Case Detail

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)

________________________

BETWEEN
	中紀投資有限公司	Applicant
	and
	青山道國際工業大廈業主立案法團	1^st Respondent
	THE INCORPORATED OWNERS OF CASTLE PEAK ROAD INTERNATIONAL INDUSTRIAL BUILDING
	STL COMPANY LIMITED	2^nd Respondent

________________________

Before :

Hon Chu VP, Cheung and Chow JJA in Court

Date of Decision :

26 May 2025

_______________

D E C I S I O N

_______________

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).

(Carlye Chu)
Vice-President

(Peter Cheung)
Justice of Appeal

(Anderson Chow)
Justice of Appeal

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

CACV 96/2021, [2024] HKCA 1179

On Appeal From [2020] HKLdT 5

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 96 OF 2021

(ON APPEAL FROM LDBM NO. 118 OF 2017)

________________________

BETWEEN

	中紀投資有限公司	Applicant
	CENTRE CHASE INVESTMENT LIMITED
	and
	青山道國際工業大廈業主立案法團 THE INCORPORATED OWNERS OF CASTLE PEAK ROAD INTERNATIONAL INDUSTRIAL BUILDING	1^st Respondent
	STL COMPANY LIMITED	2^nd Respondent

________________________

Before:

Hon Chu VP, Cheung and Chow JJA in Court

Date of Hearing:	5 December 2024
Date of Judgment:	18 December 2024

________________________

J U D G M E N T

________________________

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

I. The appeal

1. This is an appeal, pursuant to leave granted by this Court, against the judgment of H H Judge Simon Lo (‘the Judge’), sitting as the Presiding Officer of the Lands Tribunal (‘the Judgment’). The Judge dismissed the application by the Applicant, who is the owner of Flat 2A of an industrial building known as the International Industrial Building (‘the Building’), for, amongst others, an order requiring the 1^st Respondent, who is the incorporated owners of the Building, to take actions against the owner of Flat 9A for the removal of two window frames on the external wall of Flat 9A of the Building installed by it. It is common ground that the external wall is the common part of the Building. The Judge further dismissed the application by the 1^st Respondent for a review of the Judgment (‘the Review Decision’).

2. Originally at the proceedings below, the 1^st Respondent was the only respondent. The owner of Flat 9A was joined as the 2^nd Respondent in this appeal by the order of this Court.

II. Background

3. We will adopt the background of the case as summarized by the Judge and supplemented by matters that can be gathered from the documents.

4. The window frames are made of aluminium and the dimensions are 1.33 metres tall and 1.5 metres wide. They are in fact two sets of mock window frames without any actual window openings behind them. They serve no purposes such as providing structural support, ingress/egress or ventilation. It is said that the window frames are installed for feng shui purpose.

5. On 20 July 2015, the Building Authority (‘BA’) issued two notices under sections 30B(3) and 30C(3) of the Buildings Ordinance Cap. 123 (‘BO’) in respect of the Building (‘the BA Notices’) to the 1^st Respondent, under which the 1^st Respondent was required to 1) appoint a registered inspector/qualified person within three months to carry out prescribed inspection of the common parts and windows of the Building; 2) complete the prescribed inspection within the period of time as specified; and 3) complete the prescribed repairs (if any were found necessary under sections 30B(8) or 30C(6) of the BO) within the period of time as specified.

6. Pursuant to the BA Notices, two inspections of the Building had been carried out. On 14 April 2016, the first inspection was carried out by the first appointed inspector, AHL Contract Management Co Ltd (藝建工程顧問有限公司), and in its report (‘the 1^stInspection Report’), the window frames were identified as ‘UBW’ or ‘unauthorized building works’.

7. On 19 April 2017 and 2 May 2017, the Applicant wrote to the 1^st Respondent regarding the window frames and requested the 1^st Respondent to take action to require the 2^nd Respondent to reinstate the external wall back to its original condition.

8. On 22 June 2017, the Applicant commenced the present proceedings in the Lands Tribunal. In response to the Applicant’s letters, the management committee (‘MC’) of the 1^st Respondent passed a resolution on 27 July 2017 (‘the 2017 Resolution’) pursuant to section 34I of the Building Management Ordinance Cap. 344 (‘BMO’) in respect of the common part of the Building by approving the non-structural installations on the external wall of the Building including, the window frames affixed outside Flat 9A until the repair of the external wall of the Building in the future. If the 1^st Respondent resolved to homogenise the appearance of the exterior of the Building, it would resolve upon it and notify the owners. It was specifically resolved that if the installations on the external wall affected the structure of the Building, they must be reinstated.

9. The relevant extract of the 2017 Resolution is as follows :

「(九)  根據「物業管理條例34I – 公用部分」，管理委員會議決批准本大廈現有在外牆上的非結構性設施，包括冷氣架，例如9A單位外的裝飾窗框、等等，直至將來大廈外牆維修時，如決定統一大廈外觀，法團再作議決另行通知業主;
  在商討及議決此項議程時，伍顯中先生及茅幼方先生避席。
  就上述事宜，管委會商討在大廈外牆上現有之設施及裝飾，如對大廈結構造成影響者必須還原，而非結構性者就可批准。
  根據「物業管理條例34I – 公用部分」，管理委員會議決以6票贊成批准本大廈外牆上現有的非結構性設施，包括冷氣架，例如9A單位外的裝飾窗框、等等，直至將來大廈外牆維修時，由法團再作議決大廈外牆之外觀以及影響外牆外觀的設施及裝飾。」
Translation:
‘ (9)  Pursuant to section 34I of the Building Management Ordinance – Common parts, the management committee passed a resolution to approve the existing non-structural installations on the external walls of this building, including supporting frames for air-conditioning units, such as the decorative window frames outside unit 9A, etc. until the external walls of the building are repaired in the future, at which time if it is decided to homogenize the appearance of the building, the incorporated owners will again resolve upon it and notify the owners;
Mr. Ng Hin Chung and Mr. Mao Yau Fong Henry withdrew from the meeting during the deliberation and resolution of this item in the agenda.
In respect of the abovementioned matter, the management committee deliberated that for the existing installations and decorations on the external walls, those affecting the structure of the building must be reinstated, while those being non-structural are approved.’
Pursuant to section 34I of the Building Management Ordinance – Common parts, the management committee passed a resolution, with 6 votes in favour, to approve the existing non-structural installations on the external walls of this building, including supporting frames for air-conditioning units, such as the decorative window frames outside unit 9A, etc. until the external walls of the building are repaired in the future, at which time the incorporated owners will again resolve upon the appearance of the external walls of this building and the installations and decorations affecting the appearance of the external walls.’

10. On 9 August 2017, the 1^st Respondent filed its Notice of Opposition.

11. Subsequently, in August 2017, a second inspection was carried out by the second appointed inspector, Kwok, Hauser and Partners Limited (‘KHP’). It was acknowledged by KHP that the prescribed inspection was completed on 29 August 2017. At the request of the 1^st Respondent, KHP was also tasked with providing professional opinion in relation to the window frames installed by the 2^nd Respondent.

12. On 22 December 2017, KHP gave the opinion that the window frames were non-structural, did not cause immediate danger, and could be regularized, e.g. by the ‘Signboard Validation Scheme’ (違例招牌檢核計劃).

13. In early March 2018, the 2^nd Respondent removed the window frames. On 9 March 2018, it appointed Tiff Group Limited (天阜(香港)設計製作有限公司) (‘Tiff’) as prescribed registered contractor, to file Notice of Commencement of Minor Works with the Buildings Department (‘BD’) for its application to install the window frames. The window frames were later reinstalled on the external wall outside Flat 9A.

14. Upon the reinstallation of the window frames on 18 March 2018, Tiff, on behalf of the 2^nd Respondent,filed a Certificate of Completion of Minor Works on 22 March 2018. On the same day, BD issued to Tiff an acknowledgment letter in respect of the Certificate of Completion (‘the Certificate of Completion’).

15. According to the inspection report dated 13 July 2018 (‘the 2^nd Inspection Report’) prepared by KHP under section 12(2) of the Building (Inspection and Repair) Regulation Cap. 123P, it was said that the external wall outside 9^thfloor facing Castle Peak Road was altered.

16. The Judge described the window frames existing on the wall outside Flat 9A before early March 2018 as the ‘Pre-Window Frames’ and the reinstalled window frames as the ‘Post-Window Frames’. It is common ground that they are however the same structures.

17. On 17 January 2019, the Applicant filed an amended Application dealing with the removal and reinstallation of the window frames.

III. The parties’ case below

1) The Applicant

18. The Applicant contended that the window frames were installed in breach of Clause 10 of the Deed of Mutual Covenant (‘DMC’) of the Building and section 34I of the BMO; the non-compliance of the BA Notices would render void the insurance policy of the Building and the 2017 Resolution was invalid.

2) The 1^st Respondent

19. The 1^st Respondent contended that there was no breach of the DMC and BMO, the 2017 Resolution was valid and it had temporarily approved the existence of the window frames.

IV. The Judgment

1) The issues

20. The Judge identified four issues for his consideration :

(1) Whether the 2017 Resolution is reasonable and valid by reason of the failure of the owner of Flat 9A to disclose its interest in the voting of that resolution?

(2) Whether the installation of the Post-Window Frames at the external wall of the Building is in breach of Clauses 10(c), 10(e) and 10(g) of the DMC and also sections 34I(1)(a) and (b) of the BMO?

(3) Whether the 2017 Resolution is effective in approving of the breach or breaches of the DMC and the BMO?

(4) If the answer to (2) above is ‘no’, whether the 1^st Respondent had taken reasonable action against the owner of Flat 9A to enforce the terms of the DMC and the BMO?

2) Findings

(1) Issue 1

21. The Judge held that the 2017 Resolution is valid. Reasonableness is not a relevant consideration when the MC decided to grant or refuse to grant consent to an owner to use the common part of the Building. Further, the 2017 Resolution would still have been passed by the required majority even if the interested party was not allowed to vote.

(2) Issue 2

i) Breach of Clause 10(c)

22. Clause 10(c) provides that an owner shall not :

‘ ... do anything whereby any insurance of the said building or any part thereof against fire may be rendered void or voidable or whereby the premium for any such insurance may be liable to be increased and to indemnify the other owners against any increased or additional premium which by reason of any act or default of his may be required for effecting or keeping up such insurance and that in the event of the said building or any part or parts thereof being damaged or destroyed by fire at any time and the insurance money under any insurance against fire effected thereon being wholly or partially irrecoverable by reason solely or in part of any act or default of his then and in every such case he shall forthwith pay to the other owners the whole or (as the case may require) a fair proportion of the cost of completely rebuilding or reinstating the same.’

23. The Judge held that the Applicant was not able to discharge the burden that Clause 10(c) of the DMC was breached. This clause is no longer an issue in this appeal.

ii) Breach of Clause 10(e) and section 34I(1)(a) of BMO

24. The Judge deals with Clause 10(e) and section 34I(1)(a) together. Clause 10(e) of the DMC provides that an owner shall not :

‘ ... erect or affix or permit or suffer to be erected or affixed any signboard, signs, notices posters, signal, advertisement, illumination flag or sunshade bracket fitting or thing to the exterior of the said building or to common areas within [sic] the said building or any part thereof or to any exterior wall door or window of the said building.’

25. Section 34I of the BMO provides that :

‘ 34I. Common parts
(1)  No person may—
(a)  convert any part of the common parts of a building to his own use unless such conversion is approved by a resolution of the owners’ committee (if any);
(b)  use or permit to be used the common parts of a building in such a manner as-
(i)  unreasonably to interfere with the use and enjoyment of those parts by any owner or occupier of the building; or
(ii)  to cause a nuisance or hazard to any person lawfully in the building.
(2)  Any person who contravenes subsection (1)  shall be deemed to be in breach of an obligation imposed on him by the deed of mutual covenant in respect of the building.’

26. The 1^st Respondent accepted that the installation of the Post-Window Frames may be in breach of Clause 10(e) of the DMC and section 34I(1)(a) of the BMO. However, it argued before the Judge that the MC (on behalf of the 1^st Respondent) had, by the 2017 Resolution, approved and waived breach of the DMC and BMO temporarily until the large-scale renovation.

27. The Judge held that the issue whether the 1^st Respondent was in a position to approve the installation of the window frames would depend on the nature or type of the breach. First, the size of the window frames is not huge, only 1.33 metres tall and 1.5 metres wide. Second, the affixation of the same cannot be regarded as illegal upon issuance of the said Certificate of Completion and there is no evidence that it contravenes any other rules and regulations. Relying on Freder Centre (IO) v Gringo Ltd [2016] 2 HKLRD 190, he held that it is within the power of the 1^st Respondent to approve the affixation of the window frames (whether the Pre- and/or Post-Window Frames) under the DMC and under section 34I(1)(a) of the BMO. Accordingly, the installation of the Post-Window Frames was not in breach of Clause 10(e) of the DMC and section 34I(1)(a) of the BMO.

iii) Clause 10(g)

28. Clause 10(g) provides that an owner shall not :

‘ ... change the colour of the painting or alter the appearance of the exterior of the said building or any part thereof.’

29. The Judge held that the installation of the Post-Window Frames is not in breach of Clause 10(g) of the DMC as the MC had passed the 2017 Resolution which is wide enough to approve and cover the breach of Clause 10(g). The Judge further held that, even if he was wrong on this, the de minimis principle applies to decide whether the external appearance of the Building has been altered. He held that judging from the photos produced and the size of the Post-Window Frames, whilst they could easily be observed by the neighbouring buildings at about the same level, they are not obviously noticed by the ordinary man at the street level. Thus, as a matter of fact, they are not so prominent that a reasonable man would conclude that the external appearance of the Building has been altered. Hence, applying the de minimis principle, the installation of the Post-Window Frames is not in breach of Clause 10 (g) of the DMC : Metro City Management Limited v Tsui Fee Hung Vincent and Lam Wai Fun, unrep., HCA 4327/2003 (13 January 2005) [39]-[40], per Mr Recorder Edward Chan SC.

iv) Any breach of section 34I(1)(b) of the BMO?

30. The Judge held that the installation of the Post-Window Frames was not in breach of both limbs of section 34I(1) of the BMO. The Applicant only alleged that there was a risk of the window frames falling off from the external wall causing damage to pedestrians. The Judge held that the Applicant had not discharged the burden of establishing this assertion. It was a bare assertion without the support of expert opinion and in any event the BA had approved the reinstallation.

(3) Issue 3

31. The Judge answered the issue in the affirmative.

(4) Issue 4

32. The Judge did not have to deal with Issue 4 in view of his decision on Issue 3.

V. Grounds of appeal

33. The Applicant advanced four grounds of appeal :

1) The Judge erred in finding that at the time of the passing of the 2017 Resolution, it was the intention of the MC to treat the Post-Window Frames as the structures then existing at the external wall of the Building and that the 2017 Resolution on its true construction covered the Post-Window Frames. [The 2017 Resolution issue]

2) The Judge erred in failing to find that the Post-Window Frames were likewise illegal structures, and that it was beyond the power of the MC to permit their installation or retention. [The illegality issue]

3) The Judge erred in finding that the installation of the Post-Window Frames did not breach DMC Clause 10(g) due to the de minimis principle. [The de minimis issue]

4) The Judge erred in finding that the MC had the power to approve of breaches of DMC Clauses 10(e) and 10(g) by the 2017 Resolution. [The waiver and acquiescence issue]

VI. Our view

1) Ground 2 (The illegality issue)

34. We will first address the illegality issue which was not an issue at the trial and the Judge had disallowed it to be canvassed in the application for review. The Applicant’s case on illegality is grounded on the basis that the BA had not approved the installation of the window frames. It is an unauthorised building work contrary to section 14(1) of the BO. Further, installation of the Post-Window Frames is outside the scope of the designated ‘minor works item’, under Item 2.19 of Division 2 of Part 3 of Schedule 1 to the Building (Minor Works) Regulation (‘BMWR’), namely, the ‘erection or alteration of any wall signboard’.

35. At the outset of the appeal, we raised the issue whether the illegality issue could be pursued at all. This is because whilst the Agreed Issues signed by the parties’ solicitors included an issue on whether the installation of the window frames is contrary to section 14(1) of the BO, this was not included as part of issues identified and decided by the Judge. A review of the written submissions of the parties at the trial also showed that the Applicant chose not to pursue the issue concerning illegality. In fact the 1^st Respondent in its closing submission specifically drew the Judge’s attention that ‘the Applicant has effectively withdrawn its case on BO section 14(1) and BMO section 28’. The illegality issue was only raised by the Applicant on review which was objected to by the 1^st Respondent. The Judge refused to allow this issue to be raised. He held :

‘ 25. To start with, it is a completely new issue which is not raised at the trial bearing in mind that the applicant is represented by Counsel not only at the trial but also at a lot of direction hearings including the pre-trial review on 31 July 2019. If it is one of the issues in dispute, the parties shall set it out in the agreed list of issues dated 23 July 2019 which was signed by the parties’ solicitors and filed pursuant to para 4 of the order dated 29 May 2019. The applicant’s solicitors gave no or reasonable explanation for their failure to do so.’

36. The Judge also held that whether the installation of the Post-Window Frames fell within the definition of minor works was not a pleaded issue. He rejected the Applicant’s application to adduce an expert report to support the contention that the Post-Window Frames are illegal structures. The Judge pointed out that a joint report of the experts had already been adduced at the trial, no leave was obtained for the new report and no explanation was given for not adducing the new report at the trial. It would be unfair to the 1^st Respondent to allow the new report to be adduced.

37. We agree with the Judge that the issue of illegality should not be allowed to be raised at the application for review. Nor should it be allowed to be raised on appeal. In Group Leader Ltd & Ors v Hui Sun Fat [2016] 2 HKLRD 625, this Court per Lam VP (as he then was) at [13] expressed the view that additional substantial points not raised at the trial before the Lands Tribunal should not be raised when a party applied for leave to appeal against the judgment, but rather it should be made by way of an application for review so that the points could have been determined on a proper footing. This is not a case where the illegality issue and the related minor works issue were only discovered after the trial. They were at the focus of the parties from the beginning but the Applicant chose not to pursue them. In the circumstances there is no justifiable reason why they should be allowed to be raised again in the application for review. The Judge’s decision of not allowing the illegality and minor works issues to be canvassed is an exercise of his discretion and case management power. It is not showed to be plainly wrong. Although the proceedings in the Lands Tribunal are informal in nature, where the parties are legally represented and the issues had been identified and determined, the Judge was correct not to grant indulgence to the Applicant. For the same reasons the Applicant is not allowed to canvass the illegality and minor works issues in this appeal. Accordingly we ruled that the Applicant was not entitled to rely on Ground 2.

38. We would like to add that the Applicant had submitted that in the Review Decision the Judge had made a finding that the installation of the window frames is illegal. We disagree that the Judge had made any findings of illegality in the Judgment. In the Review Decision the Judge only held that if the Pre-Window Frames were illegal structures then the 1^st Respondent could not rely on the 2017 Resolution. This was made in response to the Applicant’s argument that the window frames are illegal structures. Since the Judge had disallowed this issue to be canvassed, he could hardly have made a finding on this point.

2) Ground 4 (The waiver and acquiescence issue)

39. Having disallowed the illegality and minor work issues to be canvassed, the logical sequence of dealing with the grounds of appeal is to address the waiver and acquiescence issue.

(1) The Applicant’s arguments

40. The Judge erred in finding that it was within the 1^st Respondent’s power to approve the breaches by the 2017 Resolution because,

i) The Judge had ignored that Clauses 10(e) and 10(g) are total preclusions against : (1) erecting or affixing or permitting or suffering to be erected or affixed any signboard etc on the exterior or exterior wall of the Building; and (2) altering the appearance of the exterior of the Building or any part thereof. The Judge was wrong in law in failing to consider and apply the basic principle that acquiescence (and by extension approval) is no defence to a breach which is totally precluded by the DMC : Hollywood Shopping Centre Owners Committee Limited v IO of Wing Wah Building Mongkok Kowloon (unrep. HCA 1582/2007, 16 August 2010) at [60] (Mr Recorder Rimsky Yuen SC).

ii) It is the statutory duty of 1^st Respondent under BMO section 18(1)(c) to do all things reasonably necessary to enforce the obligations contained in the DMC. Where there is a breach being perpetrated by one of the owners, it is not only the 1^st Respondent’s right but also its duty to seek to enforce the covenant, and the 1^st Respondent was bound to take proceedings to do so: IO of Hoi Luen Industrial Centre & Anor v Ohashi Chemical Industries (Hong Kong) Ltd [1995] 2 HKC 11.

iii) In considering whether the breaches can be acquiesced to or approved, the Judge took into account irrelevant matters with regard to the size and legality of the window frames.

iv) The Judge’s reliance on Freder Centre (IO) is misplaced: the relevant covenant there did not constitute a complete and absolute prohibition, but allowed for spaces to be assigned for the affixation of trade names to the external wall.

v) The Judge further erred in effectively holding that there were inconsistencies between DMC Clauses 10(e) and 10(g) and BMO section 34I(1)(a) and that such inconsistencies could be resolved by an approval given by the MC under section 34I(1)(a) which could be extended to cover breaches of DMC Clauses 10(e) and 10(g). The 2017 Resolution is invalid and ineffective. There was no inconsistency between DMC Clauses 10(e) and (g) and BMO section 34I(1)(a), because the expression ‘convert … to his own use’ does not refer to physical conversion in the sense of making alterations but to appropriation of common areas for private purposes: Wing Ming Garment Factory Ltd v Wing Ming Industrial Centre [2014] 4 HKLRD 52 [126]. Here, what DMC Clauses 10(e) and 10(g) prohibit, and what the Flat 9A owner had unlawfully done, were a) construction of structures on, and b) alteration of the appearance of, the exterior or external wall. This is not what BMO section 34I(1)(a) regulates. It follows that even if the MC has power to approve by resolution a general conversion of common parts under BMO section 34I(1)(a), such a power could and would not cover breaches of DMC Clauses 10(e) and 10(g). It also follows that the Judge was wrong to hold that BMO section 34C(2) applied to this case. The primary legislative aim of Part VIA of the BMO (in which sections 34C and 34I are found) is to ‘further facilitate the formation of owners’ corporations and to repeal those provisions in the existing deeds of mutual covenant which are considered unfair to flat owners’. As DMC Clauses 10(e) and 10(g) are more protective and beneficial to owners as a whole, they cannot be provisions ‘which are considered to be unfair to flat owners’ which Part VIA of the BMO aimed to repeal under BMO section 34C(2).

(2) Our view

41. The relevant statutory provisions under this topic are section 18(1) and section 34I(1) of the BMO. Section 18 deals with the duties and powers of the incorporated owners in respect of the common parts of a building and the provisions in a DMC :

‘ 18 (1)  The corporation shall—
  (a)  maintain the common parts and the property of the corporation in a state of good and serviceable repair and clean condition;
  (b)  carry out such work as may be ordered or required in respect of the common parts by any public officer or public body in exercise of the powers conferred by any Ordinance;
  (c)  do all things reasonably necessary for the enforcement of the obligations contained in the deed of mutual covenant (if any)  for the control, management and administration of the building.’

42. Section 34I(1) of the BMO consists of two limbs : the first limb under section 34I(1)(a) is the conversion of the common parts and the second limb under section 34I(1)(b) is the unreasonable use of the common part, nuisance and hazard. In the present case there is no evidence to support any application of the second limb and we are only concerned with the first limb.

43. In The Incorporated Owners of Hoi Luen Industrial Centre & Anor, this Court after referring to section 18(1) of the BMO, emphasized the statutory obligations of incorporated owners to enforce the DMC where breach is found which will preclude the application of acquiescence to such breach.

‘ It follows that in the instant case the plaintiffs were not only entitled but bound to take proceedings for the enforcement of these covenants. It follows, too, that they could not have granted expressly to this defendant or any other owner of any unit in the building the right to act in contravention of the deed of mutual covenant as this defendant has done. What cannot be done expressly cannot be done impliedly. Although equity will sometimes restrain a plaintiff in the exercise of his legal rights because it would be inequitable and unjust in all the circumstances to allow him so to exercise those legal rights, equity will not hold him bound by acquiescence to allow something which he could not have allowed by express grant. (For these propositions, reference may usefully be made to The Incorporated Owners of Chungking Mansions v Shamdasani (CA 199/91, unreported)).’

44. However, this Court in Hollywood Shopping Centre Owners Committee Limited v IO of Wing Wah Building Mongkok Kowloon [2011] 4 HKLRD 623, an appeal from the first instance decision of Mr Recorder Yuen, adopted in [21] the Recorder’s view at [65] on acquiescence by the incorporated owners for breach of the DMC by the owner of the building :

‘ 21(1)  ....whether or not acquiescence can be set up as a defence to a claim for breach of mutual covenants (whether express or implied by reason of section 34I(2)  of the BMO)  depends on the nature or type of breach in question;
(2)  if the breach of mutual covenants in question is within the power of the incorporated owners to acquiesce, acquiescence can be a valid defence provided all the requisite elements giving rise to acquiescence are established; and
(3)  on the other hand, if the breach of mutual covenants in question is beyond the power of the incorporated owners to acquiesce, the defence of acquiescence will not be available since the incorporated owners cannot acquiesce in acts which they in law cannot do.’

45. This is a departure from the earlier case of The Incorporated Owners of Hoi Luen Industrial Centre. This new approach was also adopted by this Court in Freder Centre (IO) v Gringo Ltd :

‘ [24] Similarly, it is also implicit in section 34I(1)(a) of BMO that the applicant can give approval to an owner to convert a common part to his own use : see the Court of Appeal’s judgment in Hollywood Shopping Centre Owners Committee Ltd v Wing Wah Building Mongkok Kowloon (IO) [2011] 4 HKLRD 623 at [67]-[69].’

46. This new approach is by now well established and cannot be gainsaid. Whilst the discussion was on acquiescence, there is no dispute that the reasoning applies to waiver as well if the conditions are satisfied. What is clear from a survey of the authorities is that waiver and acquiescence are not available where illegality is involved in the breach of DMC, an example is Incorporated Owners of Champion Court v Pang Ping Fan Peter [2008] 5 HKC 312 :

‘17. Secondly, that incorporated owners cannot acquiesce in the retention of illegal structures is by now well-established. The rationale is that since it is not within the power of incorporated owners to expressly permit illegal structures to be constructed, it is consequently not within their power to acquiesce in their retention; citing Incorporated Owners of Chungking Mansion v Shamdasani [1991] 2 HKC 342 and Incorporated Owners of Hoi Luen Industrial Centre & Anor’

47. As illegality is no longer a live issue in this appeal, it is necessary to see if there are other matters in this case which will preclude the application of the defence of waiver and acquiescence as argued by Mr Chan SC for the Applicant. We do not see Clauses 10(e) and (g) as containing any terms that may be regarded as a total preclusion against the owners from doing the prohibited acts and thus preventing the application of waiver or acquiescence. These clauses are the usual covenants given by an owner as to what he cannot do in respect of the common parts of the Building. To use the word ‘totally’ is simply adding a gloss that does not exist in the relevant clauses. The Applicant’s reference to [60] of Mr Recorder Yuen’s judgment does not advance the case further. All that the Recorder did was to refer to The Incorporated Owners of Haiphong Mansion v Convey Advertising Co. Ltd, unrep., HCA 9973/2000 (6 April 2001) where the judge in that case drew a distinction between a breach which was totally precluded by the deed of mutual covenants and a breach which was not so precluded and held that acquiescence could be an arguable defence where the act was not totally precluded by the deed of mutual covenants. But the Recorder did not actually adopt this formulation in his judgment; instead his view is at [65] which this Court has adopted on appeal. Ultimately it is a matter of examining the nature of the breach and the terms of the DMC.

48. Further, the matter can be tested this way. The incorporated owners are authorised to maintain the common parts of the Building under section 18(1) of the BMO and, at the same time, under section 34I(1)(a), it may give approval to an owner who has converted a common part to his own use. If the Applicant’s argument is correct, it will mean that the approval allowed under section 34I(1)(a) is rendered useless in respect of breaches under the DMC that may amount to a conversion of the common part under section 34I(1)(a). Section 34C(2) which together with section 34I(1) is under Part VIA of the BMO. In our view, the Judge was correct to apply section 34C(2) which provides that in the event of any inconsistency between that part and the terms of a deed of mutual covenant, that part prevails. Both respondents accepted that there had been conversion of the common parts of the Building by reason of the installation of the window frames. In any event, irrespective of the position in Wing Ming Garment Factory Ltd referred to by the Applicant where the owner had changed the original wall into a glass wall, the 1^st Respondent must have converted the common part for its own use when it installed the window frames on the external wall, thereby depriving other owners from using that part of the exterior wall.

49. Mr Chan further submitted that there is total preclusion because the DMC does not expressly provide that the incorporated owners can give prior consent for specific actions. Again we do not agree that the application of waiver and acquiescence should depend on whether there are consent provisions in the DMC. Similar arguments along the line now advanced by Mr Chan were made in Lucky Hing Shing Estate Company Limited v The Incorporated Owners of Genius Court, unrep., HCA 2048/2015 (7 April 2016) where Deputy High Court Judge Marlene Ng (as she then was) rejected this distinction :

‘ 47. The first question is what amounts to a ‘breach of mutual covenants in question [that] is beyond the power of the incorporated owners to acquiesce’. Mr Liu takes a narrow view and says the IO cannot acquiesce breaches of unqualified covenants in the DMC, ie those covenants that do not contain proviso for the incorporated owners or manager to relieve compliance, and can only acquiesce breaches of qualified covenants, eg covenants that allow the incorporated owners or manager to give ‘prior written consent’ not to comply with such covenants. But a consideration of the cases cited in Ohashi Chemical Industries (Hong Kong); Incorporated Owners of Chungking Mansion v Shamdasani [1991] 2 HKC 342; Incorporated Owners of Champion Court v Pang Ping Fan Peter [2008] 5 HKC 312, Yick Fung Holdings Ltd v Sandwood Ltd [2009] 2 HKLRD 573; Incorporated Owners of Hong Kong House v Senfield Ltd (unrep., CACV 117/2003, [2003] HKEC 1341), Incorporated Owners of Haiphong Mansion v Convey Advertising Co Ltd (unrep., HCA 9973/2000, 6 April 2001) (discussed in more detail in [52]-[62] in Mr Recorder Yuen SC’s judgment) does not necessarily support such narrow construction.’

50. We agree with the view that to preclude the operation of waiver and acquiescence on such a narrow distinction based on whether the covenant is qualified or not qualified is not valid. After all whether acquiescence applies or not depends on the action of the person having a right but chose not to exercise that right when seeing a person infringing that right. Applying the new approach adopted by this Court, we are of the view that the breach in this case can be waived or acquiesced by the 1^st Respondent.

3) Ground 1 (The 2017 Resolution issue)

(1) The Applicant’s argument

51. Ground 1 is concerned with the construction of the 2017 Resolution. The Applicant argued that the Judge was wrong when he concluded that it covers the Post-Window Frames. The 2017 Resolution that was passed on 27 July 2017 was concerned with the Pre-Window Frames that existed at that time and not the Post-Window Frames that only came into existence on 18 March 2018. The 2017 Resolution expressly referred to the ‘now existing’ non-structural installation, which included the window frames outside Flat 9A. The strained construction is contrary to the principle that in the construction of a document, the Court’s task is to determine ‘what a reasonable person would have understood the parties to have meant by using the language which they did’ : Champion Concord Ltd v Lau Koon Foo (No 2) (2011) 14 HKCFAR 837 at [12] (Bokhary PJ); [73] (Ribeiro PJ). The factual matrix of the 2017 Resolution that the Judge was required to consider included the evidence of the Chairman of the 1^st Respondent that it was not the intention of the MC to approve future breaches/installations by the 2017 Resolution. The Judge in construing 2017 Resolution had erroneously taken into account matters that occurred after the 2017 Resolution, contrary to the principle that in the construction exercise, the Court can only take into account facts or circumstances which existed at the time of the document, and which were known or reasonably available to the parties. They included the purported ‘very technical’ difference between the Pre-Window Frames and Post-Window Frames; the intention of the 2^nd Respondent to ‘regularize’ the Pre-Window Frames; the 2^nd Respondent’s notification of the minor works to the 1^st Respondent and the 1^st Respondent raising no objection; the 1^st Respondent’s position adopted throughout the Land Tribunal proceedings; and that the works done by Tiff purportedly improved the position of the Window Frames. Reliance was placed on Arnold v Britton [2015] AC 1619 at [21] (Lord Neuberger PSC); Achieve Goal Holdings Ltd v Zhong Xin Ore Material Holding Co Ltd[2020] HKCA 51 at [16(2)] (Kwan VP).

52. The Judge further erred in finding that ‘there is no reason why the MC will not permit the re-affixation of the same structures (i.e. the window frames) in March 2018 or retention of the Post-Window Frames after ‘regularization’. Whether there was ‘reason’ for the MC to permit the retention of the Post-Window Frames is simply beside the point – the fact remains that the 2017 Resolution could not constitute such permission. Having correctly found that the MC ‘could not’ by the 2017 Resolution permit the Pre-Window Frames to be retained, the Judge had in effect held that the 2017 Resolution was ultra vires and void. As a void artefact, the 2017 Resolution cannot be later ‘resurrected’ to salvage the Post-Window Frames.

(2) Our view

53. There is a short answer to the Applicant’s arguments. They are based on the wrong premise that the Pre-Window Frames and the Post-Window Frames are different structures when the Judge had expressly found that they are the same. He held :

‘ 35. It is not in dispute that the Pre-Window Frames and the Post-Window Frames are in fact the same structures. The difference between the Pre-Window Frames and the Post-Window Frames is very technical, in that it is unknown as to how the Pre-Window Frames were affixed whilst the Post-Window Frames were affixed by Tiff as prescribed registered contractor under the minor works scheme in March 2018.....’

54. It is unfortunate that the terms ‘Pre-Window Frames’ and ‘Post-Window Frames’ are used as if there are two different sets of window frames. In reality (as found by the Judge) they are the same. Clearly the criticism levied by the Applicant against the Judge’s construction cannot stand. As Mr Cheung for the 2^nd Respondent submitted, as a matter of construction of the 2017 Resolution, it cannot be so restrictive that it will not cover the removal and reinstallation of the existing structures on the exterior wall for purpose such as repair. After reinstallation, they remain to be the same structures. As it is the same set of window frames, they are covered by the 2017 Resolution which allowed them to be retained until a final decision is made on the appearance of the external wall. We disagree that the Judge had taken irrelevant matters into account when he referred to the technical difference. This does not detract from his finding that the same structures were reinstalled. By reason of the 2017 Resolution, the 1^st Respondent has approved the installation of the window frames and hence has waived or acquiesced in the breach of DMC Clauses 10(e) and (g) and section 34I(1)(a) in accordance with its terms.

55. Mr Law for the 2^nd Respondent had also relied on other matters in support of the 2017 Resolution. It is not necessary to address them in view of our decision above.

4) Ground 3 (The de minimis issue)

(1) The Applicant’s argument

56. The Applicant submitted that the de minimis principle referred to in Metro City has no application to this case. DMC Clause 10(g) is markedly different from the covenant in Metro City in that the relevant covenant (i.e. Clause B2, as set out in [11] of the judgment therein) provided that :

‘Air-conditioning units shall only be placed at the spaces provided and no Residential owner shall do or permit to be done any act or thing which may or will alter the external appearance of the Towers’ (emphasis added)

57. However, in the present case, DMC Clause 10(g) provided for a far more restrictive covenant than that in Metro City, namely :

‘ Not to change the colour of the painting or alter the appearance of the exterior of the said building or any part thereof’ (emphasis added)

58. On a proper construction of the DMC Clause 10(g), the additional words ‘or any part thereof’ clearly convey the parties’ specific and express agreement that the prohibition against alteration applied not only to the appearance of the exterior of the Building broadly or in whole, but also to the appearance of any part of the Building exterior. These words preclude the operation of any de minimis principle as they make plain that there is no part of the Building exterior’s appearance that is insignificant for the purposes of the prohibition; instead, the prohibition against alteration applies to every part thereof.

59. The Applicant then submitted that applying the de minimis principle is contrary to the other principle that the Court has no dispensing powers and that where the parties are under no disability and have, with their eyes open, entered into a contract, the duty of the Court is to give effect to it : World Ford Development Ltd v Ip Ming Wai & Anor [1994] 2 HKLR 1 at page 5, lines 25-34 (Litton JA, as he then was). Further, in light of the distinct wording of DMC Clause 10(g), the correct test should have been ‘whether the Post-Window Frames were so prominent that a reasonable man would conclude that the external appearance of the Building or any part thereof has been altered’. No reasonable tribunal, applying the correct test, would have concluded that the breach of DMC Clause 10(g) was de minimis. This is particularly clear given the Judge’s correct recognition that the Post-Window Frames in fact ‘could easily be observed by neighbouring buildings at about the same level’. In the context of a prohibition that serves to protect the appearance of a building, that fact plainly precludes any notion of de minimis impact. The Judge further erred in taking into account an irrelevant matter, i.e. that the Post-Window Frames are ‘not so obviously noticed by the ordinary man at the street level’. This consideration is not only arbitrary and scarcely (if at all) evidenced but directly conflicts with the Judge’s own previous finding in IO of Fortune Gardens v Chan, Grant & Ors[2018] HKLdT 53 [57], where he recognised that a structure that ‘cannot be seen from the ground floor street level’ still altered the external appearance of the building as the structure ‘can easily be seen’ from surrounding taller buildings and is visible from buildings facing its back.

(2) Our view

60. This topic is only relevant to Clause 10(g) which is concerned with the external appearance of the Building. We disagree that the case should be decided differently by the distinction between ‘external appearance’ and ‘exterior appearance or any part of it’. The reference to the external appearance must include any of its part. Hence the words ‘any part of it’ makes no difference to the construction of DMC Clause 10(g). In our view there is no conflict with the World Ford Development Ltd approach relied upon by Mr Chan and the de minimis principle. The Court is not rewriting the contract for the parties by relying on the de minimis principle because as Liu J (as he then was) held in G & Y Co Ltd v Kwok Kim Leung HCA 3586/1989 (unreported, 2 July 1999) at page 12 :

‘ (b) It is a “common sense judgment as to whether the act or omission is of a trifling nature against the given background”.
(c) “The magnitude of the alleged deviation and its consequence are not themselves relevant except as part of the scenario”.’

61. This approach was adopted by this Court in Thorogood Estates Ltd v Robison Heights (IO) [2013] 1 HKLRD 1077 at [26] when Kwan JA (as she then was) held that when construing the meaning of a contract (including a deed of mutual covenant), the Court has to construe it in line with common sense. Further as held by Yuen JA in Metro City Management Ltd v Tsui Fee Hung Vincent, unrep., CACV 328/2005 (6 June 2006) at [51], an appeal from the first instance decision of Mr Recorder Chan, as a start, whether a breach of the covenant is de minimis ‘is a finding of fact. It is well-established that an appellate court would be slow to interfere with a trial judge’s finding of fact unless there were no materials which could support his finding’. We are not satisfied that the finding is plainly wrong and that no reasonable tribunal would have made the finding.

62. In any event, by reason of the 2017 Resolution any breach of DMC Clause 10(g) had been waived by the 1^st Respondent.

VII. Respondent’s Notices

63. Having reached this conclusion it is not necessary for us to deal with the Respondent’s Notices filed by the 1^st Respondent and the 2^nd Respondent.

VIII. Conclusion

64. The appeal is accordingly dismissed. We will make an order nisi that the Applicant is to pay the costs of the appeal to the 1^st and 2^nd Respondents with certificate for two counsel, to be taxed if not agreed.

(Carlye Chu)	(Peter Cheung)	(Anderson Chow)
Vice-President	Justice of Appeal	Justice of Appeal

Mr Abraham Chan, SC leading Mr Lawrence K F Ng, Mr Henry Cheng and Mr John Leung, instructed by C. W. Chan & Co., for the Applicant

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

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

CACV 96/2021

[2023] HKCA 93

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 96 OF 2021

(ON APPEAL FROM LDBM NO 118 OF 2017)

________________________

BETWEEN

	中紀投資有限公司	Applicant
	and
	青山道國際工業大廈業主立案法團	1^st Respondent
	STL Company Limited	2^nd Respondent

________________________

Before:

Hon Chu VP and Yuen JA in Court

Dates of Written Submissions:
The 1^st Respondent’s Summons:	15 July 2022, 29 July 2022 and 5 August 2022
The 2^nd Respondent’s Summons:	15 July 2022, 29 July 2022 and 5 August 2022
Date of Judgment:	19 January 2023

________________________

J U D G M E N T

________________________

Hon Yuen JA (giving the Judgment of the Court):

Procedural history

1. The procedural history of LDBM 118/2017 in the Lands Tribunal (“the LT case”) has been set out in the Reasons for Judgment of this court in Centre Chase Investment Ltd v International Industrial Building, Castle Peak Road (IO)¹.

Background facts

2.1. Briefly, STL Co Ltd (“the 9A owner”), the owner of Unit 9A of International Industrial Building (“the building”), had installed some window frames on the external wall of the building which was a common part.

2.2. In 2015, the Building Authority issued notices to the Incorporated Owners of the building (“the IO”) requiring it to carry out an inspection of the common parts, and complete any necessary repairs.

2.3. In 2016, the inspector appointed by the IO reported that the window frames installed by the 9A owner were unauthorized building works.

2.4. Centre Chase Investment Ltd (“the 2A owner”), the owner of Unit 2A, requested the IO to take action against the 9A owner to remove the window frames. When the IO did not do so, the 2A owner commenced the LT case against the IO in June 2017.

2.5. The following month, July 2017, the Management Committee (“the MC”) of the IO passed a resolution (the original Chinese resolution is set out in §12 of the LT Judgment defined in §4 below). The MC resolved to approve the current non-structural installations, including the 9A decorative window frames, until the repair of the external walls in the future, when the IO will again resolve upon the appearance of the external walls and the installations and decorations affecting such appearance.

2.6. In March 2018, the 9A owner removed the original set of window frames (“Pre-Window Frames”), and replaced it by another set (“Post-Window Frames”).

Proceedings in the Lands Tribunal

3.1. Prior to the hearing of the LT case, the Presiding Officer HH Judge S Lo (“PO”) ordered the 2A owner (but not the IO) to make written submissions on whether the 9A owner should be joined in the LT case. The then counsel for the 2A owner submitted that: (1) the 2A owner had no right to sue the 9A owner, (2) the 2A owner had the right to sue the IO to compel it to take action against the 9A owner, and (3) when the 2A owner sued the IO, it was not necessary for the 2A owner to join the 9A owner as respondent. The PO did not respond to these submissions and presumably accepted them.

3.2. However, despite the possible effect of the LT case on the 9A owner, the PO did not pose the question to the IO whether it should join the 9A owner as third party.

3.3. Consequently, the LT case proceeded to trial with only the 2A owner and the IO as parties.

4. The PO dismissed the 2A owner’s claim on 24 January 2020 (“the LT Judgment”)². The 2A owner’s application for review was dismissed for reasons set out in a decision of 9 July 2020 (“the Review Decision”)³.

Leave to appeal

5.1. The 2A owner’s application for leave to appeal the Review Decision was refused by the PO, for reasons given in a decision given on 11 January 2021 (“the Leave to Appeal Decision”)⁴.

5.2. On 5 March 2021, the Court of Appeal⁵ gave leave to appeal after a renewed application.

Joinder

6.1. When giving leave, the court ordered a directions hearing on the issue whether the 9A owner should be joined as a party to the appeal.

6.2. The joinder hearing was held on 12 November 2021, with the 2A owner supporting the joinder, and the IO opposing it.

6.3. For reasons given in the Reasons for Judgment dated 18 November 2021 referred to in §1 above, this court decided that the 9A owner should be joined as the 2^nd respondent in the appeal.

6.4. The 9A owner has since filed a respondent’s notice in the appeal.

Summonses before the court

7.1. There are 2 summonses before the court for leave to adduce new evidence for the appeal:

(1)   the IO’s summons (filed on 12 October 2021)  for leave to adduce an affidavit of Yuen Man Chung, a member of the MC (“Yuen I”);
(2)   the 9A owner’s summons (filed on 31 January 2022)  for leave to adduce:
(a)   an extract from the Building Department’s website pertaining to “Minor Works Procedures”;
(b)   a photograph taken on 30 November 2021 by the building’s management company captioned “over-sized air-conditioning equipment on external wall inside 2A’s Light Well” (“the Photograph”);
(c)   the 3^rd affirmation of its director Mao Yau Fong Henry (“Mao III”).

7.2. Both summonses are opposed by the 2A owner.

Legal Principles

8.1. In considering whether to give leave to adduce new evidence on appeal, the principles set out in Ladd v Marshall⁶ apply, i.e. (1) the evidence could not have been obtained with reasonable diligence for use at the hearing below; (2) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and (3) the evidence must be such as is presumably to be believed, or it must be apparently credible, though it need not be incontrovertible.

8.2. In considering whether to allow a new point to be taken on appeal, the principles in Flywin Co Ltd v Strong & Associates⁷ apply, i.e. where a party does not take a point at trial and then seeks to raise it on appeal, it will be barred from doing so unless there was no reasonable possibility that the state of the evidence relevant to the point would have been materially more favorable to the other side if the point had been taken at trial, the foundational imperative of this “state of the evidence bar” being fairness.

Discussion

The IO’s summons

9. Dealing first with the IO’s summons, the new evidence in Yuen I relates to other proceedings taken out by the 2A owner’s controller Ng Hin Chung against the IO or persons connected with the building, updating the proceedings previously referred to in a witness statement filed by the IO before the Lands Tribunal, and adding new proceedings.

10.1. In the IO’s Composite Skeleton Submissions, it says it intends to serve a supplementary respondent’s notice to add the following ground (“the Additional Ground”)⁸:

“The learned Presiding Officer should have held that the Tribunal should not exercise its discretion to [compel the IO to take action against the 9A owner] after taking into account the exceptional circumstances taking place between the [2A owner], the [IO] and other co-owners of the Building (including but not limited to the undue hardship that would be caused to the [IO]). In the circumstances of the present case, the Tribunal should hold that it is unjust and inequitable to make a mandatory order against the [IO]”.

10.2. The IO submits⁹ that the new evidence is relevant to the exercise of the court’s discretion whether to grant a mandatory injunction¹⁰; is relevant to the issue whether “in light of what had happened in the building, whether it was reasonably necessary for the IO to take actions against the 9A owner”¹¹; shows Mr Ng’s litigious nature¹²; and shows the IO’s need to consider how to deploy resources in view of expenditure on costs¹³. It submits that the new evidence “has an important influence on the result of the appeal in light of the Additional Ground”.

11. The 2A owner’s objections to the new evidence are based on the Flywin principles as well as the Ladd v Marshall principles.

12.1. In our view, the new evidence does not pass the Flywin hurdle. Although some of the proceedings had been mentioned in the IO’s Notice of Opposition (§4A), it was in the context of the 2A owner or its controller Mr Ng being hostile to the MC, or putting pressure on it. The IO did not plead that by reason of the “exceptional circumstances”, hardship would be caused to it, or it would be unjust or inequitable if the court ordered it to take action against the 9A owner.

12.2. As such a case was not pleaded, it was not in the 4 issues for the Tribunal’s determination (LT Judgment §26) and was not a ground of review (Review Decision, §12).

12.3. In fact, even though the review process had been invoked by the 2A owner, the IO did not take that opportunity to put forward the case it is now seeking to advance of “exceptional circumstances causing hardship or injustice or inequity”.

12.4. Given the nature of the Additional Ground, it clearly cannot be said that there was no reasonable possibility that the state of the evidence relevant to the point would have been materially more favorable to the other side if the point had been taken at trial. The IO’s application therefore falls at the Flywin hurdle.

13. It is not necessary for us to consider whether the Ladd v Marshall hurdle can also be passed.

14. Accordingly, we would dismiss the IO’s summons with an order nisi that the IO pay the 2A owner’s costs to be taxed if not agreed. We do not consider it appropriate to attempt a summary assessment of costs.

The 9A owner’s summons

15.1. Before dealing with the 9A owner’s summons, it is noted that as it has not filed any pleadings, its case is set out in its Respondent’s Notice filed on 8 December 2021, ie :

(1)   both the Pre-Window Frames and Post-Window Frames are “signboards” under s.2(1)  of the Buildings Ordinance, and hence the minor works regime applies;
(2)   (a)   the IO had approved the affixation of both sets of Window Frames and is barred from complaining about them by reason of waiver, acquiescence and/or estoppel;
(b)   “by extension”, the 2A owner is also barred from complaining about the Window Frames;
(c)   the affixation was not “totally precluded by the DMC”.

15.2. Further, the 9A owner has indicated that it intends to file a supplemental respondent’s notice that because the 2A owner itself has also installed some equipment on the external wall of the building (as shown in the Photograph), it has not complied with the “clean hands principle” and should thus be precluded from claiming relief.

16. The 2A owner submits that the 9A owner was made aware of the LT case before it was heard and could have applied then to join as a party. In our view, although the 9A owner could have done so, it had no obligation in law to do so, and in any event that is not an answer to its right to produce evidence now that it is a party. The fact that the 9A owner sent a letter to the LT in May 2018 setting out its position is neither here nor there. The evidence adduced by a party is different in nature and effect from a letter sent to the court by a stranger to the litigation.

17.1. The next question is whether Ladd v Marshall and Flywin are general principles such as to preclude the 9A owner’s production of evidence even though it was not a party at the trial (as the 2A owner submits).

17.2. In our view, the 9A owner cannot be precluded from adducing evidence now when it had not been made a party at the trial, and thus could not be said to have “omitted” to produce the evidence then. None of the cases cited by the 2A owner provides support for its submission. Richly Bright International Ltd v De Monsa Investments Ltd¹⁴ appears to be the only case where evidence was sought to be adduced on appeal by an additional party, but as rightly acknowledged by counsel for the 2A owner in its Composite Submissions in Opposition (§42), in that case, the additional party had already been joined at trial as an interested party.

17.3. For the same reason, it cannot be fair to preclude the 9A owner from taking the points of “clean hands” and “estoppel, waiver and/or acquiescence” on the ground that it was not canvassed at trial, when it was not a party to the case then. As stated in Flywin, the “foundational imperative” is fairness. This court appreciates that these points are fact-sensitive, and it may well be that relevant directions may have to be made at some stage to deal with this complication. However, if the evidence on these points are precluded now, that would in effect deny a party the opportunity to advance its case.

18. For these reasons, we would make an order in terms of §(1) of the 9A owner’s summons and an order nisi that the 2A owner pay the 9A owner’s costs to be taxed if not agreed. As with the IO’s summons, we do not consider it appropriate to attempt a summary assessment of costs.

(Carlye Chu)	(Maria Yuen)
Vice President	Justice of Appeal

Mr Abraham Chan SC, Mr Lawrence K F Ng, Mr Henry Cheng and Mr John Leung, instructed by C W Chan & Co, for the applicant

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

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

[1] [2021] 5 HKLRD 457.

[2] [2020] HKLdT 5.

[3] [2020] HKLdT 25.

[4] [2021] HK LdT 2.

[5] Lam VP and Chu JA (as they then were).

[6] [1954] 1 WLR 1489.

[7] (2002) 5 HKCFAR 356.

[8] Annex I.

[9] Yuen I, §§16.1-16.5.

[10] Yuen I, §16.1.

[11] Yuen I, §16.2.

[12] Yuen I, §16.3.

[13] Yuen I, §§16.4-5.

[14] CACV 247/2012 (unrep.11/9/2013).

CACV 96/2021

[2021] HKCA 1737

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)

________________________

	中紀投資有限公司	Applicant
	and
	青山道國際工業大廈業主立案法團	Respondent

________________________

Before: Hon Yuen and Chu JJA in Court

Date of Hearing and Judgment: 12 November 2021

Date of Reasons for Judgment: 18 November 2021

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REASONS FOR JUDGMENT

________________________

Hon Yuen JA:

Procedural history

1.1. In Lands Tribunal proceedings LDBM118/2017 (“the LT case”), the applicant is the owner of unit 2A (“the 2A owner”) in a building called International Industrial Building (“the building”), and the respondent is the building’s incorporated owners (“the IO”).

1.2. The 2A owner’s complaint in the LT case was that the IO had failed to take action to remove 2 window frames installed at the 9^th floor level at the external wall of the building, which wall was a common part. The window frames had been installed or maintained by STL Co Ltd, the owner of unit 9A (“the 9A owner”).

1.3. The 9A owner was not a party in the LT case, although this question was raised prior to the hearing of the LT case in the circumstances set out in para. 10 in these Reasons for Judgment.

2. The 2A owner’s application was dismissed by His Honour Judge S. Lo, presiding officer of the Lands Tribunal (“the PO”), in a Judgment dated 24 January 2020 (“the Judgment”). The 2A owner applied for a review, but the PO confirmed his Judgment in a decision dated 9 July 2020.

3. The 2A owner applied for leave to appeal, which was dismissed by the PO in a decision dated 11 January 2021. The 2A owner then renewed his application for leave in this court in CAMP32/2021, which was granted by Lam VP (as he then was) and Chu JA on 5 March 2021.

4. A Notice of Appeal was duly lodged in CACV96/2021 on 12 March 2021. The IO filed a Respondent’s Notice on 7 April 2021.

Joinder order

5. In the order granting leave, the court also ordered that there should be a directions hearing in the appeal to consider the question of joinder of the 9A owner.

6. On 12 November 2021, after hearing leading counsel for the 2A owner and the IO respectively, this court ordered:

(1)  STL Co Ltd, being the owner of Flat 9A of International Industrial Building, be joined as the 2^nd Respondent to this appeal;
(2)  the original respondent shall thereafter be referred to herein as the “1^st Respondent”;
(3)  the Appellant shall serve its Notice of Appeal, and the 1^st Respondent shall serve its Respondent’s Notice, upon the 2^nd Respondent within 7 days from today; and
(4)  the costs of and occasioned by the hearing today shall be in the cause of the appeal, with certificate for 2 counsel.

My reasons for making this order are as follows.

Factual Background

7. The Deed of Mutual Covenant of the building contained a number of clauses regarding installations on common parts, including the following:

“10. Each owner of the said building hereby covenants with the others as follows:
(a)  Not to ... alter or interfere with any part ... of the said building in common use;
(c)  Not to do anything where by any insurance of the said building or any part thereof against fire may be rendered void or voidable or whereby the premium for any such insurances may be liable to be increased ...;
(e)  Not to ... affix ... any ... thing to the exterior of the said building ... or to any exterior wall ... of the said building;
(g)  Not to ... alter the appearance of the exterior of the said building or any part thereof;
(p)  Not to do anything which constitutes a breach of any of the terms covenants and conditions in the Crown Lease or such deeds or instruments under which the said premises is held”.

8.1. As mentioned above, the 9A owner had, prior to July 2015, installed 2 window frames on the external wall of the building, which the IO did not dispute is a common part[1].

8.2. On 20 July 2015, the Building Authority issued a notice under the Buildings Ordinance (“BO”) requiring the IO to inspect the common parts including the windows[2].

8.3. An inspector (AHL) was appointed, who reported in April 2016 that the said window frames were unauthorized building works[3].

9.1. In April and May 2017, the 2A owner requested the IO to take action to remove the window frames[4].

9.2. When the IO failed to do so, the 2A owner commenced the LT case on 22 June 2017 against the IO for an order that it

“take such actions, including legal actions, against the [9A owner] of [the building] as are necessary for the removal of the 2 window frames installed at the external wall of the Building (the ‘Window Frames’) and the reinstatement of the external wall and to restrain the [9A owner] from installing further similar structures”[5],

on the basis that the window frames were in breach of s.14(1) of the BO[6], s.34I of the Building Management Ordinance[7] and the clauses in the DMC set out in para.7 above.

9.3. At a meeting on 27 July 2017, the Management Committee of the IO resolved (among other things) to approve the existing non-structural installations on the external walls (including the 9A window frames) until the external walls are repaired in the future, at which time the IO would decide on the appearance of the external walls and the installations affecting such appearance (“the 2017 resolution”)[8].

9.4. After the 2017 resolution, a 2^nd inspection was carried out by a 2^nd inspector (KHP) who stated its opinion on 22 December 2017 that the 9A window frames were non-structural, did not cause immediate danger and could be regularized, e.g. by the “Signboard Validation Scheme” [9].

9.5. In March 2018, the 9A owner removed the existing window frames (referred to in the Judgment as the “Pre-Window Frames”) and installed new ones on 18 March 2018 (referred to in the Judgment as the “Post-Window Frames”). Its contractor (Tiff) filed a Certificate of Completion of Minor Works on 22 March 2018. On the same day, the Buildings Department issued a letter[10] acknowledging receipt of the certificate, which letter stated (among other things) that it should not be understood as indicating that the documents lodged complied with the BO, and that the department would randomly inspect such works to see if they complied with the BO or not.

9.6. As a matter of completeness, it would appear that on 13 July 2018, KHP issued a 2^nd report stating that the external wall outside the 9^th floor was “altered” [11].

PO’s question on joinder of 9A

10.1. Obviously, the PO correctly considered that the 9A owner had an interest in the LT case, as it had installed the window frames (both pre- and post-), and would be affected if the IO were compelled by the LT to take action against it for their removal.

10.2. At a hearing on 12 April 2019, the PO ordered the 2A owner (but not the IO) to provide written submissions on whether it was necessary to join the 9A owner as the 2^nd respondent in the case.

10.3. On 22 May 2019, Mr Patrick Siu, then counsel for the 2A owner, provided written submissions. In para.3 of those submissions, the question was stated as whether the 2A owner should join the 9A owner as a respondent.

10.4. Mr Siu referred to s.16 BMO which provides:

“When the owners of a building have been incorporated under section 8, powers, privileges and duties of the owners in relation to the common parts of the building shall be exercised and performed by, and the liabilities of the owners in relation to the common parts of the building shall, subject to the provisions of this Ordinance, be enforceable against, the corporation to the exclusion of the owners ...” (Emphasis added).

10.5. Mr Siu also referred to See Wah Fan v Tam Kam Yuk[12]in which the LT struck out the claim of a unit owner (SWF) made directly against another unit owner (TKY) for installing a gate on the common parts, and the sequel case See Wah Fan v Incorporated Owners of Ki Tat Garden (Phase I)[13]in which the Court of Appeal held (contrary to the IO’s submissions) that SWF had the right to sue the IO in the LT for an order to compel it to take action against TKY.

10.6. Mr Siu therefore submitted that: (1) the 2A owner had no right to sue the 9A owner, (2) the 2A owner had the right to sue the IO to compel it to take action against the 9A owner, and (3) when the 2A owner sued the IO, it was not necessary for the 2A owner to join the 9A owner as respondent.

10.7. Nevertheless, it was disclosed in the submissions that solicitors acting for 2A had informed the 9A owner of the LT case, and that if the 9A owner wished to join the proceedings, it (the 9A owner) could take out the appropriate application.

11.1. The PO did not respond to the above submissions from 2A and presumably accepted them.

11.2. However, the PO did not pose the question to the IO whether it should join the 9A owner as third party. Given the interest of the 9A owner in the subject-matter of the LT case, one would have thought that the IO should have issued a third party notice against the 9A owner under Order 16 r.1(1) Rules of the High Court[14], which provides where material:

“Where in any action a defendant who has given notice of intention to defend, ...
(b) claims against [a person not already a party to the action] any relief or remedy relating to or connected with the original subject-matter of the action and substantially the same as some relief or remedy claimed by the plaintiff; or
(c) requires that any question or issue relating to or connected with the original subject-matter of the action should be determined not only as between the plaintiff and the defendant but also as between either ... of them and a person not already a party to the action;
then ... the defendant may issue a notice ... containing a statement of the nature of the claim made against him and ... the nature and grounds of the claim made by him or of the question or issue required to be determined”.

11.3. Thus the LT case proceeded to trial with only the 2A owner and the IO as parties.

12. As mentioned earlier, the PO dismissed the 2A owner’s claim. As leave has been given to the 2A owner to appeal, it is undesirable here to say anything more about the merits of the claim at this stage. However, when giving leave, the Court of Appeal ordered a directions hearing on the issue whether the 9A owner should be joined as a party to the appeal.

13.1. Mr Abraham Chan SC leading counsel for the 2A owner[15], supported the joinder of the 9A owner as a party to the appeal as it (the 9A owner) has a direct legal interest in the outcome, and joinder would avoid the potential for multiplicity of proceedings with possibly conflicting results if the IO were to fail in the appeal and then commence fresh proceedings against the 9A owner for removal of the window frames.

13.2. Mr Chan Chi Hung SC leading counsel for the IO[16], submitted that:

(1) joinder of the 9A owner would in effect give the 2A owner a “concurrent” right to sue a co-owner, when the intention of s.16 BMO was to give the IO the exclusive right to sue owners for breach of a DMC;
(2) in any event, as the LT case has concluded, it is now too late at the stage of appeal to join the 9A owner.

Discussion

14. I shall discuss submission (1) first. It is noted that Mr Chan Chi Hung does not dispute that the LT had the power to join the 9A owner as a third party, whether on application of the IO or on its own motion. However, he said that it should not exercise that power as that would be contrary to the legislative intention of s.16 BMO, suggesting that this court’s judgment in See Wah Fun supported this submission.

15.1. With respect, the legislative intent of s.16 BMO is that a co-owner (such as the 2A owner) is not permitted or required to sue another co-owner (such as the 9A owner) when the complaint concerns common parts. If one co-owner considers that another co-owner has used a common part, he should take up his complaint with the IO, and if he considers that the IO has, in breach of its duties, failed to take action against the offending co-owner, then he can issue proceedings against the IO to compel it to do so. This was the ratio of this court’s judgment in See Wah Fun.

15.2. However, that does not mean that an IO cannot or should not issue third party proceedings against the offending co-owner. The third party procedure does not give the complaining owner any “concurrent” right to sue the offending co-owner. The right to sue the offending co-owner still remains with the IO “exclusively” in accordance with s.16 BMO.

16. Mr Chan Chi Hung was unable to point to any part of this court’s judgment in See Wah Fun which militates against an IO’s use of the third party procedure. The IO’s argument in that case was more fundamental - it was that the complaining co-owner simply had no right at all to sue the IO to compel it to take action, which argument this court rejected.

17. Of course, there may be cases in which the claim of the complaining owner is such that an IO may safely take the view that the claim has nothing to do with any particular co-owner, in which case the third party procedure would not be applicable. However, in the present case, the third party procedure seems to be especially appropriate since: (a) the window frames were installed by the 9A owner on common parts, (b) it would appear to be the IO’s case that it had waived the 9A owner’s breach (thus pre-supposing a breach), and (c) the validity of the alleged waiver is disputed (on grounds set out in the Notice of Appeal).

18. Mr Chan Chi Hung’s suggestion that if the IO fails in the LT’s case, it can then issue fresh proceedings against the 9A owner, is most unattractive. It would entail multiplicity of actions, and same or similar questions would be tried twice, with the risk of inconsistent findings of fact. This would also entail a waste of judicial time and manpower, which would be contrary to the spirit of the Civil Justice Reform.

19. For the above reasons, I rejected the submission that joinder of the 9A owner in the LT case under the third party procedure would have been against the policy or rationale of s.16 BMO.

20. As for submission (2), there is no procedural bar to an entity being joined as a party at the appeal stage[17]. Mr Chan Chi Hung submitted that the 9A owner would suffer prejudice if it were to be joined as party to the appeal. However, no evidence has been adduced in support of this submission which is made on behalf of the IO. As for the 9A owner itself, it had been made aware of the LT case[18] as well as this joinder hearing, and it has chosen not to attend, or even to set out in its correspondence[19] what prejudice it would suffer if it were to be joined.

21. As for Mr Chan Chi Hung’s argument that the 9A owner might have some factual evidence in its favour, that will be a matter for the hearing of the appeal, at which time such orders may be made as appropriate after hearing all the parties.

22. Accordingly, submission (2) also failed, and the order at para.6 above was made.

Hon Chu JA:

23. I agree with the Reasons for Judgment given by Yuen JA.

(Maria Yuen)	(Carlye Chu)
Justice of Appeal	Justice of Appeal

Mr Abraham Chan SC, Mr Lawrence K F Ng, Mr Henry Cheng and Mr John Leung, instructed by C W Chan & Co, for the applicant

Mr Chan Chi Hung SC, Mr Lewis Law and Mr Lok Ho, instructed by Leung, Tam & Wong, for the respondent

[1] Judgment, para.7.

[2] Judgment, para.8.

[3] Judgment, para.9.

[4] Judgment, para.10.

[5] This translation of the application in Chinese is taken from the Notice of Appeal.

[6] Approval required for building works.

[7] Conversion or use of common parts.

[8] Bundle p.222.

[9] Judgment, para.14.

[10] Bundle p.237.

[11] Judgment, para.17. (The report was not included in the appeal bundle).

[12] [2000] 3 HKLRD 403.

[13] [2003] 3 HKLRD 1.

[14] which practice and procedure applies to the Lands Tribunal: s.10(1) Lands Tribunal Ordinance.

[15] with Mr Lawrence KF Ng, Mr Henry Cheng and Mr John Leung.

[16] with Mr Lewis Law and Mr Lok Ho.

[17] Ming An Insurance Co Ltd v Chan Man Dun and anor CACV96/2005, 15.3.2006.

[18] Mr Patrick Siu’s written submissions 22 May 2019.

[19] 2 March 2021, 9 July 2021.

CENTRE CHASE INVESTMENT LTD v. THE INCORPORATED OWNERS OF CASTLE PEAK ROAD INTERNATIONAL INDUSTRIAL BUILDING AND ANOTHER

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