HON HING ENTERPRISES LTD v. HONOLULU LAND INVESTMENT CO LTD AND ANOTHER

1991 No. A3557

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. On the 19th floor of the Nan Fung Centre in Tsuen Wan there is a large impressive looking glass entrance door to certain commercial premises, occupying Units 1912-15 of that centre.

2. The Plaintiff in this action is the management company responsible for the Nan Fung Centre. The 1st Defendant is the owner of Units 1912-15 and the 2nd Defendant is the tenant and occupier of those units The ownership and occupation by the Defendants is subject to a Deed of Mutual Covenant (hereinafter referred to as "the DMC") dated 6th June 1983. The Defendants are bound by the covenants, provisions and restrictions contained therein.

Inter alia, the DMC provides:-

(a) At 4.01 "Subject to any necessary approval of the Building Authority or any other authority ... the First Owner (not the 1st Defendant) exclusively reserves for itself its assigns ... the following rights:-

(ii) To otherwise amend the plans and specifications approved by the Building Authority save.and except the requirements and specifications as herein stipulated.

(b) At 10.01 "... the managers shall have the following powers and duties, namely:-

(xiii) To remove any structure or installation ... which is illegal or which contravenes the terms herein contained ...

(xxi) To enforce the due observance and performance by the owners of the terms and conditions of this Deed and to take action in respect of any breach ...

(c) At 17.02 "... each owner shall not make any alteration (whether structural or otherwise) to or additions to the exterior of his unit and shall not make any window or other aperture in any part of the wall dividing his unit from the parts of the building 'in common use.

(d) At 18.24 "The common parts referred to shall include ... (i) the staircase, landings, passages, entrance hall, lift hall, corridors ...

(e) At 27.01 - "The covenants and provisions of this Deed shall be binding on all parties hereto (which by virtue of both the Deed itself and s.s.41(2) (6) and (3) of Cap,219, the Conveyancing and Property Ordinance) includes the 2nd Defendant as occupiers as well as the 1st Defendant in this action).

3. The Plaintiffs claim that the Defendants are in breach of the DMC by having installed, on the 19th floor, the door which now provides the single entrance in Units 1912-15. They claim they are in breach of Clause 17.02 in that they made an aperture in the wall dividing their units from the common parts without consent or approval.

4. They seek a mandatory order that the Defendants remove the door and, by implication, re-instate the original doors.

5. The Defence, in outline claims there has been no breach because a door is not "a window or other aperture" to which Clause 17.02 refers and an internal wall is not "the exterior of a unit". Further, that even if there has been a breach, the Plaintiffs are not entitled to any relief because by their conduct they have expressly or impleadly consented to it or have otherwise acquiesced to it.

6. There are therefore 2 main issues. Firstly, has there been a breach of the DMC? Secondly, if the answer to the first issue is in the affirmative, have the Plaintiffs acquiesced to it and are they estopped from claiming relief? Before I deal with these main issues the Defence has also taken a preliminary Point:-

Locus standi

7. Mr Li for the Defence argues that the Plaintiff is only an agent of the owners of the Nan Fung Centre and relying on the first instance decision in Goodyear ProperItY Management Ltd., The Incorporated Owners of Oriental Gardens v. Cheung Yuet, Chong Yan Kan (HC MP777/88), being an agent cannot commence an action in its own name. The Defence pleads at para.6 that "paragraph 6 of the Statement of Claim is not-admitted". Para.6 of the Statement of Claim states "6. The-Plaintiff is empowered by the terms of the DMC ... to commence ... legal proceedings".

8. Mr Merry contends that if the locus standi was a real issue it would have pleaded as a denial and further particularized. He submits that the Defence cannot take this point at such a late stage, it never having emerged before. I agree. It is an academic point which could have been dealt with by a simple amendment had it arisen at an earlier stage. If I am wrong on this I go on to say that in any event I am satisfied that the present Plaintiffs do have the necessary locus standi. The power and duty to act as Plaintiff is derived from the DMC itself, to which the Plaintiff is a party at Para.10.01(xxi), as the managers.

9. I will now deal with the main issues.

Has there been a Breach?

10. On questions of interpretation of the DMC I am satisfied that a door comes within the definition of "window or other aperture". To conclude otherwise would defy common sense. I reject the suggestion that the drafters of the DMC intented to refer only to windows and other types of window-like apertures. I am satisfied "other apertures" means apertures other than windows.

11. I am equally satisfied that the word "exterior" means not only the exterior of the building but all the walls and/or partitions which surround that area which the Defendants own and occupy.

12. I am finally satisfied that approval for any proposed alteration to the doors of the 19th floor was neither sought nor granted. The correspondence speaks for itself. The opening letter from the 1st Defendant to Plaintiff dated 20th November 1987 is not an application for approval as envisaged by the 3rd schedule of the DMC which governs such matters. It "informs" the Plaintiff of their intention to make a new door. Its wording is a hint of the somewhat robust attitude adopted by the Defence which permeates subsequent correspondence and dealings between the parties. The Plaintiffs replied on 3rd December 1987 stating that the request was turned down with regret. It is unfortunate that an explanation for the refusal was not given, because it has now transpired through the evidence that had they. applied to build the new door about 6 or 7 ft. further along the corridor approval woulc in all probability, have been given. The reason being that the part of the corridor wall which is adjacent to the lift lobby is made of marble tiles - that is a length of wall of about 30 ft. Beyond the marble tiling to the left and right down the corridor is ordinary partitioning. It is the Plaintiff's policy that the marble tiling should remain intact and should not be cut into for the purpose of access to the units. If bigger and better doors are to be put into the ordinary partitioning further down the corridor then there would be no objection. The door in question, which is 12 - 14 ft. wide has caused about 6 - 7 ft. of tiling to be removed.

13. However, the Defence stance from which they have not waivered is contained in the letter of 12th December 1987, namely, "Your approval to the proposed door opening is not necessary under the Deed of Mutual Covenant".

14. For the reasons I have outlined I find for the Plaintiff on the first issue that the door in question does constitution a breach of the DMC to which the Plaintiff did not consent.

Have the plainifff acquiesced to the Breach?

15. In answering this question I should briefly outline the history of the matter which encompasses two distinct periods. The first is the initial correspondence in 1987 and early 1988 to which I have already referred. That chapter concluded with a letter from the Defendants' solicitors dated 21st January 1988. Just prior to that date the Plaintiffs had reached an agreement with the contractor doing the work on the door space that the marble tiles which had at that time been removed would be returned to the Plaintiff for the purpose of re-instatement. (In fact the tiles never were returned and the wall, with tiles missing was boarded up). The Defence was not aware of the terms of that agreement and wrote on 21st June 1988:

"Our client is not aware of any settlement and considers that it has the right to make the proposed or similar door opening. Since your client accepts that the matter has been 'amicably settled' we shall assume that your client also accepts our client's right to make the proposed or similar door opening.

Such an assumption was without foundation and ill-considered.

16. Between the date of that letter in January 1988 and the date of the next relevant correspondence in December 1990 there is a.conflict of evidence as to the state of the door.The Plaintiff says the units were left vacant, and the damaged wall and door opening simply boarded up. The Defence on the other hand say that from March 1988 to March 1989 the units were occupied by a tenant of theirs "KK & Roberts" and a double glass door was in fact installed. When KK & Roberts left in March 1989 that door was taken down and the remaining gap was boarded up in which condition it remained until December 1990 when the existing door was installed. Whilst I accept that the units probably did have an occupier for most of 1988. I am not persuaded that those tenant installed a new and large double glass door. On this issue I prefer and accept the evidence of the Plaintiff's witnesses. I am satisfied that the only glass panel double door that has provided access to these units is the one built by the Defendants in December 1990. It is the type of door which the 1st Defendant threaten to install in December 1987 and for the reasons already stated constitutes a breach of the DMC.

17. The Defence claim that the Plaintiffs are not entitled to any relief because the breach, if there be a breach, has been waived by conduct. For there to be acquiescence which would entitle a court in its discretion to refuse any relief, there must have been a representation by the Plaintiff that the breach would be condoned or tolerated. The Defence submit that such a representation can and should be implied for 2 main reasons.

18. Firstly, there are other doors on other floors which cut into the marble wall and are breaches and have been approved or condoned. In fact there are only 2. One on the 17th floor and one on the 21st floor. Both pre-date 1987, both are single doors not double doors, the one on the 21st floor merely replaces a door which was part of the original specification and within the marble wall and perhaps the most important distinction of all is that approval was sought and, for reasons which are not known, consent was given. They are authorized breaches. In this case, consent was unequivocally refused on 2 separate occasions. The Defendants chose not to challenge the reasonableness of that refusal which they could have done through the 3rd schedule of the DMC, they chose instead to ignore it. It is but a small step in logic to say that if the existence of one authorized breach entitles an occupier to commit similar breaches without authorization it would render the DMC impotent.

19. I do not find that the actions of the Plaintiff with regard to other doors on other floors should be construed as a representation to the Defendants that their door would be tolerated.

20. Secondly the Defendants, as evidence of acquiescence rely on the length of the period of inactivity between 1987 and 1990. They argue that the failure to reply to their letter of 21st January 1988 led the 1st Defendant and later the 2nd Defendant, to believe that they did not object to the door. I reject this argument. I have already stated that the assumption made in 1988 was without foundation. The fact that 2 - 3 years passes before the assumption is repeated does not give it foundation. It is conceded and I agree, that the Plaintiffs could have been quicker in getting the matter resolved but as I have already found they were not tolerating a double glass door for 2 - 3 years but a partially boarded up opening for which the responsibility to restore lay not with them.

21. There was no confusion or ambiguity about the Plaintiff's position in 1987/8. The same position was repeated when the matter re-emerged in 1990. Criticisms for non activity should be directed on the 1st Defendant for their failure to re-instate the wall and not of the Plaintiff for its failure to pursue the matter.

22. I have listened with pleasure and profit to the detailed submissions of both counsel together with the authorities they have cited.

23. The defence have placed considerable reliance on "The Oriental Gardens" case HKLR [1979] 536 in which the granting of an injunction and mandatory.order was reversed on appeal because of the Plaintiffs' acquiescence to the breach. It was there held that other breaches were similar to the ones committed by the appellants and could reasonably have been considered by the appellants as a representation that their breach would be tolerated. It goes without saying that for this principle to apply one must compare in every case the offending breach with the pre-existing breach and decide as a matter of fact whether it amounts to a representation. The same point was made by Mr. Justice Cons in H.K. Land Co. Ltd, v. Cheung Chiu-moon [19761 HKLR 214:-

"It is well established that acquiescence may preclude the grant of relief. It is equally well established that acquiescence in a small breach may not bar relief against a wider breach."

24. On the facts of the case before me for reasons already stated I find there was no representation and therefore no acquiescence. and therefore the Plaintiffs are not estopped from claiming relief.

What is the appropriate relief:

25. I am urged by Mr. Merry to take a strong stance and order the destruction of the door and its re-instatement 7 ft. further away from the lift lobby and to restore the marble tiled wall. For well argued reasons which I shall not recite he submits that this is an important matter of principle. Other tenants on all other floors must see that the Plaintiffs will carry out its powers and duties to enforce the DMC.

26. Whilst I am not going to order the Defendants to rebuild the door the order I am going to make is intended to vindicate the Plaintiffs in bringing this action. The relief I propose to order will be by way of a declaration. I do not regard it as a hollow victory for the Plaintiffs because with it will go an order for costs in their favour. Faced with the costs of a High Court action other tenants will surely think twice before flouting the DMC both in the face of its own terms and in the face of this declaration concerning the door on the 19th floor.

27. Before this action the door on the 19th floor was an example of a prevalent attitude that the terms of DMC's are honoured more in the breach than in the observance. After this action the door on the 19th floor may be regarded as the exception which proves the rule.

28. My reasons for not making the mandatory order are briefly that the door itself is handsome and well constructed. It is not right in the middle of the marble wall but to the left. When one comes out of the lift and into the lobby you do not see it; you only see it as you walk towards the corridor. It does not give an impression that the Defendants own the whole of the 19th floor because in the middle of the marble wall there is an office index listing a dozen or more offices on that floor. Finally, the cost of re-instatement, whilst not, substantial, would not be insignificant either.

29. The Defendants^. are willing to give an undertaking not to commit further breaches should they lose on the main issue, which they have. There is no need therefore to grant an injunction. In any event I am satisfied that there is no risk of these Defendants committing further breaches.

30. I am satisfied that the Plaintiffs have properly pursued their powers and duties to enforce the DMC and have had to come to court to do so.

The declaration of this court is:

(i) The double glass door entrance to the premises of W.M. Lee & Co., Units 1912-15, 19th floor, Nan Fung Centre, Tsuen Wan is in breach of Clause 17.02 of the Deed of Mutual Covenant dated 6th June 1983 to which the Plaintiff company and the 1st and 2nd Defendants are parties.

(ii) Neither the 1st nor 2nd Defendants sought approval from the Plaintiffs for the installation of the said door.

(iii) The Plaintiff management company has never given approval either express or implied, for the installation of the said door.

(iv) The costs of this action shall be the Plaintiffs.

31. At the request of counsel I make the order as to costs an order nisi.