THE INCORPORATED OWNERS OF HONG YUEN COURT v. DUGAR SHISHIR AND DUGAR SAROJ AND ANOTHER

LDBM 89 & 90/2012
(Heard together)

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 89 OF 2012

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IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 90 OF 2012

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BETWEEN

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J U D G M E N T

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1. By the present applications, the Incorporated Owners (“IO”) of Hong Yuen Court brought actions against certain owners to remove unauthorized/illegal structures, which were allegedly erected in breach of the Deed of Mutual Covenants (“DMC”) and the Building Management Ordinance, Cap 344 (“BMO”) and Buildings Ordinance, Cap 123 (“BO”).

Background and the 2 Applications

2. Hong Yuen Court, with street address of Nos. 1, 3 & 5 Tak Shing Street, was built in 1980. The applicant was incorporated on 26 October 1994. In recent years there have been complaints that concrete fragments have fallen onto the ground. Ground floor shop owners also complained that there was serious water seepage from the flat roof into their units. The water seepage is so serious that metal trays need be installed below the ceiling to catch the water dripping down. When it was over 30 years old, the IO, by a general meeting of owners held on 8 December 2010, resolved that a contractor should be engaged to carry out major repair and renovation to the building.

3. In preparation for the repair and renovation work, inspection of the building was conducted. It was then discovered a number of unauthorized structures and/or building works were present in some flats and on the flat roofs. A consultancy company called Sky Pacific Architect & Surveyors Consulting Ltd (“Sky Pacific”) was engaged particularly to do a survey of the illegal structures/unauthorized works on the flat roofs of the building and the first report was prepared in December, 2011. Another report dated 28 December 2012 was prepared.

4. Some of these structures/building works are found in flats owned by owners and some at common areas e.g. extension on the parapet walls of the building. It is the applicant’s case that the presence of these structures constitutes breach of certain provisions of the DMC. In addition, those found in the building’s common parts affect their enjoyment by other co-owners. Common facilities, e.g. gas pipe are being covered in contravention of the relevant gas safety statutes and posing a safety hazard to other co-owners of the building. The applicant considered it under a statutory duty under section 18(1)(a) of the BMO to maintain these common areas in a state of good and serviceable repair and clean condition. Some are even subject to building orders issued by the Buildings Department (“BD”). The applicant considered it under a statutory duty to carry out or cause to carry out the remedial works to common areas under section 18(1)(b) of the BMO. The applicant requested demolition but despite demand and/or requests, a numbers of owners still refused to rectify, and thus the applicant took out the present 2 applications. The applicant ask for:

i)   An injunction against each of the respondents to remove all authorized structures from their flats and/or the common part affected, and to rectify all affected/damaged  parts forthwith;

ii)  An order that the applicant is entitled to remove all these authorized structures/works if the respondents fails and/or refuse to rectify the affected/damaged parts according to the injunction; and

iii)  Loss and damages for violating the DMC.

5. Two applications, namely LDBM 89/2012 (“1^st application”) and LDBM90/2012 (“2^nd application”) were taken out for the simple reason of catering for the different languages the respondents speak. Pursuant to direction of HH Judge Ko on 20 December 2012, the 2 applications were to be tried together.

6. After the Applications, the applicant is able to settle with the 1^st and 3^rd respondent in 1^st application, and 1^st, 3^rd and 5^th respondents in the 2^nd application. Proceedings against them have been discontinued.  Subsequently, the 2^nd and 4^th respondents in the 2^nd application have removed the alleged unauthorized/illegal structures, and action against the said 2^nd respondent was also discontinued on 8^th August 2014 with costs to be adjudicated after the outcome of the applications was known. The 4^th respondents in the 2^nd application showed no appearance after their costs with the applicant up to 15 May 2013 were resolved that date. According to Mr. Ho of counsel for the applicant[1], the 4^th respondent is willing to submit to the judgment to be made herein.

7. Accordingly, only the 2^nd respondent in the 1^st application and the 6^th and 7^th respondents in the 2^nd application are actively defending the present applications. For convenience, they are referred to as R2, R6 and R7 respectively in this judgment unless otherwise stated.

8. The applicant was incorporated on 26 October 1994 under the BMO. R2, R6 and R7 are the current owners of all the 4 units on the 1^st Floor of Flat B of the building. Hong Yuen Court is a composite building comprising two 17-storeyed contiguous residential blocks standing on a podium, ground floor shops and basement car parks. The units in one residential block are designated Flats A and the other Flats B. The podium roof becomes the flat roof, and a substantial part of it is designated to be exclusively enjoyed by owners on the 1^st floor. Each floor of the same block consists of 4 units connected by a common staircase but the two blocks are otherwise not connected. The units concerned in the present applications are all located on the same floor of the same block of the building, namely the 4 flats on the 1^st Floor designated Flats B1, B2, B3 and B4.

9. The building has an unusual history. Most of Rs’ primary grounds of defence are raised relying on this unusual background.

10. On 2 October 2013, HH Judge Ko made a decision on whether amendments proposed to be made to the pleadings should be allowed. For the purpose of the matters before the learned judge the parties then agreed on certain facts touching upon the building’s history[2]. They are also useful background for the present purpose, and are repeated below, with additional relevant facts which are basically not in dispute:

i)   The land on which Hong Yuen Court was built was originally held under 4 Government leases[3] (collectively called “the Old Government Leases”). Each of the Old Government Leases had a term of 75 years commencing on 25 June 1915. None of the Old Government Leases contained a right of renewal for a further term.

ii)  On 7 August 1980, the developer entered into a DMC with the first purchaser who acquired from the developer undivided shares in the leasehold estates held under the Old Government Leases (“1980 DMC”).

iii)  The Old Government Leases expired on 24 June 1990.

iv)  On 28 June 1993, the Government granted a new lease with a new lot number, namely, Kowloon Inland Lot No. 11009 respecting Hong Yuen Court (“the New Government Lease”) to the Financial Secretary Incorporated (“FSI”) for a term commencing 25 June 1990 and expiring 30 June 2047. The New Government Lease covers a smaller area of land than the Old Government Leases and with a slightly different layout.

v)  On 3 September 1993, the FSI entered into another DMC (known as the “1993 DMC”) with the first assignee who acquired undivided shares in the leasehold estate held under the New Government lease from FSI. The FSI thereafter similarly assigned the undivided shares to other owners at nil consideration subject to and with the benefit of the 1993 DMC. It made no reference to the 1980 DMC. Surprisingly, despite the fact there was a plan attached to each of the first assignments marking the boundary of units assigned (“old assignment plan”), all assignments from the FSI to individual owners did not contain any plan to which the assignments related nor have they made reference to such plans.

vi)  The same number of shares was designated to each residential unit in Hong Yuen Court under the 1980 DMC and the 1993 DMC, save for the basement for which 70 shares was assigned under the 1980 DMC whereas 2 shares were assigned to each of the 35 car parking spaces in the basement under the 1993 DMC.

vii)  At least one of the units in Hong Yuen Court (i.e. Flat A1 on 14/F) was assigned by the FSI to a person who was not the owner of the corresponding unit before the New Government Lease was granted.

11. HH Judge Ko considered the 1980 DMC has expired and should have no effect when the Old Government Leases expired with unity of ownership. He gave a reasoned decision[4]. Only amendments relating to the 1993 DMC were allowed. Those relating to the 1980 DMC were rejected. Since no appeal was lodged in respect of the said decision, the applicant now proceeds against the Rs under the 1993 DMC.

12. In the present case,

i)   R2 has since 19 February 1987 been the registered owner of Flat B4, 1^st Floor (together with the adjacent flat roof thereof) of Hong Yuen Court (“Flat B4”) though the family has since 1984 lived there. By an assignment dated 8 December 1993, R2 was assigned by the FSI the undivided shares. She derived her title to Flat B4 directly from the FSI.

ii)  By an assignment dated 17 May 1995, the FSI assigned the undivided shares together with right to the exclusive use of Flat B1, 1^st Floor (together with the adjacent flat roof thereof) of Hong Yuen Court (“Flat B1”) to R6’s predecessor-in-title. R6 has since 15 December 1999 been the registered owner of half share of Flat B1 (as a tenant-in-common). By another assignment of 3 February 2004, R6 got the remaining interest and has thereafter become the sole owner of Flat B1. It is noted that the 2 separate assignments by which R6 got his interest do make reference to the old assignment plan (Memorial no. 1946992). R6 leased out his unit to a tenant since September 2010.

iii)  By an assignment dated 29 March 1995, the FSI assigned the undivided shares together with right to the exclusive use of Flats B2 and B3, 1^st Floor (together with the adjacent flat roof thereof) of Hong Yuen Court (“Flat B2 and Flat B3”) to R7’s predecessor-in-title. The latter sold his interest in the said 2 units to R7 by an assignment of 22 March 2010. Unlike the case of R6, this assignment made no reference to any plan. Since then R7 and his family occupied Flats B2 and B3.

13. By an Admission of Facts dated 24 December 2013, the parties agreed that all the structures/works now being complained of by the applicant, save and except a “glass house” and a “glass canopy”, existed prior to September 1993. The glass house standing on the flat roof of Flat B1 was built by R6 in or about 2005. The glass canopy extending out of Flats B2 and B3 was erected by R7 after they became the owner in 2010. The Rs admitted that had the structures (except the glass canopy and the glass house) been erected after September 1993, they would have constituted breaches of the 1993 DMC[5].

14. The applicant’s case against each of the respondents has been set out in its two applications re-amended on 11 October 2013. The structures under complaints and which the applicant asks for their demolition and rectification are listed in annexures identified by photographs. Each photograph is given an item number, which in fact is the item number referred to in Sky Pacific’s report. They are 16 in total. In order to avoid confusion, the same item number used by the applicant in the applications will be adopted here:

i)   4 items for R2 (Flat B4), identified as item 22, 23 24 and 25;

ii)  3 items for R6 (Flat B1), identified as items 10, 11 and 12; and

iii)  9 items for R7 (Flat B2 and B3), identified as items 13, 14, 15, 16, 17, 18, 19, 20 and 21.

15. At trial, the applicant’s witness Mr. Chan Shu Wing (“Chan”) testified that a partition wall existed between Flats B2 and B3 had been demolished in contravention of the 1993 DMC[6] though it is not mentioned in IO’s application. He marked on exhibit A-1 the position of the wall. However, the applicant adduced no expert evidence in support in this respect. Further, Chan admitted in cross-examination that he only knew of it from the consultancy report(s) he had ever read. He later admitted it was an inference drawn by him because there was a partition wall between all flats A and B, there ought to have been such wall between Flat B2 and B3. On the next day of trial he did not oppose to Mr. Ng’s suggestion that there was no such partition wall between Flats B2 and B3. Chan’s answer in this respect is unsafe. As there is no undisputed documentary evidence the tribunal does not consider this issue substantiated.

16. Mr. Ng has classified the aforesaid items into 5 categories in his opening submission. Some items may fit in more than one category and will accordingly be placed thereunder. For the purpose of this decision, his classification will be adopted and repeated below with certain additions extracted from the re-amended applications to reflect the provisions of DMC and BMO which the applicant says the Rs have breached.

Category I Structures

17. Structures grouped under Category I are concrete walls built on the top of parapet walls surrounding the flat roof. These additional walls are made of concrete and are of a few feet tall. From the outside the parapet walls together with the extensions appear to form one wall and are painted the same colour. The additional walls for Flat B1 (item 11, R6’s unit) and Flat B4 (items 22 and 23 of R2’s unit) are of the same design with big circular openings filled up with vertical bars. Between the circular openings there are vertical concrete planks. From photo item 22, it can be seen that some concrete has fallen off these planks, exposing the rusting steel bar inside. Item 22 is in fact a close-up of a part of item 23. So the two items basically refer to the one and the same addition which are absent from the building plans. Rs do not seek to deny.

18. Items 16 and 19 refer to the same add-on to the wall surrounding Flat B2 and Flat B3 (R7’s units). The additions along the parapet walls of Flats B2 and B3 are of different design from Flats B1 and B4 and are composed of vertical bars without the circular openings.

19. From the Rs’ Notice of Opposition and witness statements, the following was noted:

i)   R2 (Flat B4): It is R2’s undisputed evidence that the add-ons to the parapet walls were erected shortly before the building were completed and were there as early as 1984 or even 1982[7]. R2 admitted in her Notice of Opposition the boundary walls (items 22 and 23) form part of the common parts of the building, and R2 has not done any work to the said boundary walls since the date of the 1993 DMC[8], though she has incurred expenses to maintain the local extended parapet walls prior to the date of the said DMC[9]. From the tenor of Rhee’s evidence as well as R2’s Notice of Opposition R2 disagrees the additions to the parapet walls to be removed[10].

ii)  R6 (Flat B1): It is R6’s undisputed evidence that the additions to the parapet walls were in the present state when he first acquired the unit in December 1999[11]. It is pleaded that he has not done any work to the parapet walls since the date of the 1993 DMC[12]. According to the photos supplied by the IO[13] as well as by R6[14], the additions were on 3 sides of the parapet wall of the flat roof except the side away from the street. Like R2, it is pleaded that these boundary wall (including the add-ons) formed part of the common areas of the building since the date of the 1993 DMC[15]. However, from what has been said in the defence and R6’s statements, it is a fair conclusion that R6 disagrees the add-ons to be removed.

iii)  R7 (Flat B2 and B3): Like the other 2 Rs, the additions to the parapets walls existed long before the date of the 1993 DMC. From the photos items 16 and 19[16] as well as the marked photo exhibited by Li of R7, these 2 items comprise a right-angled parapet wall extending from Flat B2. Like the other 2 Rs, while R7 acknowledged the parapet walls with the additions form part of the common areas of the building[17], it is fair to say that R7 does not agree for the additions to the parapet walls to be demolished because they would afford less protection to their family.

Category II Structures

20. It is a fact that the assignments from FSI to individual owners make no reference to any plan but each of the old ones from the developer to the first owners did come with a plan identifying the boundary of the assigned unit (the old assignment plan). Category II structures refer to additional structures built on the flat roof within the boundary of the old assignment plans. It is not in dispute all additional structures were not shown on the approved building plans.

21. Since the IO produces no evidence as to the use the structures are now being put to, this tribunal accepts Rs’ evidence in this respect:

i)   R2 (Flat B4): Items 24 and 25 consist of enclosed structures together with canopy built on the flat roof of Flat B4. Item 24 has become part of the bedroom, living room and kitchen[18], whereas item 25 has been used as a shower room[19].

ii)  R6 (Flat B1): Item 10 is an enclosed structure with canopy extended from the front portion of Flat B1. It has been used as the extended part of the living room and the kitchen[20]. There is also an enclosed metal-frame glass house standing on the side of the flat roof next to Flat B4.

iii)  R7 (Flats B2 and B3): Item 18 is an enclosed structure extended from the living and dining room of Flat B3 up to about the boundary wall of its bedroom. The entire structure forms part of the living room of Flats B2 and B3[21]. On the outside there is a metal-framed glass canopy. This canopy runs the entire length of the extended frontage of Flats B2 and B3. The part of the canopy outside Flat B2 is item 15 grouped under category V. Item 21 is an enclosed structure extending from the bedrooms of Flat B3 onto the flat roof up to the parapet wall. It forms part of the living room of Flats B2 and B3[22].

22. Necessarily, external walls of the building, which are common parts, are now being enclosed for Rs’ exclusive use, although there is no positive evidence from the IO on the extent the external walls are affected. Given the use the structures are now being put to by Rs as aforesaid, the tribunal comes to a finding that some of the external walls have been removed or tampered with. In any event they have been enclosed by Rs for their exclusive use. Section 34I of the BMO provides:

“(1) No person may-

(a) covert 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 buildings; 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.”

23. Rs do not produce any resolution of owners’ committee. These provisions of the BMO are apparently offended.

Category III Structures

24. Category III structures refer to additional structures built on the flat roof outsidethe boundary shown in the old assignment plans. There is a small space on the part of the flat roof between Flats B1 and B2. The entire space was enclosed and with canopy and windows, and basically shared by the units owned by R6 and R7. Mr. Ng agreed at the commencement of trial that if not for the strange history of the building category III structures would have remained on the common parts of the building.

i)   R6 (Flat B1): Item 12 is an enclosed “concrete house”[23] occupied about half of the aforesaid space. This structure extends from a bedroom of Flat B1 running from the external wall of the staircase to the front end of the window of the same bedroom. Pipes of the building as a result need be re-diverted. It is used as a shower room by R6[24].

ii)  R7 (Flats B2 and B3): Adjacent to the item 12 mentioned in the preceding sub-paragraph is item 13 of similar structure extended from Flat B2 owned by R7. According to R7, it has been used as part of his kitchen[25]. Item 14 is called a “Concrete House” by R7 and was built on a part of the flat roof outside the bathroom of Flat B2. According to R7, it encloses about 12 square feet and is used as a shower room[26]. As a result pipes going through that part of the building need be re-diverted.

Category VI Structures

25. It is the applicant’s case that as a result of the modification to the flat roof of Flats B2 and B3 owned by R7, drainage pipes had been modified by them. Items 17 and 20 are under this category. Item 17 originated from Flat B2 whereas item 20 from Flat B3.

Category V Structures

26. These structures are made of glass fitted to metal frames. Both R6 and R7 admitted that they were built after the 1993 DMC.

i)   R6 (Flat B1): Part of item 10 is an enclosed metal-framed glass house. According to R6 it was erected in late 2005 “as a decoration for the better enjoyment of the flat roof[27]”. The structure, made of aluminium frame and glass panels, is said to be sitting on the flat roof on its own weight. R6 testified at trial that inside the glass house there was a sofa. It opened to the unenclosed flat roof with 4 sliding doors. R6 said it can also be used to hang-dry garments. The family can be protected from cigarette ends and garbage thrown down when they stayed on the flat roof. He said the structure was fixed in position using screws fastened to outer walls of the building.  

ii)  R7 (Flats B2 and B3): Item 15 and item 18 (part) in fact refers to one and the same metal-framed glass canopy attaching to and running along the extended frontage formed by item 15 (outside Flat B2) and item 18 (outside Flat B3)[28]. According to Li (one of the two named R7), the canopy was constructed by R7 after they had become owners of the units in March 2010. The canopy extended out by approximately 2.5 feet. Although Li said it extended from the “… original building concrete lip[29]”, according to applicant’s description stated in item 18[30], the part of the canopy running outside of Flat B3 was in fact attached to a structure which is also an illegal structure (Item 18, category II). According to Li, this canopy was made of steel frame and glass, and the same was fixed to the external concrete structure by screws in a way “similar to the hanging of pictures or household items to the interior walls of one’s flat”[31]. The way of attachment will be discussed in further details below.

The Defence

27. From what has been pleaded and set out in the final submission made on Rs’ behalf, they are putting up all possible defence that lawyers can think of with a view to preserve the structures which each of them are now enjoying. The Rs’ primary defence premised on the unique history of the building, namely, all illegal structures/works under complaint, except for category V structures, predated the 1993 DMC. For category V structures, Rs said they are fixtures and their erection does not constitute breaches of the 1993 DMC. In respect of categories I to IV, it is fair to summarize the grounds of the Rs’ defence as follows:

i)   It is common ground that all the structures complained of predated the 1993 DMC. Rs, therefore, could not have since the date of the DMC, i.e. 3 September 1993, done anything in contravention of the various covenants contained in the 1993 DMC which only existed after the breaches, though these structures remain unauthorized infringing the BO.

ii)  There are no plans attached to the assignments from FSI to owners to delineate the boundary of the respective units assigned for their exclusive use and enjoyment. On a true construction of the 1993 DMC and FSI assignments, the parties to these assignments must have intended objectively the areas physically occupied by the then owners as at the time of the FSI assignments to be the subject matter of these assignments. For categories II and III structures they have already formed an integral part of the units in question enjoyed exclusively by the Rs (or their predecessors in title) as at the time of the FSI assignments, and thus they should not be common parts within the meaning of the 1993 DMC. Structures torn down prior to the 1993 DMC could not have formed the common part of the building according to the 1993 DMC [32];

iii)  For categories I and IV structures, they formed an integral part of the boundary wall and the drainage systems of the building respectively upon the ownership of the building reverting to FSI. By reason of Schedule 1 of the BMO, which definition is adopted in the 1993 DMC, they become common parts of the building in 1993. Any repair/rectification works to be done should be the IO’s responsibility and at the IO’s expenses[33];

iv)  For complaints that certain gas pipes were enclosed by structures (for R2’s and R6’s units), since these enclosures were made prior to 1993 and not by Rs, they should not be made liable for breaching the 1993 DMC. The Rs have not done anything in relation to categories I and IV structures, and accordingly, the mere existence of those structures in the Rs’ units after September 1993 would not constitute any breach of the 1993 DMC. Although the IO is responsible for maintenance of gas pipes which is common parts, the IO should not have insisted on removing the enclosures for this purpose. The IO should take steps to relocate them to exposed position as suggested by the gas company and the IO’s expert[34]. Failure to do so is a breach of duty on the part of the IO[35];

v)  Section 18(1)(b) of the BMO only imposes an obligation on IO to comply with work orders in respect of common parts of a building. Since the building orders were directed against Rs, not the IO, in respect of structures within Rs’ unit, Rs’ case is that the reliance on the said provision of the BMO misconceived[36]; and

vi)  For category V (R6 and R7 only), the Rs’ primary position is that the structures are permitted under clause 28 of the 1993 DMC because the additional structures are non-structural in nature and have not caused any structural damage to the building.

28. As a fallback, the Rs rely on the doctrine of laches and contend that it will be unjust and inequitable to grant a mandatory injunction against the Rs as it is too late for the applicant to enforce its rights.

29. At the commencement of trial this tribunal raised to the parties that, apart from the provisions of the 1993 DMC which the applicant said the Rs have breached, whether there has also been breaches of clause 40 of the said DMC. Clause 40 is a covenant by owners to comply with the terms and conditions of the New Government Lease. Clause 4(3) of the New Government Lease provides that the lessee shall from time to time keep the buildings erected on the said piece of land in accordance with the building plans approved under the BO and regulations together with all subsequent amendments. Clause 4(15) of the said lease is a covenant that any building erected or to be erected should comply with the BO and regulations made thereunder.  Both Mr. Ho of counsel for the applicant and Mr. Lui agreed to deal with this issue in their closing submissions.

30. Lengthy written submission on Rs’ behalf dated 22 October 2014 was subsequently lodged by Mr. Ng. The gist of his submission, so far as can be discerned from his written submission, is as follows:

i)   On a proper construction of the 1993 DMC, clause 40 of the 1993 DMC only requires the parties to comply with the terms and conditions of the New Government Lease as from the date of the lease. It does not cover any past breaches of the lease which had occurred before the 1993 DMC was made[37];

ii)  Further or alternatively, it is Rs’ case that any breach of the New Government Lease has been waived by the Government[38];

iii)  Clause 40 of this 1993 DMC is a positive covenant. The owners (including the Rs) take free from breaches of this clause 40 committed by FSI for reason that breaches of positive covenants will not pass to assigns in law[39];

iv)  Alternatively, if FSI’s breach does pass, every owner will be in breach of clause 40 of the 1993 DMC when taking up the FSI assignment. The IO, being the corporate embodiment of all owners of the building, is also itself in breach of clause 40 of the 1993 DMC. It is submitted that the IO should not be allowed to rely on its own fault to sue Rs, at least in respect of categories I to IV. The IO should have demolished these structures at its own expenses, but it never proposed to the Rs that it would take such course[40]; and

v)  Further or alternatively, the IO, being a party in breach of clause 40, is not entitled to the equitable relief of injunctions as it does not come to court with clean hands. It is submitted that it would be inequitable that the responsibility to remove the illegal structures falls on the Rs instead on all owners[41].  

The Evidence

31. There are 4 factual witnesses attending court to testify. They are:

i)   Mr. Chan Shu Wing (“Chan”) who is a member of the management committee of the IO. He gives evidence for the applicant. He made 2 witness statements both of 14 March 2014. He relied on these statements with certain top-up at trial;

ii)  Mr. Rhee Byung Wook (“Rhee”) who is the husband of R2. He made and relied on his 2 statements of respectively 26 March 2013 and 18 March 2014;

iii)  Mr. Lee Man Wai who is R6 (“R6”). He signed 2 statements respectively of 26 March 2013 and 18^th March 2014 and relied on them as his evidence; and

iv)  Mr. Li Bark Shing (“Li”) who is one of the 2 named R7. The other named R7 is his wife. He made 2 statements of respectively dated 26 March 2013 and 18^th March 2014. He basically relied on his statements as evidence in chief.

32. This case turns on a matter of construction of documents and their legal effects. The evidence of the witnesses is basically unchallenged save and except some minor areas which the tribunal will discuss when the factual dispute arises. This tribunal also finds them generally honest. Unless otherwise stated herein, their evidence will be accepted.

Discussion

Category V Structures (R6: item 10[part]; R7: items 15 & 18[part])

33. It is not in dispute that they are erected on or over the respective portion of the roof of which R6 or R7 have exclusive possession. The question is whether their erection contravenes the 1993 DMC.

34. Mr. Ng relies on clause 28 of the 1993 DMC which reads:

“Each of the parties hereto may at his own expense make any non-structural improvement inside the part of the said building of which he is entitled to the exclusive use occupation and enjoyment such as mantels lights fixtures wooden work panelling doors or decoration which can be fixed and removed without any structural alteration or damage to the said building and such party shall have the right to remove the same at his own expense.”

35. He submits Category V structures fall within the meaning of “… mantels lights fixtures wooden work panelling door or decoration.”

36. He relies on the meaning of fixtures defined by The Oxford English Dictionary, 2^nd edition:

“… anything fixed or securely fastened in position; anything made firm, stable or immobile”

37. Mr. Ng, submitted since they are non-structural fixtures inside the part of building of which R6 and R7 have exclusive use occupation and enjoyment, and which can be fixed or removed without any structural alternation or damage to the building, they are permissible under clause 28 of the 1993 DMC. There is therefore no breach of clause 31(a), (b) and (d)[42].

38. Clause 31(a) and (d) of the 1993 DMC provides:

“Each of the parties hereto shall not: -

(a) make any structural alterationto the part of the said building of which he is entitled to the exclusive use occupation and enjoyment or remove or make any alteration in the main water gas or steam pipes electrical conduits or plumbing or any fixtures and fittings forming part of or used for the main services of the said building or cut or injure any of the floors walls or beams of the said building.

(b) …

(c) …

(d)  construct or erect any article or structure projecting from or alter the appearance of the exterior of the said building.”

39. In the tribunal’s judgment, clause 31(a) can be divided into 3 limbs, namely (i) not to make structural alteration to owner’s own unit; (ii) not to alter the utilities supply facilities of the building; and (iii) not to injure any floors walls beams of the building. The 2^nd limb is irrelevant for the purpose of category V structures.

40. In the Court of Appeal (“CA”) decision in In Incorporated Owners of Elite Garden v Profit More Co Ltd[43], the CA is dealing with a question of what amounted to “structural alteration”. Le Pichon JA accepted the meaning of “alteration” adopted by the English CA in Bickmore v Dimmer[44] to mean something which “alters the form or structure of the building”[45]; and the “form” of a building has to do with its appearance or visual aspect. A natural and ordinary meaning rather than some special or technical meaning have to be given to the word “structural” used in DMC for multi-storey buildings.  

41. In Incorporated Owners of Elite Garden there has been discussion of some English authorities[46] on the meaning of “structural” or “structural alteration”. Their natural and ordinary meanings involve:

“… interference with, or alteration to, the framework of the building”[47]

“… the fabric of the house as opposed to the provision merely of a piece of equipment. It matters not whether the fabric in question is load-bearing or otherwise, if there is any substantial, extension or addition to the fabric of the house …”[48]

R7’s Glass Canopy

42. Applying the above, with the word “structural” added, “structural alteration” seems to concern more with the alteration to or interference with the framework or fabric of the building. The fabric or element in question needs not be a load bearing one but if such is involved it must be a structural alteration. Items 15 and 18 (part) are made of glass with steel supporting frame[49]. According to the plan prepared by the contractor which this tribunal accepts to be the canopy’s measurement, it is 429 inches (i.e. 35 ft 9 inches) long and 48 inches (i.e. 4 ft) wide[50]. It is noted that certain part of the canopy sits below a concrete slab of the building. That is perhaps why R7 said it only protrudes out of the building by about 2½ ft despite the fact that its width is about 4 ft.

43. In the tribunal’s judgment, this steel frame[51] with a surface area of about 143 sq ft[52] is a huge structure at any rate.  It has a length of almost 36 ft and runs the entire frontage of Flats B2 and B3. Although there is no evidence as to the weight of this structure, common sense will tell steel and glass are heavy building materials totally different from other types of material such as wood, glass fibre, etc. In order to fasten this huge canopy to the wall, this tribunal believe steel screws will be driven into the load bearing elements of the building for support instead of simply attaching itself to the surface plaster or mosaic of the building. Reinforcement bars fixing the canopy to the upper part of the concrete slabs were put in place[53]. The canopy is a substantial addition and must have added substantial load to the building’s framework or fabrics, namely, the concrete elements to which it attaches. According to what has been accepted in the Incorporated Owners of Elite Garden, the fabric involved needs not be load-bearing in order to be a structural alteration. If it is annexed to the load-bearing elements it certainly must be a structural alteration. Obviously it also affects the building visually. In the tribunal’s judgment, the annexation of this canopy, though by screws to the building, is a structural alteration in breach of the 1^st limb of clause 31(a) of the 1993 DMC.

44. Having come to the conclusion in the preceding paragraph, clause 28 cannot help because this provision is only concerned with non-structural alteration or improvement. In any event, applying the ejusdem generis rule in construing clause 28, the fixtures contemplated are of same kind to “mantels lights … wooden work panelling doors”. In the tribunal’s judgment, this canopy of R7 is simply not of the same type as listed under clause 28.

R6’s Glass House

45. Certain part of item 10 is an aluminium glass house. It is R6’s evidence that the glass house sits on the roof “mostly” by its own weigh[54]. According to the quotation issued by R6’s contractor, the glass house has a canopy area of 201 sq ft and is about 9 ft high [55]. It is made of aluminium frame fitted with reinforced glass. From the plan annexed to R6’s statement, the glass house comprises the said canopy, 4 sliding doors as well as 2 vertical panel walls each of about 2½ ft wide next to the sliding doors. From the same plan, apart from the said sliding doors and the 2 vertical panels, the glass house does not have any other support[56]. This tribunal does not accept that it can sit properly and securely on the flat roof without support from the side-walls of the building. The allegation that it sits on the flat roof by its weigh is misleading. This tribunal believes that steel screws need be driven into the load bearing elements of the building in order to securely fix this huge structure onto the flat roof. It has to be remembered that this glass house has to withstand the adverse weather of Hong Kong particularly in summer when typhoons are not infrequent. The annexation of this structure, which is more massive and is expected to be heavier than the canopy, onto the flat roof and the building’s side-walls must fall within the meaning of “structural alteration”. It is a substantial load on the flat roof and the side walls and pertains to the structure of the building. It affects the building’s visual aspect as well.

46. R7 is therefore in breach of the 1^st limb of Clause 31(a). Clause 28 of the 1993 DMC, again, cannot help. The glass house obviously is a big structure not of the same kind contemplated in clause 28.

47. Mr. Ng relies on Bickmore in which the erection of a clock 4 feet in diameter on the external wall of a house by 6 iron bolts, each  driven into the stone to a depth of 6 inches, not amounting to “alternation”. Accordingly, submitted Mr. Ng, category V structures do not involve structural alterations.

48. Bickmore concerned with a covenant in a lease providing that the lessee “… would not make or suffer to be made any alteration[57]” to the demised premises without the previous written consent of the lessor. However, Bickmore should be confined to its own facts because in Bickmore, co-existence with the lease in question there was also a compromise agreement between the parties. By this compromise, the lessee was permitted to carry on business including that of a jeweller and watchmaker in a part of the demised house. It was considered necessary by the English CA that a line should be drawn on the construction of “alteration” otherwise it would operate to prevent a tenant to carry on his business from doing acts which are convenient and usual for a tradesman to do in the ordinary conduct of his business[58]. Erection of a clock for the defendant as a watchmaker was considered akin to affixing of signs for a watchmaker doing business in its ordinary course. To restrict the affixing of clock may mean not giving effect to the compromise. “Alteration” in the said lease should therefore held by the English CA not be literally construed.

49. This tribunal does not consider the facts of Bickmore can help. Both the canopy and the glass house are extension or addition to the fabric of the building from which they derive supports. They are structural alterations to the building.

50. As regards the 3^rd limb, the words of “cut” and “injure” carry the meaning of hurting, harming or causing of impairment to the building. No evidence on these aspects has been adduced by the applicant. In any event clause 31(a) will be breached if any of the 3 limbs is offended.

51. As regards whether category V structures will amount to breach of clause 31(b) of the 1993 DMC (i.e. affecting the validity of insurance), it will be discussed when the same question arise in the latter of this decision[59].

52. Regarding breach of clause 31(d) of the 1993 DMC, Mr. Ng refers to §5(c)(i) of the Notice of Reply in that the applicant pleads some, if not all of the structures in question “were not clearly visible at the street level” and “the IO was unaware of their presence”. Further, it is also submitted that since category V structures are permitted under clause 28 of the 1993 DMC, to adopt a strict construction of clause 31(d) will unduly restrict the Rs’ reasonable enjoyment of their units[60].

53. This tribunal cannot accept Mr. Ng’s submission. It is a matter of fact whether the canopy and the glass house have projected from or altered the exterior appearance of the building. It is unarguable that a 36 ft canopy protruding about 2½ ft out from the external wall of the building and a glass house of size over 200 sq ft and about 9 ft high “sitting” on the flat roof not altered the exterior appearance of the building. We are here not playing with semantics. Whether or not these structures can easily be seen from outside has nothing to do with whether the exterior appearance of the building has in fact been altered. In addition, in view of the tribunal’s ruling that erection of category V structures amounts to structural alteration, clause 28 is inapplicable.

54. That being the tribunal’s conclusion, it will be unnecessary for the tribunal to deal with whether the affixing of the two structures by screws to the boundary wall amounts to conversion of common parts for Rs’ own use.

Whether there is any breach of Clause 40 of the 1993 DMC

55. By Clause 40 of the 1993 DMC, owners of Hong Yuen Court covenanted with each other as follows:

“Each owner shall comply with terms and conditions of the Lease described in the Second Schedule hereto. [there is no dispute that the Lease referred is the New Government Lease]”

56. It is provided in Clause 4(3) & (15) of the Government Lease that the lessee, i.e. FSI, covenants with the Government that:

“(3) having built or rebuilt (which expression for the purpose of this Clause only shall refer to redevelopment of the said piece or parcel of ground as contemplated in Clauses 4(4) and (5) hereof) in accordance with the terms and covenants contained in the Lease the Lessee shall from time to time and at all time hereafter when where and as often as need or occasion shall require at the Lessee’s own proper costs and charges well and sufficiently Repair Uphold Support Maintain Pave Purge Scour Cleanse Empty Amend and Keep the messuage or tenement messages or tenements and all other erections and buildings now … standing upon the said place or parcel of ground and all the Walls Banks Cuttings Hedges Ditches Rails Lights Pavements Privies Sinks Drains and Watercourses thereunto belonging and which shall in any-wise belong or appertain unto the same in by and with all and all manner of needful and necessary reparations cleansings and amendments whatsoever the whole to be done in accordance with the building plans of the said messages or tenement messuages or tenements erections and buildings approved under the Buildings Ordinance and Regulations and any amending legislation without variation or modification thereto and all the terms and covenants contained in this Lease subject to any subsequent contractual variation of this Lease,

…

   (15)   subject to the terms and covenants contained in this Lease any building or buildings erected … on the said piece or parcel of ground or any part thereof shall in all respects comply with the Buildings Ordinance any regulations made thereunder or any amending legislations. (Emphasis added)”

57. Rs strenuously resist the application of clause 40 of the 1993 DMC or that part of the New Government Lease. After reading Mr. Ng’s written submission, Rs’ opposition can be summarized into the following 7 broad grounds.

First argument – Clause 4(3) of New Government Lease not applicable

58. Rs’ first argument is that clause 4(3) of the New Government Lease appears to premise on a building having been built in accordance with the Government lease, but the building at the date of the New Government Lease was not so built in the first place. So clause 4(3) is rendered inapplicable.

59. This tribunal cannot accept Mr. Ng’s said construction. It is the tribunal’s view that the timeframe for considering whether Hong Yuen Court having been built or rebuilt in accordance with the lease condition is when the building, or rebuilding, as the case may be, takes place, not the date of the new lease. It is a matter of fact whether or not Hong Yuen Court has been built in compliance of the new lease. It is this tribunal’s finding that Hong Yuen Court, when its construction was completed and ready for occupation in or about August 1980, had been built in accordance with the then BO and all regulations made thereunder. It is because no building will be allowed to be occupied unless the BA has considered all requirements of the BO and the subsidiary regulations thereunder have been satisfied. Occupation permit would then be issued under s.21 of the BO. In the tribunal’s view all post-war buildings in Hong Kong will not be allowed to be occupied unless and until they satisfied this requirement. There is also no reason to suggest the BA not law abiding in this respect. According to undisputed evidence, Hong Yuen Court was occupied when its construction was completed in or about 1980. It is therefore a reasonable and good inference, and this tribunal so accepts as a matter of fact, that when the building was completed and ready for occupation in or about August 1980, the building having been built in accordance with the then BO and regulations with occupation permits in respect of Hong Yuen Court issued. Rs put in no evidence to suggest otherwise. No other breaches of the New Government Lease are suggested by Rs. This tribunal therefore considers clause 4(3) is applicable.  

60. In the tribunal’s judgment, clauses 4(3) and (15) require the lessee to maintain Hong Yuen Court in compliance with the BO and its subsidiary legislations as may be amended from time to time. Necessarily, compliance of the approved building plans and removal of unauthorized structures so as not to offend the relevant statues is a must failing which it is a breach under both clauses. It has been the parties’ common grounds that categories I to IV structures are not erected in accordance with approved building plans. In the tribunal’s views, although the acts of erecting these unauthorized structures were committed prior to 1993, these breaches, being continuing in nature, survive the old land grants. If no steps have been taken to rectify these continuing breaches they remain breaches when the New Government Lease and the 1993 DMC take effect. The FSI’s obligations to maintain and keep the building maintained in accordance with approved building plans and the BO arose when the New Government Lease was executed. The owners were engaged and liability immediately arisen when they gave their covenants by executing the assignments. All assignments from FSI to the then owners are expressed to be subject to and with the benefit of the 1993 DMC and the New Government Lease. Further, subsequent assignees, including Rs, expressly covenanted that they will “perform and observe the covenants and conditions in the said Lease [i.e. the New Government Lease] and the said Deed of Mutual Covenants [i.e. the 1993 DMC] …” when taking up the assignments. When there are breaches of clauses 4(3) and 4(13) of the New Government Lease, there must a corresponding breach of clause 40 of the 1993 DMC.

Second argument - Clause 40 of 1993 DMC not pleaded

61. Mr. Ng also takes a preliminary issue in that clause 40 of the 1993 DMC has not been pleaded. However, it is provided in section 10(5)(a) of the Lands Tribunal Ordinance, Cap 17 (“LTO”) that proceedings in the tribunal shall be conducted with much informality as is consistent with attaining justice. Accordingly, even if a point has not been raised in pleading, this tribunal considers it can still take it into consideration provided no prejudice is done to the parties. In the present case, Rs basically admitted if the alleged works/structures complained of were built after the 1993 DMC, they would have been amounted to a breached of the said DMC. The Rs are raising arguments basically on law and as a matter of constructions of documents and not on facts. As a result, and this tribunal agrees, expert evidence is said by the parties to be unnecessary by consent. This clause 40 argument is one of the many legal arguments that can be raised from the circumstances. No factual investigation is necessary. Sufficient time has been given for parties to file written submission. As such this tribunal does not consider there is any prejudice to Rs by allowing clause 40 to be raised and argued.

Third argument - Clause 40 of 1993 DMC not applicable to past breaches  

62. Mr. Ng’s argument, so far as can be discerned from his submission[61], is this. The said structures, which failed to comply with the BO, existed in Hong Yuen Court prior to the 1993 DMC. The FSI was therefore immediately in breach of clause 4(3) and 4(15) of the New Government Lease when it was executed. All assignees of the FSI, including the 1^st assignee (who was a party to the 1993 DMC), would have taken the assignments subject to the breaches if clause 40 of the DMC is to cover past breaches.  Mr. Ng submitted that the parties (presumably he was referring to the FSI and all the then owners) could not have intended clause 40 to have this effect. Thus he says, on a proper construction, clause 40 only requires the parties to comply with the terms and conditions of the New Government Lease as from the date the said DMC and does not cover past breaches.

63. This tribunal disagreed. Mr. Ng’s argument in this respect is totally unconvincing and wishful. It is obvious from the terms of the New Government Lease that the lessee (FSI) has covenanted with the lessor (The Government) that he will comply with all laws and regulations, and in particular the BO, its subsidiary regulations and all subsequent amendments as may from time to time be made to them[62]. Further it has been expressly provided in clause 5(3) of the New Government Lease that:

“5. PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED that:

…

   (3)  this grant and demise of the said piece or parcel of ground to the Lessee shall not be deemed to constitute any waiver or relinquishment or otherwise prejudice the Government’s rights remedies or claims whether in respect of any breach non-performance or non-observance by the Lessee of any of the terms covenants and conditions contained herein which may exist at the date of commencement of this Lease or any structure or structures on the said piece or parcel of ground which is in contravention of the Buildings Ordinance and its regulations which may exist at the date of commencement of this lease and the Government shall be entitled at any time to take whatever action it shall deem fit against the said breach non-observance or non-performance or against the said structure or structures.”

64. Contrary to Rs’ contentions, by the aforesaid provision, the Government as lessor has made known its position and has expressly reserved its rights against any past breaches and non-performance on the part of the lessee which may exist as at the grant of the New Government Lease. There is no basis for Rs to say, in light of the Government’s said express statement, that the breaches have been waived. It is therefore merely Rs’ wishful thinking that past breaches or non-performance of the covenants and conditions of the New Government Lease are waived or not counted. Further, it is also difficult to envisage that the FSI, which derives no pecuniary benefit in the matter, will take upon itself all past breaches and does not pass obligations and consequence of past breaches on owners. This tribunal believes if the FSI and the owners were to intend past breaches not binding or passing, they would have spelt out their intention expressly and more clearly in the DMC and/or assignments. None can be found. The submission that clause 40 intends to cover past breaches is simply without basis.

Fourth argument – Breach of New Government Lease Waived

65. The Rs’ further and alternative position is that any breach of the New Government Lease has been waived by the Government. Mr. Ng’s line of argument is this. All new assignments from FSI respecting Flats B1 to B4 are in standard form and contain the following (on page 4):

“THE ASSIGNOR [i.e. FSI] DOTH HEREBY COVENANT WITH THE ASSIGNEE [individual owner] that notwithstanding any act deed or thing by the Assignor done or knowingly omitted or suffered the said Lease is now valid and subsisting and that the yearly rent reserved by and the covenants by the Assignor and the conditions contained in the said Lease have been paid observed and performed up to the date of these presents AND that the Assignor now hath good right to assign the premises hereby assigned free from incumbrances AND that the Assignee shall and may at all times hereafter during the residue of the said term peaceably and quietly possess and enjoy the premises hereby assigned and take the rents and profits thereof without any lawful eviction interruption claim or demand whatsoever from or by the Assignor or any person or persons lawfully or equitably claiming from under or in trust for the Assignor …” (emphasis added by Mr. Ng)

66. Mr. Ng submitted that FSI is an official of the Government and acts as its agent in discharging his public functions. In assigning units in Hong Yuen Mansion, the FSI was acting as agent in disposing properties belonging to the Government, rather than as a vehicle for the Financial Secretary to conduct his personal matters unrelated to his public functions. So, followed Mr. Ng’s submission, when assigning and expressing that the covenants of the New Government Lease have been performed and observed, the FSI, acting as the Government’s agent, has expressly waived any breach of the New Government Lease which have occurred prior to the new assignment. The assignees thereunder took the assignments free from any breach[63].

67. Though attractive, this tribunal is unable to accept this argument. When the Old Government Leases expired, the land reverted back to the Government[64]. The Governor as the land agent of the then Sovereign and in the capacity of a lessor had decided to grant a new lease not at a premium but an annual rent more particularly provided in the said lease. It would be convenient for someone stepping into the shoe of the first landowner to take up the new grant in the position of a lessee. As a matter of tradition and practice similar new grants were made to the FSI, or the Colonial Treasurer Incorporated in the past. The FSI is a corporate sole created by the Financial Secretary Incorporation Ordinance, Cap 1015 with capacity to hold land and power to assign and execute deeds. From what has been stipulated in the New Government Lease, it is meant to be a genuine lease arrangement. All the usual lessor-lessee covenants as well as covenants unique to the particular situation of Hong Yuen Court are there. The arrangement was with a view to benefit the then owners of Hong Yuen Court so that they could continue to stay there despite expiry of the original lease. If the terms and covenants of the lease are acceptable to the owners, the same units will be assigned to them by FSI subject to, inter alia, the New Government Lease. Accordingly the FSI is in the position of a lessee and not the Government’s agent, and therefore is in no position to waive anything which only the landlord has the power to do so. In addition, FSI cannot be acting as the Government’s agent in the transaction otherwise there is only one party to a lease, which is conceptually and legally impossible. The best the Rs can do is to challenge whether the FSI has breached any covenants given in the assignments.

68. Given the Government as lessor has expressly reserved its rights against the FSI as lessee respecting any breach of the New Government Lease and/or BO/regulations existing at the commencement of the New Government Lease[65]. This waiver argument is unarguable.

Fifth argument – Breach of positive covenants by FSI not passing to individual owners as a matter of law  

69. Mr. Ng’s argument is basically this. Clause 40 of the 1993 DMC by its very nature is a covenant positive in nature. It is because the FSI as grantee of the New Government Lease did not take any steps to rectify any breach of the BO and to make the unit comply with the approved building plans. It was a breach of clause 4(15)[66] of the New Government Lease. Therefore the other party to the 1993 DMC took the FSI assignments subject to the breach. Since both parties to the 1993 DMC need to expend money to restore the building when the said DMC was made, clause 40 of this 1993 DMC is therefore a covenant positive in nature. Rs’ case is that when the FSI assigned subsequent units to other owners, they (including the Rs) took free from breaches of clause 40 committed by FSI for reason that breaches of positive covenants will not pass to assigns in law. He relies on Discovery Bay Services Management Ltd v Buxhaum[67] in support of the proposition, particularly the following passage of HHJ Downey at p.10 (starting line 35):

“Be that as it may, I consider that s. 41 of Cap. 219 merely extends the common law and rules of equity to positive covenants and makes such covenants run with the land. But nothing in the section makes the persons against whom the covenant is enforceable liable for any breach thereof committed before they become bound by the covenant.) (Emphasis added by Mr. Ng)

70. In the tribunal’s view, the quote by Mr. Ng is out of context, and is misleading. Buxhaum concerned a defendant being sued for outstanding management fees covering a period when he was merely an occupier but had not yet an owner. Section 41 of the Conveyancing and Property Ordinance, Cap 219 (“CPO”) was engaged in the analysis. Immediately after the above quoted passage, HHJ Downey continued with his analysis and referred to s.41(5) which restricted the scope of s.41(2) of the CPO. The defendant in Buxhaum fell squarely within the exception under s,41(5)(c). For discussion sake s.41(2), (3) and (5) of the CPO are set out below:

“(2) This section applies to any covenant, whether positive or restrictive in effect -

(a) which relates to the land of the covenantor;

(b) the burden of which is expressed or intended to run with the land of the covenantor; and

(c) which is expressed and intended to benefit the land of the covenantee and his successors in title or persons deriving title to that land under or through him or them.

(3) Notwithstanding any rule of law or equity but subject to subsection (5), a covenant shall run with the land and, in addition to being enforceable between the parties, shall be enforceable against the occupiers of the land and the covenantor and his successors in title and persons deriving title under or through him or them by the covenantee and his successors in title and persons deriving title under or through him or them.

…

(5) A positive covenant shall not, by virtue only of this section, be enforceable against-

(a) a lessee from the covenantor or from a successor in title of the covenantor or from any person deriving title under or through the covenantor or a successor in title of the covenantor; or

(b) any person deriving title under or through such a lessee; or

(c)  any person merely because he is an occupier of land.”

71. At common law, the burden of a covenant does not run with the land but in equity it is possible for the burden to run. In the special circumstances of Hong Kong where multi-storey buildings are everywhere, the rights and obligation of co-owners are normally governed by DMC imposing both positive and negative covenants against each other. It is essential for these covenants, either positive or negative, to be enforceable for the proper maintenance and management of the building, and thus the enactment of section 41 of the CPO. It is entirely a local provision and not modeled on the English counter-part Law of Property Act 1925, as is the case for other CPO provisions.

72. Although the defendant in Buxhaum had become the owner subsequently and therefore become liable to the positive covenant to pay rent (caught by s.41 (2) of CPO), he should not, said HHJ Downey, be liable for outstanding management fee during the period when he was only occupying the premises as an occupier prior to becoming an owner: caught by s.41(5)(c) of CPO.

73. It is noted both the New Government Lease and the 1993 DMC are expressed to be made by the covenantor, for himself, his successors and assigns[68]. There is no challenge by Mr. Ng that the s.41(2) conditions are not satisfied. It is obvious that the covenant in the 1993 DMC to comply with the land grant is a covenant that touches and concerns land and is intended to run with the land. Accordingly, both positive and negative covenants do pass and are enforceable against the Rs by reason of s.41(2). The next question is whether s.41(5), the applicability of s.41(2) is expressed to be subject to, can relieve Rs from liability.

74. In the present case, the Rs are not a lessee from the covenantor or from a successor in title of the covenantor or from any person deriving title under or through the covenantor or a successor in title of the covenantor. Each of them is an assignee of undivided shares respecting the New Government Lease and a party to the 1993 DMC. Neither do they derive title under or through such a lessee nor are they mere occupiers. S.41(5) of CPO does not apply to exclude the applicability of s.41(2). Accordingly both positive and negative covenants should be applicable.

75. This tribunal cannot see how Buxhaum can assist Rs.

76. Further, it has all along been Rs’ position that they, as registered owner of Hong Yuen Court, should observe the terms and conditions in the 1993 DMC[69]. The contention that clause 40 of the 1993 DMC not binding on them is not available to Rs.

Sixth argument – The IO is prevented from relying on its own breach 

77. Mr. Ng submitted that if the breaches do pass from FSI, every owner will be infested. According to him, every owner will be in breach of clause 40 of the 1993 DMC when they take up assignments from FSI. The IO, being the corporate embodiment of all owners of the building, is also itself in breach of clause 40 of the 1993 DMC. It is submitted that to allow the IO to sue Rs, at least in respect of categories I to IV, is “… tantamount to allowing the IO to rely on its own breach and shift the blame and costs of remedial action on the Rs”. Mr. Ng also relies on a passage from Chitty on Contracts, (31^st ed) in support, which this tribunal considers unnecessary for it to be quoted here.

78. Mr. Ng suggested it should be the FSI as lessee of the new grant who should have made good the non-compliance in Hong Yuen Court under the New Government Lease[70]. Every assign of FSI was now burdened and, submitted by Mr. Ng, no single owner was more culpable than the others insofar as the structures are concerned. In order to appreciate the full force of Mr. Ng’s argument and doing justice to him it is necessary to set out below how he furthers his argument in his written submission:

“As a matter of fact, there is no justification for the IO to shift the blame to individual owners in relation to breaches of the 1993 DMC for which the IO itself is liable in law. … No single owner was more culpable than the others insofar as the structures are concerned. It follows that the IO is as much liable for such breaches as the respondents, even though neither of them erected these structures in the first place. As the IO is itself in breach of DMC Clause 40 insofar as the Type [Categories] 1[I] to 4[IV] Structures are concerned, the Respondents submit that the IO is precluded from suing the Respondents for the same breach by the common law principle that a party should not be allowed to take advantage of its own wrong. The IO should have demolished these structures at its own expenses, but it never proposed to the Rs that it would take such course.”[71]

79. This tribunal finds the submission unfair and unacceptable. Even though each and every owner constituting the IO is in breach of the DMC, the IO has no choice but to enforce the DMC. It is because the IO is under a statutory duty to do all things reasonably necessary for the enforcement of the obligations contained in the DMC for the control, management and administration of the building: see s.18 (1)(c) of the BMO. It will be a breach of statutory duty if the IO does not take action against any breach.

80. Further, it is Rs’ case that in respect of categories II and III structures, they formed part of the areas assigned to the owners by FSI. In their witness statements all Rs said the additional areas have already formed an integral part of the units of which they have exclusive use and enjoyment. Some even said if not for the additional space they would not have bought the units[72]. Although there is no evidence suggesting who constructed the categories I to IV structures, Rs disagree to have category I structures removed for it may affect their enjoyment of their units even when they acknowledge these being common parts. In respect of categories II, and III structures Rs have treated them as their own (and this tribunal so finds as a matter of fact)[73]. They have all along maintained these structures in contravention of the relevant building plans and BO, and kept them for their exclusive use and enjoyment. Common parts such as external walls are appropriated for personal use. It is therefore most unfair for Rs to say that no single owner was more culpable than the others insofar as these structures are concerned. Why those who have appropriated common parts for their own exclusive enjoyment not more culpable than those who have been deprived their use? If these structures (at least for categories II and III) are entirely for Rs’ exclusive use and benefit but are in breach of the DMC, what is the basis for saying that the IO is as much liable for such breaches as the Rs. It is the most unfair argument.

81. In their Notice of Opposition, Rs vigorously contest the applications. They resist any order directing them to remove the structures (essentially all the 5 categories). At least in respect of category I structures, Rs have never expressed that the IO should carry out the remedial work without reference to them. Neither have they indicated willingness to permit the IO carry out such work. Quite the contrary, evidence has been given that if the parapet walls were to be rectified or lowered, it would affect their enjoyment of their own units[74]. By Rs’ respective Notices of Opposition and Rs’ testimony, they oppose demolition of all the 5 categories of structures. In the tribunal’s judgment, had the IO tried to remedy, say, category I (parapet wall) structures on its own, the Rs would have refused the remedial works to be carried out. It is therefore unfair for the Rs now to say the IO should have demolished category I structures at its own expenses or made proposal to do so. Rs’ position is no structures should be demolished. Rs’ closing submission is for the sake of argument and is inconsistent with the stance taken by them in their defence and evidence.

Seventh argument – The IO Does Not Come to Court with Clean Hand

82. Given the Tribunal’s decision above, it will not be unfair for the IO to take action for demolition of all categories I to V structures. In respect of Categories II and III structures, since the respective Rs had adopted, owned, exclusively used and enjoyed these structures which were constructed in blatant breach of the BO and approved plans, the tribunal considers it equitable for the IO to take action to have them rectified. As analyzed below, common parts of the building have been appropriated for exclusive use of Rs for category II and III structures.  Further at least in respect of categories I structures, if the Rs were saying these structures were not made by them and thus should not be held responsible for those structures, why then opposing their rectification by the IO. In the tribunal’s judgment, the clean hand argument is not available to Rs.

Whether Structures Outside Old Assignment Plans Part of the Assigned Areas

83. Mr. Ng’s argument is this. Take the example of Flat B1, the assigned area is described as “All that Flat B1 (including the adjacent Flat Roof thereof) on the First Floor”. Only words are used in the description. No plans were attached to the FSI assignments to identify the unit’s boundary. Now categories II and III structures have already formed an integral part of the units. On a true construction of the 1993 DMC and the FSI assignments, the parties must have intended objectively the areas physically occupied by the then owners being the subject matter of the assignments. Accordingly the parts which would have fallen within common parts prior to the date of the 1993 DMC have now become areas assigned and owned by individual owners. There is no question of common parts under the 1993 DMC being possessed by Rs as the possession took place before the said DMC.

84. Mr. Ng relies on the following passages as laying down the principle on the identification of subject properties from deeds of assignments:

   i)   §17.011 in Emmet and Farrand on Title, Volume 2 at p. 17/17:

“Accordingly, if no definite conclusion can be reached from the parts or the whole of the description (i.e. the parcel clause), the recitals and other parts of the deed can be looked to for expressions of the intention of the parties. If these cannot be found, as a well-established exception to the ordinary contractual rule, extrinsic evidence is admissible in order to ascertain the intentions of the parties to conveyances of land.”

   ii)   The Interpretation of Contract, 5^th Edition:

“As a general rule extrinsic evidence is admissible to identify the subject matter of the conveyance” (§11.03 at p.545)

“Evidence of the physical features of the land is admissible to enable the court to interpret a conveyance so as to arrive at the most sensible result” (§11.04 at p.548).

85. Mr. Ng submitted that one must look at the physical appearance of the properties then existing at the time of the FSI assignments as extrinsic evidence in the absence of any assignment plans. Categories II and III structures have become an integral part of the unit assigned by reversion and the subsequent regrant. Even though some of the building’s external walls might have been pulled down for the purpose of categories II and/or III structures, they would not have formed the building’s common parts under the 1993 DMC for the simple reason they have already gone as at the date of the 1993 DMC. There is no evidence showing any common part under the 1993 DMC having been enclosed or interfered with by Rs after the date of the said DMC.

86. Mr. Ng submitted that the old assignment plans are completely irrelevant in ascertaining the boundary of the units assigned by the FSI assignments because the latter made no reference to the old plans. The Rs derived their title through the FSI assignments from the New Government Lease. Had they intended the boundary as delineated in the old assignment plan to be assigned, the parties should have done so by attaching the plan to the FSI assignment, or alternatively making reference to it. The reference to the old assignment plan in the case of Flat B1 subsequent to the FSI assignment is, submitted Mr. Ng, a mistake given the first FSI assignment did not make any reference to such plan. What matters, according to him, is the objective intention of FSI and the first assignee as ascertained from the new assignment, not as between subsequent assignee.

87. In the tribunal’s judgment, if the subject matter of the assignment can be ascertained from construction of the assignment, it will be unnecessary to resort to extrinsic evidence in aid of construction.

88. As discussed above[75], by the New Government Lease, the FSI as lessee covenanted with the Government as landlord that building constructed shall in all respects comply with the BO and its subsidiary regulations[76]. It also covenanted to maintain and upkeep the same in accordance with the current legislation and approved plans[77]. The assignment to owner is also with covenants that the terms of New Government Lease have been complied with. In the tribunal’s view, by covenanting in the manner aforesaid there is simply no basis to say that when referring to assignment of a particular unit, the FSI is in mind a non-compliant unit. Quite the contrary, since the FSI has manifested an intention to comply with the lease, and thus the BO, it will only be logical to infer that they must have the approved plans of Hong Yuen Court in mind.

89. The plans referred to must be those approved by the relevant Government authorities when Hong Yuen Court was first constructed. Rs have already accepted that had the structures been erected after September 1993, their erection would have constituted breaches of the 1993 DMC[78]. Obviously, categories II and III structures will not be covered by the approved plans. It will therefore offend common sense to say that the FSI would have intended these unauthorized structures, which are outside the approved plans with which Rs have covenanted to comply, to be included in their respective assignments to individual owners. It is also unreasonable to assume the FSI not law-abiding or trying to be inconsistent intentionally when assigning, and has intended to breach the approved plans when it has given its express covenants not to do so.

90. It may well be Rs’ wishes for categories II and III structures to be assigned to them by the FSI or through their predecessors in title. By reasons of what has stated in the preceding paragraphs, it is only their wishing thinking. There is no evidence to suggest FSI has intended the areas physically occupied by the then owners being the subject matter of these assignments.

91. Similarly, what is in Rs’ (or their predecessor-in-title’s, as the case may be) mind can be inferred from what they have covenanted in the documents they have signed. Clause 40 of the 1993 DMC is a covenant by all owners to comply with the conditions of the New Government Lease. By the FSI assignment[79] it has been spelt out that the assignment of the unit in question was in consideration of “…the covenants and conditions hereinafter contained and on the part of the Assignee [i.e. R or the predecessor in title of R, as the case may be[80]] to be performed and observed”.  In each and every FSI assignment, the owner agrees to take up such assignment subject to and with the benefit of the 1993 DMC and the due performance and observance of the covenants and conditions in the New Government Lease[81]. It is stated towards the end of the assignment that the assignee, i.e. Rs or their predecessor in title (as the case may be), jointly and severally covenants with the assignor, i.e. the FSI, inter alia, to:

“…perform and observe the covenant and conditions in the said Lease [i.e. New Government Lease] and the said Deed of Mutual Covenant [i.e. the 1993 DMC] therein respectively reserved and contained and indemnify the Assignor against … the non-performance or non-observance of the said covenants and conditions or any of them.”[82] (Emphasis added)

92. Accordingly, individual owners, when taking on the premises from FSI, have repeatedly agreed to comply with the BO and the approved plans. At the same time, by the 1993 DMC these owners also agreed between themselves to abide by the terms of the New Government Lease. Is it not a clear enough manifestation of intention on the part of the owners when taking up the units from FSI? It is a logical and reasonable inference that they have a compliant unit in mind. On the other hand it will be unreasonable to say that by reference to these documents they have unauthorized structures in their minds. In the tribunal’s judgment, the minds of both FSI and the assignees do in fact meet – each unit under assignment should be a unit free from any structures outside the approved plans.

93. By reasons of the above, although there is no plan attached to each of the FSI assignments, there is no basis for Mr. Ng to say FSI and individual owners then had intended the premises to have been enlarged by categories II and III structures being the subject matter of the assignment. Extrinsic evidence is not required. Alternatively, only extrinsic evidence not inconsistent with FSI and individual owners’ manifested intention should be looked at. In the tribunal’s judgment, the old assignment plans are good evidence of the boundary of the units under assignment. They show the part of Hong Yuen Court which each of the assignees can exclusively enjoy without breach of the relevant provisions of the New Government Lease.

Categories I and IV Structures

94. It is Rs’ case now that despite the 1993 DMC, categories I (parapet wall with add-ons) and IV (diverted pipes) structures remain common parts of the building by reasons of the definition adopted in the DMC and the BMO provisions. This tribunal agrees to this submission. This tribunal considers the applicant has put in no evidence to show who in fact has constructed these structures.

95. Since the applicant fails to discharge the burden of proof, the tribunal will not grant any mandatory order against Rs to rectify to comply these structures. The IO can proceed to restore category I structures, i.e. the parapet walls in accordance with the approved plans immediately. In respect of category IV structures, i.e. diverted drainage pipes, the IO can proceed to carry out the rectification work after the unauthorized structures outside Flats B2 and B3 were removed.

The Covered Gas Pipes

96. It is not in dispute that Towngas has carried out inspection of the building. By 2 letters[83], Towngas informed the IO, inter alia, that 2 sections of gas pipe at Flat B1 (owned by R6) and Flat B4 (owned by R2) have been enclosed without ventilation, acting in breach of the relevant gas safety regulations. Although there is no mention of the chapter and verse of the regulation(s) which have been offended, this tribunal accepts the relevant gas safety regulations have been breached.

97. The Rs does not seek to argue that the gas pipes in question not common parts of the buildings. Evidence, however, has been given on behalf of R2 and R6 that they had done nothing to enclose any such gas pipes since September 1993. The IO put in no rebutting evidence in this respect. Given the plan and photo annexed in Towngas’s letter[84], and there is no evidence suggesting Towngas had made a mistake in its inspection, this tribunal accepts as facts that certain sections of Towngas pipes servicing the building have been enclosed. After comparing the said photo and plan from Towngas and the photos exhibited by the applicant, this tribunal believes the said sections of gas pipe are enclosed by categories II structures, namely, items 24 and 25 (belonging to R2) and item 10 (belonging to R6). The question therefore hinges on whether category II structures are required to be removed. If they are to be removed, these gas pipes need not be re-located. The gas pipes in question will then be exposed in compliance with the relevant gas regulations.

Clauses 31(a) and (d) of the 1993 DMC

98. Clause 31(a) and (d) of the 1993 DMC have been set out in paragraph 38 above and will not be repeated here.

99. The gist of Rs’ defence raised under this head is this. Since categories I to IV structures predated the 1993 DMC, they could not have done anything to contravene a document which was then not yet in existence. Since its coming into being in September 1993, they have done nothing to contravene the 1993 DMC. The mere existence of those structures in Rs’ flats after September 1993 would not constitute any breach of the 1993 DMC.  Mr. Ng relied on the authorities of Wing Ming Garment Factory Ltd v The Incorporated Owners of Wing Ming Industrial Centre[85] and 峰華邨業主立案法團 v Kwok King Fun 及 Tse Selina[86].

100. After reading Wing Ming, particularly §§256 to 301, this tribunal shared the views expressed by Godfrey Lam J therein and accepts that, since it has been agreed categories I to IV structures were erected before the 1993 DMC, there could be no breach of clauses 31(a) and (d) of the 1993 DMC. The prohibited acts were committed well before the existence of the 1993 DMC.

101. However, this conclusion does not affect the tribunal’s analysis above that there have been breaches of clause 40 of the said DMC analysed above. It is because clause 40 is basically a covenant by an owner to observe the land grants which in turn contains provisions imposing continuing obligation to upkeep and maintain his unit in compliance with the relevant laws and approved building plans, thus catching those breaches which are continuing in nature.

Clauses 31(b) of the 1993 DMC

102. Clause 31(b) of the 1993 DMC concerns the insurance policies of the building, and has provided as follows:

“Each of the parties hereto shall not: -

…

(b) do or cause or permit or suffer to be done anything whereby any insurance of the said building against fire may be rendered void or voidable or whereby the premium for any such insurance may be liable to be increased and shall indemnify the other parties against any increased or additional premium which by reason of any such acts or defaults may be required for effecting or maintaining such insurance and that in the event of the said building or any part or parts thereof being at any time damaged or destroyed by fire and the insurance against fire effected thereon being wholly or partially irrecoverable by reason solely or in part of any such act or default then and in every such case such party shall forthwith pay to the other parties the whole or (as the case may require) a fair proportion of the cost of completely rebuilding or re-instating the same.” (Emphasis added)

103. Mr. Ho of counsel for the IO refers the tribunal to the Fire Policy taken out by the IO to insure IO’s properties against loss and damages caused by fire.  The insured named in the Policy are the IO and the management company. The properties insured are stated in the Schedule to the Policy. It is noted that common parts of the building such as external walls, outer wall drains pipes attaching on the building are included. The Policy is, however, subject to “Legal Requirement Warranty A33”[87].

104. Under warranty A33, the insured warranted that they shall comply with and observe all provisions, requirements and regulations of:

“ (i)	Fire Services Department
and/or (ii)	Labour Department
and/or (iii)	Dangerous Goods Ordinance
and/or (iv)	Factories and Industrial Undertakings Ordinance
and/or (v)	any other Statutory Obligation
including any notices given and requirements made pursuant to same the breach and disregard of which may affect or increase the risk hereby insured except only that this Warranty shall not apply in respect of any Ordinance, Regulation Notice or Requirement expressly waived by the Company [i.e. the insurer] by endorsement on this Policy.”

105. Mr. Ng submitted for the Rs that the Policy only requires the insured, i.e. the IO and the manager to comply with the orders, notices and regulations. There could be no breach of warranty by the IO, he submits, if individual owners do not comply with the building orders issued to them personally rather than the IO.

106. This tribunal cannot accept Mr. Ng’s submission.

107. It is not in dispute that the building orders under s.24C(1) of the BO have been issued against each of the Rs for demolition of unauthorized structures erected in their respective units[88]. There is no doubt at least in respect of categories II and III structures, they are unauthorized structures in breach of statutory provisions though Mr. Ng argued they are not in breach of the 1993 DMC. In view of the tribunal’s conclusion that the areas assigned are the same as those referred to in old assignment plans, necessarily category III structures are built on common areas of the building. Although category II structures are within the boundary of the old assignment plans on the flat roofs, the buildings’ external walls are enclosed. Further, even there is no direct evidence as to what has become of these walls, Rs’ evidence suggests these structures have respectively become part of their extended enclosed living place.  It can therefore be reasonably inferred that the external walls have either been removed or tampered with, or at the very least enclosed for Rs’ exclusive self use. These external walls are common parts according to Schedule 1 of BMO.

108. External walls are IO’s properties and are covered by the said fire insurance Policy. Parts of them are now being occupied by Rs for exclusive self-use. 

109. Under s.16 of the BMO, once an IO has been incorporated, all rights powers privileges and duties of owners in relation to common parts shall be exercised and performed by the IO. Under s.18(1)(a) of the same ordinance, the IO has a statutory obligation to manage the said common parts in good and serviceable repair. Now unauthorized structures have been erected for Rs’ exclusive use. Even gas pipes were enclosed in breach of gas safety requirements. In the tribunal’s judgment, the IO was in apparent breach of the said warranty. The fact that notices were not issued to IO is immaterial because the warranty can be breached in many ways under its terms. Non-compliance of notices issued by the relevant departments is one way of breaching. Non-compliance of statutory provisions, e.g. BO, by the IO is another way of breaching. By the said warranty the IO has warranted to comply with and observe all provisions, requirements and regulations of “… any other statutory obligation”. The issue of orders against Rs under s.24(1) of the BO in respect of structures in their respective units are prima facie evidence of breaches of the BO’s relevant provisions regarding the parts affected[89]. There is therefore a real risk that the aforesaid Policy may be rendered void or voidable as a result of such breach, or that the premium may be increased as a result of the added risk.

110. Since the making of the 1993 DMC the Rs have continued to occupy these unauthorized structures built on (category III) or enclosing (category II) common parts. Rs said these structures have formed an integral part of their living places and have treated them as their own. In the tribunal’s judgment, Rs’ continued occupation and refusal of demolition of these structures despite requests[90] by the IO and the relevant Government authorities since September 1993 are acts which may render the insurance policy void or voidable or cause an increase in insurance premium because of the added or uncertain risk. Each of Rs has breached clause 31(b) of the 1993 DMC.

111. The same applies to categories V structures. As concluded above, they cause alteration to structural fabric of the building which are necessarily common parts. After comparing the building orders and the structures, category V structures are covered by the various building orders. Accordingly the erection of category V structures amounts to breach of s.31(b) of the 1993 DMC.   

Building Orders and S.18(1)(b) & (c) of the BMO

112. The IO relies on s.18(1) of BMO and considers that they have an obligations under these provisions to request the Rs to remove all unauthorized structures, particularly when the Government has issued building orders against Rs in respect of the unauthorized structures.

113. The gist of Mr. Ng’s submission on Rs’ behalf, so far as can be discerned from his submission[91], is that the building orders now issued were against the Rs, not IO, and refer to structures within Rs’ unit. If the IO takes the views that such orders in fact cover structures forming part of the common parts notwithstanding the fact that they were addressed to Rs, the IO should carry out such work at its own expenses. Under s.18(1)(b) of BMO, the IO has neither statutory duty nor power to “procure” Rs to comply with the building orders which were issued to them personally.

114. No submission was made by the parties as to whether the building orders and the structures now sought to be demolished are the same structures. The tribunal has done a comparison between the plans attached to the building orders and all the 5 categories of structures now being complained of. It is the tribunal’s view that all the 4 items for Flat B4 owned by R2 (i.e. items 22, 23, 24 and 25) and the 3 items for Flat B1 owned by R6 (items 10, 11 and 12) are covered by the plans attached to the building orders (i.e. categories I, II, III and V structures). For Flats B2 and B3 owned by R7, it appears all the categories II, III and V structures are covered (items 13, 14, 15, 18 and 21). The only structures apparently not covered by the 2 building orders against R7 are categories I and IV structures, i.e. items 16 (parapet wall), 17 (drainage pipe), 19 (parapet wall) & 20 (drainage pipe). Further, this tribunal has in the early part of this decision concluded that category III structures were built on common parts of the building. Category II structures enclose external walls for self-use. It is therefore factually incorrect for Mr. Ng to say that the building orders only refer to structures within Rs’ unit.

115. S.18(1)(b) & (c) of BMO states:

“(1) The corporation shall –

…

(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.”

116. Under s.24(1) of BO, the Building Authority (“BA”) has power to issue orders requiring demolition of building works erected in contravention of the BO. All the 4 building orders in question were issued pursuant to s.24(1) of the BO by a senior structural engineer for the BA. S.3 of Interpretation And General Clauses Ordinance, Cap 1, defines public officer to mean:

“any person holding an office of emolument under the Government, whether such office be permanent or temporary.”

117. No doubts the 4 building orders in question requesting demolition of the structures (all categories II, III and V structures and some of the categories I structures) were issued by a public officer in exercise of the powers conferred on the BA. Mr. Ng’s argument suggest the building orders now issued against Rs do not give rise to any obligations of the IO under s.18(1)(b) of BMO which concerns common parts only. The question is whether in respect of categories I and III structures which are on common parts of the building, whether the building orders issued in respect of these structures should be issued to the IO before the IO can exercise its power under s.18(1)(b) of BMO.

118. In the tribunal’s judgment, on a proper construction of s.18(1)(b) of BMO, the corporation’s statutory duty in respect of the building’s common parts will not be taken away because the request or order by a public officer is not addressed to the IO. Firstly, the statutory provision does not require the IO to be the addressee of the order/request before its duty arises. If it were the case the construction does not make sense because it will effectively leave whether the IO should carry out its statutory duty under the BMO entirely to the BA who are experts on the BO but may not be so in identifying a building’s common areas. Secondly, s.18(1)(b) only stipulates “… work as may be ordered or required in respect of the common parts.” The emphasis is on order/requirement of these public officers to be directed against the common parts. Once the parts which requires work to be done is confirmed to be common parts, no matter against whom the orders are issued, s.18(1)(b) of the BMO will be engaged, and the IO’s duty arisen.

119. Since Rs have apparently treated category I and III structures as their own, it will not be surprising for the BA to issue the demolition orders against them. It is because s.24(2) of the BO required the demolition orders to be served on the “owner” which is defined under s.2 of the BO to include any person receiving the rent of any premises, or who would receive the same if such premises were let to a tenant. All Rs fall within the ambit of the owner’s definition.

120. Accordingly, the IO is under a statutory duty pursuant to s.18(1)(b) of the BMO by reasons of the relevant building orders under s.24 of the BO to remove at least categories I and III structures.

121. The above should have sufficient disposed of Mr. Ng’s submission. This tribunal would like to add that even if s.18(1)(b) does not cover the other structures, namely, categories II and V structures because they are not on common areas, s.18(1)(c) provides the necessary basis for the IO to sue in relation to category II and V structures: see Wing Ming[92].

122. S.18(1)(c) requires the IO to do all things reasonably necessary for the enforcement of the obligations contained in the DMC for the control, management and administration of the building. Unlike s.18(1)(a) and (b), there is no restriction that the powers and duty under s.18(1)(c) are restricted to common parts of the building. It relates to obligations contained in DMC. It is this tribunal’s conclusion that in respect of all structures (including II and V structures) Rs have offended clause 40 of the 1993 DMC. The IO therefore is obliged under s.18(1)(c) of the BMO to enforce the DMC (including the institution of legal proceedings) for the control, management and administration of the building.

123. This tribunal therefore considers by virtue of s.18(1)(b) of the BMO, the IO obviously has power to ask Rs for demolition of categories I and III structures in so far as Rs has included or treated them as their own. Further and alternatively s.18(1)(c) is applicable to all the structures.    

The Fallback Defence - Laches

124. It is submitted on behalf of Rs that in the circumstances of this case, if this tribunal finds there being breaches of the 1993 DMC by Rs, it will not be just and equitable to grant injunctions against them.

125. The doctrine of laches is based on equitable principles often broadly stated as delay defeats equities or equity aids the vigilant and not the indolent. The authors of Snell’s Equity (33^rd Ed)[93] have stated the doctrine at §5-011:

“That doctrine is not based, however, on the mere fact of delay. Something more than mere delay, more even than extremely lengthy delay, is required before B will be denied equitable rights under the doctrine of laches, as the question is whether the lapse of time has given rise to circumstances that now mean it would not be inequitable to deny relief to B. The principal example occurs where, perhaps as a result of having relied on a mistaken belief that B has no relevant right, A would now suffer an irreversible detriment, as a result of B’s delay, if B were permitted relief. The doctrine will therefore apply if the delay has resulted in the destruction or loss of evidence by which B’s claim might have been resisted, or if B can be said to have released or abandoned any right. There can be no abandonment of a right without full knowledge, legal capacity and free will, so that ignorance or disability or undue influence will be a satisfactory explanation of delay. Laches is also a personal disqualification and will not bind successors in title, although if the circumstances are such as to give rise to a contract between A and B, or a proprietary estoppel based on B’s acquiescence, a third party may be bound…” (Emphasis supplied)

126. In Wing Ming[94], the learned Godfrey Lam J relied on a similar passage in Snell’s Equity in its 32^nd edition which states that putting aside the inequitable circumstances arose due to delay, delay itself is immaterial: see §238 of Wing Ming. In the tribunal’s judgment, both editions of the Snell’s Equity have stated correctly the proposition of law relation to the doctrine of laches now relied on by the Rs.

127. According to R2, she has been the registered owner of Flat B4 since 19 February 1987. The IO was incorporated in 1994. It arranged for major renovation works to be done to the building covering the external parts of the building in or about 1999. By then the IO should have realized the structures being unauthorized. It, however, raised no objection that the 1993 DMC has been offended. It is not until November 2011 that the IO issued a warning letter against her alleging unauthorized structures, though no particulars were specified.[95] As a matter of undisputed fact, according to the Land Registry record, the first building order for unauthorized structure was dated 2 April 2009 and registered against Flat B4 on 2 October 2009[96]. It was stated therein the said order was to supersede a previous notice dated 8 December 2008[97].

128. R6 has since 15 December 1999 been the registered owner of half share of Flat B1. The unauthorized structures were there when he first acquired the property. He said he has never received any compliant from the IO about any unauthorized structures until November 2011 when the solicitors acting for the IO sent them a letter. Without these unauthorized structures[98], he said he probably would not have bought the property[99]. From the tenor of his defence and witness statements, R6 opposed the injunction on, inter alia, ground that he has suffered prejudice in that he purchased the unit on the basis of the structures (excluding the glass house but necessarily including the parapet walls with add-ons) and expended significant sums of money in improving and maintaining them which he would not have done so if not for the inaction of the IO[100]. According to Land Registry record, the building order dated 8 December 2008 was first registered against Flat B1 on 4 May 2009.

129. R7 became the registered owner of Flats B2 and B3 in March 2010. All the structures complained of (except the glass canopy) existed before they purchased the units and might exist as early as the 1980s. R7 said they did not recall having received any notice from the IO’s solicitors. Nor have they received any complaint from the IO regarding these structures being unauthorized. It is R7’s case that without the concrete structures (i.e. categories II and III structures) and the parapet walls with add-ons (i.e. category I structures), they would not have considered purchasing Flats B2 and B3 at the price they have paid. It is undisputed that the building orders dated 8 December 2008 issued by the BA were first registered against both units on 4 May 2009 before they purchased the properties. It is also R7’s case that since the IO has recently permitted air conditioning outdoor units to be affixed to the parapet walls, these outdoor units need be removed before any work can be done to the said parapet walls.

130. Chan became an owner of Hong Yuen Mansion by end of 1997. He did not deny a renovation of the building was carried out in 1999. However, he said it was only a small scale renovation touching on the external walls of the buildings. He said by then the unauthorized structures in question were not detected[101]. It was not until after Sky Pacific’s report dated 15 December 2011 prepared pursuant to the IO’s resolution dated 8 December 2010 that the IO knew about the existence of the unauthorized structures. He, however, admitted that prior to issue of the report, warning letters prepared by the IO’s solicitors were issued to Rs in November 2011 for rectification.

131. Chan admitted the external appearance of the outer walls remains unchanged since he moved in. During cross-examination, he also admitted the structures in question are quite apparent to the eyes, though he said it was not until Sky Pacific’s report, which was prepared by professionals by reference to building plans, that the IO was absolutely sure that the structures are unauthorized. Regarding the air conditioning compressors outside the parapet walls of Flats B2 and B3, Chan said, and this tribunal accepts, they belong to owners of the ground floor restaurant and the works had been approved by the relevant Government authorities. Chan confirms the IO agrees to their affixing to the parapet walls. He said the outdoor units attached to the lower part of the walls which are not unauthorized structures.

132. In light of this tribunal’s conclusion reached on category IV structures[102], they will be excluded for the purpose of discussion under this head. Further, categories V structures are all recent structures. They are constructed in late 2005 and 2010[103]. This tribunal considers the lapse of time can neither fit into the meaning of “delay” nor “extreme delay” as to qualify R6 and R7 to rely on this doctrine. The next question is whether in respect of categories I, II and III structures, Rs are entitled to rely on this doctrine.

133. From the evidence, this tribunal believes that the aforesaid unauthorized structures exist long before the 1993 DMC. Since the IO of Hong Yuen Court was only incorporated in 1994, it would be unfair to impute knowledge on the part of the IO, if any, back beyond 1994. In the tribunal’s judgment, by 1999 the latest when the IO was carrying out renovation to, inter alia, the building’s external walls, the unauthorized/illegal structures in question should have been apparent to them. This tribunal believes that they started to take actions in or about November 2011 by instructing lawyers issuing letters of demand. There is therefore a lapse of about 12 years, or 17 years if reference is made to the date of incorporation of the IO. However, as discussed above[104], mere delay is insufficient. The delay must have given rise to circumstances rendering enforcement of the DMC against Rs inequitable.

134. Categories II and III structures involve the appropriation of common parts for self use by Rs. S.34I(1) of the BMO states no person may covert 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. The provision is set out in §22 above.

135. It is not Rs’ defence that they have got approval of the owners’ committee. In Gallium Development Limited & Ors v Winning Properties Management Limited[105], both Woo VP and Yuen JA considered s.34(1)(a) imposes an absolute prohibition against conversion of common parts by any owner for private use, unless there is an owners’ committee resolution approving the contrary[106]. S.18(1)(a) of the BMO imposes a statutory duty on the IO to maintain the common parts of the building in a state of good and serviceable repair and clean condition. S.18(1)(c) imposes a duty on the IO to do things reasonably necessary for enforcement of the DMC (necessarily for breach of S.34I(1)) for the control, management and administration of the building. The IO is under a statutory duty to take enforcement proceedings under the BMO. It has no choice failing which the IO may be liable to be sued for breach of statutory duties. They therefore could not have granted expressly, nor could they have granted impliedly to any owner any right to contravene the 1993 DMC. In The Incorporated Owners of Hoi Luen Industrial Centre & Anor v Ohashi Chemical Industries (Hong Kong) Ltd[107], the IO took action against the respondent to remove an air-conditioning cooling tower in breach of the DMC. Godfrey JA has this to say:

“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.” (Emphasis added)

136. Relying on Hoi Luen, the defence of laches is not available to Rs because the IO is duty bound to enforce the DMC and the statutory provisions. The IO could not have granted any consent impliedly, either by its inaction or otherwise, for something which it simply has no statutory right to do so.

137. In particular, in the tribunal’s view the Rs cannot establish what circumstances the delay has given rise to which made it inequitable for the IO to enforce the DMC and BMO. Regarding R2, the alleged detriment, so far as can be discerned from Rhee’s statement, is that over the years, R2 has been maintaining the structures (categories II and III) and the parapet walls (category I structures)[108]. In the tribunal judgment, these structures (categories II and III structures) have become her enlarged living room, bedroom, kitchen and shower room which she has exclusive possession. R2 suffers no prejudice or injustice as she is only maintaining her own home. In respect of category I structures, it is her pleaded case that she did not own them. These unauthorized structures may make her and family better enjoy her floor roof. However the add-ons are bonus which these structures may have brought to Rs. No prejudice, however, can be said to have caused to R2 if the add-ons are to be pulled down because bonus is not what R2 should have been entitled to in the first place.

138. As for R6, the same reasoning above applies in respect of categories I, II and III structures. Further, it is R6’s case that without these structures he would not have purchased the unit[109]. He became a co-owner on 15 December 1999 and presumably (and this tribunal accepts this inference on a balance) by then the 1999 renovation have already completed. Assuming (without accepting and only for the purpose of discussion) there is inducement on the part of the IO to R6’s predecessor in title before he bought his undivided share, there is no evidence to justify a conclusion that R6 could assume that he would be allowed to occupy the unauthorized structures without any legal action. It is to be remembered laches is a personal disqualification and will not bind successors in title.

139. As for R7, again the same reasoning above applicable to both R2 and R6 is also applicable to them. Further, R7 only purchased the unit in March 2010. By 4 May 2009, 2 demolition orders under s.24(1) of BO had already been registered against the 2 units. R7 should therefore have knowledge that Flats B2 and B3 were tainted with unauthorized structures. They purchased their units with assistance of lawyers and therefore with eyes wide open to these structures. It is therefore their conscious decision when they chose to buy by paying more[110]. Evidence does not show that the IO has any dealing of any sort with R7 at all in their purchase. In addition, the IO should not be held responsible for the representations, acts or inaction on its part, if any, to R7’s predecessors. As a matter of fact this tribunal accepts that warning letters dated 7 November 2011 had been issued, and did reach R7, despite R7’s evidence that they did not recall whether having received such letters. In the circumstances of R7, the defence of laches is simply not available for the simply reason there cannot be said to be any delay on the part of IO after R7 have become the owners.

140. Regarding the attaching of outdoor units at the lower parts of the parapet walls outside Flats B2 and B3. Since this tribunal accepts as facts that the installation was with approval of the IO, the works fall within the proviso of s.34I of the BMO.

141. In any event, considering all the circumstances of this case, gas pipes were covered by these unauthorized structures in breach of safety requirement thus posing a safety hazards to other owners of the building. Although there is no evidence suggesting who has re-diverted category IV drainage pipes, they are now being constructed in contravention of approved building plans. Common areas have been encroached in breach of the BMO and 1993 DMC. As a result, the warranty in respect of a fire insurance policy is likely to be breached, rendering the same to be void or voidable or premium being increased. The renovation of the entire building including the external walls of the building cannot go ahead because unauthorized structures were there.  In the circumstances of this case, it will not be inequitable for the IO to enforce the 1993 DMC for the proper management and administration of the building and for the benefit of all owners. On the other hand, it will be unfair to other owners of the building and be inequitable to them if the 1993 DMC is not to be enforced by the IO.

Conclusion and Orders

142. As stated above, the IO has not discharged its burden of proof in relation to category IV structures. Its claim against R7 will be dismissed. However, they are on common parts of the building. The IO can still re-construct the drainage pipes in accordance with the approved building plans after the unauthorized structures have been removed and/or rectified.

143. For the reasons stated in §§33 to 54 above, the IO’s claims against Rs in relation to categories V structures have been established. Appropriate injunctions will be issued.

144. As regards categories I structures, this tribunal has come to the conclusion that Rs do not claim to own them. The IO is therefore at liberty to remove the part of the parapet walls with a view to bring them in compliance with the approved building plans. However, as all Rs have adopted an opposing stance because the removal is said to be affecting their enjoyment of their own units, it will be equitable in the circumstances to grant an injunction against each of them restraining them from obstructing their demolition and/or rectification by the IO.

145. Clause 16 of the 1983 DMC states:

“The Manager or the Management Committee shall have the power to take down or remove any structure or fixture or other object erected affixed or placed on or to any part of the said building in breach of any of the provisions herein and all expenses of and incidental thereto shall be paid and recoverable from the defaulting owner.”

146. Clause 16, in the tribunal’s judgment, is not confined to common parts. It applies to any part of the building, including parts belonging to the exclusive possession of an owner. In the tribunal’s judgment, by virtue of s.18 of the BMO, the IO is vested with the power to do all things, including taking down or removing the structures concerned direct, necessary for the purpose of enforcement of the aforesaid provision of the 1993 DMC. If Rs fail and/or refuse to comply with the orders to be granted below in relation to structures erected in parts under their respective control and possession, the IO is entitled to take steps to have the structures removed and recover costs and expenses in connection thereof from them pursuant to the said provision of the DMC, even though the structures concerned are situated in a part of the building within the exclusive possession of an owner.

147. As for categories II and III structures, by reasons of above, mandatory injunctions to demolish as well as injunction restraining erections of unauthorized structures will be granted.

148. It is noted that the IO is also claiming for loss and damages arising from Rs’ violation of the 1993 DMC. Although the IO can establish there being breaches of the 1993 DMC, no loss or damages can be established by the IO. The tribunal can therefore only grant a nominal damage against each of the Rs.

149. This tribunal now makes the following orders:

Category I structures

i)   a declaration is made that the IO of Hong Yuen Court is entitled to remove the additions to the parapet walls or otherwise restore these structures (items 22, 23, 11, 16 and 19)  to comply with the approved building plans;

ii)  an injunction is granted against each of Rs restraining them whether by themselves, their servants, agents, tenants, occupiers of their respective units or otherwise whosoever from obstructing the IO of Hong Yuen Court to remove the additions to the parapet walls or otherwise restore the category I structures (items 22, 23, 11, 16 and 19) to comply with the approved building plans;

Categories II, III and V Structures

  As against R2

iii)  a mandatory injunction is granted against R2 that she, whether by herself, her servants, agents, tenants, occupiers of Flat B4 or otherwise whosoever do forthwith demolish and/or remove all structures now erected on the flat roof of Flat B4 and attaching to the external walls of Hong Yuen Court (items 24 and 25) and reinstate the said flat roof and the part of external walls so affected to its original state or otherwise comply with the approved building plans of the said building;

iv)  an injunction is granted against R2 restraining her whether by herself, her servants, agents, tenants, occupiers of Flat B4 or otherwise from erecting any structures, canopy on the flat roof of Flat B4, other part(s) or external walls of the building in breach of approved building plans or the 1993 DMC;

v)  an order that in the event R2 fails to demolish and/or remove the structures (items 24 and 25) and/or reinstate the said flat roof and the part of external walls so affected to its original state or otherwise comply with the approved building plans of the said building, the IO of Hong Yuen Court is entitled (but not obliged) to demolish and/or remove the said structures (items 24 and 25) and reinstate the said flat roof and the part of external walls so affected to its original state or otherwise comply with the approved building plans of the said building at the costs of R2, to be assessed by the tribunal, if the amount cannot be agreed;

As against R6

vi)  a mandatory injunction is granted against R6 that he, whether by himself, his servants, agents, tenants, occupiers of Flat B1 or otherwise whosoever do forthwith demolish and/or remove all structures, including a glass house, now erected on the flat roof of Flat B1 or encroached on common parts of the building outside the boundary of old assignment plan (defined in the judgment herein) and attaching to the external walls of Hong Yuen Court (items 10 and 12) and reinstate the said flat roof and common parts and external walls so affected to its original state or otherwise comply with the approved building plans of the said building;

vii)  an injunction is granted against R6 restraining him whether by himself, his servants, agents, tenants, occupiers of Flat B1 or otherwise from erecting any structures or glass house on the flat roof of Flat B1, common parts or external walls of the building in breach of approved building plans or the 1993 DMC;

viii)  an order that in the event R6 fails to demolish and/or remove the structures or glass house (items 10 and 12) and/or reinstate the said flat roof, common parts and that part of external walls so affected to its original state or otherwise comply with the approved building plans of the said building, the IO of Hong Yuen Court is entitled (but not obliged) to demolish and/or remove the said structures including the glass house (items 10 and 12) and reinstate the said flat roof, the common parts and that part of external walls so affected to its original state or otherwise comply with the approved building plans of the said building at the costs of R6, to be assessed by the tribunal, if the amount cannot be agreed;

As against R7

ix)  a mandatory injunction is granted against R7 and each of them that they, whether by themselves, their servants, agents, tenants, occupiers of Flats B3 or B4 or otherwise whosoever do forthwith demolish and/or remove all structures, including a glass canopy, now erected on or above the flat roof of Flats B3 and B4 or encroached on common parts of the building outside the boundary of old assignment plans (defined in the judgment herein) of Flat B2 and B3 and attaching to the external walls of Hong Yuen Court (items 13, 14, 15, 18 and 21) and reinstate the said flat roof, common parts and external walls so affected to its original state or otherwise comply with the approved building plans of the said building;

x)  an injunction is granted against R7 and each of them restraining them whether by themselves, their servants, agents, tenants, occupiers of Flats B2 and B3 or otherwise from erecting any structures including glass canopy on or above the flat roof of Flats B2 and B3, common parts or external walls of the building in breach of approved building plans or the 1993 DMC;

xi)  an order that in the event R7 fail to demolish and/or remove the structures or glass canopy (items 13, 14, 15, 18 and 21) and/or reinstate the said flat roof, common parts and the part of external walls so affected to its original state or otherwise comply with the approved building plans of the said building, the IO of Hong Yuen Court is entitled (but not obliged) to demolish and/or remove the said structures including the glass canopy (items 13, 14, 15, 18 and 21) and reinstate the said flat roof, the common parts and that part of external walls so affected to its original state or otherwise comply with the approved building plans of the said building at the costs of the R7, to be assessed by the tribunal, if the amount cannot be agreed;

Category IV Structures

xii)  the IO is entitled to restore the diverted drainage pipe to comply with the approved building plans;

xiii)  the request for a mandatory injunction against R7 in respect of the modification of drainage pipes is dismissed;

Damages

xiv)  Nominal damage of $1 is awarded for the IO of Hong Yuen Court against each of the Rs for breach of the 1993 DMC.

150. As regards costs this tribunal cannot see why costs should not follow the event. Although the IO loses on category IV structures, this tribunal considers almost all of the efforts and time are spent on argument in support of Rs’ case in respect of structures under other categories. Minimal time has been spent on category IV. This tribunal now makes a costs order nisi that the applicant’s costs of the 2 applications be borne by the Rs equally on District Court scale together with counsel’s certificate, such costs order be made absolute if no application is made to this tribunal to have it varied within 14 days from today.