Bothlink Ltd v. King Glare Ltd and Another

CACV 50/2015

[2018] HKCA 103

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 50 OF 2015

(ON APPEAL FROM HCA 1978 OF 2013)

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Before : Hon Lam VP, Kwan JA and Barma JA in Court

Date of Hearing : 26 November 2015

Date of Judgment : 26 November 2015

Date of Handing Down Reasons for Judgment : 15 February 2018

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REASONS FOR JUDGMENT

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Hon Lam VP:

1.I agree with the reasons for judgment of Hon Barma JA.

Hon Kwan JA:

2.I agree with the reasons for judgment of Hon Barma JA.

Hon Barma JA:

3.This was an appeal by Convey Advertising Company Limited, the 2^nd defendant in these proceedings, against the judgment of Deputy High Court Judge Yvonne Cheng SC dated 21 January 2015, by which the judge found the 2^nd defendant liable to the plaintiff, Bothlink Limited, for trespass and nuisance, and made orders against the 2^nd defendant requiring it to give the plaintiff vacant possession of the affected property (part of an external wall of a building in Causeway Bay), dismantle structures erected by it that blocked or covered the property, enjoining it from putting up structures that would block the property, and to pay mesne profits and damages for trespass in respect of its occupation of the property for two periods before the date of judgment, and from the date of the judgment until the delivery up of vacant possession, together with interest and costs.

4.The 1^st defendant, King Glare Limited, was found liable to the plaintiff for trespass (but only in respect of the first of the pre-judgment periods), and was ordered (jointly with the 2^nd defendant) to pay mesne profits in respect of its occupation of the property during that period.  The 1^st defendant did not appeal against the judgment and order against it.

5.Although the 2^nd defendant’s original notice of appeal dealt with both liability and quantum, its amended notice of appeal filed three weeks before the hearing removed all grounds of appeal relating to liability.  Both versions of the notice of appeal had also asked for the costs order below to be varied (so as to replace the certificate for two counsel with one for one counsel only) even if the appeal were to fail, but no grounds for doing so were stated, nor were any submissions as to this made in the 2^nd defendant’s written submissions.  In the event, Mr Clifford Smith SC, appearing for the 2^nd defendant, confirmed at the outset of the hearing that the appeal would be limited only to the question of quantum. Having heard Mr Smith, we did not find it necessary to call upon the plaintiff’s counsel Mr Law, and dismissed the appeal with costs to the plaintiff with a certificate for two counsel.  These are our reasons for doing so.

6.The factual background can be briefly stated.  Hong Kong Mansion (“the Building”) is situated at 1 Yee Wo Street in Causeway Bay.  The external wall on the west side of the Building (“the Wall”) faces Hennessy Road in a busy part of Causeway Bay.  Mr Leung Shun was the owner of the 4^th to 19^th floors of the Wall from 1980 until 2000, when he assigned the part of the Wall owned by him to the plaintiff, which he had recently incorporated.  The 3^rd floor of the Wall is owned by the Incorporated Owners of the Building.  Unit A of each floor of the building from the 3^rd floor upwards has windows on the west side of the Building (and thus in the Wall).  Unit 3A on the 3^rd floor also has a flat roof outside it.

7.From about late 1990 onwards, Mr Leung granted the 1^st defendant a licence to install advertising boards on the parts of the Wall owned by him for the payment of a monthly fee (initially HK$20,000 per month).  The licence was renewed from time to time, with the fee increasing on each renewal. After the plaintiff acquired those parts of the Wall, it entered into similar arrangements with the 1^st defendant.  By around 2006, various metal frames and supports had been affixed to the Wall to support advertising boards – the judge found that these were actually installed by the 2^nd defendant.  From February 2008 onwards, the monthly fee had risen to HK$108,000 per month.  Meanwhile, from at least 2007 onwards, the 1^st defendant granted a sub-licence of its rights to the 2^nd defendant.  The sub-licence was terminated in late April 2009, and the licence itself was terminated on about 31 May 2009.

8.The reason for the termination of the sub-licence and licence was that the Building was to undergo external renovations undertaken by the Incorporated Owners. Notwithstanding the termination of the licence, the frames and advertisements were not removed until the end of September 2009. During the renovations, the entire building was covered in scaffolding and green netting erected by the Incorporated Owners.  The 2^nd defendant obtained the consent of the Incorporated Owners to display advertisements on the netting and scaffolding during this period.

9.Following the completion of the renovations and removal of the netting and scaffolding, the 2^nd defendant put up a new structure for the display of advertising.  The judge found that this was done by mid-December 2010.  This new structure involved the use of metal brackets affixed to the 3^rd floor flat roof and wall outside Unit 3A, metal beams affixed to the north and south sides of the building, two metal beams anchored inside Unit 5A which extended out through that unit’s windows, and a metal crossbeam joining the two.  An elaborate scaffolding structure which could support advertisements was attached to these items.  The objective was apparently to create a structure on which advertisements could be displayed without coming into contact with, or making use of, that part of the Wall owned by the plaintiff.  In order to be able to erect the structure in this way, the 2^nd defendant entered into lease agreements with the Incorporated Owners (in respect of the 3^rd floor portion of the Wall), and the owners of Units 3A (including the flat roof), 4A and 5A (which happened to be the 1^st defendant).  In the event, the judge found that notwithstanding the efforts to avoid contact with the part of the Wall owned by the plaintiff, there was in fact such contact in that various parts of the scaffolding structure rested against the Wall, and that a security camera, spot light and associated wiring mounted at the 5^th floor of the Wall had also been installed by the 2^nd defendant.

10.The advertisements so displayed obscured the 3^rd to 5^th floors of the Wall from being seen from the street below.  No rent or licence fee was paid to the plaintiff, but the plaintiff was prevented from deriving any economic benefit from the 4^th and 5^th floors of the Wall, which it owned.

11.Having considered the evidence and legal submissions, the judge concluded that:

(1) Both defendants were jointly and severally liable to the plaintiff for trespass in the period from July to September 2009, as the structures then in use should have been removed by the end of June 2009 in accordance with the terms of the licence.

(2) The 2^nd defendant was liable to the plaintiff for trespass and nuisance by reason of its installation of the new structures (after the completion of the renovation works), as from 17 December 2010 until the date of judgment, with such liability continuing until such time as the new structures were actually removed.

12.So far as relief was concerned, for the trespass in the earlier period mentioned, the plaintiff was awarded mesne profits of HK$144,000 (being three months’ licence fee at HK$108,000 per month less a deposit of HK$180,000 which had been paid by the 1^st defendant to the plaintiff at the time the latest licence agreement was entered into).

13.In relation to the trespass and nuisance caused by the new structures, the 2^nd defendant was ordered to deliver up vacant possession of the Wall, and to remove the new structures to the extent that they blocked or covered the 4^th and 5^th floors of the Wall.  An injunction was also granted against the 2^nd defendant to prevent similar or other structures being installed, which would block or cover those parts of the Wall.  As for monetary relief, the judge ordered the 2^nd defendant to pay damages or mesne profits assessed at HK$88,900 per month from 17 December 2010 until the date of judgment, and at the rate of HK$107,800 per month from the date of judgment until such time as vacant possession was delivered up.  As noted, interest and costs were also awarded to the plaintiff.

14.The 2^nd defendant now appeals, limited to the question of quantum.  The appeal relates only to the damages or mesne profits awarded in respect of the new structures, for which only the 2^nd defendant was held responsible.

15.At the trial, it was common ground that the damages or mesne profits should be assessed by reference to the market rental for the 4^th and 5^th floors of the Wall.  The difference between the parties was as to the amount of the market rental.

16.The 2^nd defendant called as an expert witness to give evidence as to such market value, Mr Jack Chan, a valuer.  Mr Chan’s evidence was to the effect that owing to the constraints arising from:

(1) the physical configuration of the Wall, in particular the existence of windows in, and pipes on, the Wall;

(2) the issue of multiple ownership (of the Wall and the A units on the 3^rd, 4^th and 5^th floors of the Building), which would have to be overcome if a larger form of signage extending over the whole of the Wall from the 3^rd to 5^th floors, similar in size if not design to the advertising signage supported by the new structure, was to be erected; and

(3) the fact that projecting signboards could not be affixed to the Wall because the Wall was not a structural wall (according to Mr Chan, on the basis of his visual inspection of the Wall)

the optimal use of the 4^th and 5^th floors of the Wall for advertising purposes would permit only the display of two long and narrow advertising boards at the extreme left and right hand sides of the Wall.  Mr Chan assessed the monthly rental that could be derived from such boards to be HK$5,500 per month in 2009, rising to HK$7,700 per month by 2014.  As an alternative, Mr Chan also put forward the possibility of narrow signboards running the entire height of the building (i.e. from the 4^th floor up to the 19^th floor), suggesting that the rental for those would have started at HK$30,200 and risen to HK$46,400 over the same period (an increase of about 54%).

17.The 2^nd defendant contended that the correct valuation of the market rent was the amount based on the smaller signboards posited by Mr Chan.  The judge rejected this, as she did not regard Mr Chan’s evidence as reliable for this purpose.  The judge explained her reasons for rejecting this aspect of Mr Chan’s evidence in some detail at paragraph 138 of her judgment:

(1) In paragraph 138(1) she pointed out that the problem of multiple ownership was not insurmountable, commenting that even if additional arrangements might need to be made with other owners to enable larger advertising signboards than those suggested by Mr Chan to be erected, there was no reason to reject this possibility out of hand, even if it meant that the valuation would be more difficult to perform.

(2) In paragraph 138(2) she dealt with the suggestion that a projecting signboard was not feasible, pointing out that Mr Chan was not put forward as a building surveyor, and that his expertise to express a view as to whether or not the Wall was load bearing was not established.

(3) In paragraph 138(3) the judge observed, quite reasonably, that there were other alternatives to signboards, such as adhesive or painted advertisements, which could enable much more, or all, of the 4^th and 5^th floors of the Wall to be used without obscuring the A unit windows.

(4) In paragraph 138(4) she pointed out that the use of adhesive or painted advertisements would also overcome the issues of multiple ownership and whether or not the Wall was a structural one.

(5) Finally, in paragraph 138(5) she observed that the new structure in fact erected by the 2^nd defendant appeared to be a means of putting up a much larger advertisement without triggering the problems identified by Mr Chan as the reasons for restricting the use to which the 4^th and 5^th floors of the Wall could be put to the two narrow signboards proposed by him.  She also noted that Mr Chan did not appear to have been aware of the arrangements with other owners that made this possible, and rejected his suggestion that the rentals agreed by them (which he was unaware of and thus had not actually considered) might not be reflective of the market rental by reason of containing an element of “hope value” (i.e. obtaining a higher than market rental to take account of the possibility that the large advertising display might thereby be feasible).

18.The judge then went on to consider the plaintiff’s case, which was based on the identification of the closest available comparable by reference to the licence and rental agreements that had actually been agreed with the owners of the 3^rd floor of the Wall, and Units 3A, 4A and 5A.  She accepted that the closest comparable was the property leasing arrangement that the 2^nd defendant had made with the Incorporated Owners in May 2008 in relation to the 3^rd floor of the Wall, as that related to a part of the Wall itself, immediately below the 4^th and 5^th floors, and expressly stated that the arrangement was entered into to enable the 3^rd floor of the Wall to be used for “advertising purposes”.  The rental agreed under that arrangement was HK$35,000 per month.

19.The judge also accepted the plaintiff’s submission that this amount should be adjusted in two ways: first, to take account of the size of the relevant part of the Wall owned by the plaintiff, by doubling it (as the plaintiff owned two floors, while the Incorporated Owners owned one floor only) and second, to take account of the time element by applying an increase of 54%, which was in line with one of the options put forward by Mr Chan.  Although Mr Chan did not accept that the rental for the 3^rd floor of the Wall was an appropriate comparable because of his view about “hope value” (which the judge had rejected), the judge noted that he did not disagree with making these adjustments in the event that the court considered the comparable to be a suitable one.  Applying these adjustments to the amount of HK$35,000 produced a rental value for the 4^th and 5^th floors of the Wall of HK$107,800 at the date of trial.  The judge accepted that the rental would not have been at this level throughout, and adopted the amount of HK$70,000 as a starting point, with HK$107,800 as the end point.  She then took the mean of these two amounts to arrive at an average rental of HK$88,900 during the relevant period from mid-December 2010 until judgment, and used the end amount of HK$107,800 for the period after judgment until delivery of vacant possession.

20.Before us, Mr Smith contended that the market rent of the 4^th and 5^th floors of the Wall should be measured by the income that could be generated by their optimal use.  His primary contention was that having regard to the problems of physical configuration and multiple ownership, that optimal use was the layout proposed by Mr Chan consisting of the two narrow advertising boards on either side of the Wall.  In other words, Mr Smith was contending that the judge was wrong to have rejected Mr Chan’s evidence.

21.I have set out above Mr Chan’s evidence and the judge’s criticisms of it which led her to reject it.  All of the judge’s criticisms were valid and justified. Mr Smith did not put forward any real response to those criticisms.  In those circumstances, I cannot see any basis for suggesting that the judge was wrong to have rejected Mr Chan’s evidence which assigned an extremely low value to the 4^th and 5^th floors of the Wall.  On the contrary, it seems to me that she was quite right to do so.

22.Mr Smith’s actual complaint here seemed to be that the judge had (in his submission) failed to recognise that the burden of establishing the value of the 4^th and 5^th floors of the Wall lay on the plaintiff. He argued that as the plaintiff had not put forward evidence as to how much its part of the Wall could have been rented out for to enable some form of advertising other than the signboards proposed by Mr Chan to be put up, it had failed to discharge this burden, and that in consequence, Mr Chan’s valuation should have been accepted.  As a fall-back position, Mr Smith argued that even if Mr Chan’s evidence was rejected, the plaintiff should have, but did not, put forward evidence as to valuation which took account of the need to make arrangements with and payments to various other owners, and as it had not done so, the matter should be remitted for further determination.  In my view, these arguments are flawed.

23.Most fundamentally, they mistake what the plaintiff had to do to discharge its burden to establish its loss.  All that the plaintiff needed to do was to put forward evidence which would enable the court to assess the value of the part of the Wall the plaintiff owned, of which it had been deprived by the 2^nd defendant’s trespass and nuisance.  It could have done this in a number of ways.   Here, it did so by relying on the arrangements that had been made between the 2^nd defendant and the Incorporated Owners and the owners of Units 3A, 4A and 5A, and suggesting that the arrangement with the Incorporated Owners in 2008 was the best comparable, which provided a means for the court to assess the value of the 4^th and 5^th floors of the Wall.

24.The judge accepted this approach, and in my view, she was entitled to do so.  The 2008 agreement with the Incorporated Owners was a valid comparable, given that it related to a part of the Wall in close proximity to that owned by the plaintiff, and was expressly for the purpose of enabling the 3^rd floor of the Wall for advertising.

25.As it happens, the adoption of this comparable was not particularly unfavourable to the 2^nd defendant.  As noted above, it produced a starting value of HK$70,000 for the 4^th and 5^th floors of the Wall – but even in 2008, the 2^nd defendant was paying the 1^st defendant much more than that, for the same part of the Wall, under the sub-licence – HK$129,600.  Further, the judge did not increase the starting point to take account of the lapse of time between 2008 and December 2010, as the plaintiff had not put forward any proposed adjustment in this respect.

26.It is also relevant to note that the 2008 agreement with the Incorporated Owners must have taken account of the need to make arrangements with other owners, not least the plaintiff, whose part of the Wall was the subject of a separate arrangement.

27.But even if the evidence that had been put forward by the plaintiff had not been sufficient to enable the court to come to a view as to the value of its part of the Wall, it would not follow that the result would be that Mr Chan’s flawed assessment of that value should be accepted.  Having been rejected for good reason, it could not be resuscitated merely because the plaintiff had not put forward something better.  But as I have noted, the judge was entitled to, and did, accept the plaintiff’s case as to how the 4^th and 5^th floors of the Wall should be valued.

28.The fall-back position, that the matter should be remitted for a re-trial on quantum, is also based on the misconception that the plaintiff had not discharged its burden of proof, and must fail for the same reasons as are explained in paragraphs 23 to 26 above.

29.For the foregoing reasons, I rejected the contentions of the 2^nd defendant, and dismissed this appeal.

Mr Dennis Law and Mr Lawrence Cheung, instructed by W.L. Yuen & Co, for the respondent / plaintiff

Attendance excused of Kam & Fan, for the 1^st defendant

Mr Clifford Smith SC, instructed by Wilkinson & Grist, for the appellant / 2^nd defendant