The Incorporated Owners of Haiphong Mansion v. James S. Lee & Company (Kowloon) Ltd and Another
Read the full judgment text of LDBM 138/2021 on BabelCite. This Lands Tribunal judgment was delivered on 8 April 2025.
1. There has been a large advertising sign spanning two sides of the 1 st floor of Haiphong Mansion at the corner of Nathan Road and Haiphong Road in the heart of Tsim Sha Tsui since the 1960s. This application concerns that advertising sign (“Sign”).
Cites 28 cases
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LDBM 138/2021 [2025] HKLdT 15 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION BUILDING MANAGEMENT APPLICATION NO 138 OF 2021 __________________________ BETWEEN
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________________ J U D G M E N T ________________ INTRODUCTION 1.There has been a large advertising sign spanning two sides of the 1st floor of Haiphong Mansion at the corner of Nathan Road and Haiphong Road in the heart of Tsim Sha Tsui since the 1960s. This application concerns that advertising sign (“Sign”). 2.The applicant is the incorporated owners (“IO”) of Haiphong Mansion at 99-101 Nathan Road, Nos. 53, 54 and 55 Haiphong Road and No. 52 Lock Road, Tsim Sha Tsui, Kowloon (the “Building”). The Sign has been erected on the external walls of the 1/F of the Building. 3.The 1st respondent is the registered owner of Shops Nos. 2 and 3 on G/F (“G/F Premises”), and Apartments Nos. 1 to 5 and a portion of flat roof on 1/F of the Building (“1/F Premises”; together with G/F Premises, “Premises”). 4.The 2nd respondent carries on a jewellery trading business under the trade name of “Luk Fook Jewellery & Goldsmith Company (六福珠寶金行)” and/or “Luk Fook (六福)” (“Luk Fook trade names”). It has been the tenant of the Premises since March 2010. 5.The IO claims that the Sign was installed in breach of the Deed of Mutual Covenant of the Building dated 10/4/1961 (“DMC”) and section 34I of the Building Management Ordinance (Cap. 344) (“BMO”). It asks the respondents to remove the Sign, reinstate the relevant parts of the external walls and pay mesne profits. The crux of the dispute concerns whether the respondents are entitled to claim acquiescence, estoppel and/or lost modern grant in respect of the Sign. 6.The IO is represented by Mr Lewis Law and Mr Steve Cheung. The 1st respondent and the 2nd respondent are represented by Mr Bernard Man SC and Mr Harrison Miao. FACTUAL BACKGROUND 7.The parties submitted a Statement of Agreed Facts which include the following. 8.The IO was incorporated and registered on 10 February 1971. Yick Tat Property Management Company Limited (“Yick Tat”) was appointed by the IO as the management company of the Building. 9.By an assignment dated 8 November 1979, the 1st respondent became the registered owner of units of the Building, the 1/F Premises, namely Apartment No. 1 on 1/F with a portion of flat roof and Apartments Nos. 2, 3, 4 and 5 on 1/F and the G/F Premises, Shops Nos. 2 and 3 on G/F. 10.The registered owners of the Premises consisted of, inter alios:
11.Between 1960s and 1980s, Mr Lee and HK Co used the G/F Premises Shops Nos. 2 and 3 on G/F as a retail shop for a tailoring business operating under the names of “James S. Lee & Co.” and “James S. Lee & Co. Ltd.”, whereas 1/F Premises, Apartments Nos. 1 to 5 were used for storage and office for the said business. 12.After the Premises were assigned to the 1st respondent, the 1st respondent continued to use the Premises to operate the said tailoring business until the early 1980s. 13.Since the early 1980s, the 1st respondent has let the Premises to tenants. The Premises were used for, inter alia, the following purposes:
14.The various businesses referred to above shall be referred to as the “Businesses”. The signage 15.Over the years there have been signs of different types and dimensions at various positions on the outside of the Building. The Notice of Opposition (“NOO”) attaches photographs of such signs, designated by a letter to identify the position on the outside of the Building and a number, starting at 1 for the earliest in time, for the sign at that position (“Attachment 1”). The material Sign is at position A. In the earliest photograph from the 1960’s the Sign is identified as “Sign A-1”. The IO describes the Sign as an “L-shaped advertisement board and its supporting metal racks installed on the 1/F external walls”. The board and the racks are referred to as “Unauthorised Structures” in the Notice of Application (“NOA”) and marked “A-1” to “A-16” in Attachment 1. The Businesses installed various signage at the exterior 1/F Premises, position A, including:
16.The 1st and 2nd respondents first entered into a lease for the Premises on 19 March 2010. The 2nd respondent, who carried and still carries on business under and by reference to the Luk Fook trade names, is the current registered tenant of the Premises. 17.Mr. Chan Hon Keung (“Mr Chan”) worked as an Estate Officer at the Management Office of Haiphong Mansion (“the Management Office”) from around 2012. Mr. Lo Ki Hong (羅琪康，“Mr Hamilton Lo”) was the Manager of Yick Tat between 2010 and 2018, and was promoted to Senior Property Manager in 2018. He was the supervisor of Mr Chan until Mr Chan’s resignation in May 2024. 18.The IO issued four letters on or about 13 June 2012 to the 1st respondent, requiring payment of a licence fee in the sum of HK$2,200 per month, with effect from 1 July 2012, in respect of the following four advertising signs on the external wall of the Premises:
The IO informed the 1st respondent in the 13 June 2012 letter that if it refused to pay the licence fee, it would be required to remove the 2012 Advertising Signs on or before 1 July 2012. 19.On or about 18 July 2012, the IO received a letter from International Peaceful Interests Limited (“IPIL”) as the agent of the 1st respondent objecting to the new licence arrangement. 20.Three of the 2012 Advertising Signs were found at the external walls of the Ground Floor of the Building. While the LONGINES Sign was located at the First Floor, but concerned a different location from the Sign.The IO later decided not to pursue the licence arrangement for the Omega Sign, the LUKFOOK JEWELLERY Sign and the VIP fashion Sign, situated outside the external wall at the Ground Floor level of the Building. The IO informed the 1st respondent by three letters dated 9 August 2012 of the decision not to charge a licence fee for those three 2012 Advertising Signs. 21.On 20 August 2012, IPIL issued a letter to the IO in respect of the LONGINES Sign. 22.Between November 2012 and March 2013, the IO (through its legal representatives and management company) demanded the 1st respondent pay a fee for the LONGINES Sign. On 20 November 2012, Messrs. S.H. Chan & Co., on behalf of the IO, issued a letter to the 1st respondent stating that it was a final notice to demand payment of a fee, but only for the LONGINES Sign. On 8 February 2013, Yick Tat, on behalf of the IO, issued a letter to IPIL demanding payment of a fee. On 14 March 2013, the IO issued a further letter to IPIL demanding payment of a fee. The IO now claims that the 2nd respondent has been paying a licence fee for that sign between July 2012 and May 2019. In or around July 2019, the LONGINES Sign was replaced by a smaller “六福/Lukfook” sign marked as Sign C-5 in Attachment 1. The building orders 23.On 13 May 2016 and 28 June 2016, the Buildings Department issued two building orders (No. UBF/CS05-0001/13 and CL01/SU/001747/16/K) in respect of “a signboard and the associated supporting frame bearing the main inscription of "六福珠寶LUKFOOK JEWELLERY" attached to the external wall facing Nathan Road and Haiphong Road at 1/F” and “a signboard including the associated supporting frame bearing the main inscription of "六福珠寶 LUKFOOK JEWELLERY" attached to the balcony of 1/F facing Nathan Road and Haiphong Road” respectively. The building orders stated that the said building works had been carried out without having first obtained from the Building Authority approval of building plans and consent for commencement of building works under section 14 of the Building Ordinance. There is no dispute but that the building orders refer to the A Signs. 24.An application was made to the Buildings Department for the removal of the relevant signage and for the putting up of a new sign at the same location in around October 2017. The relevant building works were completed in September 2018. That new sign at position A is the Sign, the subject matter of the present dispute. Negotiations 25.It was not until 6 June 2019, after the Sign was erected, that the IO demanded the reinstatement of the external walls or an application to it for the retention of signs on the external walls by letter from Yick Tat, on behalf of the IO to Luk Fook Jewellery & Goldsmith (HK) Company Limited. 26.From December 2019 onwards, Mr Cheung Chi Keung Darwin (“Mr Darwin Cheung”), Deputy Senior Property Director of Luk Fook Holdings Company Limited (“LFH”) for the 2nd respondent began negotiating with Mr Chan, an Estate Officer at the management office of the Building for the licensing of the Sign. Mr Darwin Cheung informed Mr Tse Kwok On (“Mr Tse”), the Property Director of IPIL for the 1st respondent, of the 6 June 2019 letter, who in or about December 2019, advised Mr. Darwin Cheung to negotiate with the IO for a licence to use the external walls of 1/F of the Building. 27.On 17 December 2019, Mr Darwin Cheung replied to Mr Chan by way of email (copied to Mr Hamilton Lo) stating that the 2nd respondent understood the area was not owned by the 1st respondent, that the 2nd respondent was willing to rent the area for use; and that, due to the social incidents in 2019, the Luk Fook Group wished to put the matter on hold until peace returned to Hong Kong. It also asked for the understanding of the management office of the Building 28.On 8 June 2020, Mr Darwin Cheung sent an email to the IO (copied to Mr Hamilton Lo) and reiterated that the 2nd respondent was willing to use the external wall of 1/F of the Building for display purposes pursuant to a contract. However, due to the impact of the social events since June 2019 and the COVID-19 pandemic in early 2020, the economy and the retail industry of Hong Kong were affected at an unprecedented level, there was a significant drop of the sales volume to 10% of the original value and the shop located at the Premises could not even support the basic salary of the employees working there. As such, they hoped to enter into a user agreement with the management office of the Building after everything returned to peace, asking for the IO’s understanding. 29.On 9 June 2020, Mr Chan texted Mr Darwin Cheung via WhatsApp, asking Mr. Darwin Cheung to put forward the details of the terms of the licence agreement as soon as possible. Mr Darwin Cheung replied that it was highly likely that the 2nd respondent would not approve any extra costs for running the business. 30.On 24 September 2020, Messrs. Waller, Ma, Huang and Yeung, on behalf of the IO, issued a letter to “Lukfook Jewellery” and the 1st respondent. It demanded the removal of advertising signs / billboards at the external wall(s) spreading across the 1/F Premises. 31.Some time before 7 October 2020, Mr Darwin Cheung made a proposal to Mr Chan to pay a licence fee of HK$10,000 per month to the IO. On 7 October 2020, Mr Chan replied to Mr Darwin Cheung’s proposal by way of WhatsApp, that the IO would like to be informed whether the 2nd respondent was willing to pay the licence fee of HK$10,000 per month calculated from 6 June 2019 until the parties reached an agreement. 32.Mr Darwin Cheung replied that the 2nd respondent only wished the agreement to cover the period from 1 November 2020 to 31 October 2021. He also said that the 2nd respondent would prepare a draft licence agreement for the IO’s consideration. Meeting on 22 October 2020 33.On 22 October 2020, upon Mr Darwin Cheung’s request, Mr Tse arranged a meeting between the IO, the 1st and 2nd respondents. At the said meeting, Mr Darwin Cheung provided the IO with a draft agreement and proposed to rent a specific area of the external walls of the 1/F of the Building for the hanging or displaying of poster(s) between 1 December 2020 and 30 November 2021 for the monthly rent of HK$10,000.00, and to remove any poster, sign and supporting frame upon the end of the lease and reinstate the external walls. Proceedings The parties did not ultimately reach an agreement for the Sign. On 23 July 2021 the IO issued the NOA and commenced these proceedings. THE ISSUES 34.The List of Agreed Issues are:
35.Issues 1, 2 and 3 may be disposed of shortly. 36.Issue 1 was not pursued by the respondents. The IO has authority to bring the proceedings. 37.Issue 2 has been resolved on the basis of an agreement. Leave had been granted for experts to opine on two main issues, namely, (i) the compliance of the pre-2018 A Signs and post-2018 A Signs with the BO and subsidiary legislation or codes of practices, and (ii) whether or not the pre-2018 Signs were unauthorised building works. The parties have reached the common ground that:
38.The experts were not called to give evidence but their reports were admitted into evidence. 39.Issue 3, the respondents maintained that the A Signs did not amount to structural alteration and are not wrongful displays as prohibited by clause 8 of the DMC. Whether the installation of the Unauthorised Structures or A Signs amounts to a “structural alteration” under clause 8 of the DMC, was not pursued by the IO. Having reviewed their expert Mr Kan’s report and the DMC, the IO accepts that the installation of the A Signs at 1/F external walls did/does not amount to “structural alternation” within the meaning of this phrase in the first prohibition of clause 8 of the DMC. The IO accepts that the advertising boards were not structural alteration under clause 8 of the DMC. 40.However, the IO maintains that clause 8 is still relevant. The IO alleges that the respondents have breached the latter prohibitions in clause 8 of the DMC. Clause 8 provides:
41.The IO’s case is that the installation of the A Signs would in any event still amount to a breach of the clause 8 prohibition that a party to the DMC shall not display or cause or permit or suffer to be displayed any notices signs in any part of the Building used in common by the parties. 42.There is no dispute that the respondents had displayed, or caused to be displayed, the A Signs over the years. There has never been any resolution of the IO permitting the 1st respondent and/or the 2nd respondent to erect or install the same on the 1/F external walls, which are common parts of the Building. Therefore, subject to acquiescence or the defences there should be no issue over the interpretation of clause 8 of DMC and section 34I of the BMO. The IO’s construction of clause 8 is that it prohibits any signs in or on any part of the Building used in common. 43.The respondents contend that clause 8 has no application in the present case. First, the IO now accepts that there was no structural alteration within the meaning of clause 8. 44.Second, clause 8 only restricts displays “in” any part of the said Building used in common by the parties. The Sign is attached to the external walls and located outside of the Building. It is not a display in any part of the Building. 45.The issue is one of construction. In Jumbo King v Faithful Properties Ltd & Ors (1999) 2 HKCFAR 272 Lord Hoffmann NPJ, construing the DMC, held at 296 D-I:
46.When construing a DMC the Tribunal should seek to give effect to the intended meaning. 47.I have construed clause 8 of the DMC. I have considered the words in clause 8 and in context of the DMC as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. In my view it is tolerably clear that the objective intention was to prohibit display of any and all signs in or on common parts, including on the exterior of the Building that are common parts. The parties to the DMC are “not to display or cause to be displayed any notices or signs in the corridors staircases and landings”. The word “in” refers to signs in 3 places namely corridors, staircases and landings. Those areas are inside the Building so it is linguistically appropriate to use the word “in”. After expressly identifying those specific areas clause 8 continues by adding “or any part of the said Building used in common by the parties”. The respondents’ construction restricts the prohibition to being “inside” the Building. If the clause had also provided the word “on” to read “in or on any part” the clause would be clearer. However, construction is not to be approached from the position of a “pedantic lawyer”: per Lord Hoffmann Jumbo King at 296I. Particularly construction of a DMC. In my view the purpose and practical object that it was intended to achieve was to prohibit any signs at common parts. The prohibition is extended to any part of the building used in common, being all common parts. The exterior walls, in particular the material area of the exterior of the 1st Floor of the Building, is a common part. The clause 8 prohibition extends to the area where the A Signs have been displayed. The respondents have breached clauses 8 of the DMC. THE PARTIES’ RESPECTIVE CASES The IO’s case 48.It is the IO’s case that both the respondents have been in breach of section 34I of the BMO and clauses 8, 11 and 17 of the DMC by installing the A Signs encroaching upon the 1/F external walls and displaying (or causing to be displayed) signs on the 1/F external walls, which are the Building’s common parts. The installation has effectively converted the 1/F external walls to the respondents’ own use, while the IO has never passed any resolution consenting to such use. 49.Furthermore, the construction of the L-shaped advertisement board and the relevant metal racks were UBW before an attempt to rectify this problem in 2018 by the minor works under the BO. The minor works were undertaken by the 1st respondent and/or the 2nd respondent without obtaining the IO’s specific approval. 50.Having regard to the DMC and the BMO, the respondents accept that the external walls of the Building belong to the common parts of the Building. 51.The IO is seeking, inter alia, an injunction to compel the respondents to remove the Sign and to reinstate the affected parts at their own costs, and to restrain the respondents from erecting further advertisements or signage on the external walls of the Building without the IO’s authorisation. The IO seeks declarations, mandatory and prohibitory injunctions and damages or mesne profits against the respondents. The prayer for relief seeks:
52.Mr Law submits that the crucial dispute is not as to the IO’s right and the interpretation of the BMO/DMC, but the law of acquiescence, laches, proprietary estoppel, and creation of an enforceable right to put up signs and displays by the doctrine of lost modern grant. 53.He considers that the most important determinations are (1) whether the construction of the A Signs (including the L-shaped advertising board and the relevant metal racks) were UBW under BO before 2018; and (2) if the A Signs had been UBW, then even if they were rectified by the 2018 minor works under the BO’s regime, whether IO could have legally assented, lain by or acquiesced in their construction and erection before 2018 and/or their retention after 2018. The parties have agreed (1), the A Signs were UBW before 2018. 54.Mr Law says that the IO’s case is simple: as the 1/F external walls are the common parts of the Building, it is regulated by section 34I of the BMO and the regime under clauses 8, 11 and 17 of the DMC. It is the duty of IO to enforce the provisions of the BMO/DMC, and IO has never assented to the construction, erection or retention of the Sign. 55.As the A Signs had been UBW from 1960s to at least 2018, it was/is not within the power of the IO to permit the A Signs to be constructed/erected, and consequently it was/is not within the power of the IO in law to acquiesce in their retention. The respondents’ case 56.Since the 1960s, the Premises have been in use by the 1st respondent, its predecessors-in-title and tenants. Various signage has been installed at the external walls of the Premises over time. In particular, various iterations of a large advertising board which spanned across the side of the Building facing Nathan Road and the side facing Haiphong Road had been installed, namely the A Signs. 57.The IO’s complaint relates to the Sign, that is an advertising board of “六福珠寶 / Lukfook Jewellery” erected at the external walls of the 1/F Premises, which was erected in 2018 (and its subsequent replacements) and which occupied a similar area as the previous large advertising boards, or A Signs. The Sign was constructed by the 2nd respondent after the Building Authority issued building orders dated 13/5/2016 and 28/6/2016 in respect of the previous version of the large advertising board. The certificate of completion of minor works in respect of the Sign was submitted to the Building Authority on 27/9/2018. 58.There is no dispute that the Sign is legal. The respondents say the real complaint now is that the IO wants to charge licence fees on the ground that the Sign used common areas. 59.The IO first demanded the 1st respondent pay licence fees for the use of signage at the Building in 2012, but not for the A Signs. 60.The respondents say this is classic case where the IO’s claims should be rejected:
61.Further, Mr Man SC says that the claim for damages is hopeless. There is no evidence of quantum, while the licence fee demanded for all 4 of the 2012 Advertising Signs was only HK$2,200 per month. 62.The respondents submit that the IO’s claim is ill-considered and must be dismissed. The respondents argue, inter alia, that:
63.In response, the IO argues that the previous signs erected at the external walls on 1/F were UBW. The illegality would defeat the defences of acquiescence, estoppel, laches and lost modern grant. Statutory provisions 64.Section 34I of the BMO, Cap 344. provides:
65.Section 14 of the BO, Cap.123 provides:
Equities legal principles Acquiescence 66.Acquiescence arises if:
67.The plaintiff (i.e. the party in the position of the IO, against whom acquiescence is contended) should also have knowledge of the other person’s acts:
68.The IO also relies on The Incorporated Owners of Ming Yuen Mansion 及 Lam Yuk Lan Grace (unreported, LDBM 185/2011, 7 November 2011) in respect of acquiesce/encouragement where, at §26, it was held that although under equity, the court may prevent the incorporated owners from exercising their legal rights if allowing them to do so would cause unfairness to the respondent, equity will not find that the incorporated owners acquiesced in the respondent's actions if the incorporated owners could not expressly allow such actions in the first place. The incorporated owners have no authority to permit actions that violate the deed of mutual covenant, and the respondent cannot rely on arguments of permission, acquiescence, or delay as a defence for breaching the deed of mutual covenant. 69.Mr Law refers to Snell’s Equity (34th Ed.) at §18-041:
Proprietary estoppel 70.Mr Law relies on the extensive discussion of the doctrine of proprietary estoppel by the Court of Final Appeal in Cheung Lai Mui v Cheung Wai Shing (2021) 24 HKCFAR 116, at 128 §§21-23:
71.Proprietary estoppel consists of the following elements:
72.Silence or acquiescence may amount to representation or “passive encouragement” for the purpose of proprietary estoppel: Summit Court (IO) v Full Surplus Investment Ltd (No 2) [2005] 1 HKC 662, 678-681; Kung Wong Sau Hin v Sze To Chun Keung [1996] 3 HKC 292, 630B-C. 73.Silence or acquiescence would give rise to proprietary estoppel if:
74.Proprietary estoppel may arise, inter alia, through encouragement or unilateral mistake:
75.Both types of cases may be based on the representor’s silence. It is possible by words or conduct to encourage another to believe or assume that he has a right or interest over property when what is encouraged is only consistent with him having some such right. Thus, overt acts by the representee, coupled with silence on the part of the representor, could amount to encouragement to the representee to hold the belief which it did: Hoyl Group Ltd v Cromer Town Council [2015] EWCA Civ 782 §§53, 73, 75 per Floyd LJ; Summit Court (IO) §82. 76.As for the element of detriment:
77.If the estoppel is made out, the starting point in granting relief is to give effect to the promisee’s expectations. As explained in Guest v Guest [2022] 3 WLR 911, §§75-76 per Lord Briggs:
78.Thus, the court will only seek to satisfy the equity in a more limited way if realising the promisee’s expectations in full would be disproportionate to the detriment suffered; even then, the court will not abandon its attempt to fulfil those expectations to an appropriate degree: Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1, §70 per Ribeiro PJ. 79.Mr Law submits that it is also well-settled that the doctrine of proprietary estoppel, like any other, cannot apply if its operation would stultify the operation of a statute, or be otherwise inconsistent with a statutory scheme: Snell’s Equity §12-046. 80.Therefore, the IO’s say even if there is any mistaken belief (which is denied) of the respondents, equity will not avail them as there is no power for the IO to acquiesce in the unlawful erection of the advertising boards by the respondents in the first place. 81.In any event, he who comes into equity must come with clean hands. In view of the unlawful erection of the advertising boards, there could be no equitable relief granted to the respondents. 82.Regarding the requirement for a representation, the author of Snell’s Equity stated at §12-035 that:
83.The IO submits that there has never been any representation, express or implied, from the IO to the 1st respondent and the 2nd respondent. On the facts as set out in the NOO, no representation can in fact be identified. Without any representation, there could not have been any detrimental reliance. The detriment must be one that would be suffered by the respondents and result from the respondents’ reasonable reliance: Snell’s Equity, §12-044. 84.As to the specific type of proprietary estoppel by acquiescence (or standing by), DHCJ Marlene Ng (as she then was) in Lee Bing Cheung v Secretary for Justice [2013] 3 HKC 511 at §§42-43 referring to Fry J’s judgment in Willmott v Barber (1880) 15 Ch D 96 held as follows:
85.To determine whether the IO had knowledge of its rights, HHJ Winnie Tsui (as she then was) in Tsang Woon Ming v Tsan Hing Tat Heidi and Others [2018] HKDC 845 at §§25-26 made the following observations:
86.Mr Man SC submits that even in cases of unilateral mistake, the five probanda expounded in Willmott at 105 should not be treated as an inflexible rule and a broader test whether the assertion of strict legal rights would be unconscionable should apply: Li Kwok Ching v Secretary for Justice, HCA 1303/2010, 31/3/2015, §§96-97 per G Lam J (as he then was); Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133, 148E-G per Oliver J. This is supported also by the observations of the Court of Final Appeal in Cheung Lai Mui at §24. The doctrine of proprietary estoppel should not be treated as being subdivided into three or four watertight compartments. The Tribunal must look at the matters in the round and see whether repudiation of an assurance is unconscionable in all the circumstances. Laches 87.Laches consists of a substantial lapse of time coupled with the existence of circumstances which make it inequitable to enforce the claim: Man Hong Apartments (IO) v Kwong Yuk Ching & Ors [2001] 3 HKC 116, 124A-E per Mayo VP. 88.Such inequity may arise where, due to the party’s conduct and neglect, even if it has not waived the remedy, it has put the other party in a situation which would not be reasonable to place it in if the remedy were afterwards to be asserted: Beijing Hantong Yuzhi Convention Centre Ltd v Lao Yuan Yi [2018] HKCFI 1030 §105 per Recorder Linda Chan SC (as she then was). WITNESSES 89.The IO called Mr Hamilton Lo. The respondents called Mr Kiang Robert Chee Man (“Mr Kiang”), Mr Wan Chi Hung (“Mr Wan”), Mr Tse and Mr Darwin Cheung. Their witness statements stood as their evidence in chief. 90.I have considered the evidence, both written and oral. This includes whether each witness gave evasive or argumentative answers, gave self-contradictory evidence or internally inconsistent evidence and whether their evidence was contradicted by other evidence that was undisputed or indisputable. Where there was any conflict of evidence I have referred to objective facts proved independently of their testimony and referred to the documents as well as to their motives and the overall probabilities, to assist in ascertaining the truth. 91.Mr Hamilton Lo, the only witness called for the IO, joined Yick Tat in 2007. He is currently Senior Property Manager. He works at Yick Tat’s Head Office and is assigned to manage approximately 20 buildings, including the Building. His responsibilities included supervising subordinate colleagues serving as Estate Officers of the Building. From 2012 to August 2023, this was Mr Chan in managing the IO’s affairs. Initially Mr Chan was to be the only factual witness for the IO however, he resigned and left Hong Kong so Mr Hamilton Lo prepared a witness statement and gave evidence in his place. Mr Hamilton Lo had to rely on the documents and what he was told by Mr Chan on material matters. Other matters known to him personally were less material, did not affect the issues one way or the other and were consistent with the agreed facts. However, his direct knowledge was limited. For example, he did not attend the meeting on 22 October 2020. Where his evidence differs from that of the respondents’ witnesses who had personal direct knowledge of facts I prefer the evidence of those witnesses to that of Mr Hamilton Lo, as set out below. 92.Mr Kiang is a director of Majestic Dragon Limited, the corporate director of the 1st respondent. He began working for Mr Lee in 1955, at the age of 18. He was assigned to work overseas in 1961 but returned to Hong Kong in May 1961 and worked at the Premises for 6 months as a store manager. The Building had just been completed. The Premises has always been directly or indirectly owned or controlled by Mr Lee and, after his passing, by his descendants. 93.Mr Kiang worked for Mr Lee’s tailoring businesses in Japan from 1961 to 1984, but came to Hong Kong for one or two months at least once a year and attended general meetings as well as to other matters in respect of Mr Lee’s business. Every time he was in Hong Kong he stayed in an apartment in Nathan Road and would walk across the road to the Premises to conduct Mr Lee’s business. He was able to confirm that the photographs in the Attachment to the NOO showing the signage, including the A Signs, reflect the actual situation of the Premises at the relevant time. There was some inconsistency between his witness statement and his oral evidence. However, I found him to be an honest witness doing his best to recall matters that occurred over the decades. He had first-hand knowledge of the Building and, in particular the A Signs, since the 1960s. I did not find his evidence limited by the fact that he has not been in Hong Kong constantly. He has since the 1955 been working for and or been involved with the late Mr Lee and his businesses right up to date, first as an employee and now as a director. 94.Mr Tse joined IPIL (now known as Oxford Asset Management Limited (“OAM”)) in September 2013, part of the Oxford Group. When he joined the Oxford Group he was Assistant Leasing Manager and is now in the role of Property Director. The IO submitted, inter alia, that Mr Tse was an evasive witness. I did not find Mr Tse to be an evasive witness. Overall I accept his evidence which is addressed more particularly below. 95.Mr Wan is a director of OAM. He joined an associate company of the Oxford Group as a leasing officer in 1999. Corporate and property agent changes have occurred, but he is also manager of the 1st respondent, which is a property holding company. His main responsibilities included inspection of the 1st respondent’s properties and he would, if necessary, negotiate with tenants and deal with incorporated owners of the properties. He gave evidence in a straight forward manner. His evidence was credible. Overall I accept his evidence, subject to findings below. 96.Mr Darwin Cheung is the Deputy Senior Property Director of Luk Fook Holdings Company Limited, the parent company of the 2nd respondent, having joined the company in 2010. He did not take part in the negotiation for the 2010 lease between the respondents. He believed at the time that putting up signs on the external walls of the Premises was permissible or acceptable. He was able to give evidence with direct knowledge of the 2nd respondent. He was not able to speak for the 1st respondent. The 1st respondent and the 2nd respondent are clearly independent companies. They have a professional arms-length landlord and tenant relationship. He was not privy to the operations of the 1st respondent. He provided particulars of the sums incurred by the 2nd respondent in putting up and maintaining the A Signs, since taking up the 2010 lease. The total sum was HK$786,200. This was not disputed. His evidence was largely consistent with the documents. I accept his evidence of facts, subject to matters specifically found below. 97.The expert witnesses were not called but their reports were admitted by agreement. Issue 4 – Whether the IO could legally assent, lay by or acquiesce in the construction, erection or retention of the A Signs The respondents’ case 98.The A Signs had been in place since as early as the 1960s. The IO had not raised any objection at least until 2012. The respondents’ say that the IO has hence assented and lain by, and is barred by acquiescence from enforcing against the breaches. They also claim that it would be unjust if the IO is able to enforce against the erection of the A Signs. The IO’s case 99.The IO submits that the first and foremost question is whether the IO could assent or acquiesce in the construction/erection of the A Signs, at least A-1 to A-13, which the IO says were UBW. 100.Recorder Rimsky Yuen SC in Hollywood Shopping Centre Owners Committee Limited v The Incorporated Owners of Wing Wah Building Mongkok Kowloon (unreported, HCA 1582/2007, 16 August 2010) answered that question in the negative. The Recorder cited The Incorporated Owners of Champion Court v Pang Ping Fan Peter (unreported, CACV 317/2006, 23 May 2008) per Yuen JA at §55 and the principle at §§ 58 and 65(3):
101.The IO’s position is that as the A Signs were UBW before 2018, they could not acquiesce in the construction/erection of the A Signs before 2018. 102.Such position has also been confirmed by Deputy Judge Michelle Soong (as she then was) in 永利工業大廈業主立案法團 及 順隆置業有限公司 [2021] HKLdT 26. At §§64-66 the position of the applicant incorporated owners was summarised as follows. The respondent acknowledged that the signboard had never received consent from the applicant. In addition to sending letters to the respondent, the applicant had also verbally communicated its objections and requested the respondent to remove the signboard on multiple occasions. The applicant had never endorsed the signboard or turned a blind eye to it, nor waived its right to pursue the respondent for violating the DMC and/or the BMO. Therefore, the respondent could not rely on the applicant’s endorsement and/or inaction as a defence. In order to successfully invoke acquiescence as a defence, it must be inferred based on the conduct of the party giving acquiescence. The respondent could not rely solely on the applicant’s failure to take action to establish acquiescence. The applicant also cited The Incorporated Owners of Hoi Luen Industrial Centre and Another v Ohashi Chemical Industries (Hong Kong) Limited [1995] 2 HKC 11, pointing out that the incorporated owners have no authority to acquiesce in any act that violates the DMC. It was held that the applicant had no power to acquiesce in the construction of the signboard, which was an unauthorised building works: at §67. The approach was consistent with that taken by the Court in Hollywood Shopping Centre Owners Committee Limited. 103.In The Incorporated Owners of Ming Yuen Mansion Deputy Judge Angela Kot (as she then was) expressed agreement with Ohashi. The incorporated owners did not have the authority to acquiesce in the respondent's violations. Under section 18(1)(c) of the Multi-storey Buildings (Owners Incorporation) Ordinance (Cap. 344) incorporated owners were under a statutory duty to do all things reasonably necessary for the enforcement of the obligations contained in the DMC. When they found that there was a breach of covenant by one of the owners, it was not only their right but their duty to seek to enforce the covenant. It followed that the plaintiffs were bound to take proceedings for the enforcement of the covenants. They could not have granted expressly to the defendant or any other owner of any unit the right to act in contravention of the DMC as the defendant had done: at 13C-D. Equity would not hold a plaintiff bound by acquiescence to allow something which he could not have allowed by express grant: at 13D-E. Therefore, even though the incorporated owners had been aware of the respondent’s violations for many years, they still do not have the authority to acquiesce in such actions: at §24. The financial burden raised by the respondent did not constitute a valid argument for unfairness. Otherwise, the incorporated owners would only be able to enforce the DMC when the unit owners are financially capable, which would be contrary to the responsibilities of the incorporated owners. 104.The IO submits, first, although the existence of the signage at the L-shaped position since the 1960s is not disputed, they were all along UBW and could not be acquiesced in. The IO, as a body bound to observe the DMC and the applicable statutory laws including the BO, could not have granted to the respondents or any other owner any right to act in contravention of the law. 105.Secondly, in reply to the respondents’ argument that it would be unjust for the IO to enforce against the erection of the Sign and that the IO is barred by laches from enforcing the DMC or the BMO, the IO relies on, 永利工業大廈業主立案法團 at §§70-71, where regarding the respondent's claim that ordering the respondent to remove the signboard would cause unfairness to the respondent, the applicant relied on the principle of detrimental reliance as stated in Fisher v Brooker and Ors. The applicant asserted that the respondent has failed to provide evidence on this matter. Furthermore, §79 states:
Similarly there, even if the applicant's delay has caused unfairness to the respondent, the unfairness faced by the respondent was far less than the benefit the respondent had gained from continuing to use the signboard due to the applicant's delay (if any). 106.Mr Law submits that the situation in the present case is similar. In Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, Lord Selborne stated at page 239 that laches would only apply when “it would be practically unjust to give a remedy", and that, in every case where a defence “is founded upon mere delay … the validity of that defence must be tried upon principles substantially equitable”. What had to be considered were “the length of the delay and the nature of the acts done during the interval, which might affect either party, and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.” 107.The IO answers the respondents’ unfairness/prejudice claim thus:
Issue 5 - Whether the IO has been estopped by proprietary estoppel from enforcing the DMC and/or the BMO against the Sign 108.The respondents rely on proprietary estoppel as a defence to the IO’s claim, namely that the IO is estopped from enforcing against the respondents the DMC and/or the BMO in respect of the Sign. Evidence to establish proprietary estoppel 109.The IO submits that there is insufficient evidence to establish proprietary estoppel and to support the respondents’ claim that there had been any passive encouragement, representation, mistaken belief and/or detrimental reliance. Moreover, even if there had been a mistaken belief on the respondents’ part, the IO was not aware of it. No passive encouragement/ representation 110.The respondents’ rely on Summit Court, a case involving an IO building communal water facilities on a roof owned by the defendants. There is nothing in this case to match the kind of “passive encouragement” in that case, including the extensiveness of the installation works in the defendant’s privately-owned area, the defendant’s identity as an architect, the defendant’s signing of letters to apply for separate water meters and wide circulation of information about the facilities: at §88. The IO also refers to Shiu Fung Mansion (IO) v Wong Yuk Ming, LDBM 341/2014, 30.12.2016 at §57 on the insufficiency of silence/inaction to constitute an assurance or promise. 111.It is common ground that the IO requested a licence fee to be paid for signage, at the 1/F external walls, Sign C-4 in as early as 2012. Mr. Darwin Cheung of the 2nd respondent said he began to be doubtful about the 1st respondent’s ownership of the 1/F external walls at that time. Moreover, the IO followed up on the request for licence fee with IPIL (the 1st respondent’s agent) and sent the S.H. Chan & Co letter dated 20 November 2012 asserting ownership of the 1/F external wall as follows:
112.Mr Wan confirmed in evidence that was received by the 1st respondent. The 2nd respondent’s doubt and the subsequent agreement by its shop staff to pay the licence fee, as well as the communication of the IO’s position to the 1st respondent in 2012/2013, all point to the lack of passive encouragement on the IO’s part. 113.The respondents can only point to the conspicuousness of the A Signs and the IO’s inaction to establish “passive encouragement”. In the IO’s submission, this is not enough. The respondents’ case on proprietary estoppel by acquiescence fails at step one. No mistaken belief 114.The respondents rely on Mr Kiang’s evidence to establish a long-term belief in the 1st respondent’s right over the 1/F external walls. However, Mr Kiang lived in Okinawa, Japan from 1961 to 1984, after which he went to Canada to take care of his wife. He later retired and has settled in Vancouver, Canada for most of the time. He only occasionally returned to Hong Kong every one or two years. He was also not responsible for the day-to-day management of the Oxford Group (including the 1st respondent) as he just returned to Hong Kong for Annual General Meetings and board of directors meetings. He could not have known whether the IO had ever made any complaints or asserted any ownership over the 1/F external walls any time prior to 2012. However, the IO has not adduced evidence of any complaint or issue being taken prior to 2012, as set out in the agreed facts. Mr Kiang’s knowledge is said to be limited, and cannot be relied on to establish the 1st respondent’s substantive belief. 115.Mr Law submits that other evidence should carry more weight. First, the lease entered between the 1st respondent and the 2nd respondent on 19 March 2010 regarding the Premises. Clause 2(ee) reads:
116.The same clause was reproduced in the renewed lease in November 2015. The IO submits that, the 1st respondent and the 2nd respondent, being contractual parties to the leases, anticipated the risk that the IO (or its management company) would request the A Signs on the 1/F external walls to be removed. When such risk arises, the 2nd respondent “shall” remove the Signs, not argue with the IO or the manager, assert the 1st respondent’s right and/or undertake to defend any action, claim or proceedings from the IO. The drafting of this clause is consistent with recognition of the IO’s right, and inconsistent with the alleged mistaken relief that the 1st respondent was the owner. 117.Mr Wan testified that the leases were drafted by the 1st respondent’s staff in the leasing department and cleared with their lawyers. The IO points out that:
118.Although Mr Darwin Cheung was not involved in the drafting of the 2010 lease, he agreed he cannot disassociate himself from the 2015 lease. It was his understanding in 2015 that the IO might ask the 2nd respondent to take down the A Sign because it might be UBW. When he was asked why the IO would ask the 2nd respondent to remove such UBW, he said he could not answer. He did not question the 1st respondent why the IO would request the 2nd respondent to remove the A Signs in future. 119.In the IO’s submissions, clause 2(ee) was carefully drafted with lawyers. If the 1st respondent were indeed under the mistaken belief that the 1/F external walls had become effectively owned by the 1st respondent, it would be unreasonable for the 1st respondent to include such a specific clause in the lease. The 2nd respondent would have disputed or at least queried why the risk of being requested by the IO to remove the A Signs should emerge as an obligation. 120.Secondly, the respondents’ conduct following the receipt of the 2012/2013 letters from the IO showed not only that the IO had not passively encouraged, but the respondents had also understood the IO’s position over the 1/F external walls. 121.The S.H. Chan & Co letter dated 20 November 2012 asserted ownership of the external walls of the upper floors of the Building. No rebuttal on the legal position was issued. This should be contrasted with IPIL’s eagerness to raise the position of adverse possession (which is not adopted in this action) in the previous letter dated 18 July 2012. When the management office continued to request the 1st respondent to pay a licence fee in February 2013, Mr Wan claimed that he did not query the IO. 122.If the 1st respondent was still under the same mistaken belief that the external walls were effectively its property so that further consent from the IO would not be required, it should have reiterated its position or at least referred to its previous letter. Upon receipt of this letter the 1st respondent could no longer be mistaken in its belief. It should have doubted the previous mistaken belief (if any) or objectively, it was no longer reasonable for the 1st respondent to subscribe to the belief. In any event, the letter also shows that in continuing its use of the A Signs, the 1st respondent no longer relied on its previous belief. 123.As regards the 2nd respondent, Mr Darwin Cheung claimed that it was not until he had read Mr Chan’s statement that he came to know that the 2nd respondent has been paying a licence fee for the Longines Sign (C-4), which was also attached to 1/F external walls. It does not matter when Mr Darwin Cheung discovered this because his colleague Mr Chow , an employee of the 2nd respondent representing the 2nd respondent in dealing with the IO, paid it. He did not pay the licence fee at the first moment he received the invoice but started making such payment in 2013. There must have been a thinking process over this matter. 124.The IO submits that by paying the licence fee for the Longines Sign, the 2nd respondent had acknowledged the IO’s ownership over the 1/F external walls. Even if the 2nd respondent had had any belief that the owner of the 1/F external walls was the 1st respondent, such belief was extinguished by the time the 2nd respondent started paying the licence fee. Mr Darwin Cheung clarified in re-examination, the management office issued receipts upon receiving the fee. Mr Law submits that there is no way that the 2nd respondent was not aware of the IO’s interest over the use of the 1/F external walls. 125.Thirdly, Mr Darwin Cheung joined the 2nd respondent in 2010. As no plan showing the place for signage on the external walls was attached to the 2010 lease, the evidence of the 2nd respondent’s contractual entitlement to signage was merely Mr Darwin Cheung’s evidence of following “Watsons’ entitlement”. However, Mr Darwin Cheung himself, when reviewing and questioned on the A-6 to A-8 Signs, doubted if the part with electronic products was indeed put up by Watsons. The 2nd respondent’s “mistaken belief” as to which part of the external walls was effectively owned by the 1st respondent is unclear. 126.Fourthly, the proposal for the 2nd respondent to pay a licence fee regarding the Sign to the IO in 2020 was evidence that both the 1st respondent and the 2nd respondent no longer believed that the 1st respondent was the owner of the 1/F external walls. 127.When the IO demanded the 2nd respondent pay a licence fee for the Sign, Mr Darwin Cheung told Mr Chan on 23 October 2019 by WhatsApp that the 2nd respondent was in the course of studying with the 1st respondent “who have the title”. Mr Darwin Cheung said that, the first thing he did was to report to Mr Tse of the 1st respondent. 128.After repeated demands from Mr Chan, Mr Darwin Cheung notified Mr Chan on 17 December 2019 that the Sign area is not owned by the 1st respondent, and that the 2nd respondent was willing to rent the area. 129.Following rounds of negotiation, Mr Darwin Cheung told Mr Chan that the 2nd respondent would draft a “contract” for the use of the 1/F external walls on 7 October 2020. The draft contract was then produced to the Chairman of the IO in a meeting on 22 October 2020. 130.The IO submits that this conduct since the payment of the licence fee in respect of the Longines Sign suggests that the 2nd respondent had never believed the 1st respondent to have owned the 1/F external walls. Other conduct of the respondents’ during the negotiation between the IO and the 2nd respondent in 2019 to 2020 also warrants attention. 131.Upon learning that the IO had decided to charge a licence fee for the Sign in 2018, Mr Darwin Cheung approached Mr Tse of the 1st respondent. Mr Tse must have known about the IO’s request. Mr Law put to Mr Darwin Cheung that, if the 1st respondent thought the external walls were effectively its property, the 1st respondent would naturally argue with the IO (like IPIL initially had in 2012) as to why the IO could charge. But Mr Darwin Cheung said the 1st respondent did not do so. It was the same position after Mr Tse learnt about the IO’s intention to charge a fee for the entire Sign, but not merely the upper rim of the Sign, the “excessive height”. 132.The IO says that if ownership of the external walls was important to them, it is unimaginable the 1st respondent would simply defer the matter to the 2nd respondent but not check with the IO directly. 133.The IO submitted that Mr Tse was evasive when giving evidence; the Tribunal can observe his demeanour. The internal inconsistency and inherent improbability of his evidence also cast doubt on the reliability of his testimony:
134.Mr Law submitted that Mr. Tse took an evasive position in an attempt to delay the existence of 1st respondent’s knowledge about the IO’s assertion of ownership over the 1/F external walls. But in fact, Mr Wan already knew about it as early as in 2012. 135.Further, it was improbable that the 1st respondent did not question the 2nd respondent on the terms of the draft contract, after knowing that the 2nd respondent was going to sign that contract directly with the IO and that Mr Darwin Cheung had a different understanding. Mr Tse knew of that in around December 2019 as evidenced by the email and confirmed by him under cross-examination. 136.Furthermore, while Mr Tse says that he did not participate in the drafting of the contract between the IO and the 2nd respondent, and he did not look at it, it was suspicious why he did not directly challenge the IO’s representative in that meeting on the basis for charging a licence fee. 137.The respondents’ reactions, including the 1st respondent’s delegation of the negotiation with the IO to Mr Darwin Cheung of the 2nd respondent, shows that they had operated under the belief that the external walls of the Building, a common part, were the IO’s property before formal legal disputes broke out. It can be inferred from such reactions that, institutionally, the respondents did not have a mistaken belief that 1/F external walls belonged to the 1st respondent. The IO’s lack of knowledge of the respondents’ mistaken belief 138.Mr Law submist that even if the Tribunal finds that there had been a mistaken belief of the respondents, the evidence shows the reason for the IO’s inaction was due to Mr Chan’s “counter-mistaken belief” that the A Signs at the 1/F external walls were part and parcel of the Convey advertisement signs, and Convey was at the material time a licencee paying licence fees for putting up signs at the external walls. Mr Chan’s “counter-mistaken belief” had influenced members of the IO’s management committee and other members as they counted on the management company to discharge such duties. As Mr Hamilton Lo said, the position only became clear after Convey discontinued the licence in or about 2017 and the IO’s dispute with Convey on the deposit was settled in mid-2018. 139.Looking at the photographs showing the Convey Sign and the A Signs, it is probable that such a misunderstanding would be held by Mr Chan. On the one hand, part of the A-6 to A-9 Signs showed the advertisement of electronic products, while the Premises were then occupied by Marionnaud of Watsons Group selling perfume and cosmetics products. There was no obvious connection between that part of the A Sign and the business of the Premises. Mr Wan did not know the relationship. When this was pointed out to Mr Darwin Cheung he said it was doubtful if that part with electronic products was put up by Watsons. 140.On the other hand, jewellery and watch products were prominently promoted on the Convey signage. An ordinary passer-by would think these products were related to the shop underneath, which has since March 2010 been occupied by “Luk Fook Jewellery”. Luk Fook did market Longines watches. 141.The IO claims that the state of affairs could really lead people in Mr Chan’s position to believe that the A Signs were part of the Convey signage above: (a) at one time Watsons Group had rented part of the Convey signage at the position of the A Sign from Convey, and the other part of the A Sign was sub-let by Convey to others; or (b) at the other time Luk Fook had rented the entirety of the Convey signage, inclusive of the A Sign, from Convey. In Mr Hamilton Lo’s words, the constant changes of advertising images and products promoted made people confused. 142.As Tsang Woon Ming found, to establish knowledge of the mistaken belief, it must be for the IO to perceive the respondents’ mistake, abstain from setting them right and leave them to persevere in the error. Given Mr Chan’s misunderstanding, the IO had never perceived the respondents’ mistaken belief that the 1/F external walls belonged to the 1st respondent, until the Convey signage was removed in 2018. The IO was under the “counter-mistake belief” that it had been receiving licence fees of the A Signs from Convey. Hence, it did not know about its rights to request the respondents to remove the A Signs or pay a licence fee before 2018. This also explains why the IO only attempted to charge a licence fee for the four protruding signs but not the A Sign in 2012. The IO’s conduct has been consistent. No detrimental reliance 143.Further, it is submitted for the IO that any mistaken belief that the 1st respondent was the owner of the 1/F external walls flows from the respondents’ own misunderstanding but not the IO’s acquiescence or inaction. The respondents did not rely on the IO’s position to incur the alleged detriment. 144.Mr. Kiang’s evidence was that the late Mr Lee had always believed he (or the 1st respondent that he had control of) was the owner of the 1/F and G/F Premises, without regard to the IO’s position. The interpretation is that the late Mr Lee thought himself to be the legal/paper owner of the 1/F external wall. This was plainly possible because the DMC reserved the G/F external wall advertising right to the owner of the G/F premises. He assumed the 1/F external wall’s position to be the same as the G/F external wall, given he owned both premises on both floors. The mistaken belief that the 1st respondent was the owner of 1/F external walls (if any) stemmed from their own misconception and lack of checking of the legal instrument, not the IO’s acquiescence/inaction. Before 2012, they might not have even thought about the IO’s position. There was no reliance. 145.Mr Wan, head of the property management section and responsible for liaison with the 2nd respondent, confirmed his belief that the late Mr Lee (or his company) was the owner of the 1/F external walls. He agreed the right of the 1st respondent to put up the advertising boards on the 1/F external walls did not depend on the IO’s attitude. 146.As to the claim that the 1st respondent would have sold the Premises had it known that the IO would enforce against the erection of the A Signs, Mr Kiang confirmed that this was at best speculation or an after-thought, but not an actual detriment suffered in reliance on the so-called passive encouragement or mistaken belief in previous years. Mr Lee had never mentioned to Mr Kiang any intervention from the IO when he was alive, and so it was impossible the IO’s position had influenced Mr Lee’s decision to hold or sell the Premises. After Mr Lee’s passing in 2009 (but before the commencement of this action), Mr Kiang said it was not his responsibility to decide whether to sell the Premises; he could not comment whether it had anything to do with the position of the IO. So his witness statement is not actually his evidence. 147.Even if there had been any reliance, the IO says that such reliance was not detrimental to the 1st respondent. The 1st respondent was assigned the Premises in 1979, and had since the early 1980s let the Premises to a number of tenants. Mr Kiang agreed that the advertising boards had brought substantial commercial value to the tenants. The respondents must have enjoyed the business advantage or rental income by their infringement of the DMC and the BMO for decades. 148.The IO also submits that there could be no detrimental reliance by the 2nd respondent on the IO’s inaction. The state of Mr Darwin Cheung’s mind can be divided into several stages: (1) When he joined the 2nd respondent in 2010, it was his understanding that the right to put up the A Signs had nothing to do with the IO. It was simply permissible and/or acceptable to the landlord as he was told that the signs previously used by the Watson’s Group could continue be used by the 2nd respondent; (2) Between 2010 and 2012, he understood the 1st respondent to be the owner of the 1/F external walls, and he also understood the 1st respondent could grant the 2nd respondent the right to use the walls because it was the owner; (3) In mid-2012, the IO started to request a licence fee be paid for the Longines Sign. He became doubtful about the 1st respondent’s ownership of the 1/F external walls, wondering why the 2nd respondent could use fewer signs as compared with Watson’s Group; (4) In cross-examination he agreed that during 2010-2018, the 2nd respondent had used the A Signs because the 2nd respondent thought the 1st respondent was the owner of the 1/F external walls, and such a use was not based on the IO’s position; (5) Upon receiving the letter from the IO demanding a licencee fee in December 2018, he was responsible for the negotiation with Mr Chan in 2019 until 2020. During the negotiations he had never asserted to Mr Chan that the IO did not have power to charge the 2nd respondent as it had already lost its ownership of the 1/F external walls because of passage of time. (6) Since the IO was asserting ownership over the 1/F external walls, he chose to clarify with the landlord. Upon confirming that the IO was the real owner of the 1/F external walls, the 2nd respondent proposed to directly rent the 1/F external walls from the IO. 149.Mr Law submitted that obviously, it was not until October 2019 that Mr Darwin Cheung (or the 2nd respondent) discovered that the 1/F external walls were not the 1st respondent’s. Prior to that, it had always been acting on the assumption that the 1st respondent was the owner of the external walls and had erected the A Signs over the years. The 2nd respondent’s understanding was that they were permitted by the 1st respondent to erect the Sign had nothing to do with the IO’s position. 150.The IO continues that, after discovering the truth that the 1st respondent was not the owner, the 2nd respondent proceeded to drafting a licence agreement with the IO. This shows no representation or encouragement from the IO that it could erect the signs without the IO’s approval. Even if there had been reliance, it was reliance on the 1st respondent, but not on the IO’s action. 151.As to detriment, it could hardly be said that by taking up the lease of the Premises with the 1st respondent, that the 2nd respondent had suffered detriment. The 2nd respondent must have enjoyed great commercial gain by wrongfully displaying the A Signs at the prime location in Tsim Sha Tsui for years. It would not be unjust or unconscionable for the IO to be granted relief, as such prejudice (if any, which is denied) must be outweighed by the benefit the 2nd respondent had obtained: 永利工業大廈業主立案法團 at §§70-71, and The Incorporated Owners of Ming Yuen Mansions at §21. 152.Based on the above, the IO’s submit that the respondents’ claim for proprietary estoppel should be rejected. The respondent’s’ case – proprietary estoppel acquiesce and laches 153.The respondents point out that the IO does not seriously dispute that no objections have been raised to the erection of signage at the external walls of the 1/F Premises from the 1960s until the 2010s, as stated in the agreed facts. I find that there is no evidence of any objection until 2012 and even then, it was only in respect of the 2012 Advertising Signs, which was ultimately limited to the Longines Sign, never the A Signs. 154.Mr Man SC submits that as is well recognised in the authorities, such persistent silence by the IO and the other owners’ constitutes a representation or assurance that it would consent to the display of signs at the area. There was an assent or lying by to the same, and a substantial lapse of time in the enforcement of the relevant provisions in the DMC and BMO:
155.Further, it is clear that the respondents have reasonably relied on the representation, assurance or acquiescence:
156.The respondents would also suffer detriment if the IO were able to go back on its representation, assurance or acquiescence, and it is unjust and unconscionable in the circumstances for the IO to request the removal of the Sign:
157.Mr Man SC submits that the following matters are beyond dispute:
158.In summary, the respondents’ case is that it follows from the prolonged, prominent and undisturbed display of the signage, in particular the A Signs that acquiescence, proprietary estoppel, laches and lost modern grant would be established on the facts. 159.The historical illegality of the pre-2018 A Signs had no significance, and could not operate to defeat the respondents’ defences. The IO complains that the respondents had converted common areas, and it is and was entirely within the IO’s and the owners’ power (as they did) to consent such conversion. Status of the signage 160.I find that there are four distinctive features of the signage. 161.First, the signage has been in continual existence for an exceptionally long period:
162.Second, the signage has been on prominent display throughout. It is plain from the photographic evidence that the signage, especially the A Signs, were both large and conspicuous. There is no doubt that any casual observer, not least the other owners of the building and the IO, would have been aware of their existence. Indeed, Mr Law has described the A Signs as “huge” and “giant”. 163.Third, it is obvious that the signage, including the A Signs, were put up by the 1st respondent’s predecessors, the 1st respondent or by the 1st respondent’s tenants:
164.Fourth, the signage, including the A Signs, were clearly connected with the business carried out in the Premises contemporaneously:
IO’s lack of objection 165.I find that the IO has not raised any complaint or demand for a licence fee for the A Signs until 12 December 2018. By then, the A Signs had already been in existence for 57 years. 166.The IO’s lack of objections must be considered against the features highlighted above. The IO has continued to lay by as the 1st respondent or its tenants continued to put up large and prominent displays at the 1/F external walls for over 50 years. I accept that this prolonged silence encouraged the 1st respondent to form the view that it was allowed to install and permit to be installed the signage at the 1/F external walls. 167.It is also relevant that, even before the 1st respondent had become the owner of the Premises, the other owners had not raised objections to the 1st respondent’s predecessors’ installation of signage either. I have no hesitation in finding that the lack of objection to the continuous breaches by the 1st respondent’s predecessors and the 1st respondent could reasonably be taken as indicating that the installation of signage, in particular the A Signs, on the 1/F external walls would be tolerated: Freder Centre (IO) §§32-33. 168.Further, in my view the IO’s demand for a licence fee for the LONGINES Sign in November 2012, Sign C-4 in Attachment 1, does not assist the IO, and would indeed fortify the respondents’ case:
169.Mr Man SC submits that it is plain from the persistent use of the 1/F external walls to display signage by the 1st respondent or its tenants that they had relied on the IO’s tolerance of such display. The 1st respondent has repeatedly stated that it believed that it was the owner of the 1/F external walls or it was entitled to put up signage there. That was caused or encouraged by the IO’s conduct:
170.The respondents case is that the 2nd respondent relied on the 1st respondent’s grant in the leases to put up signage at the 1/F external walls:
171.The respondents submit further, even if Luk Fook’s shop manager paid a licence fee for the LONGINES Sign to the IO since 2013 this would not affect the longstanding tolerance of the IO over the signage. I find that:
172.Similarly, I find that the 2nd respondent’s attempt to negotiate with the IO between 2019 and 2020 does not undermine the respondents’ reliance on the IO’s assurance:
173.I find in all the circumstances that the respondents had suffered detriment as a result of the IO’s assurance:
Acquiescence, proprietary estoppel and laches 174.Mr Man SC submits that the respondents have satisfied all elements of the equitable defences. Mr Law has gone through the evidence to show otherwise. Acquiescence 175.Acquiescence is shown if (i) the IO has assented to or lain by the respondents’ acts, and (ii) in view of the assent or lying by and consequential acts, it is unjust in all the circumstances to grant the relief: Freder Centre (IO), §26. 176.The IO only had to know of the facts or matters that gave rise to its rights to equitable relief in the sense that it was aware of sufficient matters to raise a doubt in its mind as to whether an infringement had taken place; it needed not to have fully understood, as a question of law, the rights that it possessed: Yick Fung §28. 177.In this case the IO had obviously assented to or lain by as the 1st respondent continued to put up, or to permit others to put up, signage at the 1/F external walls for over 50 years before it had raised any objections. 178.The 1st respondent’s conduct in putting up the signage at the 1/F external walls followed the practice of its predecessors-in-title. 179.I find that it is also clear that the IO had possessed the requisite knowledge for acquiescence to arise:
180.I find that in all the circumstances it would be unjust to grant relief to the IO:
181.The facts of this case are particularly striking when juxtaposed with the decision of the Court of Appeal in Freder Centre (IO). In that case, other owners or occupiers of the basement and ground floor units of the building had affixed or exhibited shop names, signboards or product brand names on the external walls 30 years before the IO’s complaint, and where the tenant has affixed business signs on other parts of the external walls for 14 years, the lack of objection or enforcement actions in the face of such prevalent and prolonged breaches could reasonably be taken as representation that exhibiting or affixing trade name or business sign on the external walls would be tolerated by the IO. The IO was thus barred by acquiescence from enforcing against the tenant’s signs: at §§28, 32, 33. 182.In several respects the present case is a fortiori of Freder:
183.I hold that the IO has acquiesced in the presence of the A Signs on the exterior 1/F of the Building, including the Sign. Proprietary estoppel 184.I find that first, it is clear that the IO has through its prolonged silence made an assurance to the respondents that it would allow signage to be installed at the 1/F external walls:
185.Second, as set out above I am satisfied that the respondents had relied on the IO’s assurance and acted to their detriment. It is also of note that:
186.Third, the respondents case is that the proprietary estoppel should be satisfied by allowing the respondents to continue to put up signage at the 1/F Premises:
187.The respondents have established proprietary estoppel. They rely on the doctrine as a defence. They have not brought a counterclaim or sought any declaratory or other relief. Therefore, subject to the illegality issue, the Tribunal should give effect to the assurance by refusing the IO’s claim. The effect would be to maintain the status quo. Laches 188.Laches requires a substantial lapse of time coupled with the existence of circumstances which make it inequitable to enforce the claim: Man Hong Apartments (IO). 189.First, on any view, the delay of over 57 years in enforcing the claim over the signage is a substantial lapse of time. 190.Second, in light of the matters above, regardless of whether the IO has otherwise given up its claim, the enforcement of its claim would put the respondents in an unreasonable position. 191.In all the circumstances, I find that it would be inequitable to allow the IO to enforce the claims, subject to the illegality issue. On balance I hold that the laches defence is made out. ILLEGALITY 192.The Supreme Court in Patel v Mirza [2017] AC 467 held that the Tinsley v Milligan [1994] 1 AC 340 test for the defence of illegality should no longer be applied and provided the range of factors test. In Hong Kong the Court of Appeal in Monat Investment Ltd v All Persons in Occupation [2023] HKCA 479 held that Patel now represents the common law on the defence of illegality, and that accordingly the “range of factors approach” based on the trio of necessary considerations should be adopted in Hong Kong. 193.In Monat Yuen JA explained at §§27 – 28:
194.Yuen JA addressed the public policy nature of the defence, including at §31.1:
195.Yuen JA considered Patel, including at §§36.1 to 36.5:
196.Yuen JA held at §§52.2 and 57:
197.The Court of Appeal determined the appeal applying Patel. Yuen JA held at §§62.2 – 62.3:
198.The Supreme Court in Henderson v Dorset Healthcare University NHS Trust [2021] AC 563 determined how Patel should be applied in circumstances where there is already a body of case law. Lord Hamblen JSC considered that an important issue which arose in the appeal concerned the width of the application of Patel and how it applies in relation to existing case law: at 619 §73. Mr Man SC relies on Henderson to submit that Patel does not represent “year zero”. Lord Hamblen JSC held at 620 §77:
199.Lord Hamblen JSC also held that reliance will often be a relevant factor, at §120:
200.Lord Hamblen JSC found that centrality will often be an important factor, at §124:
201.The equitable defences of estoppel, acquiescence and laches and also lost modern grant can be set up against a claim for breach of the DMC or section 34I of the BMO if the nature and type of the breach is one within the IO’s power to acquiesce in: Hollywood Shopping Centre (CFI) §65. 202.Thus, the defences can apply to:
Illegality – the IO’s case 203.The IO argues that it cannot acquiesce in the construction or retention of illegal structures: Champion Court (IO) §§15, 17; Hollywood Shopping Centre (CFI) §§53-56. 204.Mr Law explains the authorities on illegality as follows. In Monat Yuen JA highlighted the problem of the Tinsley “reliance” approach at §28.1. It led to a concentration on the procedural aspects of a claim for relief, focusing on the state of the pleadings to see if the cause of action is founded on an illegal act, rather than on the merits of the claim. At §30, Yuen JA cited the earlier authority of Parking Eye that:
205.The underlying principle was encapsulated at §31.1 – a party should not profit from wrongful conduct. When a claim is so closely connected or inextricably linked to illegal conduct, but the court still allows the claimant to recover compensation, the court may appear to condone the illegality. The Supreme Court’s decision in Patel changed the direction of the common law. The “trio of necessary considerations” and “range of factors approach” adopted by the majority in Patel was stated by Yuen JA at §36.1, adding insertions in square brackets. 206.Applying the approach to the case of adverse possession, Yuen JA set out the purpose of BO section 14, being to protect public safety in the construction of buildings by ensuing that plans are submitted and approved before building works commence. The trespasser’s continuous possession of the relevant brick house did not infringe the law. The purpose of the BO was not to penalise trespassers. A person can be in adverse possession of a piece of land without erecting any building on it; erecting and maintaining a fence would be sufficient. Therefore, the paper owner’s attempt to defeat the adverse possession claim by virtue of illegality under BO section14 failed. 207.Mr Law submits that this case is entirely different:
208.The respondents emphasised that Patel did not represent “year zero” for illegality and previous decisions would remain of precedential value unless they are not compatible with the approach set out in Patel: Henderson at 620D-E per Lord Hamblen JSC. Mr Law submits that the IO Annex summary of authorities since Senfield shows that the Yick Fung approach was highly influenced by the technicality of pleadings, with no reference to the connection between the claim/defence and the statutory prohibition, either because the illegality was touched upon only during costs argument, a matter not in contention between the parties or not made out by evidence. However, in my view the IO has not shown that that those decisions are incompatible with the approach in Patel in that they cannot stand with the reasoning of Patel or were wrongly decided in light of the reasoning. 209.The IO applies the “range of factors” approach as follows. For the first step of the trio of necessary considerations, Yuen JA has identified the statutory purpose of the prohibition against UBW under the BO. Mr Law considers that in this case, there is no counter-public policy that will be rendered ineffective by denial of the respondents’ acquiescence, estoppel, laches or lost modern grant defences. Unlike the potential of putting many adverse possession cases in the New Territories to an end if the Court of Appeal in Monat found breach of the BO defeated adverse possession in general, there will be no ending of the specific equitable or property law doctrines sought to be relied on by the respondents in this case; neither would their extent of application be severely limited. Mr Law submits that the second step is not engaged. 210.On the third step, due sense of proportionality, the IO submits that it is not overkill to revert the control of the relevant external walls to the IO by denying the respondents’ claim on the ground of the past illegality of the A Signs:
211.Mr Law points out at §210 (7) above that even the experts could not judge whether particular A Signs design, structure and materials were equal to the post-2018 Sign. I am not prepared to make any findings on material differences in the A Signs on the basis of the photographs when the experts could not judge from the photographs and, they could only say that the exterior appearance was similar. The parties have agreed that the pre-2018 A Signs were illegal and the post-2018 Sign is legal. I decline to find degrees of illegality. 212.The submission at §210 (5) above, that starting from Sign A3, the larger size of the board would have led to greater concern if the attention of the IO had been drawn to it at the time is somewhat hollow where the IO also submits that the A Signs were “huge”. The IO members or a co-owner simply needed to look up any time they approached the Building and they would see the A Signs. 213.As to the commercial gain, the evidence did not actually address particulars of the value or gain in financial terms derived by the respondents. To the contrary, there was even evidence adduced by the 2nd respondent as to the financial difficulty suffered during the period a licence fee was sought for the Sign. 214.The IO submits that it is not overkill to “revert the control of the relevant external walls to the IO”. The reality is that the IO has never had exclusive control of that part of the external wall for advertising purposes. The DMC is dated 23 June 1961. Mr Lee was assigned the Premises between December 1960 and September 1961. He as owner of the Premises put up the first A Sign in the 1960s, long before the IO was incorporated in 1971. Mr Kiang confirmed that the A Sign was there since 1961. The A Signs have been in existence on the external walls for the entire working life of the Building. The IO seeks to change that status quo, not revert to a previous position where the IO had control. The IO or other co-owners have never derived any financial benefit therefrom. 215.Mr Law submits that applying the above considerations, it is plainly proportional to refuse the respondents’ defence by reason of the illegality concerned. The claim to enforce the DMC should prevail. The respondents have already gained so much from the A Signs and have not accounted for their gain. Against such illegality, the respondents cannot establish a permanent waiver or abandonment of right under DMC/BMO (considering its high threshold). 216.The IO submits that the same result can be arrived at under the equity considerations of the various doctrines specifically pleaded by the respondents. Illegality – the respondent’s case 217.Mr Man SC replies that however, the Sign is legal, so the IO’s argument must fail. Thus, the only argument of substance is whether the historical illegality of the pre-2018 A Signs would preclude the application of the defences. He submits that it is clear from the authorities that the respondents’ defences would not be defeated on the ground of the historical illegality. 218.There are numerous authorities to the effect that if the illegality only emerged as part of the background, it would not preclude the party from raising a defence such as acquiescence so long as the party was not forced to plead or rely on the illegality as part of its defence against a claim of breach of DMC: Yick Fung §24 per Le Pichon JA (acquiescence); Hong Kong House (IO) v Senfield Ltd, CACV 117/2003, 10.10.2003, §§16-17 per Ma CJHC, as he then was (acquiescence, estoppel, waiver, laches); Shiu Fung Mansion (IO), §71 per Judge K W Wong (acquiescence); Kam Luk Building (IO) v Poon Mui Sang [2018] HKDC 1493 §§120–122 per HHJ Andrew Li (acquiescence); Li Lap Wai v Lee Tin Choi [2021] HKCFI 3923, §§173-182 per Au-Yeung J (proprietary estoppel). 219.The respondents’ case is that this conclusion is not affected, and is indeed fortified, by the development of the doctrine of illegality in other areas of the law. Even if the previous signs constituted illegal structures, they would not prevent the respondents from setting up the defences of estoppel, acquiescence and laches. 220.First, the IO does not dispute that the Sign is not an illegal structure. It is within the IO’s power to permit the construction and retention of the Sign:
221.Second, Mr Man SC submits that the illegality would at most emerge as part of the background and would not preclude the defences from operating:
The IO’s claim 222.The starting point is that the IO’s claim is not based on any covenant to comply with the BO:
223.Mr Man SC submits that it is therefore natural that the respondents’ defences would answer those claims, and do not contend that past signs were illegal (or legal):
224.Numerous authorities, including those of the Court of Appeal, have established that the respondents’ defences would be available in these circumstances:
225.Mr Man SC submits that the same distinction applies to lost modern grant, which is addresses below. Patel v Mirza 226.The most significant issue is whether the respondents can still rely on the equitable defences in light of Patel and Monat. The difficulty faced by the respondents is that the above authorities were based on the Tinsley test, namely, whether the defendant is required to plead or rely on the illegality as part of its defence: Yick Fung §24. 227.Mr Man SC submits that nonetheless, the authorities should remain good law under the Patel approach:
228.Mr Man SC submits that even applying the Patel test, the illegality of the pre-2018 A Signs should not defeat the defences: Patel §101 per Lord Toulson. 229.I apply the Patal test as follows.
230.Applying the Patel test I hold that the past illegality does not defeat the equitable defences of acquiescence, estoppel and laches. Further, in my view the past decisions are not incompatible with the approach in Patel in that they cannot stand with the reasoning of Patel or were wrongly decided in light of the reasoning. They remain a valuable body of case law. The jurisprudence in this area, crucially the Court of Appeal decisions, provide essential guidance and ensure consistency of decisions in this jurisdiction. It is necessary to consider each sides’ case but that is not to concentrate on procedural aspects or to mechanically rely upon the pleaded case to the exclusion of the public policy considerations and merits on the facts. In my determination the public interest in preserving the integrity of the justice system does not require denial of the equitable defences. There is no question of the Tribunal appearing to condone illegality. The Sign is a legal sign. Issue 6 - Whether the 1st respondent has obtained a legal or quasi-easement to put up signs and displays at the relevant part of the external walls by the doctrine of lost modern grant Legal principles – lost modern grant 231.Co-owners of a multi-storey building may enjoy a “quasi-easement” over the common parts of the building even though they cannot have a real easement over their own property. This type of quasi-easement (or contractual quasi-easement) functions for all practical purposes as if it was an easement: Jumbo King Ltd v Faithful Properties Ltd & Ors (1999) 2 HKCFAR 279, 297D per Lord Hofmann NPJ ; Kung Ming Tak Tong Co Ltd v Park Solid Enterprises Ltd (2008) 11 HKCFAR 403 §41 per Li CJ . 232.The doctrine of lost modern grant means that, if a person can show that he has enjoyed an easement for at least 20 years, there is a presumption that a grant of easement has been made by deed during that period, but that deed has been misplaced or lost: Goo and Lee, §12-92. 233.The use must not be by force, stealth or licence of the owner of the dominant tenement, and must have continued without interruption for at least 20 years: China Field Ltd v Appeal Tribunal (Buildings) (No.2) (2009) 12 HKCFAR 342 §71 per Lord Millet NPJ; Yik Wai Pong v Yick Pak Kin §73(2) per W Chan J. 234.Lost modern grant can be rebutted only by proof that throughout the period of user relied on, the servient owner was incapable of making the grant: China Field Ltd §48. The 1st respondents’ case 235.First, the right to put up advertisements at the external walls of the Building (“Advertising Right”) constitutes a quasi-easement. 236.The IO does not dispute that the Advertising Right constitutes a quasi-easement. This must be correct given that advertising rights were granted under the DMC. The IO’s objections are that the right to put up signs / displays was only exercised with permission from the owner, and that the claim for lost modern grant is tainted by illegality. 237.Mr Man SC submits that here the Advertising Right “accommodates” the “dominant tenement” (i.e., the 1/F Premises) in the sense that it is connected with the normal use of the 1/F Premises as business premises:
238.The signage therefore served as invitations to the public for the specific businesses being carried out at the 1/F Premises, and was connected with the mode in which the occupants had been using the 1/F Premises. 239.Similarly, in Moody v Steggles (1879) 12 Ch D 261, a right to hang a signboard on an adjoining house pointing towards a public house was held to be an easement. The easement was connected with the mode in which the dominant tenement was used (i.e., as a public house), and was convenient if not necessary for the enjoyment of the dominant tenement: 264-266 per Fry J. 240.Second, there is no question that the putting up of signs at the 1/F Premises was done nec precario.
241.Third, similar to the analysis above, the alleged illegality would not prevent a lost modern grant from arising:
The IO’s case 242.The 1st respondent claims that the 1st respondent and its predecessors have since 1960s enjoyed as of right and without interruption an entitlement to put up signs and displays on the 1/F external walls, and claims the right to do so as a quasi-easement by virtue of a grant by deed which has since been accidentally lost or destroyed . 243.First, Mr Law emphasised that there can be no legal easement. The Court of Appeal confirmed in Hollywood Shopping Centre Owners Committee Ltd at §60:
244.In Kung Ming Tak Tong Co Ltd, the Court of Final Appeal (at §§18-19) referred to the Hong Kong system of dealing with multi-storey buildings in multi-occupation. This does not result in the creation of separate tenements capable of sustaining a legal easement. Therefore, it is not open to the 1st respondent, as a co-owner of the Building, to claim legal easement over common parts of the Building. It does not. 245.As to “quasi-easements” in its contractual sense (a shorthand description of the rights arising between co-owners by express/implicit agreement), given the DMC has expressly prohibited the display of signs at the common parts of the Building, no such quasi-easement to display can arise to benefit the 1st respondent. Even if there was any implied quasi-easement derived from clause 2 of the DMC, such quasi-easement could only be extended to the use the common entrance, halls, staircases, lifts, etc. The use of the 1/F external walls, by way of installing advertising boards, was of a very different nature. The 1st respondent would have to establish that the use of 1/F external walls was “continuous and apparent” for it to be implied as a contractual quasi-easement as such. 246.The IO relies upon principles as to how an easement can be acquired by prescription or loss of modern grant summarised by W Chan J in Yik Wai Pong at §73, including:
247.Here the 1st respondent has agreed by the Statement of Agreed Facts at §26 that the representative of the 1st respondent, Mr Tse, had advised Mr Darwin Cheung for the 2nd respondent to negotiate with the IO for a licence to use of the 1/F external walls; Mr Darwin Cheung then did follow up on that. Such situation will go to whether the 1st respondent’s alleged acquisition of the right to put up signs/displays was indeed nec precario. 248.Furthermore, the 1st respondent’s claim of lost modern grant is tainted by illegality, and the presumption of such a grant must be rebutted. As Lord Millett NPJ pointed out in in China Field Ltd at §48:
249.In Neaverson the first sentence of the headnote succinctly states the holding thus:
250.Collins MR further explained, at pp. 563–564 and p.573, that:
251.Neaverson was later cited by Eve J in Hulley at 282 as authority for the proposition that:
252.Mr Law submits that given the A Signs were all UBW before 2018 and their construction was in contravention of the BO, the 1st respondent’s claim for the presumption of a lost modern grant would have to be rejected. 253.For lost modern grant to succeed, the respondents must prove their continuing occupation period for 20 years, which means the period must overlap with the pre-2018 period when the A Signs was illegal. 254.In Bakewell Management Ltd, the House of Lords held at §§46-47:
255.Bakewell, concerns owners of a number of adjoining properties openly gaining access to their homes by driving vehicles on a road over the common without obtaining the consent of the landowner, which constituted a criminal offence. However, as long as there is a grant or a consent given by the landowner, the act could have been made legal. 256.Mr Law submits that the facts in this case can be readily distinguished from Bakewell. The grant (if there had been one) could not have made the construction of a UBW lawful. The IO could not have granted any rights to carry out UBW. If the grant could not be deemed to have been made 20 years ago, there is no question as to whether the doctrine of lost modern grant can run in this case. Lost modern grant defence 257.Lost modern grant arises if a person can show that he has enjoyed an easement for at least 20 years. In that case, it will be presumed that a grant of easement has been made by deed during that period, but that deed has been misplaced or lost: Goo & Lee, §12-92. 258.The presumption cannot be rebutted by proof that no such grant had in fact been made. It can only be defeated if, throughout the period of user, the servient owner was incapable of making the grant: China Field Ltd, §48. 259.The respondents’ case is first, it is beyond dispute that the 1st respondent has put up signage at the same position on the 1/F external walls (by itself or its tenant) for at least 20 years before the claim for lost modern grant is made in the NOO dated 11/10/2021. In fact, the 1st respondent had been enjoying the easement for 60 years by then. I have so found. 260.Second, I accept that the 1st respondent’s right to put up signage at the 1/F external walls could constitute a quasi-easement:
261.The IO argues that lost modern grant cannot apply as the signage was not put up nec precario. However, I find that there had been no actual grant for the 1st respondent to put up the signage. It had been putting up the signage nec precario: Odey, §§19-20. 262.Mr Man SC primarily relied upon acquiescence as the defence, submitting that doctrine was the clear way through for the respondents. Not to suggest he formally abandoned the lost modern grant case. In my view the defence is more problematical for the defendants. I would agree with Mr Law’s submission that the grant must have been legal from the outset. The parties have agreed that the pre-2018 A Signs were illegal. As with the equitable doctrine case of the respondents, Mr Man SC makes the distinction that the grant was not to put up unlawful signs. It is important to focus on the subject of the grant. In the present case, the grant is only for the right to put up signage at the 1/F external walls, and not a right to put up illegal signage: NOO §19. 263.In these proceedings the respondents are not making any counterclaim or seeking any relief. I have found that the defence of acquiesce is made out. So to the other equitable defences. It is unnecessary to also determine the lost modern grant claim, when no relief is sought on that basis. It is pleaded as an additional defence. That issue is better determined in a case where there is a claim for relief on that basis. Therefore, I shall not determine these proceedings on the basis of the claim for lost modern grant. Issue 7 - Whether the tribunal should refuse to grant any injunctive relief by reasons of the doctrines of acquiescence, laches and proprietary estoppel in the circumstances of this case 264.The IO prays that the respondents’ defence based on the equitable doctrines be rejected, judgment be entered for the IO and the pleaded relief granted. 265.I hold that the equitable defences acquiescence, laches and proprietary estoppel operate as a complete bar to the IO’s claim. I decline to grant the declarations, injunctions and mesne profits sought. The IO’s claim is dismissed. The IO’s alternative remedy 266.The IO closing submission proposed an alternative, that the judgment should not be understood as the respondents having adversely possessed the 1/F external walls. There can be no such risk, given that adverse possession was never the basis of any claim by the respondents. The respondents have defended the IO’s claim. They have not brought a counterclaim or sought any declaratory or other relief. 267.The IO continues, alternatively, if the Tribunal finds that there had been acquiescence by the IO, but estoppel and lost modern grant are not made out, the judgment of the Tribunal should not be misunderstood as the 1st respondent having adversely possessed the 1/F external walls or that the IO must permit the respondents to erect and retain the advertising boards in future. The IO refers to Hollywood Shopping Centre (CFI) at §98 finding that the defendant in that case should be granted appropriate relief in respect of the plaintiff’s breaches that took place after the original term of contract expired (30 November 2008), but not before: see §99. 268.The IO acknowledges that an injunction is a discretionary remedy and that the respondents may show that it would be unjust and inequitable to require the IO to restore the position. However, the Tribunal must take into account the fact that a significant period has lapsed since 2018. The respondents have not shown any special circumstances or significant hardship that would render such relief unjust and unconscionable. In particular, even if some expense might be incurred, that would have been well covered by the benefits received by the respondents over the years. 269.Therefore, if the Tribunal is of the view that there had been acquiescence by the IO, it suggested that, inter alia, relief similar to Hollywood Shopping Centre of delaying the operation of the mandatory injunction for a short period of time should be granted. 270.Mr Man SC objects to this unpleaded alternative being raised in closing submissions. The IO does not plead an alternative basis for acquiescence confined by time nor a prayer for any alternative relief. If the IO had an alternative case that the acquiescence was not in respect of signs after or during a certain period that case should have been pleaded. The respondents would then have been able to address that case in evidence and during the hearing. Further, and in any event the new alternative is unsustainable. In Hollywood Shopping Centre the relevant period was 6 years in respect of the advertising board, not the more than 5 decades acquiesced in here. Each case must depend on its own facts. 271.In my view the IO has not established a factual foundation to grant relief but with a “short delay”. For reasons set out by the respondents I decline to grant the alternative relief. In any event the facts also satisfy the other equitable defences. 272.Mr Man SC has asks that a photograph of the post-2018 Sign be attached to this judgment. I attach the photograph of the Sign identified as A-16 in the Attachment to the NOO taken in or about August 2021. Issue 8 Whether the IO should be entitled to mesne profits or damages arising from the respondnets’ breach of the DMC and/or the BMO 273.Lest I be wrong, I set out my findings on the IO’s claim for mesne profits. 274.If the Tribunal accepts the IO’s case that the 1st respondent and the 2nd respondent have been in breach of the DMC and/or the BMO and have no defence, the IO seeks mesne profits from 12 December 2018, being the date of a warning letter issued by the IO’s representative which fell within the limitation period counting backward from the date of commencement of action, until the removal of the Unauthorised Structures, the Sign and reinstatement of the affected parts of the 1/F external walls. 275.The IO’s position is that it should be entitled mesne profits to be paid by the respondents because it could not use the external wall as the respondents did. The principle that the defendant is bound to pay a reasonable price for the use of the land or chattel for trespass regardless of whether the plaintiff has found use in the land or chattel is well settled: Attorney General v Blake and Another [2001] 1 AC 268 at 278D-279F . It is not open to the respondents to say that the applicant suffers no loss and thus no damages are payable. In any event, having a metal frame and a giant advertising board installed on the 1/F external walls, thus defacing the Building, is itself a detriment to the owners of the Building. The owners could not use the 1/F external walls in the manner which they wished, namely an appearance free of the A Signs or licensing the advertising rights to receive promising licensing fees. Mr Law submits that there is no reason why the IO should not be allowed mesne profits for the respondents wrongful occupation of the 1/F external walls since 12 December 2018. 276.The measure of damages is not compensatory but based on the price a reasonable person would pay for the right of user. The damages or mesne profits that the IO is entitled to recover from the respondents represent the price a reasonable person would pay for the use of a property: per HHJ M Wong in The Incorporated Owners of Percival House v Fusion Advertising Solution Limited [2012] 5 HKC 94 at §9. 277.The IO suggests the mesne profits should be assessed at the rate of “at least $10,000 per month”, this being the price Mr Darwin Cheung (for the 2nd respondent) proposed to the IO when negotiating for the licence fee for the L-shaped advertising board. 278.The party seeking mesne profits bears the burden to prove the quantum of his claim. He has to put forward sufficient and reliable evidence to do so: 黎偉雄 v Sino Estates Management Ltd & Anr [2023] HKLdT 23, §40 per DDJ S H Lee (as he then was). 279.Mr Man SC submits that the claim for mesne profits suffers from an additional defect that the IO has not discharged its burden of proof for quantum. The IO has adduced no evidence to prove the reasonable price payable for the use of the 1/F external walls for advertisement: cf. A-G v Blake at 278E per Lord Nicholls. The IO’s reliance on the licence fee proposed by the 2nd respondent in the course of its negotiations is unwarranted. As Mr Darwin Cheung explained, the 2nd respondent only made the proposal to avoid disputes or costly and tedious litigation with the IO. There is no basis to suggest that the proposed licence fee represented the reasonable price payable for the use of the 1/F external walls to display the Sign. 280.The IO claims that mesne profits should be assessed at the rate of “at least” HK$10,000 per month. There is no explanation or evidence on what any higher rate should be. An offer may, in certain instances, be some evidence of market value at time of offer. There is no other evidence, such as comparables or from the Rating and Valuation Department, much less of a valuer or expert. The mere fact that the 2nd respondent proposed a certain licence fee in the course of negotiations with the IO did not mean that it was the reasonable price payable for the benefit at that time. The 2nd respondent had different considerations in putting forward the proposal. In the present circumstances the $10,000 offer cannot be relied upon as proof of value or the reasonable price. I find that the IO has failed to discharge its burden of proving the reasonable price payable for the use of the 1/F external walls or a basis to assess mesne profits. The IO has not established the quantum for any mesne profits. COSTS 281.I make a costs order nisi that the IO do pay the costs of the respondents taxed on the District Court scale with certificate for leading counsel (1 counsel). Any party may apply to vary the costs order nisi within 14 days hereof, failing which the order nisi shall become absolute.
Mr Law, Lewis C.M. and Mr Cheung, Steve K.K., instructed by Waller Ma Huang & Yeung, for the applicant Mr Man, Bernard, S.C. and Mr Miao, Kee Chang Harrison, instructed by Lau, Wong & Chan, for the 1st and 2nd respondents
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Cases cited in this judgment
Further hearings and rulings under LDBM 138/2021