Centre Chase Investment Ltd v. The Incorporated Owners of Castle Peak Road International Industrial Building and Another

CACV 96/2021, [2025] HKCA 505

On Appeal From [2020] HKLdT 5

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 96 OF 2021

(ON APPEAL FROM LDBM NO. 118 OF 2017)

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D E C I S I O N

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Hon Cheung JA (giving the Decision of the Court) :

1.This is an application by the applicant for leave to appeal to the Court of Final Appeal against our judgment of 18 December 2024. We will deal with this application on paper.

2.In its notice of motion of 15 January 2025, the applicant identifies three questions said to be of great, general or public importance that ought to be submitted to the Court of Final Appeal for decision :

(1)  Question 1:  Outside of cases of breach of a deed of mutual covenant (‘DMC’) involving illegality – as to which the undisputed position is that there can be no waiver or acquiescence – in what circumstances, if any, can waiver or acquiescence be raised to curtail the scope and/or excuse the discharge of the statutory duty imposed by section 18(1)(c) of the Building Management Ordinance, Cap. 344 (‘BMO’) on a building’s incorporated owners (‘IO’), i.e. the positive and on its face unqualified statutory duty of an IO to do all things reasonably necessary to enforce obligations contained in the DMC?

(2)  Question 2:  To the extent that under the BMO scheme an IO may waive or acquiesce to a breach of a DMC outside of illegality (c.f. the Court of Appeal in IO of Hoi Luen Industrial Centre & Anor v Ohashi Chemical Industries (Hong Kong) Ltd [1995] 2 HKC 11 at 13A-B), what is the proper approach to determining whether waiver or acquiescence can be raised as a defence to a breach of mutual covenants, and in particular :

i)  Should the Court of Final Appeal affirm the ‘new approach’ (per Court of Appeal Judgment [44]‑[46]) endorsed by the Court of Appeal in Hollywood Shopping Centre Owners Committee Limited v IO of Wing Wah Building Mongkok Kowloon [2011] 4 HKLRD 623 or some other approach?

ii)  More specifically, if acquiescence or waiver can be raised for breaches not involving illegality, does the power of the IO to acquiesce to, waive, or approve such breach depend on the nature or type of breach in question? And having regard inter alia to the positive statutory requirements of the BMO, what type(s) of breaches of the DMC can the IO waive or acquiesce to?

(3)  Question 3:  Focusing on a DMC’s specific terms where these are allegedly breached, would it be contrary to the IO’s statutory duty under section 18(1)(c) of the BMO and thus beyond the power of the IO to waive or acquiesce to a breach of the DMC where : a) the covenant breached imposes a prohibition against all owners from doing the act in question without any qualifications or proviso for relieving compliance; and b) the DMC does not contain (and cannot be otherwise construed as containing) any other provisions conferring on the IO the power to not take action to enforce the breach in question?

3.We will deal with the three questions in turn.

1)  Question 1

4.We will not grant leave for Question 1 to be argued. In our view, the threshold requirement of great, general or public importance is not engaged and the question is not reasonably arguable. The approach that other than illegality, waiver or acquiescence can be raised to limit the scope of section 18(1)(c) of the BMO is clear enough in light of the authorities. As to what other circumstances can such defences be relied upon is a fact specific question depending on the nature and extent of the breach. Putting aside the difficulty of formulating a list of breaches that can be waived or acquiesced in by the incorporated owners, it is plain that such an approach is against the rationale to leave sufficient flexibility to the incorporated owners to resolve building management issues. It is also putting excessive focus on BMO at section 18(1)(c), disregarding BMO section 34I(1)(a) on the power of the incorporated owners to approve common part conversion by a resolution of the owner’s committee.

5.The submission by the applicant on whether Hoi Luen is superseded by Hollywood Shopping Centre Owners Committee Limited is academic. It has not been submitted that this Court’s latter decision (which has considered Hoi Luen) is plainly wrong and should not be followed by this Court.

2)  Questions 2 and 3

6.These two questions are merely variations of the same theme advanced under Question 1. For the same reasons, we will not grant leave.

3)  Conclusion

7.Accordingly, the application is dismissed with costs to the 1^st and 2^nd respondents.

8.We will assess the respondents’ costs of this application summarily on a party and party basis by awarding the 1^st respondent the sum of $150,000 which includes counsel fee of $120,000 and the 2^nd respondent the sum of $150,000 which includes fee for two counsel of $120,000 ($75,000 and $45,000 respectively).

Mr Abraham Chan SC leading Mr Lawrence KF Ng, Mr Henry Cheng and Mr John Leung, instructed by CW Chan & Co, for the Applicant

Mr Lewis Law and Mr Lok Ho, instructed by Vitus Lawyers, for the 1^st Respondent

Mr Tommy Cheung, instructed by Fred Kan & Co, for the 2^nd Respondent