THE INCORPORATED OWNERS OF PERCIVAL HOUSE v. FUSION ADVERTISING SOLUTION LTD

LDBM 59/2011

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 59 OF 2011

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JUDGMENT

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1.  The applicant is the owners’ corporation of Percival House, Nos. 77, 79, 81 and 83 Percival Street, Hong Kong (“the Building”). The respondent paid the owners of Units 1C and 2C of the Building to use the external wall of the Building for advertising business. There is no dispute that the respondent erected a metal frame at the external wall of the Building for the purpose of placing advertisements.

2.  On 6 January 2012, the respondent consented to have judgment entered against it in that the respondent was ordered to demolish the advertisement signs erected at the external wall of the Building on or before 29 February 2012.  There is no dispute that the respondent occupied the external wall for a total period of 32 months.  However, the respondent disputed with the applicant on the quantum of damages payable to the applicant and hence the hearing on quantum was adjourned to a date to be fixed.

3.  The assessment of damages was heard by me on 11 June 2012 and the parties agreed at the hearing that there is only one issue for me to determine, namely whether the amount of damages payable to the applicant should be nominal, or whether the applicant is entitled to mesne profits for the wrongful occupation of the external wall of the Building by the respondent.  Should I find that the applicant is entitled to mesne profits, the parties agree that the amount thereof is in the sum of $1,844,500.00.

4.  In the respondent’s written skeleton submissions, the respondent submitted as its secondary position that the applicant is not entitled to damages by way of mesne profits for the whole period of 32 months because there was a considerable delay on the part of the applicant in starting and prosecuting the present action.  However, as the respondent now agrees that the amount of the mesne profits is $1,844,500.00 once I have determined that the damages is not nominal, it is not necessary for me to decide anything on the respondent’s secondary position.

5.  The only issue raised on whether the applicant is entitled to mesne profits is purely a legal one.  Thus, the parties did not call any witness or adduce any evidence, save that the respondent has produced the Deed of Mutual Covenant of the Building (“the DMC”).  The parties have also submitted some agreed facts as follows:-

“1. The Respondent had wrongful [sic] occupied the external wall of Percival House for a period of 32 months between 16.07.2009 to 15.03.2012 for the purpose of advertising business.

2. R paid the owner of unit 1C and unit 2C of Percival House for occupying the wall. R has now commenced proceedings against the owners of unit 1C and unit 2C for indemnity and damages for misrepresentation.

3. If the Tribunal makes an award for damages other than nominal, the method of calculating the market rental of the external wall shall be as follows:

· For the period between 16.7.2009 to 30.06.2010 (total 11.5 months)

market value = $26000 x 11.5 x 2

= $598,000

· For the period between 01.07.2010 to 31.03.2011 (total 9 months)

market value = $29,000 x 9 x 2

= $522,000

· For the period between 01.04.2011 to 15.03.2012 (total 11.5 months)

market value = $31,500 x 11.5 x 2

= $724,500

Total market value = $1,844,500 ($598,000 + $522,000 + $724,500)

4. The Respondent intends to rely on the DMC of Percival House.”

6.  The respondent contends that the applicant suffered no damages from the respondent’s use of the external wall, and the applicant cannot use the external wall for any purpose as it together with the owners of the Building are prohibited from constructing or erecting any article or structure projecting from the external wall by virtue of clause 12 of the DMC.  The applicant is duty bound to enforce the DMC and cannot act contrary to the DMC (section 18(1)(c) of the Building Management Ordinance (“the BMO”) and Yu Chau Yeung v Incorporated Owners of Yee Hong Building, LT Case No. BM 76 of 1995 cited with approval in Merry & Kent: Building Management in Hong Kong, 2^nd ed, p 207).  The applicant’s claim for damages, being compensatory in nature, cannot flow from the respondent’s use of the external wall as the applicant cannot rent out the external wall to any third party in any event without contravening the DMC.  In the absence of an express stipulation in the DMC as to the use of the external wall, the external wall as common area has to be maintained solely for the common enjoyment with unrestricted access of all owners of the Building. Renting out the external wall will deprive the owners of their common enjoyment.  Thus, the respondent submits that the applicant has not suffered any loss or damages, or if any, the applicant has suffered nominal damages only.

7.  On the other hand, the applicant contends that it is misconceived for the respondent to argue that the applicant suffered no loss because it could not have used the external wall as the respondent had used it.  As stated in Attorney General v Blake and Another [2000] UKHL 45, the principle that the defendant is bound to pay 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 has been established and is not controversial.  It is not open to the respondent to say that the applicant suffers no loss and thus no damages is payable.  In any event, having a metal frame installed at the external wall, thus defacing the Building, is itself a detriment to the owners of the Building.  The owners could not use the external wall in the manner which they wished, ie an appearance free of structures.  Thus, there is no reason why the applicant should not be allowed mesne profits for the entire period which the respondent wrongfully occupied the external wall.

8.  Having considered the submissions of both parties carefully, I am of the view that the applicant is entitled to mesne profits as claimed.  Lord Nicholls’ judgment in Attorney General v Blake and Another, supra, has in fact succinctly set out the common law principle as follows:-

“So I turn to established, basic principles. I shall first set the scene by noting how the court approaches the question of financial recompense for interference with rights of property. As with breaches of contract, so with tort, the general principle regarding assessment of damages is that they are compensatory for loss or injury. The general rule is that, in the oft quoted words of Lord Blackburn, the measure of damages is to be, as far as possible, that amount of money which will put the injured party in the same position he would have been in had he not sustained the wrong: Livingstone v. Rawyards Coal Co. (1880) 5 App. Cas. 25, 39. Damages are measured by the plaintiff’s loss, not the defendant’s gain. But the common law, pragmatic as ever, has long recognized that there are many commonplace situations where a strict application of this principle would not do justice between the parties. Then compensation for the wrong done to the plaintiff is measured by a different yardstick. A trespasser who enters another’s land may cause the landowner no financial loss. In such a case damages are measured by the benefit received by the trespasser, namely, by his use of the land. The same principle is applied where the wrong consists of use of another’s land for depositing waste, or by using a path across the land or using passages in an underground mine. In this type of case the damages recoverable will be, in short, the price a reasonable person would pay for the right of user: see Whitwam v. Westminster Brymbo Coal Co. [1892] 2 Ch. 538, and the ‘wayleave’ cases such as Martin v. Porter (1839) 5 M. and W. 351 and Jegon v. Vivian (1871) L.R. 6 Ch. 742. A more recent example was the non-removal of a floating dock, in Penarth Dock Engineering Co. Ltd. v. Pounds [1963] 1 Lloyd’s Rep. 359.

…

This principle is established and not controversial.  More difficult is the alignment of this measure of damages within the basic compensatory measure.  Recently there has been a move towards applying the label of restitution to awards of this character: see, for instance, Ministry of Defence v. Ashman [1993] 2 E.G.L.R. 102, 105, and Ministry of Defence v. Thompson [1993] 2 E.G.L.R. 107.  However that may be, these awards cannot be regarded as conforming to the strictly compensatory measure of damage for the injured person’s loss unless loss is given a strained and artificial meaning.  The reality is that the injured person’s rights were invaded but, in financial terms, he suffered no loss.  Nevertheless the common law has found a means to award him a sensibly calculated amount of money.  Such awards are probably best regarded as an exception to the general rule.”

9.  The above judgment shows clearly that the respondent, as trespasser to the applicant’s property, is liable to pay damages to the applicant measured by the benefit received by the respondent, ie by its use of the external wall of the Building, even though the applicant suffered no financial loss.  The measure of damages in this type of cases is not compensatory but based on the price a reasonable person would pay for the right of user.  As mesne profits do represent the price a reasonable person would pay for the use of a property, it is the right damages that the applicant is entitled to recover from the respondent (see also Clerk & Lindsell on Torts (20^th ed), paragraph 19-73, HSBC Private Trustee (Hong Kong) Ltd v Au Yeung Chung, HCA 1662 of 2001 and The Incorporated Owners of Tai Tat Building v Leung Koon, HCA 1931 of 2002).

10.  Thus, it is wrong for the respondent to insist on paying nominal damages to the applicant.  It is irrelevant whether the applicant itself is prohibited by clause 12 of the DMC to construct or erect any article or structure projecting from the external wall of the Building or whether it has any intention to rent out the external wall to any third party, as the measure of damages in this type of cases is not compensatory in nature.

11.  As I have held that the applicant is entitled to claim mesne profits, not nominal damages, and the parties have agreed that the amount of mesne profits is in the sum of $1,844,500.00, I therefore assess the amount of damages to be in this sum.

12.  Accordingly, I order as follows:-

(1) The respondent do pay the applicant damages for wrongful occupation of the external wall of the Building assessed at $1,844,500.00.

(2) Costs order nisi: The respondent do pay the applicant costs for the assessment of damages to be taxed on High Court scale with certificate for counsel, if not agreed.  If there is no further application on costs within the next 14 days, this costs order nisi shall become absolute.