好順利大廈業主立案法團 v. Wealth Gear Ltd and Another

CACV 292-295/2018
[2020] HKCA 1086

CACV 292/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 292 OF 2018

(ON APPEAL FROM LDBM NO 220 OF 2014)

________________________

BETWEEN

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and

CACV 293/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 293 OF 2018

(ON APPEAL FROM LDBM NO 221 OF 2014)

________________________

BETWEEN

________________________

and

CACV 294/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 294 OF 2018

(ON APPEAL FROM LDBM NO 222 OF 2014)

________________________

BETWEEN

________________________

and

CACV 295/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 295 OF 2018

(ON APPEAL FROM LDBM NO 226 OF 2014)

________________________

BETWEEN

________________________

(heard together)

Before:  Hon Lam VP, Yuen and Au JJA in Court

Date of Hearing:  31 October 2019

Date of Judgment:  31 October 2019

Date of Reasons for Judgment:  31 December 2020

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REASONS FOR JUDGMENT

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Hon Au JA (giving the reasons for judgment of the court):

A.  INTRODUCTION

1.The applicant in these proceedings is the incorporated owners (“the IO”) of Ho Shun Lee Building (“the Building”).  The 1^st respondent is the registered owner of several units situated on the G/F and 1/F of the Building, and the respective 2^nd respondents are the tenants of the 1^st respondent.

2.It is common ground that the 1^st respondent and its respective tenants have erected various signboards (including metal frames, signage and lighting system) (“the Signboards”) on the northern side and western side of the exterior walls of the Building.  It is the IO’s case that the installations of the Signboards are in breach of clauses 4(m), 10(a)(i), 10(a)(iii) and 10(d) of the Building’s deed of mutual covenant (“the DMC”) dated 13 July 1984 as they were done without the written consent of the manager of the Building as required under these provisions.  For convenience, I would refer to these clauses as “the Subject Clauses”.

3.The IO therefore brought these proceedings in the Lands Tribunal seeking, amongst other reliefs, injunctions against the respondents for the removal of the Signboards and restoration of the damaged surface of the exterior walls.

4.After trial, by way of his judgment in Chinese dated 21 March 2018 (“the Judgment”), Deputy District Judge Lui (“the Judge”) found in favour of the IO and granted the injunctions as sought[1].  He also ordered costs against the respondents.

5.Upon the 1^st respondent’s applications, on 27 June 2018, the Judge granted it leave to appeal to this Court against the Judgment.  The 1^st respondent thereafter filed the respective Notices of Appeal, while the IO filed the respective Respondent’s Notices on 20 July 2018.

6.At the end of the hearing, we dismissed the 1^st respondent’s appeals and indicated that we would hand down our reasons later.  This is what we do now.

B.  RELEVANT BACKGROUND

7.The background leading to the dispute is not controversial and can be briefly stated as follows.

B1.  The Building, the exterior walls and the erection of the Signboards

8.The Building was erected some time in 1984, and consists of a commercial portion at the G/F and 1/F, a Roof Garden in Block 2 and two blocks of residential flats from 3/F to 20/F.

9.Under the DMC, the exterior walls with other places in the Building were allocated 1 out of the 991 undivided shares.  They were owned by the developer, Yau Fook Hong Co Ltd (“YFH”), which is defined in the DMC as the “First Owner”.

10.By an assignment dated 14 August 2006, YFH assigned the exterior walls to Oriental Shine Ltd (“Oriental Shine”), a BVI company.  It is the IO’s case that Oriental Shine was dissolved on 31 December 2010[2], although a search report[3] indicates that it was deemed dissolved on 31 October 2015.  However, this inconsistency is immaterial to the issues on appeal.

11.Between 4 May 2012 and 3 October 2014, the 1^st or the 2^nd respondents erected the Signboards at the exterior walls.  There is no dispute that they did so without obtaining any consent from the manager of the Building, YFH or Oriental Shine.

B2.  The IO’s claim and the respondents’ opposition in the Lands Tribunal

12.As mentioned above, in support of its applications in the Lands Tribunal, it is the IO’s case that the Signboards were erected by the respondents in breach of the Subject Clauses.  They provide relevantly as follows:

“4.  Each owner shall be bound by and shall observe and perform the following covenants provisions and restrictions:

…

(m)  No owner shall without the consent in writing of the Manager do or cause or permit to be done any of the following:

(i)  Repaint redecorate or alter the appearance of the exterior of the said Building or any part thereof.

(ii)  Erect or affix any signboard sunshade bracket structures fitting or thing to the exterior of the said Building or to the roof or flatted roof or any part or parts thereof or to the common areas within the said Building or any part thereof.

(iii)  Hang up clothing or laundry outside the said Building or in the common areas within the said building or any part thereof.

…

10. Each party hereto hereby covenants with the others as follows:

(a)  (i)  Not to make any alterations to the walls or structure or façade of the Building or to the said premises of which it or they is/are entitled to the sole and exclusive use, occupation and enjoyment;

…

(iii)  Not to cut or damage any of the main walls or beams or floors of the Building.

…

(d)  Not to affix or exhibit or paint on any part of the exterior walls, the common entrance hall, staircase, landings, lifts or passages of and in the Building any trade profession or business notice or advertisement whatsoever save and except only in the space at the entrance on the ground floor of the Building as the Manager of the Building shall designate for the purpose of affixing or exhibiting the trade or firm name of the tenant or occupier of such premises.” (emphasis added)

13.On the other hand, the respondents opposed the applications on the following grounds:

(1)  The IO had no locus standi to bring the proceedings against them (“the Locus Ground”);

(2)  They were not in breach of the Subject Clauses (“the No Breach Ground”);

(3)  They had the right to erect the Signboards under clause 17 of the DMC (“Clause 17”) (“the Clause 17 Ground”); and

(4)  In any event, the Tribunal should not exercise its discretion to grant the injunctions sought as it would be unfair and inequitable to do so in light of all the circumstances as the Signboards (a) had been erected for many years; (b) had caused no damage or harm to any of the other owners or anyone; (c) had not caused any risks of danger or inconvenience to anyone; and (d) they were erected in compliance with the relevant regulations (“the Discretion Ground”).

14.In this respect, Clause 17 provides:

“Notwithstanding anything to the contrary hereinbefore contained, it is hereby mutually agreed and declared that the First Owner (so designated in the First Schedule hereto) shall have the full and free right for itself and its licensees and permittees to affix fit up and attach signs, signboards and/or advertisements whether illuminated or otherwise to such part or parts of the exterior walls of the said Building and/or to affix fit up and erect one or more chimney at the exterior walls of the said building Provided that such affixture or erections shall not unreasonably interfere with the enjoyment comfort and well-being of the co-owners or affect the structural safety of the building PROVIDED ALWAYS that the First Owner or its assigns, licensees permittees and all persons authorised by it shall at all times observe and comply with all the laws and regulations relating to erecting maintaining and dismantling the said signs or signboards (whether illuminated or otherwise) for advertisement purposes or the chimney or chimneys and shall solely be responsible for the repair maintenance upkeep renewal and removal of any such signs or signboards chimney or chimneys and the repairs, maintenance, upkeep and renewal of such part or parts of the external walls of the said Building upon which and/or to which such signs or signboards chimney or chimneys shall be affixed PROVIDED FURTHER that the First Owner and/or its assigns licensees permittees and all persons authorised by it will at all times indemnify and keep indemnified the co-owners and occupiers for the time being of the said Building against all loss damage injury costs expenses actions claims and demands arising out of or on account of or resulting from the installation repair renewal removal maintenance and upkeep of such signs or signboards chimney or chimneys of the repair, maintenance, upkeep and renewal of those parts of the external walls of the said Building affected by signs signboards and chimney or chimneys or any defect therein or any failure to maintain the same in proper repair and conditions.” (emphasis added)

C.  THE JUDGMENT

15.In allowing the applications, the Judge in the Judgment rejected the respondents’ grounds of opposition for the following reasons.

16.The Judge rejected the Locus Ground as he concluded that the IO had the necessary locus under section 18(1)(c) of the Building Management Ordinance (Cap 344) (“the BMO”) to bring these applications against the respondents in seeking to enforce provisions in the DMC.  This is so as section 18(1)(c) expressly provides that the incorporated owners shall “do all things reasonably necessary for the enforcement of the obligations contained in the deed of mutual covenant (if any) for the control, management and administration of the building”.  In coming to this conclusion, the Judge cited in support the authorities of The Incorporated Owners of Yee Fung Garden v Basic Tech Ltd (HCA 6622/1998, 23 January 2003) at [68] and Wing Ming Garment Factory Ltd v Wing Ming Industrial Centre (IO) [2014] 4 HKLRD 52 at [274] per G Lam J.  See [9] - [18] of the Judgment.

17.The Judge rejected the No Breach Ground for the following reasons:

(1)  He did not accept the respondents’ contention that clauses 4(m) and 10(d) of the DMC served no useful or valid purposes as Clause 17 had an overriding effect over these clauses.  The Judge was of the view that Clause 17 only gave the First Owner and its permittees and licensees the right to erect structures on the exterior walls.  In the premises, on a proper construction in the context of Clause 17, clauses 4(m) and 10(d) were intended to govern the other owners of the Building, in that they had to obtain the written consent of the manager before they could erect structures on the exterior walls.  See: [22] - [26] of the Judgment.

(2)  The Judge also disagreed with the respondents’ argument that they were not in breach of clauses 10(a)(i) and (iii) of the DMC as the Signboards did not cause any structural safety concerns to the Building. Relying on Incorporated Owners of Elite Garden v Profit More Co Ltd [2002] 2 HKLRD 518 (CA), the Judge concluded that, on a proper construction, these provisions did not require the alterations to have caused structural safety risks to the Building for them to be prohibited.  See: [26] - [27] of the Judgment.

(3)  In the premises, the Judge concluded that erection of the Signboards without the consent of the manager was clearly in breach of these provisions of the DMC.  See [28] of the Judgment.

18.Third, the Judge also dismissed the Clause 17 Ground as:

(1)  Even if Clause 17 had an overriding effect over the other provisions in the DMC, it was plain from the words that the rights provided under Clause 17 were only given to the First Owner (ie, YFH) and its permittees and licensees to erect structures on the exterior walls.  As the respondents had never obtained any permission from the First Owner to erect the Signboards, they could not rely on Clause 17 to oppose the applications.  See [30] and [32] of the Judgment.

(2)  Further, as the First Owner and Oriental Shine were not parties to these proceedings, the Tribunal would not adjudicate as to whether on a proper construction, a successor in title to the First Owner was also able to give the necessary permission or licence under Clause 17.  In any event, given that all the respondents admitted that they had not obtained any permission from the First Owner or any successor in title to erect the Signboards, this alone would have been sufficient to dispose of the Clause 17 argument.  See [31] and [32] of the Judgment.

19.Finally, the Judge also dismissed the Discretion Ground as it was not unfair in all the circumstances to grant the injunctions. See [34] - [37] of the Judgment.

D.  THIS APPEAL

20.In this appeal, the 1^st respondent in summary raised the following grounds of appeal[4]:

(1)  The Judge erred in law in holding that the IO has the locus standi to take legal actions against the 1^st respondent (“Grounds 1 and 2”); and

(2)  The Judge erred in law in deciding that the 1^st respondent had breached the DMC (“Ground 3”).

21.On the other hand, by way of the Respondent’s Notice, the IO sought to affirm the Judgment on additional bases.  As it will become apparent later in this Judgment, it is unnecessary for the Court to set out these additional bases as we do not find it necessary to deal with them.

22.We will now turn to consider the grounds of appeal.

D1.  Grounds 1 and 2

23.Under Grounds 1 and 2, Mr CY Li SC (leading Mr Chan and Mr Lau) advanced the following submissions in support[5]:

(1)  First, in relation to finding that the IO had locus to sue under section 18(2)(g) of the BMO, the Judge erred in concluding at [19] of the Judgment that the co-owners of the Building had a “common interest” in the exterior walls;

(2)  Second, the Judge also erred in the construction of section 18(1)(c) of the BMO to conclude that the IO had locus to bring these proceedings against the respondents to enforce the Subject Clauses.

24.As Yuen JA indicated at the hearing, it was unnecessary to consider the contentions raised in relation to section 18(2)(g) as we were of the view that the IO clearly had locus to bring these actions under section 18(1)(c).  We will therefore only deal with the arguments raised by Mr Li in relation to section 18(1)(c) below.

25.Section 18(1)(c) provides that “The Corporation shall… do all things reasonably necessary for the enforcement of the obligations contained in the deed of mutual covenant (if any) for the control, management and administration of the building”.

26.There is no dispute that doing “all things reasonably necessary” includes bringing legal proceedings.

27.However, Mr Li submitted that on a proper construction, the words “the obligations” provided in this provision refer only to the positive obligations in the relevant deed of mutual covenant, and do not include negative obligations such as those now provided under the Subject Clauses. This is so, Mr Li continued, as the natural and ordinary meaning of the word “obligation” is “to do something” instead of “not to do something”.

28.We are unable to agree.

29.First, the ordinary meaning of the word “obligation” refers to committing or constraining oneself by way of promise or contract to a course of action[6].  This natural meaning does not limit it to refer only to committing oneself to positively do something. It is equally applicable to committing oneself not to do something.

30.Second, objectively, there are simply no reasons in principle why the legislature would have intended to give the incorporated owners powers to enforce only the positive obligations but not the negative obligations imposed on the owners under the deed of mutual covenant.

31.Third, as pointed out by Mr Lam SC (together with Ms Jacqueline Law) for the IO, a number of authorities both at the Court of Appeal and first instance levels have upheld the incorporated owners’ actions brought under section 18(1)(c) to enforce various restrictive covenants provided in the relevant deed of mutual covenants:

(1)  In Cheng Chi v Chan Hok Man [1984] HKC 35 (CA), the Court of Appeal held that section 18(1)(c) of the Multi-storeyed Building Management Ordinance (Cap 344)[7] imposed on the owners’ corporation the duty to enforce the provisions in the deed of mutual covenant which prohibited the posting of notices by owners in the common areas (ie, a negative obligation provided in the deed of mutual covenant).  See: p 39A-E per Roberts CJ.

(2)  In Hoi Luen Industrial Centre (IO) v Ohashi Industries [1995] 2 HKC 11 (CA), Godfrey JA held at 13A-H that the incorporated owners were entitled under section 18(1)(c) to commence proceedings seeking an injunction against the owner defendant to “secure compliance … with the negative covenants contained in the [deed of mutual covenant]”.

(3)  In Wing Ming Garment Factory Ltd v Wing Ming Industrial Centre (IO) [2014] 4 HKLRD 52, G Lam J similarly held that section 18(1)(c) provided the necessary basis for the IO’s standing to sue to enforce restrictive covenants provided in the deed of mutual covenant.

32.These authorities show that it is plain and obvious that section 18(1)(c) gives the IO the necessary standing to bring proceedings to enforce restrictive or negative covenants of the relevant deed of mutual covenants.

33.In contrast, Mr Li accepted that there is no authority at all to support the purported limited construction that he had advanced.

34.For all these reasons, we have no hesitation in rejecting Mr Li’s submissions and agree with the Judge that the IO has the necessary standing under section 18(1)(c) to bring the present proceedings against the respondents seeking to enforce the Subject Clauses.

35.Grounds 1 and 2 therefore fail.

D2.   Ground 3

36.Under this ground, Mr Li first and foremost submitted that the 1^st respondent was entitled to rely on Clause 17 to erect (and presumably also to permit its tenants to erect) the Signboards on the exterior walls.

37.In support of this, at paragraphs 24 - 28 of his skeleton submissions, Mr Li’s initially contended that the 1^st respondent could rely on Clause 17 as it had become the permittee or licensee of the First Owner or Oriental Shine by reason of the doctrine of estoppel, given that they had allegedly acquiesced in the erection of the Signboards.

38.However, at the hearing when dealing with the court’s questions as to (a) how the 1^st respondent could rely on estoppel without joining the First Owner and Oriental Shine as parties to these proceedings; and (b) in any event, how the estoppel could work against the IO, Mr Li disavowed the submissions that the 1^st respondent was a permittee or licensee of the First Owner or Oriental Shine.  He then advanced for the first time the submission that the 1^st respondent had somehow acquired a “proprietary interest” in the exterior walls and had “stepped into the shoes” of the First Owner or Oriental Shine by reason of their acquiescence.  The 1^st respondent could therefore, Mr Li continued, exercise all the rights provided under Clause 17 to the First Owner as if it was the First Owner itself.

39.This latest submission is entirely without merit and a non-starter:

(1)  First, as a matter of substantive law, Mr Li had not been able to refer the Court to any legal principles to support his bold submission that the 1^st respondent had somehow acquired a proprietary interest in the exterior walls solely because the First Owner or Oriental Shine had “acquiesced” in the erection of the Signboards.  In this respect, he had rightly said that he was not relying on the principles relating to adverse possession as the 1^st respondent simply had not achieved the necessary period of possession to even start arguing possessory title.  In our view, Mr Li’s said submission is totally devoid of any legal basis.

(2)  Second and in any event, on a procedural aspect, without joining the First Owner and Oriental Shine as parties to these proceedings, it is simply not open to the 1^st respondent to advance such a submission as there is no way the court could and would seek to determine whether the 1^st respondent had allegedly acquired an interest in the exterior walls adverse to their title owners.  Mr Li however said it was the IO’s own case that Oriental Shine had been dissolved and thus it was not practicable to join it.  As pointed out by Yuen JA, the 1^st respondent had not even attempted to obtain a court order to revive the company.

(3)  Moreover, such a contention had not been advanced below and it is obviously facts and evidence sensitive and would affect the IO’s conduct of the case.  In light of the approach discussed in Flywin Co Ltd v Strong & Associates (2002) 5 HKCFAR 356 and Lehmanbrown Ltd v Union Trade Holdings Inc HCMP 977/2015, 17 June 2015, such new point cannot be entertained on appeal.

40.In the premises, we would also reject the submission that the 1^st respondent had somehow acquired a proprietary interest in the exterior walls and become effectively the First Owner for the purpose of Clause 17.

41.Other than relying on Clause 17, Mr Li also submitted under this ground that the 1^st respondent was in any event not in breach of clauses 10(a)(i) and (iii) of the DMC for the following reasons:

(1)  The restriction in clause 10(a)(i) of the DMC confines itself to walls or structures or façade of the building of which an owner(s) “is/are entitled to the sole and exclusive use, occupation and enjoyment”.  However, given it is the IO’s own case that the 1^st respondent does not have exclusive possession, occupation and / or enjoyment of the said exterior wall, it must follow that clause 10(a)(i) is inapplicable to the 1^st respondent.

(2)  In relation to clause 10(a)(iii), the restriction under it is confined to “not to cut or damage” any of “the main walls or beams or floors of the Building”.  There is however no discussion in the Judgment and at the trial as to what constitutes a main wall for the purpose of this clause, nor is there any finding that the said external walls are main walls.  There could therefore be no basis to find that the 1^st respondent was in breach of this clause.

42.There is also nothing in these submissions.  As submitted by Mr Lam, which we accept:

(1)  The phrase “of which it or they is/are entitled to the sole and exclusive use, occupation and enjoyment” in clause 10(a)(i) only describe the words “the said premises” preceding the phrase, which each owner shall not alter.  Each owner separately has also covenanted thereunder not to alter “the walls or structure or façade of the Building”, which was what the 1^st respondent and its tenants undeniably did. See: [28] of the Judgment.

(2)  The Judge in [28] of the Judgment noted that clause 10(a)(iii) is confined to “not to cut or damage” inter alia, “the main walls” of the Building and held that the respondents were in breach by erecting the Signboards to the exterior walls.  This can only be interpreted to mean that the Tribunal regarded the external walls to fall within the meaning of “main walls”, which must be correct as a matter of construction of the DMC: see IO of Hong Leong Industrial Complex v HL Resources Ltd [2009] 4 HKLRD 692 per Sakhrani J at paragraphs 75 - 77.[8]

43.We therefore also reject Ground 3.

E.  CONCLUSION

44.For the above reasons, we have dismissed the appeals.  As we have rejected all the grounds of appeal, it is unnecessary for us to deal with the grounds raised by the IO in the Respondent’s Notice to affirm the Judgment.

45.Mr Li accepted that the IO should have the costs of the appeals.  The IO has set out its costs for the appeals in its Statement of Costs dated 28 October 2019 to be $601,424.

46.In relation to this, Mr Li made only one objection at the hearing.  He submitted that the costs for preparing the Respondent’s Notice (which is $30,000) should be disallowed as it was in effect a cross-appeal. This was so, said Mr Li, as the IO stated at paragraph 1 of the Respondent’s Notice that the ruling of the Judge at [19] of the Judgment is “erroneous”.

47.This objection is misconceived.

48.At the preamble of the Respondent’s Notice, it is clearly stated that the IO was seeking to affirm the Judge’s decision on the additional grounds to be set out thereafter.  Paragraph 1 of the Respondent’s Statement then states as follows:

“Insofar as paragraph 19 of the Judgment is interpreted to mean that the [IO] had locus standi to sue only in respect of matter in which the owners have a common interest, such a ruling is erroneous. The Learned Judge should have ruled or made it clear that the [IO] had locus standi to sue under section 18(1)(c) of the [BMO], irrespective of whether the subject matter is situated at the common parts or not.” (emphasis added)

49.Read in this context and properly, it is clear that what the IO is asking by way of the Respondent’s Notice is to affirm the Judge’s decision that it had the locus standi to sue in these proceedings under section 18(1)(c) of the BMO which does not require the finding that the subject matter of the suit concerns a common interest of the owners.  This is not in the nature of a cross-appeal as contended by Mr Li.

50.We therefore do not accept this objection.

51.At the same time, Mr Lam fairly accepted at the hearing that the costs of the junior fee earner[9] as stated in the Statement of Costs could be reduced,[10] as it was unnecessary to involve two fee earners for the same types of work.  In the premises, we would summarily assess the costs to be $543,424[11].

52.We would therefore further order that the 1^st respondent shall pay the IO the costs of the appeals in the sum of $543,424.

Mr CY Li SC, Mr Avery Chan and Mr Lau Ka Kin, instructed by Cheung & Yip, for the Appellant (1^st Respondent) in all actions

Mr Douglas Lam SC and Ms Jacqueline Law, instructed by SK Lam, Alfred Chan & Co, for the Respondent (Applicant) in all actions