THE INCORPORATED OWNERS OF HONG KONG HOUSE v. SENFIELD LTD

CACV117/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 117 OF 2003

(ON APPEAL FROM HCA NO.3041 OF 2002)

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REASONS FOR DECISION AND DECISION ON COSTS

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Hon Ma CJHC :

Introduction

1. On 26 March 2003, Deputy Judge Carlson gave summary judgment on a part of the plaintiff's claims in this action, ordering unconditional leave for the balance. The plaintiff now appeals that part of the decision in relation to the balance claims and seeks summary judgment.

2. The plaintiff comprises the incorporated owners of a commercial building known as Hong Kong House situate at 15, 17 and 19, Wellington Street, in Central ("the Building"). The defendant is the tenant of premises located in the basement, ground, mezzanine and first floors of the Building ("the Premises"). The owner of the Premises is Yorkbest Investment Limited ("Yorkbest"). The rights and obligations of the various owners of the Building are governed by a Deed of Mutual Covenant dated 1 August 1972 ("the DMC"). It is accepted that the defendant is bound by the terms of the DMC. The defendant uses the basement, ground and mezzanine floors of the Building to run a restaurant, the Tsui Wah Restaurant. The first floor is used by the defendant for the purposes of a pub and café known as the DJ Pub and Café.

3. As pleaded in the Statement of Claim, the plaintiff claims that the defendant has breached the DMC and the Building Management Ordinance, Cap.344 in the following way, namely, that the defendant had :-

"	a.	Sometime between 9th August 2000 and 6th September 2000, connected its sprinkler system to the water tank (the 'Water Tanks') constructed at the roof top of the Building ('the Roof Top') which provided water supply to the hose reel and fire hydrant system of the Building;
	b.	On a date unknown to the Plaintiff, erected a neon sign (the 'Neon Sign') attaching to the external wall of the Building (the 'External Wall'); and
	c.	On or about 3rd June 2002, installed a satellite disc and ancillary equipment on the Roof Top (the 'Satellite Disc') for the reception of television signal."

4. I shall hereinafter refer to these claims as the Water Tanks, the Neon Sign and the Satellite Disc claims. It is not clear from the pleadings whether the Water Tanks claim involves only the sprinklers of the DJ Pub and Café or whether those in the Tsui Wah Restaurant are also included. However, this does not really matter for present purposes.

5. In the prayer to the Statement of Claim, the plaintiff sought essentially the following relief :-

(1)	A declaration to the effect that the plaintiff had the power or right to manage the Building;
(2)	A declaration that the Water Tanks, the Roof Top and External Wall of the Building were common parts;
(3)	Injunctions to restrain the defendant from connecting its sprinkler system or any other sprinkler system to the Water Tanks, erecting the Neon Sign or any other signs to the External Wall and installing the Satellite Disc or similar devices on the Roof Top of the Building;
(4)	Mandatory injunctions ordering the defendant forthwith to disconnect its sprinkler system from the Water Tanks, dismantle the Neon Sign, remove the Satellite Disc and reinstate the Water Tanks, the External Wall and the Roof Top of the Building to their original condition;
(5)	Damages to be assessed.

The judgment below

6. After hearing submissions from counsel for the plaintiff (Mr Daniel Tang, who also appeared before us) and Mr Choy Bing Wing (a director of the defendant who was given leave by the court to represent the defendant in these proceedings), Deputy Judge Carlson :-

(1)	Granted the declaration sought in paragraph 5(1) above.
(2)	Granted the declaration sought in paragraph 5(2) above so far as the Roof Top was concerned.
(3)	Gave summary judgment in relation to the Satellite Disc claim and ordered that the defendant do forthwith remove the Satellite Disc and make good any damage to the Roof Top and other common parts of the Building caused by the installation and removal of the Satellite Disc. The judge also ordered damages to be assessed on this claim, such assessment to take place after the disposal of the remainder of the action.
(4)	Ordered that there be unconditional leave to defend on the balance of the plaintiff's claims, namely, the Water Tanks and Neon Sign claims.

7. The plaintiff appeals from the judge's decision giving unconditional leave for the Water Tanks and Neon Sign claims. There is no cross appeal by the defendant in relation to the Satellite Disc claim and it is therefore unnecessary to refer to this claim further.

8. At the hearing of the appeal before us, as I have said, Mr Daniel Tang appeared for the plaintiff. Mr Choy continued to represent the defendant. At the conclusion of submissions from Mr Tang, we dismissed the appeal and having heard submissions, reserved the decision on costs.

9. I shall now deal with the two claims in greater detail.

The Water Tanks claim

10. The essence of this claim is that the Water Tanks to which the defendant's sprinkler system was connected, were a part of the common parts of the Building and the defendant had made a connection without having obtained the requisite consent or authorization from the plaintiff. Reliance was placed on clause 9 of the DMC and on section 34I of the Building Management Ordinance (although neither was expressly pleaded in the Statement of Claim).

11. The facts before the court do demonstrate that the Water Tanks form a part of the common parts of the Building and that the defendant has not obtained permission or authorization to make the connection as alleged. That, argued Mr Tang, was enough to dispose of the matter and the plaintiff was therefore entitled to summary judgment.

12. In my view, the matter is not quite so simple. The following facts and matters are relevant in this context :-

(1)	As I have already noted, the Building was a non-domestic one. The plaintiff would be aware that the Premises were used as a restaurant and bar café. As such, it must at least be arguable that it would also be aware (or should have been aware) of the fact that fire regulations would be in existence requiring the plaintiff to have a fire sprinkler system in place. In order for a fire sprinkler system to be operative, a supply of water is obviously necessary.
(2)	Clause 1 of the DMC is the usual covenant in which it is stated that an occupant of premises is to be entitled to the full use, occupation and enjoyment of the part of the building he occupies. Clause 3(c) entitles the occupant to free and uninterrupted passage and running of water through, among other things, the water tanks in the Building.
(3)	In spite of these clauses, it would appear that no supply of water was made available to the defendant to enable it to comply with the fire services regulations. In a letter dated 11 January 2002 from Bing Choy and Associates (presumably the defendant's consultant) to the plaintiff's solicitors, it was stated that "there had never been fire water supply to Hong Kong House at all". There has been no evidence from the plaintiff to indicate that at all times, water was made available to the defendant for the purpose of feeding its fire sprinkler system.
(4)	The defendant did seek permission from the plaintiff for this purpose but none was given, it would appear. In a letter dated 4 February 2002 again from Bing Choy and Associates to the plaintiff's solicitors, it was stated, "Our position has been made very clear to your client months ago that we would be pleased to have the new fire water system of your client connected to our existing and approved fire water system if your client is willing to share the installation costs on pro rata basis".

13. In these circumstances and particularly given the obligations set out in clauses (1) and (3)(c) of the DMC, the judge below was, in my view, justified to regard as a triable issue the question whether the plaintiff was entitled to withhold consent to the supply of water to feed the defendant's fire sprinkler system. Involving as it does mixed questions of fact and law, as well as questions of reasonableness (an almost impossible concept to determine in summary judgment proceedings), this issue cannot be resolved at this stage. It is perhaps useful in this context to refer as an analogy to the covenant of quiet enjoyment in leases. This covenant can be defined as having been broken by any acts which substantially interfere with the title to or possession of the relevant premises or the ordinary and lawful enjoyment of those premises; whether or not it is broken in any given case is a question of fact :- see Hill and Redman's Law and Landlord of Tenant (2003 Edition) at paragraphs 6830-6840, 6842. I fully appreciate the possibility that all along the plaintiff may have acted reasonably and that it was the defendant who has acted improperly. For example, Mr Tang impressed on us the argument (although there was little evidence on this in the papers before us) that all along the plaintiff had been reasonable towards the defendant and that on the contrary, it was the defendant by its unilateral acts that had obstructed the plaintiff in installing a fire system for the Building. However, all these are matters for trial and obviously, both sides will have to amend their respective pleadings at some stage to reflect the precise ambit of their cases here.

14. I should also deal with another reason why the dispute on this claim should only be resolved at trial. According to the plaintiff, the unlawful connection of the Water Tanks to the defendant's fire sprinkler system took place between 9 August 2000 and 6 September 2000. Yet it was not until January 2002 when a solicitor's letter was sent to the defendant that the plaintiff appears to have taken any action. Whether this can give rise to any defence of waiver, estoppel or laches, is another matter that cannot easily or comfortably be disposed of now. The possibility is also to be borne in mind that such delay as may be found to exist in the present case could feature in the court's discretion whether or not to grant an injunction, which is of course an equitable remedy. I appreciate that the defence (which is drafted by a layman) does not plead any of this, but the plaintiff's position and conduct (as well as that of the defendant) over the relevant period involve matters that ought to be further investigated at trial. This provides in my view "some other reason" for a trial :- see RHC Order 14 rule 3(1); Hong Kong Civil Procedure 2002 Vol.1 at paragraph 14/4/10.

15. In the circumstances, given the questions which arise from the evidence at this stage and which remain unresolved, it would simply not be right to order summary judgment. Bearing in mind the court's approach to Order 14 applications, I am compelled to reach the same conclusion as the judge below that unconditional leave to defend should be given on this claim.

The Neon Sign Claim

16. This part of the appeal can be disposed of shortly. In his judgment, the judge referred to the fact that a sign has existed outside the Building, where the Neon Sign erected by the defendant is now affixed, for a period in excess of 30 years. Of course, the actual sign has changed over the years together with whatever business has been run. The correspondence between the plaintiff and the Buildings Department shows that the Neon Sign is an unauthorized structure contravening the terms of the Buildings Ordinance, Cap.123, but the Government has not accorded any priority to its removal.

17. In these circumstances and with no evidence that the structure causes any danger or that its removal has been insisted on by the relevant Government authorities, it is arguable that the plaintiff may be estopped from now complaining about the sign or may have waived its right to do so. Acquiescence and laches may also feature since the remedy sought is again an injunction to have the structure removed. It is also to be noted that according to the affirmation evidence of the plaintiff, the defendant erected the Neon Sign in or about November 1998. Yet it does not appear that any complaint was made by the plaintiff until the issue of the Writ in this action in August 2002. I make the same observations as in paragraph 14 above.

18. Again, the judge was correct in my judgment to order unconditional leave to defend on this claim.

Conclusion and costs

19. For the above reasons, the plaintiff's appeal was dismissed.

20. On costs, it is important to bear in mind that those issues which I have regarded as giving rise to arguable matters to be determined at trial, were barely raised in the defendant's pleadings. No clear allegations were raised in the defence as to any possible breach of the covenant of quiet enjoyment or the right to water under the DMC, nor as to waiver, estoppel, acquiescence or delay. While it is right for us at this stage to take a broad view of the evidence and a more lenient view of the pleadings in determining the merits of the summary judgment application, as far as costs are concerned, it would be wrong to ignore the technicalities of the situation. I therefore regard the correct order for costs to be costs in the cause.

21. Finally, as I remarked to the parties at the conclusion of the hearing, this is a case in which the interests of both parties would best be served by proper legal representation. The plaintiff is legally represented. As for the defendant, there have been disadvantages (but also advantages) in its being unrepresented so far in this action and these will continue if this remains the position. The defendant is a limited company. It obtained leave from Master Lung under RHC Order 12 rule 2A to be represented in this action by Mr Choy, one of its directors. This leave was given by the Master at an early stage of the action. Having regard to the circumstances now prevailing as well as to the somewhat sparse financial information contained in the affirmation that originally supported the defendant's application under Order 12 rule 2A, I am of the view that the court ought seriously to reconsider the leave that was granted by the court on 10 January 2003.

Hon Stone J :

22. I agree with the judgment of Ma CJHC.

23. The appropriate order for the costs of this appeal has provided pause for reflection, but in the circumstances of this somewhat unusual case I am persuaded that costs in the cause meets the broad justice of the situation.