those metal gates;

(c) damages; and

(d) costs.

The defendant filed their defence on 25 July 1996 contending that the metal gates were not affixed to any part of the common property and insisting that the plaintiff prove otherwise.

On 23 August 1996 the plaintiff filed an application by way of summons in chambers requesting for the same orders as prayed for in the writ of summons in other words, they applied for summary judgment.

At the hearing of the application, counsel for the plaintiff, Mr John Yeo Chun Ming referred to clause 3(i) of the Deed, reproduced above, and also clause 9(8) of the deed which reads -

"9. UPKEEP MAINTENANCE AND REPAIR OF THE SAID PARCEL

(8) The Purchaser shall not make any form of renovation or alterations to the said Parcel that will in any way alter the external appearance of the said Parcel or the said Building."

Counsel pointed out that the respective floor plan of the parcels attached to the said agreements shows that the entrance lobbies leading to the respective apartments were common property. He contended that since the metal gates have been constructed on common property, that would be contrary to the provisions of the Deed and hence should be removed. He submitted that in a multi-storey building, the common boundary of any parcel with the common property shall be the centre of the wall, ceiling or floor and to support his contention referred to the case of Lee Wah Bank Ltd v Chi Liung Holdings Sdn Bhd [1984] 2 MLJ 262.

In that case, which was decided under the former section 155(3) of the National Land Code (which is now section 13(3) of the Strata Titles Act 1985), the respondents had sold to the appellants a parcel in their multi-storey building which the latter wanted to use for their banking business. The appellants wanted to install an automated teller machine (ATM) which involved making a hole through the external wall and installing the machine. The appellants sought and were granted approval for the installation of the ATM on the exterior wall subject to the payment of rent. The appellants did not agree to the payment of rent and applied for a declaration to the effect that they were entitled to install the ATM for their business.

The then section 155(3) which appeared under Chapter 4 of Part Nine of the Code and entitled "Sub-division of Buildings" read -

"For the purposes of the preparation of any such plan, the common boundary of any parcel of a building with any other parcel, or with any part of the building which is not included in any of the parcels, shall, except in so far as it may have been otherwise provided in the relevant storey plan, be taken to be the centre of the floor, wall or ceiling, as the case may be."

Section 13(3) of the Strata Titles Act 1985 which is almost similarly worded reads

"For the purposes of the preparation of any such certified strata plan, the common boundary of any parcel of a building with any other parcel, or with any part of the building which is not included in any of the parcels, shall, except in so far as it may have been otherwise provided in the relevant storey plans, be taken to be the centre of the floor, wall or ceiling, as the case may be."

The High Court dismissed the application whereupon the appeal was taken to the Federal Court. The Federal Court was of the opinion that ownership of the external wall was vested in the respondents - in his judgment Azmi FJ said (at page 265):

"Under section 155 of the National Land Code, after any subdivision has been approved (which is the case here) the Chief Surveyor shall prepare a plan delineating the several storeys of the building to be subdivided for the purpose of obtaining subsidiary or strata titles. For the purpose of the preparation of any such plan, it is provided by sub-section (3) of section 155 that the boundary of any parcel of a building with any other parcel or with any part of the building which is not included in any of the parcels, shall except in so far as it may have been otherwise provided in the relevant storey plan, be taken to be the centre of the floor, wall or ceiling as the case may be. When subsidiary title is eventually issued in this particular case, it is more than probable that the common boundary of the appellants' premises separating it from the common areas or any other parcel of premises in the building complex would be the centre of the wall. As such the exterior wall and certainly the wall facing the common corridor where the ATM machine was to be installed, could not possibly belong to the appellants unless it is so provided in the relevant storey plans. The burden in this case is on the appellants as plaintiffs to show that the common boundary is not the centre of the wall. In the absence of the Surveyor's storey plan showing the contrary, we are of the view that the centre of the wall separating the appellants' premises from common areas and any other parcel in the building must in accordance with section 155(3) NLC be the centre of the wall and consequently the appellants have no proprietary rights to the exterior part of the wall to their premises except such rights as may be provided in the sale agreement."

Mr Yeo then submitted that since the entrance lobbies leading to the two apartments form part of the common property, the defendant was not entitled to obstruct the lobbies by affixing metal gates. He contended that since the obligation to maintain the common property is on the plaintiff and the metal gates were erected thereon, that act is contrary to the Deed and hence should be removed.

In her reply, counsel for the defendant, Miss Serene Ong argued that the facts and the law were not clear-cut and hence the matter should go for trial. She argued that the metal gates are not on common property and insisted that it is the storey plan which dilineates the parcels and not the floor plan. She pointed out that the parcels are identified in the storey plan attached to the said agreements and those plans show that the entrance lobbies are situated within the parcels

The defendant had also engaged the services of a chartered surveyor to measure the parcels. In his affidavit that surveyor stated that with regard to parcel #05-01, the area as stated in the agreement is 1,580 square feet whereas his measurements showed that even with the inclusion of its entrance lobby, it was only 1,542 square feet,., there was a shortfall of 38 square feet. Similarly, for parcel #05-02, he stated that there was a shortfall of 10 square feet even with the inclusion of its entrance lobby. Based on above revelations, Miss Serene Ong insisted that the matter should go for trial and not be disposed off summarily since, until the strata titles to the parcels are issued, it is not clear where the common property is.

Miss Serene Ong then contended that clause 9(8) of the Deed was never pleaded - that covenant provides that the purchaser shall not make any form of renovation or alterations to the parcel that will in any way alter the external appearance of the parcel or the building - and that being the case, she was caught by surprise. In relation to this averment, she referred to paragraph 7 of the statement of claim which reads -

"Walaupun terdapat pelaksanaan dan persetujuan atas terma-terma Perjanjian-perjanjian Jual-beli tersebut, Defendan telah memungkiri obligasinya dan membina kekisi-kekisi/pintu-pintu besi di atas harta bersama (common property) ("Halangan tersebut") yang menjadi halangan yang tidak diizinkan dan selanjutnya mengakibatkan penukaran kelihatan luar Yunit-yunit tersebut dan seterusnya Bangunan tersebut."

She argued that the said clause 7 did not show that the plaintiff had clause 9(8) of the Deed in mind - she was misled by that paragraph and also by the affidavit. She further alleged that the statement of claim is not informative, is vague and misleading. She then cited the case of Lee Ah Chor v Southern Bank Berhad [1991] 1 CLJ 667 where it was held there where a vital issue was not raised in the pleadings it could not be allowed to be argued and referred to page 672 of the case where Mohd Jemuri Serjan SCJ (as he then was) said:

"Mohd Azmi SCJ in delivering the judgment of the court in the case of Muniandy & Anor v Muhammad Abdul Kader & Ors [1989] 2 MLJ 416 said at page 418:

Unless the objection raised is merely technical, the importance of pleadings can be found in many authorities. The most instructive is perhaps by Lord Diplock in Hadmor Productions v Hamilton [1983] 1 AC 191 (refd) at p 233:

'Under our adversary system of procedure, for a judge to disregard the rule by which counsels are bound, has the effect of depriving the parties to the action of the benefit of one of the most fundamental rules of natural justice, the right of each to be informed of any point adverse to him that is going to be relied upon by the judge, and to be given the opportunity of stating what his answer to it is.'

Another point raised by Miss Serene Ong in opposing the application was that, although she conceded that the Deeds were signed together with the said agreements, the Deeds were outside the Housing Developers (Control and Licensing) Act 1966 and the Housing Developers (Control and Licensing) Regulations 1989 and ifthey are contracts at all, they are void for lack of consideration. She then referred to section 26 of the Contracts Act 1950 which provides that a contract made without consideration is void.

With regard to the prayer for a mandatory injunction, she submitted that if it is granted, the defendant will lose money spent on the metal gates and would incur further expenses to remove them. They would also have to repair the walls and the floor. She contended that the metal gates will not cause any problems until the outcome of the trial and urged that the application be dismissed.

In his reply Mr Yeo submitted that this is a proper case for the court to grant the declaration and mandatory injunction sought by an Order 14 application since no new evidence will come out at the trial. As to the shortfall in the area of the parcels, he pointed out that there is a provision in the said agreements which provides for such an eventuality, namely clause 11 which reads -

"11. Position and area of Parcel.

(1) The position, measurements, boundaries and area of the said Parcel as given are believed but not guaranteed to be correct and if its measurements, boundaries and area as shown in the Building Plan shall be different from that shown in the strata title when issued, the purchase price of the said Parcel as calculated at the rate of Ringgit THREE HUNDRED AND TEN (M$310.00) only per square ft shall be adjusted accordingly.

(2) Any payment resulting from the adjustment and required to be paid by the party concerned shall be paid within fourteen (14) days of the issue of the strata title."

At the end of the day, I allowed the plaintiff's application and gave the declaratory judgment and granted the mandatory injunction asked for. I also ordered that the defendant pay to the plaintiff the costs of this action and application. Incidentally the plaintiff did not pursue its claim for damages. I will now give my reasons as to why I allowed the application.

The first question which I had to determine is whether a party to a suit can apply under an Order 14 application for a declaratory judgment without the matter going for a full trial. Generally an Order 14 application is only suitable for a liquidated claim but there have been a number of instances where the Courts have given declaratory judgments under such an application. In Avel Consultants Sdn Bhd & Anor v Mohamed Zain Yusof & Ors [1985] 2 MLJ 209 the first and second respondents, who were directors in two companies called Elmec and Avel, i.e., the appellants, and the latter company being the subsidiary of the first, and the third respondent, who was a director of Elmec, formed a firm with the object of carrying on business as consultant engineers, the same as that of the appellant companies. The firm canvassed for work and were appointed to carry on work in place of the appellants. The appellants sued the respondents for breach of fiduciary duties and after the defence was filed, they took out a summons to enter judgment in their favour praying, inter alia, that the respondents be declared that they were trustees for Elmec and Avel in respect of all professional charges received by them and/or their firm. George J who heard the summons refused the application and hence this appeal. In allowing the appeal, Salleh Abas LP, in delivering the judgment of the Federal Court, said (at pages 210 and 211):

"The law is clear that a director of a company is in fiduciary relationship with his company and as such he is precluded from acting in a manner which will bring his personal interest into conflict with that of his company In fact, the learned judge ruled that there was clear breach but he was not prepared to give leave to Avel and Elmec to sign the judgment because in his view there were other reasons within the meaning of Order 14(3) which entitled the respondents to defend the suit."

"The cause of action is founded on the fact that the respondents as directors of the appellants have committed breach of their fiduciary duties and this was so found by the learned judge. Once he has so held, there can be no more defence to the appellants' suit and they should therefore be entitled to judgment and the rest of the case should only be a matter of the requisite relief to which the appellants would be entitled consequential upon the finding."

The above case would lend support to the submission of counsel for the plaintiff that an Order 14 application can be employed in an action for declaration where the case is clear. In European Asian Bank AG v Punjab and Sind Bank [1983] 2 All ER 508. Robert Goff LJ at page 516 said -

"Moreover, at least since Cow v Casey [1949] 1 All ER 197, [1949] 1 KB 474, this court has made it plain that it will not hesitate, in an appropriate case, to decide questions of law under Ord 14, even if the question of law is at first blush of some complexity and therefore takes 'a little longer to understand'. It may offend against the whole purpose of Ord 14 not to decide a case which raises a clear-cut issue, when full argument has been addressed to the court, and the only result of not deciding it will be that the case will go for trial and the argument will be rehearsed all over again before a judge, with the possibility of yet another appeal (see Verral v Great Yarmouth BC (1980] 1 All ER 839 at 845-846, [1981] 1 QB 202 at 215, 218, per Lord Denning MR and Roskill LJ). The policy of Ord 14 is to prevent delay in cases where there is no defence.

In Ponniah v Sivalingam & Ors [1991] 3 MLJ 190, vide an Order 14 application, the plaintiff sought a declaration, inter alia, that the shares, the subject matter of the suit, were held by the defendants on trust for him. Zakaria Yatim J (as he then was) held that as the defendants have no defence to the plaintiffs claim, the court can enter summary judgment in terms of the prayers sought although they are for a declaration. In Fabrique Ebel Societe Anonyme v SyarikatPerniagaan Tukang Jam City Port & Ors [1988] 1 MLJ 188 the same Judge said (at page 189):

"It is clear that the court has jurisdiction to enter summary judgment under Order 14 of the Rules of the High Court for an injunction. In Shell-Mex and BP Ltd v Manchester Garages Ltd*, Lord Denning MR, "I see no reason whatever why a plaintiff cannot go straight to the judge and ask for summary judgment under RSC Order 14 for an injunction.... The plaintiffs were quite entitled to go under RSC Order 14 to the judge for an injunction."

(* [1971] 1 All ER 841 842-845

Having satisfied myself that the court can enter summary judgment under Order 14 for a declaration and for an injunction I went on to deal with the next issue, namely, whether the entrance lobby to each apartment is comprised in the

respective parcel or is common property. Section 4(1) of the Strata Titles Act 1985, which is an Act to facilitate the subdivision of buildings into parcels and the disposition of titles thereto and for the purposes connected therewith, provides "common property" means so much of the lot as is not comprised in any parcel (including any accessory parcel), or any provisional block as shown in an approved strata plan;".

Upon perusing the floor plan annexed to each of the said agreements it is my finding that the entrance lobby to each apartment is not comprised in the parcel and hence is common property. The respective parcel is clearly delineated in blue in the floor plan and shows that the balcony, living room, dining room, bedrooms, bathrooms, kitchen, utility room and the yard are comprised in the parcel but clearly excludes the entrance lobby. Counsel for the defendant had insisted that it is the storey plan which show the delineation of the parcel but I cannot see how this can be so as the storey plan - as its classification denotes - only shows the elevated plan of the building itself and do not contain a detailed plan of the layout of the apartment as opposed to the floor plan.

Thus, having found that the entrance lobbies to both apartments are not comprised in the parcels and hence would form part of the common property, I would think that the defendant clearly breached clauses 3(i) and 9(8) of the Deed when they affixed the metal gates to the entrance lobbies. I would also agree with the contention of the plaintiff that the act of affixing metal gates to the entrance lobbies have altered the external appearance of the parcels which is contrary to clause 9(8) of the Deed.

To me, the defendant itself had indirectly acknowledged in their letter, dated 27 May 1996 and addressed to the plaintiff, the latter's averment that the entrance lobbies form part of the common property - in that letter, they explained that they affixed the metal gates for additional security and expressed their views that the security service provided by the plaintiff to the  condominium was inadequate. They also requested the plaintiff "not to exercise the provision"which to me would denote that they are requesting the plaintiff not to enforce that covenant. However in subsequent correspondence, it is the defendant's stand that the entrance lobbies to both apartments were comprised in the respective parcels. In relation to this stand, their counsel had argued that the defendant had been "short-changed", i.e., on the ground, there were discrepancies in the size of the parcels as opposed to what was stipulated in the said agreements and that even after taking into account the area occupied by the entrance lobbies, which were 42 square feet and 53 square feet respectively, they were still "short-changed" by 38 square feet and 10 square feet respectively With respect, I think this question of discrepancies in the floor area stipulated in the said agreements has nothing to do with the proceedings here. Clause 11(1) of the said agreements, which have been referred to earlier, provides, inter alia, that the area of the parcel "as given are believed but not guaranteed to be correct" and if the area shall be different from that shown in the strata title when issued, the price of the parcels shall be adjusted accordingly at RM310.00 per square foot. This is the remedy for any "short-change" in area and I cannot see how this issue can vitiate this application for summary judgment.

I also cannot see any merit in the contention of counsel for the defendant that she was misled by paragraph 7 of the statement of claim, namely, it did not show that that the plaintiff had clause 9(8) of the Deed in mind when they filed this action and also this application for summary judgment. With due respect to counsel, that paragraph in the statement of claim, which has been reproduced earlier, was clearly a summary or a precise of clauses 3(i) and 9(8) of the Deed -the words "dan selanjutnya mengakibatkan penukaran kelihatan luar Yunit-yunit tersebut dan seterusnya Bangunan tersebut" would more or less be a direct translation of the words "that will in any way alter the external appearance of the said Parcel or the said building". I do not think I need to delve further into this issue on semantics.

The only other issue of importance raised by counsel for the defendant is with regard to her contention that the Deed is a void contract as there was no consideration. I cannot see any merit in this contention. Clause 27 of the said agreements read -

"27. Common rights of Purchaser.

(1) The Vendor confirms that the said Parcel and all other parcels are sold together with free rights and liberties for the Purchaser, his personal representatives, successors in title, his permitted assigns and his servants, agents, licensees and invitees in common with the Vendor and all other persons having the like rights and liberties to use without or with vehicles of every description at all times and for all purposes whatsoever connected with the use and enjoyment of the said Parcel to pass and repass along over and upon all roads serving the said housing development and to make all necessary connections and thereafter to use in a proper manner the drains, pipes, cables and wires laid or constructed by the Vendor under or over such roads.

(2) The Vendor hereby undertakes that the purchasers of parcels comprised in the said housing development shall enter into similar covenants and hereby further undertakes to ensure that in the event of any transfer of the said Parcel from the Purchaser to a subsequent purchaser the latter shall undertake to be bound by the covenants of this clause which shall continue to apply notwithstanding the completion of the sale and purchase agreement."

This clause clearly denotes that the vendor and the purchaser, i.e., the plaintiff and defendant will enter into a deed of mutual covenants which will be binding on a subsequent purchaser. The evidence has shown that the said agreements and the said Deeds were executed simultaneously. The Deed refers to the said agreements and when both documents were executed, both parties had legal representation. The Deed itself states that the parties have agreed to enter into the Deed to make further covenants and agreements supplementary to the sale and purchase agreement in respect of the beneficial use and peaceful enjoyment of the parcel, the said building, the said land and the common property comprised therein for the benefits of the purchaser in common with the developer and all other purchasers of parcels in the  condominium. The consideration would be the mutual covenants. To me, there was free consent when the defendant entered into the Deed and since they have not raised anything to show that there was coercion, undue influence, fraud, misrepresentation or mistake, their contention that the Deed was void cannot stand at all.

On the whole I was of the view that nothing new will surface if this matter goes for trial and since the floor plan clearly shows that the entrance lobbies to both apartments are not comprised in the respective parcels, which would denote that the metal gates were affixed to the exterior walls of the parcels, i.e., on common property, I decided that the plaintiff should be given the declaratory judgment and mandatory injunction asked for.I also ordered that the defendant pay to the plaintiff costs of this action.

(DATO' MOHD GHAZALI BIN MOHD YUSOFF)

Hakim

Mahkamah Tinggi

Johor Bahru

Tarikh: 4 April 1997

[Application allowed with costs ]