Centre Chase Investment Ltd v. The Incorporated Owners of Castle Peak Road International Industrial Building and Another
Read the full judgment text of CACV 96/2021 on BabelCite. This Court of Appeal judgment was delivered on 18 December 2024.
1. This is an appeal, pursuant to leave granted by this Court, against the judgment of H H Judge Simon Lo (‘the Judge’), sitting as the Presiding Officer of the Lands Tribunal (‘the Judgment’). The Judge dismissed the application by the Applicant, who is the owner of Flat 2A of an industrial building known as the International Industrial Building (‘the Building’), for, amongst others, an order requiring the 1 st Respondent, who is the incorporated owners of the Building, to take actions against
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CACV 96/2021, [2024] HKCA 1179 On Appeal From [2020] HKLdT 5 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 96 OF 2021 (ON APPEAL FROM LDBM NO. 118 OF 2017) ________________________ BETWEEN
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________________________ J U D G M E N T ________________________ Hon Cheung JA (giving the Judgment of the Court) : I. The appeal 1.This is an appeal, pursuant to leave granted by this Court, against the judgment of H H Judge Simon Lo (‘the Judge’), sitting as the Presiding Officer of the Lands Tribunal (‘the Judgment’). The Judge dismissed the application by the Applicant, who is the owner of Flat 2A of an industrial building known as the International Industrial Building (‘the Building’), for, amongst others, an order requiring the 1st Respondent, who is the incorporated owners of the Building, to take actions against the owner of Flat 9A for the removal of two window frames on the external wall of Flat 9A of the Building installed by it. It is common ground that the external wall is the common part of the Building. The Judge further dismissed the application by the 1st Respondent for a review of the Judgment (‘the Review Decision’). 2.Originally at the proceedings below, the 1st Respondent was the only respondent. The owner of Flat 9A was joined as the 2nd Respondent in this appeal by the order of this Court. II. Background 3.We will adopt the background of the case as summarized by the Judge and supplemented by matters that can be gathered from the documents. 4.The window frames are made of aluminium and the dimensions are 1.33 metres tall and 1.5 metres wide. They are in fact two sets of mock window frames without any actual window openings behind them. They serve no purposes such as providing structural support, ingress/egress or ventilation. It is said that the window frames are installed for feng shui purpose. 5.On 20 July 2015, the Building Authority (‘BA’) issued two notices under sections 30B(3) and 30C(3) of the Buildings Ordinance Cap. 123 (‘BO’) in respect of the Building (‘the BA Notices’) to the 1st Respondent, under which the 1st Respondent was required to 1) appoint a registered inspector/qualified person within three months to carry out prescribed inspection of the common parts and windows of the Building; 2) complete the prescribed inspection within the period of time as specified; and 3) complete the prescribed repairs (if any were found necessary under sections 30B(8) or 30C(6) of the BO) within the period of time as specified. 6.Pursuant to the BA Notices, two inspections of the Building had been carried out. On 14 April 2016, the first inspection was carried out by the first appointed inspector, AHL Contract Management Co Ltd (藝建工程顧問有限公司), and in its report (‘the 1st Inspection Report’), the window frames were identified as ‘UBW’ or ‘unauthorized building works’. 7.On 19 April 2017 and 2 May 2017, the Applicant wrote to the 1st Respondent regarding the window frames and requested the 1st Respondent to take action to require the 2nd Respondent to reinstate the external wall back to its original condition. 8.On 22 June 2017, the Applicant commenced the present proceedings in the Lands Tribunal. In response to the Applicant’s letters, the management committee (‘MC’) of the 1st Respondent passed a resolution on 27 July 2017 (‘the 2017 Resolution’) pursuant to section 34I of the Building Management Ordinance Cap. 344 (‘BMO’) in respect of the common part of the Building by approving the non-structural installations on the external wall of the Building including, the window frames affixed outside Flat 9A until the repair of the external wall of the Building in the future. If the 1st Respondent resolved to homogenise the appearance of the exterior of the Building, it would resolve upon it and notify the owners. It was specifically resolved that if the installations on the external wall affected the structure of the Building, they must be reinstated. 9.The relevant extract of the 2017 Resolution is as follows :
10.On 9 August 2017, the 1st Respondent filed its Notice of Opposition. 11.Subsequently, in August 2017, a second inspection was carried out by the second appointed inspector, Kwok, Hauser and Partners Limited (‘KHP’). It was acknowledged by KHP that the prescribed inspection was completed on 29 August 2017. At the request of the 1st Respondent, KHP was also tasked with providing professional opinion in relation to the window frames installed by the 2nd Respondent. 12.On 22 December 2017, KHP gave the opinion that the window frames were non-structural, did not cause immediate danger, and could be regularized, e.g. by the ‘Signboard Validation Scheme’ (違例招牌檢核計劃). 13.In early March 2018, the 2nd Respondent removed the window frames. On 9 March 2018, it appointed Tiff Group Limited (天阜(香港)設計製作有限公司) (‘Tiff’) as prescribed registered contractor, to file Notice of Commencement of Minor Works with the Buildings Department (‘BD’) for its application to install the window frames. The window frames were later reinstalled on the external wall outside Flat 9A. 14.Upon the reinstallation of the window frames on 18 March 2018, Tiff, on behalf of the 2nd Respondent,filed a Certificate of Completion of Minor Works on 22 March 2018. On the same day, BD issued to Tiff an acknowledgment letter in respect of the Certificate of Completion (‘the Certificate of Completion’). 15.According to the inspection report dated 13 July 2018 (‘the 2nd Inspection Report’) prepared by KHP under section 12(2) of the Building (Inspection and Repair) Regulation Cap. 123P, it was said that the external wall outside 9th floor facing Castle Peak Road was altered. 16.The Judge described the window frames existing on the wall outside Flat 9A before early March 2018 as the ‘Pre-Window Frames’ and the reinstalled window frames as the ‘Post-Window Frames’. It is common ground that they are however the same structures. 17.On 17 January 2019, the Applicant filed an amended Application dealing with the removal and reinstallation of the window frames. III. The parties’ case below 1) The Applicant 18.The Applicant contended that the window frames were installed in breach of Clause 10 of the Deed of Mutual Covenant (‘DMC’) of the Building and section 34I of the BMO; the non-compliance of the BA Notices would render void the insurance policy of the Building and the 2017 Resolution was invalid. 2) The 1st Respondent 19.The 1st Respondent contended that there was no breach of the DMC and BMO, the 2017 Resolution was valid and it had temporarily approved the existence of the window frames. IV. The Judgment 1) The issues 20.The Judge identified four issues for his consideration : (1) Whether the 2017 Resolution is reasonable and valid by reason of the failure of the owner of Flat 9A to disclose its interest in the voting of that resolution? (2) Whether the installation of the Post-Window Frames at the external wall of the Building is in breach of Clauses 10(c), 10(e) and 10(g) of the DMC and also sections 34I(1)(a) and (b) of the BMO? (3) Whether the 2017 Resolution is effective in approving of the breach or breaches of the DMC and the BMO? (4) If the answer to (2) above is ‘no’, whether the 1st Respondent had taken reasonable action against the owner of Flat 9A to enforce the terms of the DMC and the BMO? 2) Findings (1) Issue 1 21.The Judge held that the 2017 Resolution is valid. Reasonableness is not a relevant consideration when the MC decided to grant or refuse to grant consent to an owner to use the common part of the Building. Further, the 2017 Resolution would still have been passed by the required majority even if the interested party was not allowed to vote. (2) Issue 2 i) Breach of Clause 10(c) 22.Clause 10(c) provides that an owner shall not :
23.The Judge held that the Applicant was not able to discharge the burden that Clause 10(c) of the DMC was breached. This clause is no longer an issue in this appeal. ii) Breach of Clause 10(e) and section 34I(1)(a) of BMO 24.The Judge deals with Clause 10(e) and section 34I(1)(a) together. Clause 10(e) of the DMC provides that an owner shall not :
25.Section 34I of the BMO provides that :
26.The 1st Respondent accepted that the installation of the Post-Window Frames may be in breach of Clause 10(e) of the DMC and section 34I(1)(a) of the BMO. However, it argued before the Judge that the MC (on behalf of the 1st Respondent) had, by the 2017 Resolution, approved and waived breach of the DMC and BMO temporarily until the large-scale renovation. 27.The Judge held that the issue whether the 1st Respondent was in a position to approve the installation of the window frames would depend on the nature or type of the breach. First, the size of the window frames is not huge, only 1.33 metres tall and 1.5 metres wide. Second, the affixation of the same cannot be regarded as illegal upon issuance of the said Certificate of Completion and there is no evidence that it contravenes any other rules and regulations. Relying on Freder Centre (IO) v Gringo Ltd [2016] 2 HKLRD 190, he held that it is within the power of the 1st Respondent to approve the affixation of the window frames (whether the Pre- and/or Post-Window Frames) under the DMC and under section 34I(1)(a) of the BMO. Accordingly, the installation of the Post-Window Frames was not in breach of Clause 10(e) of the DMC and section 34I(1)(a) of the BMO. iii) Clause 10(g) 28.Clause 10(g) provides that an owner shall not :
29.The Judge held that the installation of the Post-Window Frames is not in breach of Clause 10(g) of the DMC as the MC had passed the 2017 Resolution which is wide enough to approve and cover the breach of Clause 10(g). The Judge further held that, even if he was wrong on this, the de minimis principle applies to decide whether the external appearance of the Building has been altered. He held that judging from the photos produced and the size of the Post-Window Frames, whilst they could easily be observed by the neighbouring buildings at about the same level, they are not obviously noticed by the ordinary man at the street level. Thus, as a matter of fact, they are not so prominent that a reasonable man would conclude that the external appearance of the Building has been altered. Hence, applying the de minimis principle, the installation of the Post-Window Frames is not in breach of Clause 10 (g) of the DMC : Metro City Management Limited v Tsui Fee Hung Vincent and Lam Wai Fun, unrep., HCA 4327/2003 (13 January 2005) [39]-[40], per Mr Recorder Edward Chan SC. iv) Any breach of section 34I(1)(b) of the BMO? 30.The Judge held that the installation of the Post-Window Frames was not in breach of both limbs of section 34I(1) of the BMO. The Applicant only alleged that there was a risk of the window frames falling off from the external wall causing damage to pedestrians. The Judge held that the Applicant had not discharged the burden of establishing this assertion. It was a bare assertion without the support of expert opinion and in any event the BA had approved the reinstallation. (3) Issue 3 31.The Judge answered the issue in the affirmative. (4) Issue 4 32.The Judge did not have to deal with Issue 4 in view of his decision on Issue 3. V. Grounds of appeal 33.The Applicant advanced four grounds of appeal : 1) The Judge erred in finding that at the time of the passing of the 2017 Resolution, it was the intention of the MC to treat the Post-Window Frames as the structures then existing at the external wall of the Building and that the 2017 Resolution on its true construction covered the Post-Window Frames. [The 2017 Resolution issue] 2) The Judge erred in failing to find that the Post-Window Frames were likewise illegal structures, and that it was beyond the power of the MC to permit their installation or retention. [The illegality issue] 3) The Judge erred in finding that the installation of the Post-Window Frames did not breach DMC Clause 10(g) due to the de minimis principle. [The de minimis issue] 4) The Judge erred in finding that the MC had the power to approve of breaches of DMC Clauses 10(e) and 10(g) by the 2017 Resolution. [The waiver and acquiescence issue] VI. Our view 1) Ground 2 (The illegality issue) 34.We will first address the illegality issue which was not an issue at the trial and the Judge had disallowed it to be canvassed in the application for review. The Applicant’s case on illegality is grounded on the basis that the BA had not approved the installation of the window frames. It is an unauthorised building work contrary to section 14(1) of the BO. Further, installation of the Post-Window Frames is outside the scope of the designated ‘minor works item’, under Item 2.19 of Division 2 of Part 3 of Schedule 1 to the Building (Minor Works) Regulation (‘BMWR’), namely, the ‘erection or alteration of any wall signboard’. 35.At the outset of the appeal, we raised the issue whether the illegality issue could be pursued at all. This is because whilst the Agreed Issues signed by the parties’ solicitors included an issue on whether the installation of the window frames is contrary to section 14(1) of the BO, this was not included as part of issues identified and decided by the Judge. A review of the written submissions of the parties at the trial also showed that the Applicant chose not to pursue the issue concerning illegality. In fact the 1st Respondent in its closing submission specifically drew the Judge’s attention that ‘the Applicant has effectively withdrawn its case on BO section 14(1) and BMO section 28’. The illegality issue was only raised by the Applicant on review which was objected to by the 1st Respondent. The Judge refused to allow this issue to be raised. He held :
36.The Judge also held that whether the installation of the Post-Window Frames fell within the definition of minor works was not a pleaded issue. He rejected the Applicant’s application to adduce an expert report to support the contention that the Post-Window Frames are illegal structures. The Judge pointed out that a joint report of the experts had already been adduced at the trial, no leave was obtained for the new report and no explanation was given for not adducing the new report at the trial. It would be unfair to the 1st Respondent to allow the new report to be adduced. 37.We agree with the Judge that the issue of illegality should not be allowed to be raised at the application for review. Nor should it be allowed to be raised on appeal. In Group Leader Ltd & Ors v Hui Sun Fat [2016] 2 HKLRD 625, this Court per Lam VP (as he then was) at [13] expressed the view that additional substantial points not raised at the trial before the Lands Tribunal should not be raised when a party applied for leave to appeal against the judgment, but rather it should be made by way of an application for review so that the points could have been determined on a proper footing. This is not a case where the illegality issue and the related minor works issue were only discovered after the trial. They were at the focus of the parties from the beginning but the Applicant chose not to pursue them. In the circumstances there is no justifiable reason why they should be allowed to be raised again in the application for review. The Judge’s decision of not allowing the illegality and minor works issues to be canvassed is an exercise of his discretion and case management power. It is not showed to be plainly wrong. Although the proceedings in the Lands Tribunal are informal in nature, where the parties are legally represented and the issues had been identified and determined, the Judge was correct not to grant indulgence to the Applicant. For the same reasons the Applicant is not allowed to canvass the illegality and minor works issues in this appeal. Accordingly we ruled that the Applicant was not entitled to rely on Ground 2. 38.We would like to add that the Applicant had submitted that in the Review Decision the Judge had made a finding that the installation of the window frames is illegal. We disagree that the Judge had made any findings of illegality in the Judgment. In the Review Decision the Judge only held that if the Pre-Window Frames were illegal structures then the 1st Respondent could not rely on the 2017 Resolution. This was made in response to the Applicant’s argument that the window frames are illegal structures. Since the Judge had disallowed this issue to be canvassed, he could hardly have made a finding on this point. 2) Ground 4 (The waiver and acquiescence issue) 39.Having disallowed the illegality and minor work issues to be canvassed, the logical sequence of dealing with the grounds of appeal is to address the waiver and acquiescence issue. (1) The Applicant’s arguments 40.The Judge erred in finding that it was within the 1st Respondent’s power to approve the breaches by the 2017 Resolution because, i) The Judge had ignored that Clauses 10(e) and 10(g) are total preclusions against : (1) erecting or affixing or permitting or suffering to be erected or affixed any signboard etc on the exterior or exterior wall of the Building; and (2) altering the appearance of the exterior of the Building or any part thereof. The Judge was wrong in law in failing to consider and apply the basic principle that acquiescence (and by extension approval) is no defence to a breach which is totally precluded by the DMC : Hollywood Shopping Centre Owners Committee Limited v IO of Wing Wah Building Mongkok Kowloon (unrep. HCA 1582/2007, 16 August 2010) at [60] (Mr Recorder Rimsky Yuen SC). ii) It is the statutory duty of 1st Respondent under BMO section 18(1)(c) to do all things reasonably necessary to enforce the obligations contained in the DMC. Where there is a breach being perpetrated by one of the owners, it is not only the 1st Respondent’s right but also its duty to seek to enforce the covenant, and the 1st Respondent was bound to take proceedings to do so: IO of Hoi Luen Industrial Centre & Anor v Ohashi Chemical Industries (Hong Kong) Ltd [1995] 2 HKC 11. iii) In considering whether the breaches can be acquiesced to or approved, the Judge took into account irrelevant matters with regard to the size and legality of the window frames. iv) The Judge’s reliance on Freder Centre (IO) is misplaced: the relevant covenant there did not constitute a complete and absolute prohibition, but allowed for spaces to be assigned for the affixation of trade names to the external wall. v) The Judge further erred in effectively holding that there were inconsistencies between DMC Clauses 10(e) and 10(g) and BMO section 34I(1)(a) and that such inconsistencies could be resolved by an approval given by the MC under section 34I(1)(a) which could be extended to cover breaches of DMC Clauses 10(e) and 10(g). The 2017 Resolution is invalid and ineffective. There was no inconsistency between DMC Clauses 10(e) and (g) and BMO section 34I(1)(a), because the expression ‘convert … to his own use’ does not refer to physical conversion in the sense of making alterations but to appropriation of common areas for private purposes: Wing Ming Garment Factory Ltd v Wing Ming Industrial Centre [2014] 4 HKLRD 52 [126]. Here, what DMC Clauses 10(e) and 10(g) prohibit, and what the Flat 9A owner had unlawfully done, were a) construction of structures on, and b) alteration of the appearance of, the exterior or external wall. This is not what BMO section 34I(1)(a) regulates. It follows that even if the MC has power to approve by resolution a general conversion of common parts under BMO section 34I(1)(a), such a power could and would not cover breaches of DMC Clauses 10(e) and 10(g). It also follows that the Judge was wrong to hold that BMO section 34C(2) applied to this case. The primary legislative aim of Part VIA of the BMO (in which sections 34C and 34I are found) is to ‘further facilitate the formation of owners’ corporations and to repeal those provisions in the existing deeds of mutual covenant which are considered unfair to flat owners’. As DMC Clauses 10(e) and 10(g) are more protective and beneficial to owners as a whole, they cannot be provisions ‘which are considered to be unfair to flat owners’ which Part VIA of the BMO aimed to repeal under BMO section 34C(2). (2) Our view 41.The relevant statutory provisions under this topic are section 18(1) and section 34I(1) of the BMO. Section 18 deals with the duties and powers of the incorporated owners in respect of the common parts of a building and the provisions in a DMC :
42.Section 34I(1) of the BMO consists of two limbs : the first limb under section 34I(1)(a) is the conversion of the common parts and the second limb under section 34I(1)(b) is the unreasonable use of the common part, nuisance and hazard. In the present case there is no evidence to support any application of the second limb and we are only concerned with the first limb. 43.In The Incorporated Owners of Hoi Luen Industrial Centre & Anor, this Court after referring to section 18(1) of the BMO, emphasized the statutory obligations of incorporated owners to enforce the DMC where breach is found which will preclude the application of acquiescence to such breach.
44.However, this Court in Hollywood Shopping Centre Owners Committee Limited v IO of Wing Wah Building Mongkok Kowloon [2011] 4 HKLRD 623, an appeal from the first instance decision of Mr Recorder Yuen, adopted in [21] the Recorder’s view at [65] on acquiescence by the incorporated owners for breach of the DMC by the owner of the building :
45.This is a departure from the earlier case of The Incorporated Owners of Hoi Luen Industrial Centre. This new approach was also adopted by this Court in Freder Centre (IO) v Gringo Ltd :
46.This new approach is by now well established and cannot be gainsaid. Whilst the discussion was on acquiescence, there is no dispute that the reasoning applies to waiver as well if the conditions are satisfied. What is clear from a survey of the authorities is that waiver and acquiescence are not available where illegality is involved in the breach of DMC, an example is Incorporated Owners of Champion Court v Pang Ping Fan Peter [2008] 5 HKC 312 :
47.As illegality is no longer a live issue in this appeal, it is necessary to see if there are other matters in this case which will preclude the application of the defence of waiver and acquiescence as argued by Mr Chan SC for the Applicant. We do not see Clauses 10(e) and (g) as containing any terms that may be regarded as a total preclusion against the owners from doing the prohibited acts and thus preventing the application of waiver or acquiescence. These clauses are the usual covenants given by an owner as to what he cannot do in respect of the common parts of the Building. To use the word ‘totally’ is simply adding a gloss that does not exist in the relevant clauses. The Applicant’s reference to [60] of Mr Recorder Yuen’s judgment does not advance the case further. All that the Recorder did was to refer to The Incorporated Owners of Haiphong Mansion v Convey Advertising Co. Ltd, unrep., HCA 9973/2000 (6 April 2001) where the judge in that case drew a distinction between a breach which was totally precluded by the deed of mutual covenants and a breach which was not so precluded and held that acquiescence could be an arguable defence where the act was not totally precluded by the deed of mutual covenants. But the Recorder did not actually adopt this formulation in his judgment; instead his view is at [65] which this Court has adopted on appeal. Ultimately it is a matter of examining the nature of the breach and the terms of the DMC. 48.Further, the matter can be tested this way. The incorporated owners are authorised to maintain the common parts of the Building under section 18(1) of the BMO and, at the same time, under section 34I(1)(a), it may give approval to an owner who has converted a common part to his own use. If the Applicant’s argument is correct, it will mean that the approval allowed under section 34I(1)(a) is rendered useless in respect of breaches under the DMC that may amount to a conversion of the common part under section 34I(1)(a). Section 34C(2) which together with section 34I(1) is under Part VIA of the BMO. In our view, the Judge was correct to apply section 34C(2) which provides that in the event of any inconsistency between that part and the terms of a deed of mutual covenant, that part prevails. Both respondents accepted that there had been conversion of the common parts of the Building by reason of the installation of the window frames. In any event, irrespective of the position in Wing Ming Garment Factory Ltd referred to by the Applicant where the owner had changed the original wall into a glass wall, the 1st Respondent must have converted the common part for its own use when it installed the window frames on the external wall, thereby depriving other owners from using that part of the exterior wall. 49.Mr Chan further submitted that there is total preclusion because the DMC does not expressly provide that the incorporated owners can give prior consent for specific actions. Again we do not agree that the application of waiver and acquiescence should depend on whether there are consent provisions in the DMC. Similar arguments along the line now advanced by Mr Chan were made in Lucky Hing Shing Estate Company Limited v The Incorporated Owners of Genius Court, unrep., HCA 2048/2015 (7 April 2016) where Deputy High Court Judge Marlene Ng (as she then was) rejected this distinction :
50.We agree with the view that to preclude the operation of waiver and acquiescence on such a narrow distinction based on whether the covenant is qualified or not qualified is not valid. After all whether acquiescence applies or not depends on the action of the person having a right but chose not to exercise that right when seeing a person infringing that right. Applying the new approach adopted by this Court, we are of the view that the breach in this case can be waived or acquiesced by the 1st Respondent. 3) Ground 1 (The 2017 Resolution issue) (1) The Applicant’s argument 51.Ground 1 is concerned with the construction of the 2017 Resolution. The Applicant argued that the Judge was wrong when he concluded that it covers the Post-Window Frames. The 2017 Resolution that was passed on 27 July 2017 was concerned with the Pre-Window Frames that existed at that time and not the Post-Window Frames that only came into existence on 18 March 2018. The 2017 Resolution expressly referred to the ‘now existing’ non-structural installation, which included the window frames outside Flat 9A. The strained construction is contrary to the principle that in the construction of a document, the Court’s task is to determine ‘what a reasonable person would have understood the parties to have meant by using the language which they did’ : Champion Concord Ltd v Lau Koon Foo (No 2) (2011) 14 HKCFAR 837 at [12] (Bokhary PJ); [73] (Ribeiro PJ). The factual matrix of the 2017 Resolution that the Judge was required to consider included the evidence of the Chairman of the 1st Respondent that it was not the intention of the MC to approve future breaches/installations by the 2017 Resolution. The Judge in construing 2017 Resolution had erroneously taken into account matters that occurred after the 2017 Resolution, contrary to the principle that in the construction exercise, the Court can only take into account facts or circumstances which existed at the time of the document, and which were known or reasonably available to the parties. They included the purported ‘very technical’ difference between the Pre-Window Frames and Post-Window Frames; the intention of the 2nd Respondent to ‘regularize’ the Pre-Window Frames; the 2nd Respondent’s notification of the minor works to the 1st Respondent and the 1st Respondent raising no objection; the 1st Respondent’s position adopted throughout the Land Tribunal proceedings; and that the works done by Tiff purportedly improved the position of the Window Frames. Reliance was placed on Arnold v Britton [2015] AC 1619 at [21] (Lord Neuberger PSC); Achieve Goal Holdings Ltd v Zhong Xin Ore Material Holding Co Ltd [2020] HKCA 51 at [16(2)] (Kwan VP). 52.The Judge further erred in finding that ‘there is no reason why the MC will not permit the re-affixation of the same structures (i.e. the window frames) in March 2018 or retention of the Post-Window Frames after ‘regularization’. Whether there was ‘reason’ for the MC to permit the retention of the Post-Window Frames is simply beside the point – the fact remains that the 2017 Resolution could not constitute such permission. Having correctly found that the MC ‘could not’ by the 2017 Resolution permit the Pre-Window Frames to be retained, the Judge had in effect held that the 2017 Resolution was ultra vires and void. As a void artefact, the 2017 Resolution cannot be later ‘resurrected’ to salvage the Post-Window Frames. (2) Our view 53.There is a short answer to the Applicant’s arguments. They are based on the wrong premise that the Pre-Window Frames and the Post-Window Frames are different structures when the Judge had expressly found that they are the same. He held :
54.It is unfortunate that the terms ‘Pre-Window Frames’ and ‘Post-Window Frames’ are used as if there are two different sets of window frames. In reality (as found by the Judge) they are the same. Clearly the criticism levied by the Applicant against the Judge’s construction cannot stand. As Mr Cheung for the 2nd Respondent submitted, as a matter of construction of the 2017 Resolution, it cannot be so restrictive that it will not cover the removal and reinstallation of the existing structures on the exterior wall for purpose such as repair. After reinstallation, they remain to be the same structures. As it is the same set of window frames, they are covered by the 2017 Resolution which allowed them to be retained until a final decision is made on the appearance of the external wall. We disagree that the Judge had taken irrelevant matters into account when he referred to the technical difference. This does not detract from his finding that the same structures were reinstalled. By reason of the 2017 Resolution, the 1st Respondent has approved the installation of the window frames and hence has waived or acquiesced in the breach of DMC Clauses 10(e) and (g) and section 34I(1)(a) in accordance with its terms. 55.Mr Law for the 2nd Respondent had also relied on other matters in support of the 2017 Resolution. It is not necessary to address them in view of our decision above. 4) Ground 3 (The de minimis issue) (1) The Applicant’s argument 56.The Applicant submitted that the de minimis principle referred to in Metro City has no application to this case. DMC Clause 10(g) is markedly different from the covenant in Metro City in that the relevant covenant (i.e. Clause B2, as set out in [11] of the judgment therein) provided that :
57.However, in the present case, DMC Clause 10(g) provided for a far more restrictive covenant than that in Metro City, namely :
58.On a proper construction of the DMC Clause 10(g), the additional words ‘or any part thereof’ clearly convey the parties’ specific and express agreement that the prohibition against alteration applied not only to the appearance of the exterior of the Building broadly or in whole, but also to the appearance of any part of the Building exterior. These words preclude the operation of any de minimis principle as they make plain that there is no part of the Building exterior’s appearance that is insignificant for the purposes of the prohibition; instead, the prohibition against alteration applies to every part thereof. 59.The Applicant then submitted that applying the de minimis principle is contrary to the other principle that the Court has no dispensing powers and that where the parties are under no disability and have, with their eyes open, entered into a contract, the duty of the Court is to give effect to it : World Ford Development Ltd v Ip Ming Wai & Anor [1994] 2 HKLR 1 at page 5, lines 25-34 (Litton JA, as he then was). Further, in light of the distinct wording of DMC Clause 10(g), the correct test should have been ‘whether the Post-Window Frames were so prominent that a reasonable man would conclude that the external appearance of the Building or any part thereof has been altered’. No reasonable tribunal, applying the correct test, would have concluded that the breach of DMC Clause 10(g) was de minimis. This is particularly clear given the Judge’s correct recognition that the Post-Window Frames in fact ‘could easily be observed by neighbouring buildings at about the same level’. In the context of a prohibition that serves to protect the appearance of a building, that fact plainly precludes any notion of de minimis impact. The Judge further erred in taking into account an irrelevant matter, i.e. that the Post-Window Frames are ‘not so obviously noticed by the ordinary man at the street level’. This consideration is not only arbitrary and scarcely (if at all) evidenced but directly conflicts with the Judge’s own previous finding in IO of Fortune Gardens v Chan, Grant & Ors [2018] HKLdT 53 [57], where he recognised that a structure that ‘cannot be seen from the ground floor street level’ still altered the external appearance of the building as the structure ‘can easily be seen’ from surrounding taller buildings and is visible from buildings facing its back. (2) Our view 60.This topic is only relevant to Clause 10(g) which is concerned with the external appearance of the Building. We disagree that the case should be decided differently by the distinction between ‘external appearance’ and ‘exterior appearance or any part of it’. The reference to the external appearance must include any of its part. Hence the words ‘any part of it’ makes no difference to the construction of DMC Clause 10(g). In our view there is no conflict with the World Ford Development Ltd approach relied upon by Mr Chan and the de minimis principle. The Court is not rewriting the contract for the parties by relying on the de minimis principle because as Liu J (as he then was) held in G & Y Co Ltd v Kwok Kim Leung HCA 3586/1989 (unreported, 2 July 1999) at page 12 :
61.This approach was adopted by this Court in Thorogood Estates Ltd v Robison Heights (IO) [2013] 1 HKLRD 1077 at [26] when Kwan JA (as she then was) held that when construing the meaning of a contract (including a deed of mutual covenant), the Court has to construe it in line with common sense. Further as held by Yuen JA in Metro City Management Ltd v Tsui Fee Hung Vincent, unrep., CACV 328/2005 (6 June 2006) at [51], an appeal from the first instance decision of Mr Recorder Chan, as a start, whether a breach of the covenant is de minimis ‘is a finding of fact. It is well-established that an appellate court would be slow to interfere with a trial judge’s finding of fact unless there were no materials which could support his finding’. We are not satisfied that the finding is plainly wrong and that no reasonable tribunal would have made the finding. 62.In any event, by reason of the 2017 Resolution any breach of DMC Clause 10(g) had been waived by the 1st Respondent. VII. Respondent’s Notices 63.Having reached this conclusion it is not necessary for us to deal with the Respondent’s Notices filed by the 1st Respondent and the 2nd Respondent. VIII. Conclusion 64.The appeal is accordingly dismissed. We will make an order nisi that the Applicant is to pay the costs of the appeal to the 1st and 2nd Respondents with certificate for two counsel, to be taxed if not agreed.
Mr Abraham Chan, SC leading Mr Lawrence K F Ng, Mr Henry Cheng and Mr John Leung, instructed by C. W. Chan & Co., for the Applicant Mr Lewis Law and Mr Lok Ho, instructed by Vitus Lawyers, for the 1st Respondent Mr Tommy Cheung, instructed by Fred Kan & Co., for the 2nd Respondent |
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