Felan Investment Ltd v. Sarwin Industries Ltd and Another

LDBM 7/2015

[2018] HKLdT 17

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 7 OF 2015

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DECISION ON COSTS

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1.This is the hearing of the parties’ argument on costs upon discontinuance of the applicant’s (“A”) claim against both respondents (collectively “Rs” and individually “R1” and “R2”) and the R1’s counterclaim against A.

2.The parties’ respective position on costs are as follows:

i) A:	A’s costs of the claims and counterclaim be paid by R1, and that there be no order as costs between A and R2. If A is ordered to pay R2’s costs, A asks such costs to R2 be indemnified by R1 by way of a Bullock or Sanderson order;
ii) R1:	There be no order as to costs between A and R1. If the Tribunal so orders, it asks for costs of the argument. Neither Bullock nor Sanderson orders are appropriate in the present case; and
iii) R2:	R2’s costs be paid by A in any event. Neither Bullock nor Sanderson orders are appropriate in the present case.

Brief Background

3.A is the registered owner of Shop A on ground floor and the whole of the first floor (collectively “A’s Shop”) of a composite building known as the Chung Wui Apartments (“the Building”) along certain part of the Johnston Road and Wan Chai Road. In addition, A is also the owner of the outside walls of the 1^st Floor of the Building (“the said external wall”). It is undisputed that certain part of the said external wall was converted into a display window with dimension 190 cm (height) x 330 cm (width) (“the said Display Window”).

4.R1 is the registered owner of Shop B on the ground floor of the Building (“R1’s Shop”) which is situated directly below the said Display Window.

5.R2 was the tenant occupying R1’s Shop at all the material times.

6.According to the parties’ pleadings, R1 denies A being entitled to the benefit of the said Display Window. However, the fact of A being entitled to the exclusive use occupation and enjoyment of the said external wall (in contra-distinction to the said Display Window) for commercial purposes of erecting painting or display of sign-boards or indication of name and nature of business carried on in A’s Shop[1] is, apparently, admitted by R1[2], though its position is somewhat inconsistent with its subsequent pleadings[3].

7.It is A’s pleaded case that on or about 10 November 2014, R1 and/or R2 and/or their agent[4] installed a split-type air-conditioner for the benefit of R1’s Shop. The air-conditioner comprised 2 stacking up outdoor condensers. They were installed in such manner that although the supporting frame was fixed to R1’s Shop, the upper of the 2 stack-up units was placed in front of the said Display Window and the said external wall. It is A’s case the erection of these outdoor units amounted to trespass into its property rights. It blocked part of the said external wall and obstructed part of the said Display Window to the extent of 60 cm (height) x 98 cm (width). It is A’s case the modification of part of the said external wall to Display Window was with approval of the Buildings Department. It is also A’s case that the heat generated by these outdoor units particularly the upper one placed directly outside the said Display Window was a nuisance and/or has caused annoyance to A’s enjoyment of A’s Shop. It had also diminished the commercial value of A’s Shop.

8.A took out the present application against R1 and R2 for using R1’s Shop which might be or becoming a nuisance and/or annoyance to A, acting in breach of the Deed of Mutual Covenant (“DMC”) dated 3 February 1964 of the Building. Among the provisions relied on, A pleaded clause 10(c) of the DMC. It is not a claim based on common law of tort but breach of DMC. Mandatory orders to remove the air-conditioner as well as injunctions prohibiting further breaches were sought against each of Rs. No expressed claim for damages was pleaded though in the joint statement of issues dated 7 January 2016 filed by the parties, one of the issues to be decided is whether, and if so, what loss and damage have been caused by R1 to A. Although contended otherwise by Mr Ng on R1’s behalf, it is fair, from an overall assessment of the pleadings and evidence disclosed so far, to say A’s main concern was the removal of the stack-up units outside the said Display Window. It is because A did not seek damages particularly in its prayer. The request for damages is only caught by the prayer of “further and/or other relief”. Mr Law of counsel confirmed that A was not claiming any damages.

9.Mr Law submitted that A was not sure by whom the said air-conditioner was installed at the commencement of the proceedings. A therefore sued both Rs in the present application. It is essential to note that in [6] of his re-amended statement of claim made on 19 January 2016, A pleaded it was R1 and/or R2 and/or their agent who installed the split type air-conditioner. In A’s statement of claim, A re-amended it to plead in aid of section 41(3) of the Conveyancing and Property Ordinance, Cap 219 (“CPO”) with a view to holding R2 liable as an occupier for breach of negative covenants of the DMC.

10.R1 initially did not admit the said air-conditioner was installed by it by putting A to strict proof of its case. As can be seen in the latter part of this decision, R1 even refused to answer a request for further and better particulars (“FBP”) on whether the air- conditioner was owned by it. It is not until 30 October 2015 when R1 filed the witness statement of Madam Wong that it admitted such fact[5]. R1’s defence and counterclaim was only accordingly amended on 5 February 2016[6] following A’s re-amendment of its statement of claim. It is fair to summarize R1’s grounds of defence into the following broad grounds:

i)   The DMC of the Building does not provide for the said external wall using for the purpose of erecting painting or hanging sign-boards or indication of name and nature of business despite the fact that the assignment by which A derived its title apparently provides so;

ii)   Alternatively, the Display Window is an unauthorized building work and is thus an illegal structure. A has no entitlement to use the said external wall as display window.Clause 10(c) of the DMC was particularly relied on[7]. Alternatively, expert opinion has to be adduced in order to show whether the alteration of the said external wall to Display Window and/or its enlargement were in strict compliance with the alleged approval from the Buildings Department;

iii)   Further or alternatively, the 1^st Floor of A’s Shop was now being used as a retail shop which is in breach of the user prescribed in the occupation permit issued in respect of the said 1^st Floor (“the said OP”). According to the said OP, the 1^st Floor was for offices and non-domestic use. A is not entitled to any commercial value said to have attached to the Display Window by reason of A putting it to use outside that prescribed by the said OP;

iv)   The upper of the 2 stack-up units was at least 14 cm from the said Display Window and did not physically touch it. Accordingly, it did not obstruct the full open view of the Display Window. Alternatively, A has no right to any view; and

v)   The Lands Tribunal has no jurisdiction to deal with a claim for trespass.

11.In addition, R1 raised the following counterclaims against A:

i)   The said Display Window was an illegal building work. A has caused or may have caused a nuisance or annoyance to R1 as the latter is suffering from potential and/or existing structural risk/danger[8]. A also opened other display windows on the said external wall. All these windows are in breach of clause 10 of the DMC which prohibits structural alteration of one’s own unit without Government’s consent and causes interference with the enjoyment of other using their units (“R1’s Display Window Counterclaim”); and

ii)   In or around June 2010, A built 2 cabinets on the said    external wall housing therein at least 7 air-conditioner    outdoor compressors. These, again, according to R1,    are illegal structures as A had not been authorized under the Buildings Ordinance. They were therefore    erected in contravention of the assignment by which A   derived title to A’s Shop as well as the DMC. These    illegal structures cause nuisance and/or annoyance to    R1 (“R1’s Cabinets Counterclaim”).

12.R1 sought a number of declarations to the effect that the said Display Window, other display windows and the 2 cabinets are illegal structures and are erected in breach of the DMC. R1 also asks for mandatory orders for dismantling those structures and injunctions restraining A from further breaches.

13.In response to R1’s counterclaims, A’s case is that:

i)   The said Display Window and other display windows were built as per plans approved by the Building Authority with BD reference no BD2-3/2562/61, and they were not unauthorized structures as alleged by R1. No unauthorized structural alterations/loadings to the Building was made as contended. The alleged approved plans were attached to A’s witness statements;

ii)   By virtue of the assignment whereby A got the exclusive right and enjoyment of the said external wall including the right to hang sign-boards or display painting, it is implied that A is entitled to display its products at the said Display Window and enjoy its benefit. This carries a commercial value. Further and alternatively, the display of products causes no nuisance nor annoyance and no breaches to any DMC provision;

iii)   The use of the 1^st Floor of the Building is not inconsistent with the said OP. Even if (which is denied by A) the 1^st floor could not be used for retail, A will not be barred from using the said Display Window for display of its product;

iv)   Since R1 is the owner and R2 is the occupier, tenant or licensee of R1’s Shop, both R1 and R2 are the owner of the said split type air-conditioner as it was installed by them or their agent on or about 10 November 2014. They were both liable to A for the restrictive covenants of the DMC; and

v)   A admitted the 2 cabinets were unauthorized structures. However, A put R1 to strict proof that they have not caused the nuisance or annoyance as alleged. In any event the 2 cabinets were dismantled by A on or about 7 January 2016.

14.R2 filed and served his Notice of Opposition on 6 February 2015. R2 admitted he is an occupier and/or a tenant of R1’s Shop[9]. The gist of R2’s defence is that the split type air-conditioning units were not erected by him but by R1[10]. He should not have been sued in the first place.

15.For reason not apparent from the documents exhibited, the air-conditioner and the said cabinets were subsequently removed. In or about January 2016[11], without A’s consent, R1 relocated the 2 outdoor units to a place, though still obstructing part of the said external wall but obviously clear of the said Display Window which A had complained most. In light of this A proposed to withdrew its claim. Subsequently, R1 said it would not pursue its counterclaim in early March 2016[12]. A and R1 therefore agreed to discontinue their respective claim and counterclaim.

16.The parties later filed a consent summons on 30 March 2016 for, inter alia, both the claim and counterclaim be discontinued. On 1 April 2016, an order in terms of such discontinuance was made by consent with costs to be argued.

17.Prior to the discontinuance, the parties have already exchanged witness statements as to facts. Despite directions having been given to A and R1 to file expert reports on whether the said Display Window and cabinets were unauthorized structures on or before 31 March 2016, no such reports have ever been filed before the discontinuance.

18.It is parties’ common ground that there are 3 basic issues to be dealt with had this case gone to trial. They are:

i)   A’s Air-conditioner Claim;

ii)   R1’s Display Window Counterclaim; and

iii)   R1’s Cabinets Counterclaim.

The Applicable Principles

   Costs On Discontinuance

19.Section 12(1) of the Lands Tribunal Ordinance (Cap 17) stipulates that costs of and incidental to all proceedings in the Tribunal are in the discretion of the Tribunal. Section 12(7) states that O.62 of the Rules of the High Court (“RHC”) applies, with the necessary modifications. O.62 r.5 RHC provides that the court shall, in exercising its discretion as to costs, take into account a number of factors including the underlying objectives set out in O.1A r.1 (which is also applicable to proceedings in Tribunal); the conduct of all the parties; and whether a party has succeeded on part of his case, even if he has not been wholly successful. For the purpose of assessing the conduct of a party, the rules further set out the following considerations to be taken into account: see O.62 r.5 (2)(a) to (d) RHC:

i)   Whether it was reasonable for a party to raise, pursue    or contest a particular allegation or issue;

ii)   The manner in which a party has pursued or defended    his case or a particular allegation or issue;

iii)   Whether a claimant who has succeeded in his claim, in    whole or in part, exaggerated his claim; and

iv)   Conduct before, as well as during, the proceedings.

20.Both A and R1 discontinued their respective claim and counterclaim without a trial of the merit. The principles governing costs on discontinuance is relevant. From the parties’ written submission, it is fair to say basically they have no quarrel on the principles applicable to costs upon discontinuance. They invited the Tribunal to approach the question of costs on the basis of a compromise. In the Tribunal’s judgment, in discontinuance situation the usual approach would be for the party withdrawing or discontinuing to pay costs of his opponent unless there is a good reason to order otherwise[13]. Applying the agreed principles to the question of costs, they differ only on the conclusion.

21.The parties embraced the “successful party approach”. They referred this Tribunal to the principles set out in Famous Marvel Company Limited & Ors v Conversant Group Limited & Ors[14]. In that case Hon Au-Yeung J, after considering a number of earlier decisions on costs on discontinuance and the aforesaid provisions of the RHC, summarized in [22] the following guiding principles:

“22.   There is no dispute that even if a case is settled except as to costs, the Court still has power to determine which party should be liable for costs.  There is no tradition for there to be “no order as to costs” in such a scenario.  I am guided by the following principles in deciding costs:

(i)   The Court is to decide if the party seeking costs has substantially obtained the reliefs sought in the litigation:    Re Chinese United Establishment Ltd, HCCW 291/1994,    5 October 1995, Rogers J (as he then was), approved in CACV 214/1995; Lai Yuet Chun v Super Deluxe    International Limited & ors, HCCW 186/2001, 3 June    2003 Kwan J (as she then was).

(ii)   At each end of the spectrum there will be cases where it    is obvious which side would have won had the substantive issues been fought to a conclusion.  In between, the position will, in differing degrees, be less clear.  How far the Court will    be prepared to look into the previously unresolved substantive issues will depend on the circumstances of the particular case, not least the amount of costs at stake and the conduct of the    parties.  Brawley v Marcynski (No.1) [2003] 1 WLR 813.

(iii)   The Court will first consider if it is in a position to say    what the likely outcome after trial would have been.  If it is not in a position to do so, the order may well be no order as to costs: Brawley v Marcynski (No.1),at para 18, Longmore LJ; followed in BCT Software Solutions Ltd v C Brewer & Sons Ltd [2004] FSR 150.

(iv)   The Court may permit parties to adduce evidence on the    question of costs: Ta Tung China & Arts Ltd v Fontana    Restaurant Ltd [1999] 1 HKLRD 404; Lai Yuet Chun v Super Deluxe International Limited & ors, at para 12.  However, to say that the parties must go to trial in order to resolve any outstanding questions of costs would be contrary to the    underlying objectives enshrined in RHC Order 1A rules 1 and 2: Graham M Morley v Kwan Wo Wan & others, HCA 4366/2003, 30 December 2009, Recorder Jat SC.

(v)   A broad brush can be taken by referring to all matters already laid before the Court, eg. pleadings, correspondence, witness statements, transcripts of evidence and the terms of the settlement order: c.f. BCT Software Solutions Ltd v C Brewer & Sons Ltd, at para 9; Graham M Morley v Kwan Wo Wan & others.

(vi)   The objective is to do justice between the parties    without incurring unnecessary Court time and consequently additional cost: Brawley v Marcynski (No.1).”

22.Applying these principles, the starting point is to ask which party has succeeded by substantially obtaining the reliefs sought. Only when it is unclear which side has succeeded then is it necessary for the court to consider the substantive issues. In that event a broad brush approach should be adopted, otherwise it will be contrary to the underlying objectives set out in O.1A r.1 & 2 RHC. When the court is not in a position to come to a decision, an order directing no costs is appropriate. However, the overall consideration is to do justice between the parties without incurring unnecessary court time and additional costs.

23.R1 and R2 further relied on the English Court of Appeal decision of M v Croydon London Borough Council[15]. After going through Croydon LBC supra, this Tribunal does not consider it setting up new principles. The principles enunciated therein are no more than those distilled by Hon Au-Yeung J in Famous Marvel, supra, except that it appeared to emphasize that where the court was unable to gauge whether there was a successful party in any respect, the usual or default order should be no order as to costs. It is submitted on R1’s behalf that there is now simply insufficient evidence for this Tribunal to make determination on the merit of the issues in dispute. Accordingly, there should be no order as to costs.

24.On the other hand, A submitted in respect of the 3 issues set out in [18] above, A is the successful party.

25.R2 submitted that A should not have sued him in the first place because A should have known from the outset it was not R2 who erected it. It was made known to it prior to the commencement of the proceedings. It was also so pleaded by R2. He also expressly said it was R1 who installed it in his defence. Now R1 had admitted it. A should therefore pay R2’s costs of defending the proceedings.

   Sanderson or Bullock Order

26.In Chong Ngan Seng v China Harbour Engineering Company Limited & Ors[16], the Court of Appeal has this to say in respect of the 2 orders:

“5. Where a plaintiff sues a number of defendants, the court may order an unsuccessful defendant to pay the costs of a successful defendant. It may do so in one of two ways: either by a Sanderson order^[17] whereby the unsuccessful defendant is ordered to pay the costs of the successful defendant directly; or by a Bullock order^[18] whereby the plaintiff pays the costs of the successful defendant but is indemnified in respect of that liability by the unsuccessful defendant, thereby indirectly requiring the unsuccessful defendant to pay those costs.

6. In deciding whether to make a Sanderson or Bullock order and, if so, which of the two orders to make, the court is exercising its discretion.

7.   It was common ground that, in deciding whether to exercise that discretion, the court looks to see whether it was reasonable in all the circumstances of the case for the plaintiff to join the successful defendant in the action: see Leung Lai-ha and Another v Hon Sau-ling and Another [1993] 1 HKLRD 86, a decision of this court, and see also, as a recent example of the statement of this principle, the judgment of Bharwaney J in Fung Chun Man v Hospital Authority [2012] 1 HKC 531 at §5.”

27.As explained by Bharwaney J in [5] of Fung Chun Man supra, the rationale for a Sanderson or Bullock order is that the costs of suing the wrong party form part of the reasonable costs of the action, and the following passage of Vaughan Williams LJ stated in Besterman v British Motor Cab Co Ltd [1914] 3 KB 191 at p.187 was referred to in [5] of Fung Chun Man, supra in support:

“… The proper way is - do not join any defendant unreasonably; if the facts are such that it is reasonable to join them both and reasonable to be in a state of uncertainty as to which of the two is the really guilty one, then it is part of the reasonable costs of the action that the costs of the action which you have launched against one of those defendants, and who has succeeded in defending himself, should be borne by the man who is to blame.”

28.The Tribunal will be guided by the aforesaid principles in approaching the respective costs liability of the parties.

29.As said above, there are basically 3 matters to be dealt with had the matter proceeded to trial. This approach is agreeable to the Tribunal. The Tribunal will approach the costs issue by considering who is the successful party in these matters adopting the successful party approach agreed upon by the parties.

A’s Air-conditioner Claim

30.From the statement of claim and the witness statement filed on A’s behalf, A was not happy with the stack-up outdoor units blocking the said Display Window. Afounded its case on breach of DMC, and in particular, clause 10(c). A claimed either of or both Rs “installed” these stack-up units. It added a further and alternative claim against R2 pursuant to s.41(3) of the CPO when it further amended its pleadings on 19 January 2016[19]. By relying on the said CPO provision, A held R2 liable as an occupier of a land for the negative covenants of the DMC that run with the land.

31.R1 eventually admitted the stack-up units were installed by it and had blocked part of the said Display Window though it alleged the upper of the said outdoor units was at less 14 cm from the said Display Window/external wall.

32.No doubt A’s discontinuance of its claim was triggered off by R1 removing the outdoor units to a position not blocking the said Display Window. Prior to the removal, A dismantled the cabinets. The removal of the said air-conditioner was, in the Tribunal’s judgment, the main purpose of A taking out the present proceedings. Now A basically achieved what it intended to achieve. In the Tribunal’s judgment, prima facie, A is the successful party.

33.After going through R1’s pleaded grounds of defence[20] and the facts which are uncontroversial, this Tribunal does not consider any of them constituting good defence to A’s claim.

DMC Not Providing for the Purpose of the Assigned Rights

34.This ground cannot help R1. The fact that the DMC does not provide positively for the said external wall to be used for displaying painting or hanging signboards or indication of name as per A’s assignment does not mean it prohibits such uses. It is not a defence to enforcement of clause 10(c) relied on by A. In clause 10(c) an owner covenants:

“Not to use or permit or suffer to be used its self-contained portion for any noisesome, obnoxious, immoral or illegal purpose and not to do, or permit to be done or suffer in the said self-contained portion or in the said Building anything which may be or become a nuisance or annoyance to the other party or the other occupiers of the said Building or adjoining premises.” (Emphasis Added)

35.Further, clause 10(f) of the DMC stipulates the following covenant of owners:

“Not to exhibit any neon or other sign, poster or advertisements except on such part or parts of the premises (other than parts used or intended to be used for domestic purposes only) to which the party shall have the exclusive right to occupy and enjoy and then only so that the same shall not cause or be or become a nuisance or annoyance to any other owner, tenant or occupier of the Building.” (Emphasis added)

36.In the Tribunal’s judgment, clause 10(f) above supports the proposition, which is now being contended for by A and contrary to R1’s contention, that A can use the said external wall for any of the purposes expressed in the assignment. The DMC expressly took away prohibition of display of signs and advertisement in the non-domestic part of the Building (the said external wall is such a part) to which an owner (A is such owner) has an exclusive right to use. In other words, there is a strong argument that the DMC permits the same in an indirect way.

The Said Display Window Being Unauthorized Structure

37.Clause 10(a) of the DMC does not impose an absolute prohibition against structural alteration. It only provides for owners of the building not to:

“(i) make any structural alternation in its self-contained portion of the building without the consent of the Director of Public Works and all other interested authorities.

(ii) make any structural alternation which may affect or interfere with the use or enjoyment of any other portions of the building.”

38.A has pleaded and in fact exhibited approved plans and the relevant correspondence to establish that the said Display Window and other windows were approved by the Building Authority. The Tribunal has gone them and tends to agree. Prima facie, A is now equipped with the Director’s consent and thus has a strong case that the said Display Window and the other windows being authorized. The evidential burden of showing them illegal has shifted to R1.

39.In the evidence filed on R1’s behalf, Madam Wong stated that when altering the said external wall to the said Display Window, A carried out such work in a manner which was a nuisance and annoyance to R1. The subsequent regular maintenance when cleaning workers climbing up ladders placed directly in front of R1’s Shop also amounted to a nuisance and annoyance to R1’s use of its shop. However, these parts were, at most, only pleaded in the counterclaim but not as a defence to A’s claim. Accordingly, these issues would not help defending A’s claim. They will be discussed when R1’s counterclaims are discussed below.

Against the User Stated in the Occupation Permit

40.The gist of A’s pleaded claim is that its rights and entitlement to use the said external wall were being interfered with by the stack-up outdoor units in breach of the DMC, and in particular, clause 10(c). A pleaded, inter alia, that the heat generated from these outdoor units has caused nuisance and annoyance to A being owner of the said external wall with the said Display Window. R1 said A used the said external wall outside the scope of the said OP. Apparently, R1 is advancing a case that when using the external wall in the manner as A did then, A has lost the benefit and protection of the DMC.

41.R1 also said A had not produced any evidence such as electricity bill showing increase in air-conditioning charges as a result of temperature rise caused by the heat generated by the outdoor units. In the Tribunal’s judgment, it is an unfair attack. It is common sense that heat will be generated by these outdoor units when they are operating. In fact, in R1’s letter to the incorporated owners of the Building (see [67] below), R1 referred these outdoor units to as “split type heat dispersers of air-conditioner (分體冷氣機散熱器)”[21]. The choice of description employed by R1 was telling. R1 should have appreciated heat would be generated and dispersed through these outdoor units. The failure to produce any electricity bill will be immaterial to A establishing nuisance and annoyance caused by the heat generated.

42.Nuisance is a condition or activity which interferes with the use or enjoyment of one’s land. In MTR Corporation Limited v Cheung Ching Kin[22], I accepted the following proposition stated in the then Halsbury’s Law of Hong Kong[23]:

“Where the covenant is against any act which may lead to ‘annoyance, nuisance or damage’, it is wider, and is broken by anything which disturbs the reasonable peace of mind of an adjoining occupier. The disturbance needs not amount to physical detriment to comfort, nor need the adjoining occupier be a tenant of the same landlord” (Emphasis added)

43.The threshold for breach of the said provision is, in my view, a low one. It will be breached if the heat generated interferes with A’s enjoyment of the said external wall or the 1^st floor by disturbing the reasonable peace of mind of occupiers of A’s Shop. As a matter of common sense, this Tribunal considers this conclusion can easily be drawn in favour of an owner of a wall used for display purpose when heat is generated and dispersed onto it from a distance of about 6 inches and with the display view obstructed. In the Tribunal’s judgment, A’s right under the DMC will not be lost simply because the said external wall has been converted from brick to glass, which the DMC makes no absolute prohibition[24]. Neither is it lost when A used the premises not in accordance with the said OP. It would be a matter of enforcement action by the relevant authorities if the user prescribed by the said OP or land grant documents is breached.

44.In The Incorporated Owners of Fanling Centre v Wong Yu Ting Terrence and Other[25], the erection of 5 antennae with 2 of them some 10 feet away from an owner’s unit was held by this Tribunal to be in breach of a similar provision in a deed of mutual covenant prohibiting acts or things which may be or becoming a “nuisance or annoyance” to other owners or occupiers. In that case the subjective fear of these antennae being a health hazard was held to be sufficient.

45.Even assuming A is not entitled to convert part of the external wall to the said Display Window, that does not mean A’s rights under the DMC can be interfered with randomly. Further, there is still commercial value attached to the said external wall for display of advertisement or signboards which, in the Tribunal’s judgment, is permitted by the DMC, or at least not prohibited by it. In the Tribunal’s view, the acts of blocking the view to an external wall for display of signs purposes and dissipating heat directly onto it constitute, prima facie, breaches of clause 10(c) of the DMC.

46.The defence of breach of the said OP is, in my view, no defence to a claim founded on breach of clause 10(c) of DMC. It was held by Hon L Chan J in Wing Hong Investment Company Limited v Fung Sok Han and Others[26] that the use of a premises different from that stated in the OP is not illegal, and thus not in breach of a provision[27] in the DMC similar to the present one. A’s right under the said clause will not be extinguished by reason of A’s unit being used not in accordance with the occupational permit.

The Upper Unit Did Not Touch the Display Window

47.There are authorities to support that there is no right to a view under common law. However, A and R1 being parties to a DMC, are bound not to use their premises in a manner amounting to a nuisance and/or annoyance to others. By reason of what have been discussed above, this Tribunal considers this ground not a defence to A’s present claim.

This Tribunal Has No Jurisdiction to Trespass

48.This ground of defence is totally without merit. The trespass allegation is pleaded in its general sense, and A’s claim is based on breach of DMC which is squarely within the Tribunal’s jurisdiction.

49.In the Tribunal’s view, had A’s claim gone to trial, it would probably have succeeded based on breach of DMC and obtained the relief sought.

Other Considerations

50.One of the issues to be decided by the Tribunal is who erected those stack-up outdoor units. A pleaded in [6] of the Notice of Application that it was R1 and/or R2 who installed them[28]. Before amendment, R1 pleaded in its Notice of Opposition and Counterclaim dated 10 February 2015 at [20]:

“Save as to the following, paragraph 6 of the Statement of Claim is admitted:

a) [R1] does not admit that it was involved in installing the alleged large size split type air conditioner at [R1’s Shop] which comprises two sets of machines. [A] is put to its strict proof.

b) [not relevant for the present discussion]”

(Emphasis added)

51.R1 expressly refused to admit it being the one who installed the air-conditioner, and put A to strict proof thereof. R2 denied and pointed out it was R1 who installed it.

52.On 12 March 2015, A’s solicitors asked for FBP from R1’s solicitors specifically on this paragraph of R1’s pleading. The gist of the request was whether R1 was the proprietary owner of the conditioner and if not, who was the owner.

53.On the same date, A’s solicitors wrote to R2’s solicitors asking similar questions. The request was couched in similar terms as its letter to R1.

54.For reason not apparent from the documents before the Tribunal, the description of “proprietary owner” is employed. It is interesting to note the response of both Rs to A’s request.

55.By a letter dated 18 March 2015, R1’s solicitors replied refusing to provide the requested particulars. The following paragraphs were added by R1’s solicitors when refusing the request:

“… By paragraph 20(a) of our client’s Notice of Opposition and Counterclaim, our client puts your client to strict proof of its allegation. As such, it goes without saying that paragraph 20(a) merely is a traverse of a positive allegation which your client is under the burden to prove at trial.

With respect, we simply fail to see on what basis, be it common sense or with any legal authority, your client sees that paragraph 20(a) is a double negative and/or in any event involves a positive allegation that our client is required to prove and give any particulars.

Secondly, we note that your Request (1) and the first part of Request (3) concerns the proprietary ownership of the subject air-conditioner…

It is trite that a defendant should never traverse matter which the plaintiff might have, but has not, raised against him: Rassam v Budge [1893] 1 QB 571. Moreover, it is no part of a defendant’s duty, when drafting its defence, to anticipate what the plaintiff may hereafter allege in its reply: Hong Kong Civil Procedure 2015, Vol.1, paragraph 18/13/5.”

56.Solicitors for R2 refused to provide the requested particulars though not in the same manner as R1’s solicitors did. R2 challenged that since A had not put forward a case relating to proprietary ownership of the air-conditioner, A is not entitled to the requested FBP from R2.

57.A’s solicitors insisted on a reply, and repeated the request in their further letter dated 24 March 2015 (“A’s further letter of 24/3/2015”). No useful reply was received. The request remained unanswered.

58.By A’s further letter of 24/3/2015, A stressed it had asked the same question before the issue of the proceedings for the purpose of avoiding suing the wrong person. It now asked the same question again. If there was no positive reply, A would deem that neither R1 nor R2 were the owners of the air-conditioner, and would proceed to dismantle the same without further reference to them.

59.This letter, however, triggered a strong-worded response from R1 immediately. R1’s solicitors warned that the dismantling of the air-conditioner without consent of its owner (but without admitting it being the owner) may amount to criminal offence. R1 put A on notice that if that happened, they would immediately report the matter to the Police.

60.It was apparent from the above correspondence that R1 has adopted a difficult stance and a very uncooperative attitude. R1 deliberately maintained a non-admission position to a factual issue which it eventually admitted. This Tribunal cannot help coming to a view that R1 was deliberately making A hanging in the air on the identity of the air-conditioner’s owner. The threat to report the dismantling of the air-conditioner suggested R1 might be the owner. Yet R1 chose not to admit this fact despite being repeatedly asked for. Although R2 said it was R1 who installed the air-conditioner, R1 deployed a tactic of putting A to a state of uncertainty. It is not until R1 filed the aforesaid statement of Madam Wong by end of October 2015 that it admitted such fact. In the Tribunal’s judgment, the stance taken by R1 or its legal advisors is most uncooperative, unhelpful and in fact contrary to the underlying objectives of RHC.

61.The underlying objectives set out under O.1A r.1 of the RHC include:

i)   To increase the cost-effectiveness of any practice and    procedure to be followed in relation to proceedings    before the court;

ii)   To ensure that a case is dealt with as expeditiously as    is reasonably practicable; and

iii)   To promote a sense of reasonable proportion and    procedural economy in the conduct of proceedings.

62.O.1A r.3 of RHC imposes a duty (emphasis added) on a party and his/her legal representatives to assist the court to further the underlying objectives of the rules. Further, the court shall further the underlying objectives of the rules by encouraging the parties to co-operate with each other in the conduct of the proceedings; identify the issues at the early stage; deciding which issues need full investigation, etc. Accordingly, post-Civil Justice Reform, a party is not complying with the underlying objectives of the rules if it simply or indiscriminately puts its opponent to strict proof of everything. This Tribunal cannot see why in the present case, R1 cannot be frank and be more forthcoming in the early stage of the proceedings as to who had installed or was the owner of the air-conditioner. The time where parties are entitled to put their opponent to strict proof of everything, material or otherwise, has long gone post-Civil Justice Reform. Parties should focus only on material issues necessary for resolution of their dispute and agree on all other non-material issues and facts as early as possible. The issue to be disposed of in the present claim is whether the outdoor units stacking up in the manner they did then amounted to a breach of the DMC and ought to have been removed. The circumstances of the case are either R1 or R2 or both had installed them. A was not sure, but had made clear its position that it only wanted to sue the right person, i.e. the owner. At the end of the day unless both Rs remained silent throughout the trial, one will expect this fact will be coming out at trial, and most probably from R1.

63.Further, this Tribunal finds R1’s response (which this Tribunal has particularly set out in [55] above) to A’s request for FBP objectionable. Although undoubtedly, there is always room for improvement of A’s request, the purpose for which the request is made is, in the Tribunal’s view, crystal clear. A wanted to know exactly who owned these out-door units. We are not here to play a semantic or pedant’s game. Parties are expected to plead in the clearest possible terms as early as possible focusing on the real issues in dispute between them. The purpose of so doing is to enable the parties’ real dispute to be identified and resolved expeditiously with certain degree of proportionality and procedural economy. This is one of the underlying objectives of the RHC. The answers now given by R1 were obviously most unhelpful. This Tribunal will definitely take these unhelpful and un-cooperative conduct into account when considering the issue of costs.

64.By reason of the above, R1 should pay A’s costs of its claim upon discontinuance.

65.As regards R2’s costs of the proceedings, according to what this Tribunal has stated in [20] above, the usual approach should be for A to shoulder its costs upon discontinuance. The question is whether there is sufficient ground to depart from the usual rules, or to make a Sanderson or Bullock order against R1.

66.R2 expressly pleaded it was R1 who installed the air-conditioner. Question arises as to whether A has a genuine doubt as to this fact prior to the proceedings, and whether it should continue against R2 despite the said pleading.

67.Apart from the post-action letters discussed above, the following pre-action letters shed light on the matter. This Tribunal does not consider the contents controversial:

i)   Prior to the issue of the present proceedings, the dispute had been brought to the attention of the   incorporated owners of the Building. The management company issued a letter dated 26 November 2014[29] to R1 and tenant of R1’s Shop (without naming R2). It was left at R1’s Shop.  The management company said that complaint had been received from A regarding the installation of the air-conditioner by the tenant. The management company requested the   addressees to remove the air-conditioner. It is not sure how and why the said management company said the    air-conditioner was installed by the tenant;

ii)   R1 responded to this letter. By its letter of 1 December 2014[30], R1 asked the incorporated owners for the proper grounds as to why R1 could not install the said outdoor units so that it can ask the tenant to rectify [31]    (emphasis added). Apparently, R1 was also suggesting R2 being the owner of the air-conditioner;

iii)   R1 repeated the same to the incorporated owners by another letter of 21 January 2015 when it received no   reply[32]. By then, the present proceedings have already been issued and served[33]; and

iv)   Prior to issue of the proceedings, solicitors for A issued 2 letters respectively dated 5 and 19 December    2014[34] each addressed to R1 (with its name properly identified) and “tenant of R1’s Shop” delivered to R1’s Shop. Both letters were written in Chinese. The purpose of the 2 letters were clear. They complained about the obstruction of the said Display Window by the outdoor units of the air-conditioner. They made enquiry as to who owned this air-conditioner. The said solicitors stated in the first letter that enquiry had ever been made of the tenant who said he did not pay for the installation. It was said the tenant expressed he did not know who paid for its installation. The first letter of 5 December 2014 elicited no response. A’s    solicitors issued the second one on 19 December 2014. By this letter, it was stated that unless the parties   replied within 5 days, A would treat R1 and R2 being one of the owners and would proceed against both of    them. It is A’s case that they received no reply from Rs[35].

68.It was stated by R2 in his witness statement that when the installation work was carried out on or about 10 November 2014 one Ms Tsang of A attended R1’s Shop with a view to stopping the installation. She was there and told by R2 that the work was carried out by R1 and he had no right to stop it. Further, said R2, one Mr Ling of A made a phone call to him about a week later to enquire as to who paid for the installation of the air-conditioner. R2 said Mr Ling should contact one Mrs Wong of R1 as he had no acknowledge about it[36].

69.Given R1’s manners of either making a confusing stance, or making no response to enquiry, or conducting itself in an un-cooperative manner as elaborated above, this Tribunal accepts Mr Law’s submission that at the commencement of the proceedings, A was in a state of uncertainty as to who exactly was the one installing and/or owning this air-conditioner.

70.Despite R2 alleging R1 being the one who installed the air-conditioner after the proceedings, the Tribunal can understand A’s difficulties, and thus its decision to continue suing R2 until it received express confirmation direct from R1. It is because while R1 is the registered owner of R1’s Shop, it might not have control over it during the term of the tenancy. R2, being a tenant, would have the exclusive right to enjoy and use the entire premises to R1’s exclusion. The metal frame supporting this air-conditioner was attached to R1’s Shop which was supposed to be under R2’s exclusive control. Further, given R1 had adopted a confusing and, in appropriate circumstances, a no response approach, it will be reasonable for A to remain sceptical to R2’s answers bearing in mind R2 has no obligation to help A prove its case. As such, until and unless A has obtained direct admission from R1, A can never be sure who owned this air-conditioner. It will therefore be reasonable for A to join in R2 before the issue of ownership is sorted out. The confusion or uncertainty, in the Tribunal’s judgment, is entirely brought about by R1.

71.There are many ways in which clause 10(c) DMC can be breached. It can be breached directly by committing an act. Alternatively, it can be breached indirectly by permitting to be done or suffering something to have been done which amounts to a nuisance or annoyance to other owners. The manner of breach by R1 and R2 pleaded herein by A is by directly “installing” the air-conditioner[37]. After R1 made the admission, A still saw fit to amend the statement of claim by pleading s.41(3) of CPO to hold R2 liable. There is, however, no corresponding amendment to the effect that R2, being the occupier of R1’s Shop, suffered or permitted use of his premises which became a nuisance or annoyance to A. In the Tribunal’s view, without the said corresponding amendment, s.41(3) of CPO cannot help. It is because A could never prove such fact, as it was R1, not R2, who installed it. A’s own pleading presents a technical hurdle that A needs to overcome. However, the increase of costs to R2 brought about by the re-amendment has already been disposed of by the usual order of amendment in favour of the Rs: see the Tribunal’s order on costs of amendment dated 15 January 2016.

72.The Tribunal is satisfied in the circumstances of this case, it would be reasonable for A to join in R2 due to the stance taken by R1. Save and except for the costs orders in respect of interlocutory applications which have already been made, this Tribunal considers it fair and reasonable for R2’s costs of defending A’s claim be directly paid by R1. This Tribunal now so directs.

R1’s Display Window Counterclaim

73.This counterclaim of R1 is based on the said Display Window being unauthorized structures, and mandatory order for dismantling and injunction were asked for. This counterclaim has been discontinued. Prima facie, R1 is not the successful party for it does not get what it intends to achieve.

74.Further, as discussed above, R1 premised its claim on the said Display Window and other windows being unauthorized. This is not a case where A has totally no evidence on whether or not the said Display Window is illegal. In the present case, A can produce and in fact has produced plans and correspondence which on the face of them, can substantiate A’s assertion that the said Display Window and other windows are authorized. In my judgment, the burden shifts.

75.R1 pleaded the erection and maintenance of the said Display Window had caused nuisance and/or annoyance. However, the said building works was completed in 2010. According to R1’s own evidence, it mentioned no complaint having ever been made to A at that time. Further, in the Tribunal’s assessment, it would be doubtful whether R1 would be able to obtain the relief of injunction/demolition order sought, bearing in mind that cleaning of the windows, if protested by R1 and/or R2, can be carried out after the shop’s opening hours or even in the mid-night.

76.R1 should bear A’s costs in defending this counterclaim.

R1’s Cabinets Counterclaim

77.A admitted the cabinets being unauthorized structures. There is letter from the Building Authority confirming the said cabinets being unauthorized. Such cabinets were erected apparently in breach of clause 10(a)(i) of the DMC. A demolished them eventually. R1 achieves what it intends to achieve. In the Tribunal’s assessment, R1 should be entitled to its costs of counterclaim under this head.

Disposition and Costs

78.Viewing the matter as a whole, A’s Air-conditioner Claim and R1’s Display Window Counterclaim have taken up most of the costs. Taking into account the above and the overall conduct of the parties, save and except the costs order(s) already made, this Tribunal now make the following orders:

i)   R1 do pay 90% of the A’s costs of its claim  against    Rs and defending R1’s counterclaim; and

ii)   R1 do pay direct R2’s costs of defending A’s claim,

such costs be on the District Court scale, to be taxed if not agreed.

79.As regards the costs of this argument, there is no reason why the usual rule of costs to follow the event not applicable. This Tribunal do order Rs to pay A’s costs of the argument, apportioned as to 80% be paid by R1 and 20% by R2, on District Court scale, together with certificate for counsel, to be taxed if not agreed. This is a costs order nisi, and be made absolute after 14 days if no application is made to have it varied.

Mr Ryan T H LAW instructed by Nixon Peabody CWL, for the applicant

Mr Man-kin NG of Kwok, Ng & Chan, for the 1^st respondent

Mr Adrian BUT instructed by Chan, Tang & Kwok for the 2^nd respondent