THE INCORPORATED OWNERS OF YEE FUNG GARDEN v. BASIC TECH LTD AND ANOTHER

CACV 40/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL No. 40 of 2003

(ON APPEAL FROM HCA No.6622 OF 1998)

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JUDGMENT

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Hon.  Yeung JA:

1.  I have the advantage of reading the judgment of Yuen JA.  I agree with her judgment and the order she proposes.

Hon Yuen JA:

2.  This is the Defendants’ appeal from an order of Deputy Judge B. Fung given on 23 January 2003 in which he ordered a mandatory injunction to be issued against the Defendants requiring them to remove certain articles and to restore certain utilities in respect of the Defendant’s premises.

Background

3.  Yee Fung Garden ("the Building") comprises 2 towers of residential units on top of a podium with shops on the Ground Floor, car parking on the Ground and 1^st Floors, and recreational facilities on the 2^nd Floor.

4.  A Deed of Mutual Covenants dated 10 June 1992 ("the DMC”) governed the rights and obligations of the owners of the building.

5.  In November 1996, the Defendants (which were controlled by the same person Mr Chung Wai Ping) acquired Shops No. 32-55 and Shop No. 76 on the Ground Floor of the Building. 

6.  Shop No.32-55 was used as a seafood hotpot restaurant ("the Restaurant premises") .  The main entrance faced south onto a public road.  The southern and eastern facades of the Restaurant premises comprised mostly ceiling-to-floor glass panes, and the western facade was the external wall of the Building which abutted a public road.

7.  The eastern facade faced an area which was referred to in the building plans as an "open corridor" of the Building.  Across that corridor was Shop No. 76, which was used to house the air-conditioning water-cooling tower  for the Restaurant. 

8.  Above the Restaurant premises were the car parking floor and the recreational facilities floor of the podium.   The residential tower blocks were located at the north-west and south-east corners of the podium, the Restaurant premises being at its south-west.

9.  Although some conversion building works had commenced earlier, in October 1996 the Defendants submitted plans to the Plaintiff for consideration.  This was followed by protracted negotiations and meetings between the parties.  The Plaintiff also made complaints to various authorities, with mixed results. 

10.  In 1998, the Plaintiff commenced legal proceedings in the present action.  At the same time as the negotiations, complaints and legal proceedings were taking place, works were being done, undone and re-done.

Works subject to mandatory injunction

11.  For the purposes of this appeal, it may be more helpful to focus on those works which are referred to in the mandatory injunction ("the Works"), which were:

(1)	signage (featuring the name of the restaurant) positioned horizontally along the southern facade and part of the eastern facade of the Restaurant premises ("the Signage");
(2)	a sloping glass canopy above the signage on the southern facade ("the Canopy");
(3)	an exhaust air duct in a steel frame, running horizontally along the upper part of the external wall at the western facade of the Restaurant premises ("the Exhaust Air Duct");
(4)	a gas pipe running above the exhaust air duct ("the Gas Pipe");
(5)	a metal air hood at Shop No. 76 ("the Hood");
(6)	relocated toilets inside the Restaurant premises containing additional toilet bowls and urinals and associated plumbing, drainage and sewage ("the Toilets");
(7)	a bulkhead structure along the eastern and western facades housing air-conditioning equipment ("the Bulkhead").

Breaches found by trial judge

12.  The Plaintiff had made various allegations against the Defendants of breach of the DMC.  The judge made a number of findings of fact and concluded that as a result, the Defendants were in breach of certain provisions of the DMC which he listed in paragraph 123 of his judgment. 

13.  Actually, a reading of the judgment showed that the judge had also made some other findings of breach of the DMC which he had apparently left out of paragraph 123.  These are also shown in the following table.  Where the table shows a breach as stated in paragraph 123 but without a specific paragraph number, that connotes that there was no specific finding in the judgment.

Works/  DMC	Signs	Canopy	Exh Air Duct	Gas Pipe	Hood	Toilets	Bulk- head
A4	Brch J84	Brch J84	Brch J90			Omt J99	Brch J84
A6						Brch J99
A13			Brch J90
A14	Brch J75	Brch J75		Brch		Brch J99	Brch J75
A15				Brch
A19	Brch
A20	Brch J85	Brch J85	Brch				Brch J85
A21	Brch J80	Brch J80	Brch J90	Omt J98	Brch J113		Brch J80
A25						Brch
C1	Brch		Brch		Brch
C2	Brch

	s.14	s.14		s.34		s.14	s.14
						C28

Italicized clauses involve managers’ approval
J__:	Trial judgment paragraph No.
Brch:	Breach listed in paragraph 123 of trial judgment.
Omt:	Breach found but omitted from paragraph 123 of trial judgment.
s.14:	Breach of s.14 Buildings Ordinance.
s.34:	Breach of s.34I(1)(a) Buildings Management Ordinance.
C28:	Breach of condition 28 Crown Grant
The relevant clauses in the DMC (appended to this judgment) can be summarized as follows:
	A4:	No structural alterations without written consent of manager.
	A6:	No act to be done in contravention of Crown Grant
		(Crown Grant provided that drainage was subject to Director of Lands’ approval: Condition 28).
	A13:	No use of premises for illegal purpose or causing nuisance or annoyance or causing damage to other occupiers.
	A14:	No user of premises except in accordance with Crown Grant,  Building or other regulations, and DMC.
		(Buildings Management Ordinance provided that no common parts may be converted to private use unless by owners’ committee’s resolution: s.34I).
	A15:	No communal areas to be obstructed or incumbered without manager’s consent.
	A19:	No sign or advertisement to be displayed without prior written consent of manager.
	A20:	No projections or structures extending outside exterior of the Building.
	A21:	No alteration of external appearance of Building without prior written consent of manager.
	A25:	No clogging of flush or drainage system of Building.
	C1:	Design of facades or exteriors of Shops to be first approved in writing by manager.
	C2:	No advertising or other signs to be exhibited from Shop without the prior written approval of manager.

Appeal

14.  I now come to the points taken on appeal.

Ownership of external walls

15.  Mr Edward Chan SC, leading counsel for the Defendants, submitted (on the basis of clause (II)(i)(a) in the Exceptions and Reservations made in the first Assignment) that the external walls of the Restaurant premises were owned either by the developer or by the 1^st Defendant.  He submitted that consequently the Plaintiff had no right to complain about the use of the external walls. 

16.  With respect, I do not agree with that submission.  The first Assignment and the DMC were both executed on the same day by the same parties.  They were obviously intended to be read together.  We were not referred to any provision in the DMC that excluded the external walls from its application.  In fact, that the DMC did apply to the use of the external walls is fortified by a clause in the DMC giving the right to affix a chimney on the external walls (clause 7(c) Section I).  Obviously, if the use of the external walls were not governed by the DMC at all, there would have been no need for that specific provision.

17.  In any event, it was not clear who owned the external walls.  Neither the 1^st assignment nor the DMC indicated whether any shares had been allocated to the external walls, nor was there any cogent evidence before the trial judge  of the current ownership of these shares (paragraph 70 of the judgment).  Where the Defendants needed to assert the separate ownership of the external walls as part of their defence, the evidential burden was on them to show that specific, privately-owned shares had been allocated for those external walls. 

Whether erection of signage was “use” of premises within A14

18.  It was also submitted for the Defendants that assuming that the erection of signage contravened s.14 Buildings Ordinance, there could not have been breach of clause A14 as it did not involved “use” of any part of the premises.

19.  I do not agree with that submission.  Clause A14 provides that no owner may use or permit (etc.) any part of the Building owned by him to be used except in accordance with the Crown Grant and any applicable Building Regulations or other Ordinance and Regulations (etc.).  That clause is drafted in wide language and is not confined to economic “use” in terms of say, commercial use or residential use.   It is wide enough to include physical “use”.  In my view, to affix an article onto a wall is to use the wall as support for the article.

Whether A20 subject to A24

20.  It was also submitted on behalf of the Defendants that clause A20 had to be read with clause A24 which provides that each owner may install “additions” in the part of the Building owned by him.  Accordingly (so the argument went) if the external walls were owned by the developer or by the Defendants, clause A20 would not apply. 

21.  I do not agree with that submission. Clause A24 started with the phrase “save and except as herein provided”.  Hence, I read clause A20 as being the dominant clause.  That clause specifically prohibits projections from the Building.  Whilst it is true that clause A20 started with “except as herein mentioned”, it is obvious in my view that that is to provide for excepted projections such as the private aerials referred to in clause A18.

Whether Managers should have given approval for erection of signage, canopy or bulkhead

22.  The managers had not given approval for the erection of the signage, canopy or bulkhead.  It was submitted on behalf of the Defendants that the managers had no good reason not to give approval as there was no substantial evidence that the signage, canopy or bulkhead were structurally unsafe.  Consequently since the managers had no good reason to refuse approval, the court should not exercise its discretion to grant a mandatory injunction.

23.  The grant or refusal of a mandatory injunction is of course a judicial discretion.  As such, an appellate court should be slow to interfere with the trial judge’s discretion unless satisfied that he had erred in law, or had misapprehended pertinent facts, or had taken irrelevant matters into account, or had failed to take relevant matters into account, or that his conclusion was outside the generous ambit within which a reasonable disagreement is possible (Hong Kong Civil Procedure §59/1/49).

24.  It has not been shown in what way the trial judge had erred in principle when he exercised his judicial discretion to grant a mandatory injunction in the present case.  I do not accept the Defendants’ submission that the managers should have given approval on the basis of the Defendants’ experts evidence - which was based on design sketches only.  The evidence from the Plaintiffs’ experts was to the effect that structural plans were required and inspection had to be done to verify the integrity of materials.  In the light of that evidence from their professional advisers, the Plaintiffs could not be criticized for withholding approval, and it followed that there was evidence on which the trial judge could properly exercise his discretion.

Whether A4, A20, A21 and C1 subject to developer’s right to affix chimney

25.  It was submitted on behalf of the Defendants that clauses A4, A20, A21 and C1 should be read subject to the developer’s express right to affix chimneys on the external walls.  This was presumably a reference to clause 7(c) in Section I of the DMC which provided that there was reserved unto the developer, its successors and assigns the exclusive right to erect, use, affix to and maintain on the external walls of the Building one or more chimneys, provided that the registered owners (etc.) should maintain, repair and uphold the chimney(s).

26.  There was no finding of fact by the trial judge that the exhaust air duct was a chimney.  Indeed one of the Defendants’ own witnesses (DW3) had distinguished between the exhaust air duct and a chimney (§9.2).

Whether exhaust air duct a nuisance or annoyance to other owners

27.  Although it had been accepted by the Defendants that the exhaust air duct smeared the external wall of the car parking floor which required extra cleaning, it was also submitted that there was no breach of clause A13 as the external walls belonged to the developer.  I refer to the discussion in paragraph 17 above on the failure of the Defendants to show the allocation of specific privately-owned shares for the external walls and I will not repeat it here.

28.  It was also submitted that in any event, “it is difficult to see how the manager could withhold its consent and approval” for the exhaust air duct.  I do not agree.  Taking into account the admitted smearing of the external wall by the exhaust air duct, a responsible manager would more likely be expected to withhold its consent in the interests of the occupants of the development as a whole.

Whether gas pipe conversion of common parts

29.  It was submitted on behalf of the Defendants that they could not have been in breach of clause A14 because that clause applied only to the use of privately-owned premises, not common areas.  I think that submission must be correct because in that part of the judgment dealing with the gas pipe (paragraphs 93-98), the judge dealt only with common areas.

30.  I also accept the Defendants’ submission that there could not have been a breach of clause A15, as the language of that clause does not envisage the digging up of communal areas for the burial of an additional gas pipe underground.

31.  It is not clear whether the judge found a breach of clause A21.  Although in paragraph 98 of his judgment, he said “I also find that the gas pipe amount to the alteration of the external appearance of the building”, no reference was made to clause A21 and this clause was not listed in the paragraph listing “breaches of the DMC” (paragraph 123).  There was no Respondent’s Notice.

32.  As for breach of s.34I(1)(a) Buildings Management Ordinance, I think the occupation of common areas (albeit underground) must be a conversion of common parts.  That must be so, as otherwise there would be nothing to stop owners digging up common parts and using underground areas for say, wine-cellars.   

33.  The issue is whether there was an  exemption where the occupation is for a gas pipe providing gas to private premises.  The onus of showing that there was such an exemption was on the Defendants as the party seeking to assert the defence.  In considering that the Defendants had failed to discharge the onus, the judge was influenced by the lack of evidence that the gas pipe had been approved by the utility company (paragraph 93 of the judgment).  However he seems to have failed to take into account the fact that the pipe had been installed and certified by a qualified contractor.

34.  In my view, if he had taken that into account, together with the Defendants’ rights to have the free and uninterrupted passage of gas through pipes (whether at the time of the DMC or thereafter) passing through the Lot and the Building, for the proper use and enjoyment of the Restaurant premises, a mandatory injunction would not have been granted.  

Whether hood de minimis

35.  As for the metal air hood at Shop No, 76, this was located on the outside of the shop premises facing the open corridor and as such, clearly alters the external appearance of the Building. 

36.  Whether it should have been regarded as de minimis was a matter of fact for the trial judge.  At paragraph 135, the judge found that none of the impugned works was a minor or trivial item.  It was in this connection that he said that there was no assurance as to the structural stability of the hood, which was by no means an insubstantial article.  This was a matter which the judge could legitimately take into account in the exercise of his discretion whether to grant a mandatory injunction.

Whether relocation of toilets breach of Crown Grant

37.  The toilets were relocated and more toilet bowls and urinals were added.  There was no dispute that the relocation and expansion of the toilets were building works which had been undertaken in breach of the Buildings Ordinance (paragraph 99 of the judgment).

38.  It was submitted at some length on behalf of the Defendants that there had not been a breach of Condition 28 of the Crown Grant as it could not have been the intention of the Crown that even minor alterations to the drainage system would require the approval of the Director.  I do not see why there should be a narrow interpretation of this condition.  By its very nature, drainage has the potential to seriously affect other members of the public.  I consider therefore that the judge was right in finding that there has been a breach of Condition 28 and hence clause A6. 

39.  It is arguable that clause A14 was not engaged, but in light of the breach of clause A6, it is not necessary to consider this issue.  Although in paragraph 99 of his judgment, the judge recorded that there was no dispute that the toilets were structural alterations, no reference was made to clause A4, and this clause was not listed in the paragraph listing “breaches of the DMC” (paragraph 123).  There was no Respondent’s Notice.  As for clause A25, I accept that there was no cogent evidence that the added toilet bowls and urinals would lead to “clogging or impairing of the flush or drainage systems”, as there was no evidence of the relationship between these systems and the “water tank and pumping system” that the judge referred to in paragraph 110.  The only objection made by the Plaintiff’s expert was that “the increase in the number of sanitary fitments would normally cause an increase in water consumption rate”, which should not be charged to the Building (Kenneth Chan Report § 4.2.6).       

Exercise of judicial discretion

40.  Finally, I have referred in an earlier part of this judgment to the well-established reluctance of an appellate court to interfere in the exercise of judicial discretion.  It is accepted by the Defendants that the correct principles had been set out in the judgment.  It is also accepted that the judge did consider the question of hardship that would be suffered by the Defendants in complying with the mandatory injunction.

41.  It was submitted on behalf of the Defendants that the judge had failed to appreciate that the effect of the orders relating to the toilets, the exhaust air duct, the gas pipe and the air hood would mean that the business of the Restaurant would have to cease.  But, as shown in paragraph 131 of the judgment, there was at trial  “a lack of evidence of hardship save by way of submission of the likely effect of restoration”.  As the judge also recorded at paragraph 134, the Defendants had failed to adduce any evidence as to the extent and time required for restoration.

42.  At paragraphs 135-136, the trial judge took into account the manager’s duty to provide a safe environment.  At one stage, I was minded to allow the appeal in relation to the signage, canopy and bulkhead, given the fact that the Building Authority had not imposed a Building Order.  However, on more mature reflection, in the absence of cogent evidence that the Authority had actually inspected these building works after their completion and decided not to impose a Building Order, I do not think this court should interfere with the judge’s order in these respects.

43.  However, given the lack of evidence of any detriment to the owners or occupiers of the Building by the relocation and expansion of the toilets within the Defendant’s privately-owned premises to fulfill licensing hygiene requirements (K. Chan Report §3.6.1), the obvious detriment to the Defendants by reason of their need for the toilets for the Restaurant premises, and since the trial judge’s fears of re-entry onto the Lot for breach of the Crown Grant were unfounded (as the Government would not be re-entering the entire Lot for breach by only one owner on that part of the land exclusively occupied by him), there is little justification for maintaining the mandatory injunction in respect of the toilets.  The Plaintiff has not shown why a declaration that the toilets were in breach of the Grant and hence clause A6 would not suffice.

Order

44.  Accordingly, I would only allow that part of the appeal seeking an order to set aside the mandatory injunction in relation to the gas pipe and the toilets.  The rest of the appeal is dismissed.

45.  Given the limited extent of the Defendants’ success, I would give an order nisi that the Defendants are to bear the Plaintiff’s costs.

Hon Yam J:

46.  I agree with the judgment delivered by the Hon Yuen JA.