It has been established by Hong Kong courts for more than 30 years that the right to name a building is not an interest in land but merely a personal right. Naming right is not binding on a subsequent purchaser becoming owner of the building, even though the naming right is incorporated into the deed of mutual covenant of the building.1
Deputy High Court Judge Maria Yuen gave her judgment in Falcome Co Ltd v The Incorporated Owners of ZJ 300 and Another [2024] HKCFI 2992 (the “Judgment”) on 7 November 2024, ruling that a resolution passed by a meeting of owners convened in accordance with provisions of the deed of mutual covenant to change the name of a building is binding on all co-owners.
The Judgment is intriguing as it lays down an alternative means to change the name of a building.
Case facts
The Judgment concerned a dispute over the change of name of a commercial building in Wanchai (the “Building”). The deed of mutual covenant of the Building (the “DMC”) expressly reserved and granted to the developer of the Building “the exclusive and unrestricted right and privilege to give whatever name for the Building or any part(s) thereof and to designate and change the name of the Building or any part(s) thereof any time or times and from time to time…” (the “Naming Right”).
The developer assigned the Naming Right together with other units in the Building to the 2nd Defendant in 2011.
In 2018, the 2nd Defendant wished to exercise the Naming Right and this matter was discussed at the owners’ meeting on three occasions. According to the minutes of the meeting, the majority of the co-owners who attended the three meetings did not object to the proposed new name.
Eventually, the 1st Defendant (as incorporated owner of the Building) signed a Memorandum on Change of Name of Building on 1 March 2019 to effect the change of name, and submitted it to Land Registry for registration.
However, the Land Registry withheld the registration of the Memorandum, explaining: (a) the 2nd Defendant’s exercise of the Naming Right was not binding on other co-owners of the Building; and (b) there was no record that a formal resolution was passed in accordance with the requirements set out in Sub-section B of Section VII of the DMC (the “Section VII B”) to change the name.
Section VII B of the DMC provides that “a resolution shall be validly passed if passed with a simple majority of the vote by the Owners who are present … at the meeting …” and “all resolutions passed at a meeting duly convened and held shall be binding on all owners”.
In response, the 2nd Defendant convened an extraordinary owners’ meeting in accordance with Section VII B of the DMC in August 2019. A resolution (the “Resolution”) approving the change of name was passed by a majority of votes among co-owners present.
The 1st Defendant subsequently signed a new Memorandum on Change of Name of Building on 20 April 2020, which was eventually successfully registered in the Land Registry.
But in mid-2021, the Plaintiff, a co-owner of the Building, challenged the validity of the Resolution, asserting that the right to change the name should be subject to unanimous consent of all co-owners.
Court of First Instance key findings
Was the Resolution binding on all co-owners?
The Plaintiff contended it was necessary for all co-owners to agree to the change of name, relying on Pak Fah Yeow case, where Rogers VP said: “…it would be necessary for all the owners to agree to the change of name” 2.
Notwithstanding the conventional assumption that unanimous consent of all co-owners is required, Yuen DHCJ found the statement of Rogers VP to be obiter. In the Pak Fah Yeow case, the relevant deed of mutual covenant contained a restriction that “the name of the Development shall not be changed … without the unanimous consent of all the Owners of the Shares of the Development” – but there was no similar restriction in the present DMC.
The Plaintiff further argued that naming of the Building was not a matter governed by the DMC; and the Resolution could not have been passed in accordance with Section VII B of the DMC which dealt with “matter concerning the Land and the Building”.
Likewise, the Plaintiff contended that the 2nd Defendant did not have the power pursuant to section 18(2)(g) of the Building Management Ordinance (Cap. 344) (the “BMO”) in relation to naming of the Building. This stipulates that incorporated owners “may, in its discretion, act on behalf of the owners in respect of any other matter in which the owners have a common interest.”
Yuen DHCJ rejected such argument on the basis that it is in the common interest of co-owners to name a building (which logically includes subsequent change of name) and this is a matter relating to the management of the building. Such matter therefore fell within the proper purpose of the DMC, and within the scope of section 18(2)(g) of the BMO.
As all the co-owners were bound by the provisions of the DMC, including the relevant provisions of the conduct of meetings of all co-owners, the learned judge ruled that the Resolution, which was passed by a valid quorum after proper notice being given to all co-owners, binds all co-owners of the Building (including the Plaintiff).
The Judgment also ruled that the 2nd Defendant had the power to effect the change of name on behalf of the co-owners.
Enforceability of Naming Right?
Regarding the enforceability of the Naming Right against other co-owners, the 2nd Defendant accepted that the Court of Appeal judgments in the Lamaya case and Pak Fa Yeow case were binding on the Court of First Instance.
However, the 2nd Defendant considered that the Naming Right complies with section 41(2) of the Conveyancing and Property Ordinance (Cap. 219) (the “CPO”) and hence was enforceable.
The 2nd Defendant reserved its right to appeal on this issue to the Court of Appeal and invited the judge to express her views.
Section 41 of the CPO adapts “the common law and equitable rules concerning covenants which affect land to the special needs of Hong Kong conveyancing.“3 Generally, a covenant relating to land and complying with sections 41(2) of the CPO is enforceable by a co-owner against other co-owners of the same land.
Yuen DHCJ agreed with the ruling in Lamaya, in which the Court of Appeal held that a naming right covenant does not fall within section 41(2) of the CPO because it does not touch and concern the land. The test adopted in Lamaya was that “the covenant must either affect the land as regards mode of occupation [the first limb], or it must be such as per se, and not merely from collateral circumstances, affects the value of the land [the second limb]“.4
For the first limb of the test, the learned judge observed that a naming right covenant related to the whole of the building, whereas the person enjoying naming right covenant only has exclusive possession of a part of the building. Hence, “there is no real connection between the subject right (pertaining to the whole of the building) and occupation of the subject land (the unit for which the alleged covenantee has exclusive possession)“.5
For the second limb of the test, the learned judge considered that the commercial value of the naming right covenant “lies only in the intangible, unquantifiable perceived prestige” of having a building called by an attractive name. Whether a building has a name or not does not increase or diminish its value.
Conclusion
The ruling confirms the line of authorities following the Lamaya case that naming right remains a personal right and not an interest in land.
However, the Judgement provides an interesting perspective as to how owners of a building and incorporated owners may effect a change of name without naming right.
Developers and investors who are keen to secure naming right should be cautious with the wordings adopted in the DMC to adequately assess the opportunity (or risk) that the name of a building may be changed.
1 Lamaya Ltd v Supreme Honour Development Ltd [1991] 1 HKC 198; Incorporated owners of Nine Queens Road Central v Minkind Development Ltd [2004] 1 HKC 270; Yazhou Travel Investment Co Ltd v Bateson [2004] 1 HKLRD 969; Pak Fah Yeow Investment (Hong Kong) Co Ltd v Proper Invest Group Ltd [2009] 3 HKC 385.
2 Paragraph 18, Pak Fah Yeow Investment (Hong Kong) Co Ltd v Proper Invest Group Ltd [2009] 3 HKC 385
3 Paragraph 55, Sky Heart Ltd v Lee Hysan Estate Co Ltd [1999] 1 HKLRD 100
4 Paragraph 71 of the Judgment.
5 Paragraph 78 of the Judgment.
