Grand Power International Ltd v. Chan Sing Hoi Enterprises Ltd and Others
Read the full judgment text of LDBM 329/2014 on BabelCite. This Lands Tribunal judgment was delivered on 1 November 2018.
1. This is not the classic building management dispute. The dispute concerns the building at Nos 70, 72, 74 and 76 Percival Street, No 60 Russell Street and Nos 21, 23, 25 and 27 Lee Garden Road (“Building”), which is located at the heart of Causeway Bay.
Cited by 1 case · Cites 14 cases
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LDBM 329/2014 [2018] HKLdT 86 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION BUILDING MANAGEMENT APPLICATION NO 329 OF 2014 _______________
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_______________ JUDGMENT _______________ A. Background 1.This is not the classic building management dispute. The dispute concerns the building at Nos 70, 72, 74 and 76 Percival Street, No 60 Russell Street and Nos 21, 23, 25 and 27 Lee Garden Road (“Building”), which is located at the heart of Causeway Bay. 2.The Deed of Mutual Covenant of the Building is registered by Memorial No UB394096 and dated 22 February 1963 (“DMC”). Pursuant to clause 1 of the recital of the DMC, the owners shall have the full right to occupy during the residue term of 982 years from 25 June 1860. The Building is now over 50 years old[1] dividing into 9 shops units on the ground floor and 84 domestic units, making the total of 93 units. It does not have any incorporated owners or the agent as appointed to undertake the management of the Building under clause 16 of the DMC. 3.The applicant (“A”) is a $1 company[2], shareholder of which is a BVI company. In June 2013, A purchased and becomes the registered owner of 2 units in the Building, namely:
4.The 1st respondent (“R1”) is the registered owner of the following 4 units:
5.The 2nd respondent (“R2”) is listed company in Hong Kong and has been the tenant of R1 in respect of the G/F No 72, the G/F No 74, the 1/F No 74 and the 1/F No 76 under the tenancy agreement registered by Memorial No 09091100780030 since 11 August 2009 and remains the current tenant under the subsequent tenancy agreements. 6.R1 converted the wall enclosing the 1/F No 74 and the 1/F No 76 into glass wall extending from the floor of 1st floor to its ceiling (“Glass Wall”) in around June 2009. It is not disputed that building approval for the Glass Wall had been obtained from the Buildings Department[3]. 7.There are erected 3 signages (“3 Signages”), each bearing R2’s trade name and/or logo “Sasa” and/or “莎莎” after commencement of the tenancy as follows:
8.The said soffits (ie the undersides) of the balconies of the front portions of the 1/F No 72 (“No 72 Soffit”) and the 1/F No 74 (“No 74 Soffit”) are horizontal to and downward surface facing the public footpath of Percival Street (collectively “Soffits”). B. A’s case and claims 9.A contends that the external wall and the Soffits form parts of the common parts of the Building and that erection of the 3 Signages and the conversion a part of the external wall into the Glass Wall are in breach of the DMC and/or the Building Management Ordinance (“BMO”). 10.A alleges not knowing that the 3 Signages and the Glass Wall were unauthorised under the DMC when it purchased the 3/F No 70 and the 5/F No 72 in June 2013. After discovering their unauthorised nature, A issued a notice on 16 August 2013 to convene an owners’ meeting for the purpose of incorporating the owners of the Building and appointing a management committee. However, no resolution was passed at the meetings held on 10 September 2013 and 16 October 2013. Then, A raised objections concerning the unauthorised signages by issuing legal letters through its solicitors (“MBJSM”) to all the then registered owners including R1 in January 2014 and all the then signage users including R2 in March 2014. 11.As R1 and R2 refused to remove the 3 Signages and to reinstate the Glass Wall, A commenced the present proceedings in the Lands Tribunal on 5 November 2014 seeking various reliefs, such as declarations, mandatory and restrictive injunctions, damages for conversion etc. 12.A raises the issue of bona fide purchaser for value without notice in its Reply filed on 8 August 2018. C. R1’s case and counterclaim 13.R1 contends that there exists an acquisition campaign (“Acquisition Campaign”) over the Building as well as a few of its adjoining buildings. It is noteworthy that A took out a summons to expunge certain paragraphs in the witness statements of both R1 and R2 filed pursuant to the consent order dated 2 August 2018 concerning the Acquisition Campaign. Such summons was dismissed by me with costs in the morning of the 2nd day of the trial. 14.R1’s defences are summarized as follows:-
15.R1 also seeks by way of counterclaim various declarations in its Amended Notice of Opposition[6]. D. R2’s case 16.According to R2’s Amended Notice of Opposition, its position is quite similar to R1which is as follows:
17.In the afternoon of the 2nd day of the trial, A and R2 reached the settlement by consent and endorsed by me on the same day, in which upon A’s undertaking inter alia not to enforce against R1 any injunction to the like effect of paras. (1A) and (2) of the prayer of the Amended Notice of Application, ie order compelling R1 to demolish the Glass Wall and the 3 Signages before 31 December 2022 provided that R2 remains R1’s tenant, and against an indemnity given by R2 to A in respect of any liability the 3 Signages may occasion to A, A do withdraw the present proceedings against R2 without recourse and with no order as to costs between them. 18.In practical terms as submitted by Mr Man SC leading Mr Jason Lee for A, this would mean that the 3 Signages and the Glass Wall could remain in place until 31 December 2022 or until R2 ceases to be R1’s tenant, whichever is sooner (“A’s Undertaking Not to Enforce”). Mr Man SC further submitted that A intends to enforce the injunction orders it is seeking from this Tribunal immediately after the expiry of A’s Undertaking Not to Enforce (if R1 has not removed and reinstated the 3 Signages and the Glass Wall before then). E. Main Issues and Factual Evidence 19.The following are the main issues in dispute:
20.Each of A and R1 called one factual witness at the trial:-
21.By consent of Counsel for A and R1 during the trial, the following items, such as photos, company and business registration search records etc originally adduced by R2 were also admitted as evidence:-
E.1. Yip’s evidence 22.Yip’s witness statement dated 19 May 2017 and his supplemental witness statement dated 8 August 2018 stood as evidence in chief. 23.Yip gave evidence at the trial that he worked for A as “representative” and “consultant” since 2012. In particular, he as a registered general building contractor provided professional consultancy services in relation to sales and purchases of landed properties, group acquisitions of landed properties, matters pertaining to building and legal issues involved therein. Yip was also responsible for general repair and maintenance for the buildings and liaising with Fire Services Department and Buildings Department. He admitted that he also represented A as member of the management committee of the Incorporated Owners of Happy Mansion as of September 2013. 24.He is the chairman and director of Fong Wing Shing Construction Co.,Ltd. (方永勝建築有限公司), a Registered General Building Contractor registered with the Buildings Department, which indicated in Buildings Department’s record that they are interested in providing services in the removal of unauthorised building works and carrying out necessary consequential reinstatement works. Yip specifically admitted that he is familiar with compliance and regulatory issues pertaining to building works. 25.Yip revealed that he was very experienced in the industry of building service with more than 35 years of experience. Prior to being engaged by A, during 1997 up to 2010, Yip was working for a listed company involving in investment in electronic businesses while he also kept making personal investment in landed properties and acting as building consultant. Yip had extensive experience in sale and purchase of residential properties including old Chinese tenement buildings, some of which were aged more than 40 years. 26.Yip said that A is a special purpose vehicle (“SPV”) incorporated for investment purpose. One of the 2 directors of A, one Mr. Yeung Chung Hei (also known as Yeung Sai Cheung) is a family friend of Yip. Yeung Chung Hei’s father, Yeung Kwok Shan[8] (楊國生) (“YKS”) is the boss in charge of A. Yip claimed that he was acquainted with, personally invested in and from time to time worked for many similar SPVs but could not recall exactly how many or even the names of the other SPVs. 27.As agreed between Yip and A, Yip would not receive direct remuneration in respect of each successful sale and purchase of properties but would be remunerated by a certain percentage of the profit deriving from the overall development project in future. 28.As regards the purchase of the 3/F No 70 and the 5/F No 72, Yip claimed that it was the first time that he had been involved in advising sale and purchase of landed properties for the commercial purpose of redevelopment. In the present case, he visited the vicinity of Percival Street in Causeway Bay with a view to identifying appropriate properties. He specifically assessed the potential return from redevelopment of the lots by observing the clientele in the vicinity and considered the suitability of shop types. He said that the lots involved had the potential of being redeveloped into the “2nd Times Square”. Once Yip spotted individual units in the vicinity available for sale in appropriate price range, he would report to YKS who then made the decision to purchase. Nevertheless, Yip emphasized that he did not specifically visit the area but for the acquisition of the 3/F No 70 and the 5/F No 72. 29.In respect of the acquisition of the 3/F No 70 and the 5/F No 72, Yip negotiated for the price merely through the estate agents and he did not know the vendors himself and was not personally involved in the signing the provisional sale and purchase agreements or the formal sale and purchase agreements. A engaged a solicitors’ firm Messrs. Peter W. K. Lo & Co. (“PWKL”) to handle the conveyancing transactions. 30.According to Yip, he had not read the DMC before the purchases of the 3/F No 70 and the 5/F No 72 as he considered that there was simply no need to retrieve the DMC at all. What mattered to him is only the Government leases which would assist him to assess the profitability of the future redevelopment. Concerning the exterior look of the Building when Yip visited prior to A’s purchase (“the Pre-Purchase Visits”), Yip said in his Supplemental Witness Statement at para. 6:
31.Further, according to Yip:-
32.On 23 January 2014, A via MBJSM sent a batch of mass letters to all the registered owners of the Building to make enquiries about the signages as depicted in the photo annexure. None of the owners gave a reply. 33.On 18th March 2014, A via its MBJSM sent a batch of Pre-Action Letters to “all the then signage users” (including R2). When being asked about the Pre-Action Letters and the photos annexed thereto, Yip said that:-
34.As regards Aladin Mess[10] situate at the 2nd Floor No 76 Percival Street :-
35.As regards the glass wall (appearing with the sign of “翡翠玉壐”) situate at the 3rd Floor No 76 Percival Street:-
36.Yip emphasized the safety concern arising from the “rampant problem” of the unauthorised signboards in his witness statement. He explained during cross-examination as to why A chose R1 and R2 for legal actions:-
37.As to potential negative or adverse impacts of the Glass Wall and the 3 Signages on the users or occupants of the 3/F No 70 and the 5/F No 72, Yip said as follows:-
38.Yip denied all the “acquisition tactics” as reported in the magazine articles[11]. E.2. Yuen’s evidence 39.Yuen’s witness statement dated 16 May 2017 and his supplemental witness statement dated 6 August 2018 stood as evidence in chief. 40.The main evidence relied on by R1 in establishing the existence of the Common Assumptions is the evidence in para. 41 of Yuen’s witness statement. Upon being cross-examined, Yuen admitted as follows:
41.Yuen acknowledged during his cross-examination that some commercial owners had erected signages in places other than the part of the external wall adjoining their units:
42.Yuen is unable to identify any instance where any owner has made any alteration to his unit in a similar way as the construction of the Glass Wall. 43.He considered that demolition and reinstatement of the Glass Wall would cause R1 to suffer grave damage and loss. F. Whether the external wall and the Soffits are common parts 44.The parties agree that there is no express verbal reference to “external wall” or “soffit” in the DMC. However, Clause 2 sets out some examples of the common areas which states that:
45.Regarding the construction of a deed of mutual covenant, Chan PJ said in The Grande Properties Management Ltd v Sun Wah Ornament Manufactory Ltd[15] as follows:
46.In Jumbo King Ltd v Faithful Properties Ltd & Ors[16], Lord Hoffmann NPJ adopted a reasonable man test and said:
47.In applying the above legal principles, the following clauses of the DMC are, in my view, relevant to whether the external wall and the Soffits are intended to fall within the common areas which are designated under Clause 2 to be shared in common amongst the co-owners:
48.Besides, the definition of “common parts” in section 2 of the BMO provides as follows:
49.The very first item in Schedule 1 of the BMO is “External walls”. 50.In Incorporated Owners of Elite Garden v Profit More Co. Ltd.[17], the Court of Appeal held that in a multi-storey building in Hong Kong, the external walls were not owned by the owners of the relevant unit. 51.To begin with, I am of the view that the external wall in a particular case is decided by the court to be common part may not necessarily mean the external wall in another case should also be decided to be common part since different deeds of mutual covenant may have different drafting or definitions. If the external wall is not expressly defined as common part in the deed of mutual covenant, the starting point is section 2 of the BMO. I accept the submission of Mr Fan for R1 that before looking into Schedule 1 of BMO, the Tribunal should first go through the DMC and the relevant first assignments of units as properly construed in order to see whether a particular part of a building has been “specified or designated as being for the exclusive use, occupation or enjoyment of an owner”. 52.In my view, it is crystal clear in the present case that there is no such specification or designation in the DMC and the relevant assignments. The first assignments[18] do not mention the external wall. In the plan annexed to each of these assignments, the walls are simply delineated by way of thin lines and only what is inside of the lines has been coloured. I am of the view that the coloured area is the internal space or volume of the particular unit which the owner has the exclusiveuse, occupation or enjoyment. 53.Mr Fan for R1 argued that the interpretation exercise shall go on before adopting the default position as stated in Schedule 1 of the BMO. He said that as Clause 2 mentions only “entrances staircases landings passages and common areas” in the Building and nothing more, the inference is that the external wall and the Soffit were deliberately omitted in Clause 2 by applying the principle of expressio unius est exclusion alterius[19]. He also submitted that evidence of subsequent conduct, namely signages being erected around the exterior or external wall of the Building over the past few decades, is admissible as an aid to the interpretation of parcels clauses if it is probative of the parties’ intention at the date of the conveyance. Hence, there is no need to go further into Schedule 1 in order to find the answer. 54.With respect, I disagree. Given the DMC was drafted in 1963 and consists of only 16 pages including the signing pages and the back sheet, a reasonable man would not expect that the DMC would set out an exclusive list of common areas. The DMC is unlike the deed of mutual covenant drafted in the recent years sometimes containing over hundred pages, in which a reasonable man may expect that it would set out an almost exclusive list of common areas, common facilities, apparatus, equipment etc. That is why Chan PJ said in The Grande Properties’ case that some of the rights and obligations in the deed of mutual covenant are modified by the BMO. Furthermore, the principle of expressio unius est exclusion alterius is not a rule of law, but merely a principle of interpretation which, like all principles, is no more than a guide to the true meaning of the contract[20]. I therefore refuse to draw the inference that the external wall and the Soffit were deliberately omitted in Clause 2. 55.For the admissibility of the evidence of subsequent conduct as an aid to the interpretation of parcels clauses as contended by Mr Fan for R1, Mr Man SC for A opposed and relied on James Miller and Partners Ltd v Whitworth Street Estates (Manchester) Ltd[21], Lord Reid said at 603:
56.As recently confirmed by the Court of Appeal in SNE Engineering Co Ltd v Chim Kee Machinery Co Ltd[22], James Miller remains good law in Hong Kong such that subsequent conduct of the parties is generally not admissible as an aid in construction. 57.I agree with the submission of Mr Man SC. If the Tribunal in construing a deed of mutual covenant shall not consider the evidence of negotiation of agreement as said by Lord Hoffmann NPJ in Jumbo King’s case, I doubt very much that the Tribunal has to consider the evidence of subsequent conduct as submitted by Mr Fan. In the circumstances, I take the view that it is necessary to look into Schedule 1 in the present case. Relying on item 1 of Schedule 1, I am able to conclude that the external wall of the Building is the common part within the definition of the BMO and a part of the common areas within the meaning in Clause 2 of the DMC. 58.Indeed, even without relying on item 1 of Schedule 1, I will come to the same conclusion based on the effects of clauses 4(b), 6 and 7 of the DMC. According to clause 4(b), the costs of “white-washing, distempering and painting the exterior” shall be borne by the co-owners in the proportion of their undivided shares. Applying the common sense, if the external wall of a particular unit solely belongs to the owner of this unit as contended by R1, this owner shall normally bear such costs according to the DMC. However, it will be contrary to clause 4(b) since no reasonable man would agree that the other co-owners shall share such costs in whatever proportion. Just like clause 6, under which the owner shall bear the expenses for keeping his/her unit’s interior simply because he/she is the owner of his/her unit’s interior. The effect of clause 7 is more or less the same as clause 6. In other words, if it is the intention of the DMC to give the exclusive use and enjoyment of the external wall of a particular unit solely to the owner of this unit, clauses 6 and 7 shall expressly mention not just “interior” and “inside” but also “exterior” and “outside”. 59.Turning to the Soffits, Mr Fan for R1 submitted that No 72 Soffit belongs to the owner of the 1/F No 72 who is not a party to these proceedings and No 74 Soffit belongs to the owner of the 1/F No 74 ie R1. With respect, I disagree. Based on the reasons aforesaid, I conclude that the Soffits which are exterior of the Building (as opposed to the interior of a unit) are the common areas within the meaning in Clause 2 of the DMC and the common parts within the definition of the BMO. In addition, I would say that the Soffits (in fact the entire underside of the balcony of the whole 1st floor[23]) provides shelter to all co-owners of the Building who use the ground floor pavement area beneath the Soffit to enter and exit the Building. It must be a matter of common interest to all the co-owners. 60.Besides, item 10 in Schedule 1 of the BMO includes those installations intended for the use and benefit of all the owners generally as common parts. Although the Soffits may not be regarded as installations, I consider that the Soffits are intended for the use and benefit of all the owners generally and hence, they shall be treated as common parts. 61.Indeed, it is possible to argue that No 72 Soffit belongs to the owner of the G/F No 72 and that similar to No 74 Soffit. Nonetheless, there is not the cases of A and R1. 62.Regarding the applicability of Sturge v Hackett[24], Mr Fan for R1 contends that owners of individual units are entitled to exclusive use of the corresponding external wall and soffit under a presumption enunciated in this authority that a demise of a part of a building includes the external walls enclosing the part so demised. Mr Man SC for A submitted that in IO of Elite Garden’s case[25], the Court of Appeal held that the principle relating to the demise of a part of building is “of no assistance” to the system of landholding in multi-storey buildings, which is peculiar to Hong Kong. Mr Man SC further submitted that the same applies equally in respect of the Soffits. In Century Star Ltd v Kenford Enterprises Ltd[26], a case also concerning signboards erected onto the external wall of a building, Deputy District Judge K Lo (as she then was) held[27] that the Sturge v Hackett principle has no application. 63.In my view, if section 2 and Schedule 1 of the BMO which are statutory provisions apply, the common law principle in Sturge v Hackett must be inapplicable or statutory provisions shall prevail or modify the common law if they have conflict. In para. 2.26 of Colin Sara, Boundaries and Easements (5th ed.), the learned author relied on Sturge v Hackett and said that where there is a conveyance or demise of a room, a flat, or a storey, the outside wall enclosing the property conveyed or demised, together with any fixtures attached to the outside, is included unless a contrary intention is shown. Even if section 2 and Schedule 1 of the BMO do not apply for some reasons, I am of the view that contrary intention has been shown in the clauses 4(b), 6 and 7 of the DMC that the Soffits, namely exterior parts of the 1/F No 72 and the 1/F No 74 shall not belong to the owners of these units (nor the G/F of No 72 and No 74). Further, I think that it is illogical for the Tribunal to hold the external walls which include the exterior parts of the balconies of the 1/F No 72 and the 1/F No 74 (vertically facing the street) to be common parts but to hold the undersides of the balconies of the 1/F No 72 and the 1/F No 74 (horizontally facing the pavement) not to be common parts. Indeed, the Soffits serve no purpose to the individual owners of the 1/F No 72 and the 1/F No 74 save to provide shelter to them as well as to all other co-owners of the Building when using the ground floor pavement area beneath the Soffits to enter and exit the Building. 64.In any event, it is purely academic for the Tribunal to find whether the Soffits are common parts or not for the reasons given below. G. Whether the 3 Signages were erected by R1 or with its permission 65.Mr Fan for R1 submitted that so far as the 3 Signages are concerned, no evidence suggests that R1 converted the relevant parts to its own use and has used or permitted to be used those parts of the external wall and the Soffits for erecting the 3 Signages. I accept his submission since Mr Man SC for A simply made no submission in reply. 66.As a fact, I find on balance of probabilities that the 3 Signages were not erected by R1 and not erected with its permission because:
67.Hence, in respect of the 3 Signages, R1 cannot be held to commit trespass or nuisance, or in breach of the BMO or the DMC since R1 never erected or permitted R2 to erect the same. In the circumstances, all A’s claims against R1 in so far as the 3 Signages concerned shall be dismissed. That is why it is purely academic for the Tribunal to find whether the Soffits (ie the underside of the balconies of the 1/F, No 72 and No 74) are common parts, to which No 72 Signage and No 74 Signage are attached. 68.In any event, when R2 is no longer the tenant of R1, it is highly likely that someone either R1, R2 or the new tenant will remove or demolish the 3 Signages which bear R2’s trade name and logo. There is a term in the tenancy agreement between R1 and R2 that:
69.Thus, I consider that it is entirely meaningless for the Tribunal to grant mandatory injunction against R1 for demolition of the 3 Signages in view of A’s Undertaking Not to Enforce. H. Whether the construction of the Glass Wall amounts to trespass, or is in breach of the BMO or the DMC H.1. Trespass 70.Mr Man SC submitted that the construction of the Glass Wall amounts to trespass since the other co-owners have been ousted from those parts of the external wall which R1 and R2 have occupied to the exclusion to other owners. Mr Fan for R1 submitted that the common law right to sue on trespass in a multi-storey building in Hong Kong, if any, has been subsumed under the BMO regime and the DMC. Both Counsel rely on 383 HK Limited v The Incorporated Owners of Tak Bo Building[30], in which Cheung CJHC held that:-
71.In my view, the common law right to sue on trespass by a co-owner against another co-owner of the same multi-storey building in Hong Kong has not been subsumed under the BMO regime and the DMC, as submitted by Mr Fan but only been modified especially when there is a management committee, an owners’ committee or incorporated owners. Nonetheless, in the present case, there is no management committee, etc. Therefore, the necessary approval cannot be granted under section 34I(1)(a) of the BMO. In common law, unanimous agreement of all co-owners is needed. 72.I am of the view that the construction of the Glass Wall which involves the demolition of certain parts of the external wall (ie the exterior part of the balcony) and conversion into glass to R1’s own use amounts to trespass since the other co-owners have been ousted from those parts of the external wall which have become the Glass Wall. In other words, the other owners can no longer use or enjoy these parts of the external wall nor can R1 say that the other owners are free to use or enjoy the Glass Wall together with R1. I therefore conclude that R1 commits trespass in this regard. H.2. Breach of the BMO 73.The relevant section of the BMO is section 34I(1), subsection (a) of which concerns conversion of those parts to a particular owner’s own use and subsection (b) of which concerns use of those parts in such a way as unreasonably to interfere with the use and enjoyment of those parts by other owners. 74.As R1 cannot get the consent from the incorporated owners of the Building which does not exist and no express consent from all other co-owners is given, it must follow that R1 is in breach of section 34I(1)(a). 75.For section 34I(1)(b), it is analogous to a claim in private nuisance[31]. There is no or insufficient evidence from A as to how its use and enjoyment is unreasonably interfered. Indeed, there is no evidence at all as to the fact that A and the other co-owners of the Building have ever used or enjoyed this part of the external wall in the past. As accepted by Yip during the cross-examination, the Glass Wall cannot or can hardly be seen from the 3/F No 70 and the 5/F No 72. Hence, I conclude that R1 is not in breach of this sub-section. 76.Under section 34I(2) of the BMO, contravention of section 34I(1) is deemed breaches of the DMC. H.3. Breach of the DMC 77.The relevant clauses of the DMC are clauses 2, 7, 8 and 10. 78.Clause 2 states, inter alia, that none of the parties hereto shall use or allow or permit to be used the common areas in the Building in any manner so as to causenuisance obstruction or annoyance to the other co-owners. 79.For establishing breach of Clause 2, I consider that A has to prove that the construction and use of the Glass Wall would cause “nuisance obstruction or annoyance” to the other owners. Similarly, I disagree that A has adduced sufficient evidence to prove the same. Hence, I conclude that R1 is not in breach of Clause 2. 80.Clauses 7, 8 and 10 provides as follows:
81.As Mr Fan for R1 does not object that the construction of the Glass Wall amounts to “structural alteration” for the purpose of clauses 7 and 8, I conclude that R1 is in breach of them. 82.However, clause 10 has no application to the construction of the Glass Wall but relates to the erection of the 3 Signages. For the sake of completeness, I accept Mr Fan’s submission that clause 10, as properly construed, only extends to cover, and would hold R1 liable for, R2’s act and default committed with R1’s consent, express or implied. Accordingly, R1 should not be held liable for the erection of the 3 Signages by reason of clause 10 since, as found by the Tribunal above, the 3 Signages were erected by R2 without R1’s permission whether express or implied. I. Whether the said Equities are established as against A and/or its predecessor I.1. Pleading issue complained by A 83.Mr Man SC for A contended in his closing submission that to allow R1 to rely on equities different from those set out in its Amended Notice of Opposition is to allow R1 to run an unpleaded case and that would be grossly unfair to A. 84.Mr Man SC rightly refer me to Section 10(5)(a) of the Lands Tribunal Ordinance, Cap 17 (“LTO”) which stipulates as follows:
85.In 莫炎熙 v 香港房屋委員會[32], the Court of Appeal set aside the Judge’s decision and exercise the discretion afresh to permit the respondent in that case (who was all along represented by senior and junior counsel) to rely on the limitation defence which was not pleaded in the notice of opposition. Lam VP (giving the judgment of the Court of Appeal) held as follows:
86.Direction No 4 states, inter alia, that Presiding Officers of the Tribunal should not regard Notices as in the nature of pleadings by which parties are bound, but as an indication of the issues which are likely to be raised. 87.Mr Fan for R1 referred me to R1’s Amended Notice of Opposition which pleaded, among others, as follows:-
88.The heading before para. 49 of R1’s Amended Notice of Opposition is “Acquiescence, waiver and estoppel”[33] but the word “laches” is not stated. Mr Fan only loosely mentioned “laches” in paras. 5(2), 22 and 33 of his opening submission and in paras. 5(2), 58, 69, 72, headings of Part I and J of his closing submission without detail elaboration save that he submitted in para. 22 of his opening that the legal principles in relation to waiver, acquiescence, estoppel and laches are well settled. 89.The defences of acquiescence, wavier, estoppel and laches are technically different lines of defence although the ultimate result for each is likely to be the same[34]. In my view, reading the entire R1’s Amended Notice of Opposition as a whole, R1 has properly pleaded the defences of waiver, acquiescence and estoppel but not laches as laches is not mentioned at all in R1’s Amended Notice of Opposition. 90.In any event, I would exercise my discretion to allow R1 to run the defences of waiver, acquiescence and estoppel as I can see no real prejudice suffered by A. It is also consistent with attaining justice since R2 is running the similar defences of waiver, acquiescence and estoppel even including laches[35]. But for the sudden settlement as between R2 and A on the second day of the trial, A should have fully prepared to oppose the defences of waiver, acquiescence and estoppel whether raised by R1 or R2 and shall not be taken by surprise. I.2. Whether waiver, acquiescence and estoppel are established as against A and/or its predecessor I.2.1. wavier and acquiescence 91.It is beyond dispute that the defences of waiver and acquiescence are based upon the conduct of A’s predecessors-in-title as it is not argued by R1 that A has been guilty of any delay in taking enforcement action, given that A only acquired the 2 units in the Building in 2013 before issuing the Pre-Action Letters and making the present application in 2014. Accordingly, I conclude that the defences of waiver and acquiescence are not established as against A. But it is necessary for me to find whether they are established as against its predecessor. 92.In Freder Centre (IO) v Gringo Ltd[36], Chu JA summarized the defence of acquiescence that:-
93.In Yick Fung Holdings Ltd v Sandwood Ltd[37], Le Pichon JA dealt with the issue of knowledge for the purpose of establishing acquiescence and held that:-
94.For waiver, as briefly explained in Wilken & Ghaly: The Law of Waiver, Variation and Estoppel (3rd ed., 2012) at para. 4.45, the elements are as follows:
95.Regarding the issue of knowledge, as the Glass Wall (which existed since 2009) is constructed in such a patent and obvious manner in the Building, I consider that A’s predecessors-in-title must have been fully aware of R1’s breach (or at the very least the facts and circumstances in relation to R1’s breach) in respect of the Glass Wall. 96.Concerning the relevance of similar breaches by other owners or occupiers as mentioned by the Court of Appeal in Freder Centre’s case, I accept that whether in Yuen’s witness statement, his supplemental witness statement or oral testimony,Yuen is unable to identify any instance where any owner has made any alteration to his unit in a similar way as the construction of the Glass Wall. Mr Fan for R1 accepted that the only alteration similar to the construction of the Glass Wall is the glass wall situate at 3rd Floor No 76 Percival Street as shown in the photos[38] dated from July to October 2009[39] and exhibited to R2’s witness statement made by Mr Garrick Chiu. However, in 38/2A/11 of Hong Kong Civil Procedure 2018 vol. 1, it states:
97.As Mr Garrick Chiu has not been called, his witness statement together with the exhibits cannot be adduced as evidence. Furthermore, on the third day of the trial, Mr Man SC and Mr Fan had only agreed to adduce some evidence by R2 which did not include those photos in Trial bundle B4, Tab 136[40]. To be fair to A, I therefore refuse to consider these photos. Even if they are considered, the weight to be attached is very minimal as no one is able to tell when these photos were taken. 98.Yip claimed that, all along even up to the date of giving evidence at the trial, he was unware of the existence of the glass wall on the 3rd Floor. Nonetheless, from the Pre-Action Letter to R2 dated 18 March 2014, it is clear from the photo[41] annexed thereto that glass wall has been constructed on the 3rd Floor. I suppose that this photo should be taken on the day very close to the date of issuing the Pre-Action Letter to R2 ie 18 March 2014. In the circumstances, I can accept that the glass wall on the 3rd Floor has existed since 18 March 2014 but not earlier. 99.In the circumstances, I am not satisfied before the purchase of the 3/F No 70 and the 5/F No 72 by A in June 2013, there was any breaches by the other owners in the Building in a similar way as the construction of the Glass Wall. However, it is unnecessary for R1 to establish similar breaches since there was lapse of four months between the affixing the unauthorized signboard and the issue of the solicitors’ letter in Freder Centre’s case whereas there was inaction of all the co-owners including A’s predecessor for at least 4 years in the present case. 100.Mr Man SC for A also contended that an element common to acquiescence, waiver and estoppel by convention is the existence of a representation made by one party (either by statement or conduct) which is then relied on by the other party. He submitted, which I agree, that:
101.He argued that no such representation has been made out on the evidence in the present case. 102.On the other hand, Mr Fan for R1 cited a very useful chapter written by Professor Lusina Ho of the University of Hong Hong, The Importance of Being Earnest: The Doctrines of Laches and Acquiescence in Davies, Douglas and Goudkamp (Ed.), Defences in Equity. The learned professor classified the doctrine of acquiescence into strict sense and loose sense and said at pg. 324:
103.In my view, the representation does not have to be express but can be implied by conduct. As in Freder Centre’s case, even there was no express representation, the Court of Appeal inferred the representation made by the applicant (an incorporated owners) from its particular circumstances. In the present case, I am satisfied that implied assent can be inferred from the silence of A’s predecessors-in-title. In other words, the fact that A’s predecessors-in-title is inaction for at least 4 years from 2009 to 2013 is sufficient to give rise an inference of an implied representation which encourages R1 to believe or misbelieve that R1 is entitled to construct the Glass Wall or that the Glass Wall will be tolerated. With respect, Mr Man SC’s argument on representation is rejected. I.2.2. Whether detrimental reliance is an element for acquiescence 104.This is not a straightforward issue. The laws in both UK and HK seem not settled. Mr Man SC submitted that in addition to the existence of a representation, the party raising equitable arguments such as acquiescence, waiver and estoppel must also establish that the circumstances are such that it would be unjust to grant relief. This depends on the acts done during the relevant time which result in a balance of justice justifying the refusal of relief, and would usually involve some sort of detrimental reliance. In the House of Lords case Fisher v Brooker & Anor[42], Lord Neuberger said in para. 64:
105.Mr Fan disagreed and contended that reading from the judgment in Freder Centre’s case, detrimental reliance is not a requisite element to find acquiescence. Mr Man SC argued that the fact that the issue of detrimental reliance is not discussed in Freder Centre’s case does not mean that it is not a requirement or element for acquiescence. My understanding is that the Court of Appeal may not deal with those issues which is not mentioned either in the notice of appeal or the respondent’s notice under Order 59 RHC. 106.Based on the authorities cited by parties, it seems to me that this issue may not have been fully argued in Hong Kong courts. Indeed, acquiescence can sometimes be regarded as a form of estoppel[43]. As discussed in the abovementioned chapter written by Professor Lusina Ho, she said at pg. 312:
107.In my view, the learned professor considers that estoppel will apply if detrimental reliance is established. Hence, for the application of estoppel, detrimental reliance must be a requisite element. However, for the application of acquiescence, the learned professor seems to suggest otherwise. In any event, I agree with the comments made by Lord Neuberger in Fisher’s case that instead of labelling as requisite element or immutable requirement, what is required is only “some sort of detrimental reliance”. In other words, the court shall not impose a high threshold or burden for showing the same on those who rely on the defence of acquiescence. 108.In the present case, R1 has leased the 2 units of the 1/F No 74 and the 1/F No 76 together with the Glass Wall since 2009 for at least 4 years up to the complaint made by A in 2013. The period of 4 years must be a substantial lapse of time. Even without any valuation expert’s opinion, I can say that for commercial use as a shop, the rental of a unit in 1/F with the Glass Wall is obviously higher than that with the original balcony but without the Glass Wall. Simply judging from the photos produced, the unit in 1/F with the Glass Wall looks more attractive in its appearance than that without the Glass Wall or with the original balcony. Besides, R2 entered into the tenancy agreement with R1 for 3 years in August 2009 and then renewed several times up to this date. Without the Glass Wall, I doubt very much that R2 will renew the tenancy unless there is some downward adjustment of the rent by R1. 109.I am also of the view that the circumstances have made it inequitable for A’s predecessors-in-title to enforce the DMC to demolish the Glass Wall especially at the time when R1 and R2 decided to renew the tenancy in about July 2012[44] or before the expiry of the remaining terms of the subsequent tenancy agreement since R1 may be sued by R2 for breach of the tenancy agreement if R1 is compelled to reinstate the unit. 110.In the circumstances, I am satisfied that “some sort of detrimental reliance” has been shown on the balance of probabilities. I therefore come to the conclusion that the defence of acquiescence is established against A’s predecessors-in-title. 111.For the sake of completeness but not necessary, I am also satisfied that the defence of wavier is established as unequivocal representation by conduct of A’s predecessors-in-title to forgo his right to enforce under the DMC in the past of at least 4 years has been shown. I.3. Estoppel by convention 112.For estoppel by convention, there must have been some manifest representation of the common assumption which crosses the line between the representor and representee, either by statement or conduct: Unruh v Seeberger[45]. Putting aside the representation, it is necessary to prove common assumption in accordance with the legal principles before establishing estoppel by convention. 113.Regarding the Common Assumptions, it is alleged by R1, inter alia, that the respective owners of the individual units of the Building are entitled to exclusive use, occupation and enjoyment of the part of the external wall adjoining their respective units and the exterior part of their respective units[46]. As Yuen agreed in the cross-examination, some commercial owners had even erected signages in places other than the part of the external wall adjoining their units such as the signage for Kamlun Pharmacy Co. It is also not disputed that R2 affixed No 72 Signage from the soffit (ie the underside) of the balcony of the front portion of the 1/F No 72 which is not owned by R1. R1 contended that R2 erected the 3 Signages without R1’s permission, which is accepted by the Tribunal. In my view, many owners or occupiers of the Building simply erect the signages wherever they like as they think that there are so many signages having been erected presently or in the past. I have no doubt to find as a fact that the Common Assumptions as alleged by R1 simply do not exist. Defence of estoppel by convention based on the Common Assumptions must fail. J. Whether A can prove to be a bona fide purchaser for value without notice 114.The legal principles in respect of the requirement of “no notice” for the bona fide purchaser defence against prior equities are authoritatively summarized in Snell’s Equity (33rd ed.) at para. 4-027 at pg. 67, which reads:-
115.It was admitted by Yip that he was aware of the Glass Wall at the time of purchase but simplyassumed that it must have been erected with proper authorization or consent. A does not challenge that approval for the Glass Wall had been obtained from the Buildings Department. Therefore, the only remaining authorization or consent is from the incorporated owners of the Building, which Yip thought that it exists but in fact does not exist at the time of the Pre-Purchase Visits. Given that Yip accepted that there was no security guard or guard station at the Building during the Pre-Purchase Visits, I doubt very much that he did believe in the existence of the incorporated owners at that time. Further, if the existence of the incorporated owners of the Building is so important to A, Yip could simply instruct A’s conveyancing solicitors PWKL to check if it did exist. If PWKL did so, it will reveal that the incorporated owners never exists. Besides, in view of the extensive personal experience of Yip in the industry of building service, I am sure that he himself is capable to check even without the assistance from the solicitors. I am of the view that Yip and A simply turns their blind eyes as to the existence of the incorporated owners without making any or any reasonable or proper enquiries. 116.In fact, Yip eventually admitted during the cross examination that he became aware of the non-existence of the incorporated owners before the completion. In my view, his assumption of proper authorization by the incorporated owners was made without any basis. Further, if he considered that the construction of the Glass Wall with or without proper authorization by the incorporated owners was a very important matter to A, he should seek legal advice from PWKL, especially when he subsequently knew that the incorporated owners did not exist. There is no explanation from Yip in this regard. In my view, A would in any event proceed to completion regardless of the so-called proper authorization because the main purpose for A to acquire these 2 units is for redevelopment. 117.Based on the reasons above, I find that A has constructive, if not actual, notice of the Glass Wall which is unauthorised under the DMC, and also notice of R1’s defences of acquiescence and waiver as A ought to know that no co-owners of the Building has taken any action against R1 for the Glass Wall. K. Whether A is bound by the defences of acquiescence and waiver 118.This topic attracts hot arguments from the parties. Mr Man SC submitted that the defences of acquiescence and waiver only give rise to defences which are personal in nature but not to any proprietary interest capable of binding successors. In a Scottish case Brown v Baty[47], Lord Walker said:
119.In para. 6.35 of Spencer Bower: Reliance-Based Estoppel[48], the learned editors reviewed numerous authorities and concluded that an estoppel will bind a successor in title only if it is an estoppel which the court will satisfy by the grant of a proprietary right in the property (e.g. proprietary estoppel). In para. 6.37 thereof, it said:
120.Mr Man SC also argued that the effect of the defences of acquiescence and waiver in allowing R1 to construct the Glass Wall can at most be that of a contractual licence granted by all the co-owners of the Building. A contractual licence is merely personal and incapable of binding a successor (even with notice) unless his conscience is affected so as to justify the imposition of a constructive trust: Chen Tek Yee & Ors v Chan Moon Shing & Anor[49]. Based on the analysis in Spencer Bowerat paras. 6.30-6.40 (in particular para. 6.37), Mr Man SC submitted that an equity which gives rise to an entitlement no more than a contractual licence (as opposed to an equity which is satisfied by the grant of a proprietary interest) should similarly be purely personal and incapable of binding a successor (even with notice) unless his conscience is affected. 121.Mr Fan cited 2 Hong Kong authorities, which support that acquiescence and waiver by a predecessor-in-title of a breach of the deed of mutual covenants will normally bind its successor-in-title. In 高英姿 v 何東道貳、肆、陸、捌號業主立案法團[50], HH Judge Kot said at para. 61:
122.In Perfect Name Ltd. v Fung Chi Mui[51], Chief District Judge ST Poon said as follows:
123.Mr Fan also relied on E.R. Ives Investment Ltd v High[52] , in which Lord Denning said an equity arising out of acquiescence also available against the successors in title:
124.Apart from contractual licence as mentioned by Mr Man SC, there is another form of licence which coupled with interest is not only irrevocable but also enforceable against successor. Megarry & Wade: The law of Real Property (8th ed., 2012) at pg. 1440, para. 34-005 which is not cited by parties states:
125.The law in this area seems not yet well settled. But I prefer the view that a contractual licence (as opposed to a licence coupled with interest and an equity satisfied by the grant of a proprietary interest) is purely personal and incapable of binding a successor (even with notice) unless his conscience is affected. Nonetheless, if a licence coupled with interest or proprietary interest is established, it will certainly bind the successor even without notice. In the present case, I disagree that the inaction of all the co-owners of the Building for at least 4 years in allowing R1’s construction of the Glass Wall creates only a contractual licence on the following reasons:
126.In the circumstances, I consider that R1 is entitled to a licence coupled with interest or proprietary interest to use the Glass Wall instead of just a contractual licence against A’s predecessor and that such interest binds A even A does not have notice. 127.Since R1 can successfully raise the defence of waiver and acquiescence against A’s predecessor which binds A, the necessary consequence is that A’s Application shall be dismissed. L. Whether the Tribunal shall exercise the discretion to grant the equitable reliefs sought by A 128.In the event R1 fails in establishing the defence by way of the defences of acquiescence and waiver, it does not mean that A is entitled to the injunctive reliefs as of right. Being a discretionary remedy[53], there have been many occasions on which the court found it unjust and inequitable to grant mandatory injunctions (as opposed to negative injunctions to prevent the continuance or recurrence of a wrongful act)[54] to demolish and reinstate building works carried out in breach of the deed of mutual covenants. 129.For whether an injunction to restrain trespass should be granted, Mr Man SC submitted, which I agree, that the relevant principles are summarised by Thomas Au J in Billion Star Development Ltd v Wong Tak Chuen[55] and outlined as follows:
130.In addition to what was said in para. 124 above, I consider that special circumstances exist in the present case for refusing the mandatory injunction:
131.Based on the evidence given, although R1 accused A of deploying dirty tactics in the Acquisition Campaign, I am not able to say or guess what A’s motives of commencing the present proceedings are. Nonetheless, I cannot accept Yip’s evidence in paras. 35 to 38 of his witness statement[56] that the issue of safety is the reason for instituting this action. 132.To conclude, I do not think it just and equitable to grant the mandatory injunction in respect of reinstatement of the Glass Wall as sought by A. M. Declarations sought by A and R1 133.It is trite that the power to make binding declaration of right is a discretionary power. In exercising its discretion, the court will consider whether any useful purpose would be served by granting declaratory relief[57]. 134.There is no evidence from both Yip and Yuen as well as no submission from Mr Man SC and Mr Fan as to the useful purpose of the respective declarations sought. In the Amended Notice of Application, A is seeking declaration that not just the external wall of the Building but also exterior part of the 1/F Units are common parts of the Building. I am not sure if the exterior part of the 1/F Units only means the Soffits (as defined in this Judgment above as the undersides of the balconies of the 1/F No 72 and the 1/F No 74) but nowhere else, like the undersides of the balconies of the 1/F No 70 and the 1/F No 76, Percival Street. There is a similar problem in the declarations sought in R1’s Amended Notice of Opposition. 135.In the circumstances, I refuse to grant the declarations sought by A and R1 as I am not satisfied that there is any useful purpose. N. Conclusion 136.All A’s claims and R1’s counterclaims in these proceedings be dismissed. 137.Regarding the question of costs, I consider that R1 is the winning party and A shall pay costs of these proceedings including all costs reserved, if any. As to the scale, the Tribunal has the jurisdiction to order the costs to be taxed on the District Court or High Court scale according to section 12 of LTO. I have no doubt to say that the issues in dispute are very complicated and each of them are hotly contested by the parties’ Counsel. There are altogether 10 trial bundles. Mr Man SC for A submitted 47 authorities, Mr Fan for R1 submitted 48 authorities whilst Mr Leung SC for R2 submitted 20 (though A had settled with R2 on the 2nd day of the trial) making the total number of authorities submitted over 110. 138.It is also worth noting that A is claiming costs on indemnity basis pursuant to Clause 10 of the DMC and that A has commenced another action in the Court of First Instance (HCMP 430 of 2015[58]) against one C & B Advertising (Outdoor) Limited and R2 for affixing a placard to the external wall of the Building. In the circumstances, I exercise my discretion to make an order nisi that A do pay R1 costs of these proceedings including all costs reserved, if any, to be taxed on the High Court scale if not agreed, with certificate for counsel, which shall become absolute unless any of the parties apply for variation within 14 days by summons. 139.Last but not least, I must thank all Counsel for their helpful assistance to the Tribunal.
Mr Bernard Man SC and Mr Jason Lee, instructed by Mayer Brown, for the applicant Mr Alex Fan, instructed by Hon & Co., for the 1st respondent Mr Raymond Leung SC and Mr Jeremy Kwong, instructed by Carpio & To, for the 2nd respondent [1] Occupation permit issued on 24 January 1963 [2] Trial bundle B9 pg. 2283-2290 [3] Trial bundle A pg. 73-74, paras. 21 to 23 of the witness statement of Yuen Chi Ho filed 19 May 2017 [4] Trial bundle A pg. 42, pleaded in para. 23(c)(iii)(2) of R2’s Amended of Notice of Opposition [5] Trial bundle A pg. 26, Common Assumptions as defined in para. 50 of R1’s Amended Notice of Opposition [6] Trial bundle A pg. 28-29 [7] Item 176 spans over Trial bundles B6-B9 [8] English translation only [9] Trial bundle B3 pg. 635, 638, 642, 645, 648, 651, 654, 657, 660, 663, 666, 667, 670, 673, 676, 679, 682 and 685 [10] Trial bundle B4 pg. 818-820 [11] Trial bundle B6 pg. 1297-1304 [12] Trial bundle B4 pg. 849 [13] Trial bundle B6 pg. 1122 [14] Trial bundle B3 pg. 648 [15] [2006] 9 HKCFAR 462 [16] [1999] 2 HKCFAR 279 [17] [2002] 2 HKLRD 518, paras. 10-11 of the Judgment [18] Trial bundle B1 pg. 20-112 [19] Lewison, The Interpretation of Contracts (6th ed.) pg. 381 [20] Lewison, The Interpretation of Contracts (6th ed.) pg. 382-383 [21] [1970] AC 583 [22] CACV 101/2016(11 July 2017), para. 52 of the Judgment [23] Plan annexed to the assignment, Trial bundle B1 pg. 39 [24] [1962] 3 All ER 166 [25] at paras. 9-11 of the Judgment (per Le Pichon JA) [26] DCCJ 4631/2009 (29 June 2012) [27] at para. 127 of the Judgment [28] Trial bundle A pg. 74, paras. 25-29 of Yuen’s witness statement [29] Trial bundle A pg. 77 [31] Para. 12 in 高英姿 v 何東道貳、肆、陸、捌號業主立案法團 [2018]2 HKLRD 1357 [32] CACV 147/2015 (17 August 2015) [33] Trial bundle A pg. 26 [34] As per para. 66 in the Judgment of Mr Recorder Yuen, SC in Hollywood Shopping Centre Owners Committee Ltd. v the Incorporated Owners of Wing Wah Building Monkong Kowloon, upheld by the Court of Appeal [2011] 4 HKLRD 623 [35] Trial bundle A pg. 44-45 [36] [2016] 2 HKLRD 190 [37] [2009] 4 HKC 43 [38] Trial bundle B4 Tab 136, pg. 807-809 [39] Date is shown in the index of Trial bundle B4 Tab 136 [40] See para. 21 of this Judgment [41] Trial bundle B3 pg. 642 [42] [2009] 1 WLR 1764 [43] para. 63 of Mr. Recorder Yuen’s judgment in Hollywood Shopping Centre’s case [44] Trial bundle B2 pg. 265-291 [45] [2007] 10 HKCFAR 31 at para. 135 (per Ribeiro PJ) [46] Trial bundle A pg. 26, para. 50(2) of R1’s Amended Notice of Opposition [47] [1957] SC 351 [48] 5th ed., 2017 [49] CACV 136/2015 (29 February 2016) at para. 34 (per Yuen JA) [51] DCCJ 1789/2008 (22 October 2012) [52] [1967] 2 QB 379 (at 394F-395B) [53] Snell’s Equity (33rd ed.) at para. 18-036 [54] Redland Bricks Ltd v Morris & Anor [1970] AC 652 at pg. 665 F-G [55] [2012] 2 HKLRD 85, para. 38 of the judgment [56] Trial bundle A pg. 64-65 [57] Para. 15/16/2, Hong Kong Civil Procedure 2018 vol. 1 [58] Trial bundle B4 pg. 852-854 | ||||||||||||||||||||||||||||
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