Lo Yu Chu v. Kam Fu Lai Development Co. Ltd. and Another

IN THE COURT OF APPEAL

1994, No. 50
(Civil)

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J U D G M E N T

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Penlington, J.A. :

Background

1. In 1981, the 1st respondent was the owner and developer of a property in Kowloon City known as Pearl House (the building).

2. It consists of seven levels, the basement and three lower levels being commercial and the upper three residential flats. There are 152 shops in the lower three levels and 27 flats in the upper three. The building is therefore a very substantial commercial and residential development but, strangely enough, at the time when the plans were approved by the Buildings Ordinance Office, or the equivalent of what is now the Buildings Ordinance Office, there was apparently no provision made for the shops to be air-conditioned by any central air-conditioning system. Presumably each shop was to have its own air-conditioning unit although there was no evidence in the trial below about that.

3. The 1st respondent sold off all the shops and flats but retained 26/720th shares of the building. Those shares consisted of part of the basement and an area which is the subject of this dispute known as flat roof K (area K) on the third floor. It is an area adjoining flat 3B on the third floor which was purchased by the appellant on 20th January 1981.

4. On 25th June 1981, the occupation permit for the building was issued. In August the 1st respondent developer, contrary to the approved plans, erected an air-conditioning plant on area K on the third floor to service all the shops on the lower floors.

5. On 23rd September of that year, the appellant confirmed her purchase of the flat at a slightly reduced price because the flat area outside her flat was a little smaller than it had originally been shown on the plans. There was, however, no reduction in price due to the air-conditioning plant.

6. On 25th September, the Deed of Mutual Covenant (D.M.C.), which is in normal terms, was registered and on 30th November the flat 3B was formally assigned by the 1st respondent to the appellant.

7. The second respondent was not incorporated until 10th August 1987. It filed a defence to the action in the court below but was not represented and took no part when the matter came on for hearing either as 2nd respondent or as third party. It was not represented before us.

8. After moving into her flat, the appellant complained verbally to the 1st respondent of excessive noise coming from the air-conditioning plant and some 4 years later, having herself pursued these complaints, she eventually consulted solicitors and formal complaint was made by them to various government departments. These were the Buildings Ordinance Office, the Urban Services Department and the Environment Protection Department. However, as is not uncommon, she got little satisfaction from these various departments. The Buildings Ordinance Office did write to her saying that the air-conditioning plant was an illegal structure in that it was not approved when the plans were submitted but that, to quote the letter, "this had low priority". That clearly meant they would not do anything about the air-conditioning plant. The appellant was then left to take whatever action she considered necessary. Complaint is however made here that in fact no legal proceedings were taken some 8 years after she had moved into the flat and it is one of the grounds of the 1st respondent in this appeal that the appellant has been guilty of undue delay.

9. Eventually the appellant did issue proceedings and the matter came before the District Court. In a judgment of 1st March of this year, judgment was entered for the appellant by Deputy Judge Gould against both the 1st and 2nd respondents. The basis of the judgment was that the 1st respondent was in breach of clause 10(h) of the Deed of Mutual Covenant by allowing flat area K to be used for non-residential purposes. Damages for the nuisance which had been caused to the appellant were to be assessed by a Master, it having been agreed by the parties before the trial that the Judge would only decide the question of liability. He found that the 1st respondent's liability should be limited to 50% of the provable damage on the basis that, while it was liable, so was the Manager of the building but that until 10th August 1987, when the 2nd respondent was incorporated, there was no such manager and the balance of 50% for the period prior to 10th August 1987 was not recoverable in the action. He found the 1st and 2nd respondents each liable for 50% of the provable damage from 10th August onwards.

10. The judge did not grant an injunction against the respondents, which is what the appellant has sought because he considered that damages was an adequate remedy and the grant of an injunction would cause grave inconvenience to the shop owners. It is again a ground on which the appeal is resisted that a factor which must be considered in cases such as this is that where there are third parties who are not represented in the proceedings, an injunction should not be granted if the circumstances of the case are such that there will be such harm done to those third parties which is not justified by the degree of nuisance suffered by the person aggrieved.

11. The judge found that for the purposes of clause 4(k)(i) of the Deed of Mutual Covenant the flat roof area K was not a common part of the building because it was reserved for the exclusive use of the 1st respondent, but that pursuant to clause 9 of the D.M.C. the 1st respondent was entitled to erect the air-conditioner on flat area K. Having done so, however, the air-conditioner itself became a common part pursuant to clause 4(k)(ii). This sub-clause provides that "common parts" shall include the sewers, gutters, drains etc. and "other apparatus and equipment used or installed for the benefit of the said building as part of the amenities thereof and not by any individual owner for his own use or purpose". The judge found that:

"Even though only part of the building enjoyed the direct benefit of the air- conditioning, I am satisfied that it was an amenity from which Pearl House as a whole benefited."

12. Reliance was also placed by the judge below and by Mr. Samual Chan, who appeared for the 1st respondent here and below, on the provisions of the Building Management Ordinance, Cap. 344. "Common parts" is defined in s. 2, para. (a) as:

"(a) the whole of a building, except such parts as have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner;"

13. The judge was in no doubt that area K on the third floor was for the exclusive use and occupation of the 1st respondent pursuant to the terms of the D.M.C. Sub-paragraph (b) goes on:

"(b) unless so specified or designated, those parts specified in the First Schedule."

14. The First Schedule in paragraph 10 includes lighting apparatus, air-conditioning apparatus etc. "intended for the use and benefit of all the owners generally and any room or chamber in which such apparatus, equipment or installation is fitted or installed."

15. Some reliance was also placed by the 1st respondent before us in paragraph 11 of the First Schedule which includes as common parts "fixtures situated in a flat which are used in connection with the enjoyment of any other flat or other portions of the building".

16. It is argued that this must be read in conjunction with the definition of "flat" in s. 2 of the Ordinance which states that "flat" means "any premises in the building which are referred to in a Deed of Mutual Covenant whether they described therein as a flat or any other name and whether used as a dwelling, shop, factory, office or for any other purpose." Here, it is argued that flat area K comes within that definition. A fixture situated on flat area K which is used in connection with the enjoyment of the lower shops therefore is a common part.

17. Having found that the air-conditioner was a common part of the building pursuant to the provisions of the D.M.C. the judge then considered what he regarded as the most important clause in that document namely clause 10(h). This provides that the 3rd to 5th floors of the building will not be used "otherwise than for residential purposes". He found that the air-conditioner was not used for such residential purposes as its sole purpose was for the ventilation of the shops below the 3rd floor and that therefore the 1st respondent was in breach of that clause of the D.M.C.

18. On the question of a nuisance, the judge found that the 1st respondent by erecting and using the air-conditioner on area K, while not giving rise to a cause of action of loss of light, which had been claimed but not strenuously pursued, had compromised the status of the windows of the appellant's flat for the purposes of the Buildings (Planning) Regulations and in particular Regulation 31(2). This breach has caused a diminution of the ventilation of the appellant's flat. He also found that a wall constructed round area K, albeit to try to reduce the noise level coming from the air-conditioner also diminished the appellant's depth of vision from her flat which was much restricted as a result.

19. However the main cause of complaint by the appellant was the noise coming from the air-conditioner. While the judge did find that the appellant was "much given to exaggeration and contradiction" he accepted that the noise from the air-conditioner made it very difficult to hear a telephone conversation or a television programme. He accepted that the appellant's sleep was affected and her son could not do his homework. They found the noise level so oppressive that they moved out of the flat for a while and let it to tenants. However the tenants also found that the noise was unacceptable and gave up the tenancy.

20. In addition to the appellant's own evidence, she also called an expert witness. He said that when the air-conditioner was running the noise level in Flat 3B was only "acceptable" if the windows were closed. That of course greatly reduced the ventilation.

21. The judge did take notice of the fact that the building is in a noisy area. There are restaurants, cinemas and heavy traffic. Kai Tak Airport is nearby and aircraft are constantly landing and taking off close to the building. However the expert said that that noise did not seem to be a noticeable intrusion and the noise from the air-conditioner masked out the general background traffic and other noise.

22. No evidence was called by either respondent and the judge came to the conclusion that the operation of the air-conditioner was an annoyance and inconvenience which was contrary to the appellant's rights under the D.M.C. and it also was a nuisance giving rise to a claim for damages in tort.

23. The judge went on to consider the question of the duties of the "manager" under the D.M.C. Clause 4(a) provided that the manager should be the 1st respondent (who was the "first owner" of the building) or any other person appointed by it. The 1st respondent appointed management companies from 1981 to 1st June 1987 when the owners exercised their right to appoint a manager. Clause 4(a) provides that the manager shall be the agent of the owners and the judge therefore found that the 1st respondent was not liable as manager for the nuisance caused by the air-conditioner prior to 10th August 1987, when the 2nd respondent was incorporated. After that date the 2nd respondent became jointly liable for the nuisance by its failure to carry out its responsibilities under the D.M.C. The 1st respondent was however liable for nuisance from the date of the purchase by the appellant of her flat. The judge found that the 1st respondent was liable for 50% of the damages between the purchase of the flat and by the appellant and the 10th August 1987. The balance was not recoverable. The 1st and 2nd respondents were each liable for 50% of the damages from the 10th August 1987 onwards. He made no order on the 1st respondent's third party notice to the 2nd respondent either for indemnity or contribution.

24. The judge refused to grant the appellant an order that the air-conditioner be demolished or its operation be prohibited. He said that he believed that the damages awarded would be an adequate remedy and said he was concerned that there may be severe problems in re-locating the air-conditioner. That refusal is the main basis for the appellant's appeal to this Court. She also however challenges the award of only 50% of her damages before 10th August 1987. That award was based on the judge's finding that the air-conditioner was a "common part" of the building and the other owners were therefore liable for the damage it caused. The appellant challenges that finding.

25. The 1st respondent by a notice and a cross appeal contends that although he did not say so the judge was right not to grant an order for the demolition of the air-conditioner or prohibiting its use because the appellant was guilty of delay in seeking that remedy. It would be oppressive and cause undue damage not only to the 1st respondent but also to the many shop-owners in the building who were not party to the action and who had probably bought their premises in ignorance of the legal position regarding the air-conditioner.

26. I am unable to accept the judge's finding that the air-conditioner was an "apparatus or equipment installed for the benefit of the said building as part of the amenities thereof" within paragraph 4(k) of the D.M.C. There was no dispute that the air-conditioner serves only the shops, not any of the flats, and while there are 152 such shops and only 27 flats they occupy the upper three floors of a seven-floor building. The judge said that he was satisfied that the air-conditioner "was an amenity from which Pearl House as a whole benefited". The evidence clearly was that only four sevenths of the building so benefited. I also do not consider there is support for the judge's view in the Buildings Management Ordinance. Paragraph 10 of the First Schedule very clearly says that air-conditioning apparatus is a common part of a building if it is for the benefit of "all the owners generally".

27. The judge's finding that the 1st respondent was in breach of clause 10(h) of the D.M.C. was challenged here by Mr. Chan who contended that the 1st respondent was entitled to erect and use the air-conditioner by virtue of clause 3(g) which provides that the 1st respondent has the exclusive right to use and enjoy all the flat roofs and also clause 9 which provides that any owner may erect on his own part of the building any additions or improvements. That is subject to paragraph 10(a) but that sub-paragraph, it is argued, relates only to structural alterations which may damage the building. That is not the case here.

28. It was also argued here, as it was below, that area K could never have been even contemplated as being used for residential purposes. Its access is via a ladder leading from a toilet on the 2nd floor. Clause 10(h) of the D.M.C. was not applicable to area K. The judge rejected that contention and said that while there clearly is confusion in the wording of various clauses of the D.M.C. there is no reference at all to air-conditioning and only one to "ventilation". The general tenor of the D.M.C. was that there would be no air-conditioning. Probably the judge there meant central air-conditioning of the sort erected on area K. There would be nothing to inhibit individual owners installing air-conditioning in their own premises. Clause 10(h) is a clear and unequivocal prohibition on using the flat areas on the 3rd floor for anything except residential purposes. I am therefore satisfied that the air-conditioner is not a common part of the building and that by erecting it on area K the 1st respondent was in breach of clause 10(h) of the D.M.C. It is therefore liable in damages for nuisance to the appellant from the time she bought her flat, not from the 10th August 1987.

29. The demolition/prohibition order. It was the main thrust of the appellant's argument before us, and one which clearly has very serious consequences for the respondents, that the judge was wrong in coming to the conclusion that damages was an adequate remedy for the appellant and that there should not be a demolition or prohibition order in respect of the air-conditioner. It is the case for the appellant essentially that because the nuisance makes conditions for living in her flat almost intolerable and that the nuisance will continue unless there is a demolition or prohibition order, an award of damages is not an adequate remedy. For the 1st respondent it is contended that the appellant has been guilty of delay in applying for these discretionary orders and that in the light of the consequences if such an order is made, damages should be considered as adequate. There will be the gravest consequences to the shop-owners in the building if they are unable to receive air-conditioning for their units.

30. I do not consider that on the facts found by the judge, damages was an adequate remedy for the appellant.

31. Reliance was placed by Mr. Ismail for the appellant on Shelfer v. City of London Electric Lighting Co. [1985] 1 Ch. 287 where it was held that a person who was liable for nuisance should not be able to simply buy their way out of the situation.

Smith L.J. said:

"Many Judges have stated, and I emphatically agree with them that a person by committing a wrongful act (whether it be a public company for public purposes or a private individual) is not thereby entitled to ask the Court to sanction his doing so by purchasing his neighbour's rights, by assessing damages in that behalf, leaving his neighbour with the nuisance, or his lights dimmed, as the case may be."

32. He did however also say that if the injury to a plaintiff's legal rights is small and one which is capable of being estimated in money and adequately compensated by a small money payment and the case is one in which it will be oppressive to grant an injunction, damages may be an adequate remedy.

33. I am satisfied that on the evidence here the injury suffered by the plaintiff is not small and could not be adequately compensated by an equally small money payment. There was clear evidence which was accepted albeit with some reservations by the judge that the appellant found the noise from the air-conditioner so bad that she moved out of the flat. Her tenants did the same. Only by closing all the windows was the noise level acceptable. In Hong Kong that means that in summer the whole flat would have to be air-conditioned.

34. I do not consider that the appellant has been guilty of such delay as would disentitle her to the injunction sought. It is true that it is now 13 years since the appellant purchased her flat. Without doubt, she could have acted more promptly in bringing legal proceedings but she did first of all make efforts herself to have the nuisance from the air-conditioner abated and then her solicitors consulted the various government departments who were concerned with this problem. It was only after all such remedies failed that these proceedings were brought. Furthermore, I do not consider that the respondents have been prejudiced by the delay. We have been referred to Spry on the Principles of Equitable Remedies, 4th edition, page 425 where the learned author states "it is not sufficient however that the defendant should be able to show merely that the plaintiff has been guilty of unreasonable delay. It must be shown further that the delay in question has rendered unjust the grant of the particular relief that he sought." I do not consider that the position of the 1st or 2nd respondents has been adversely altered by the appellant's delay.

35. What has caused me some concern is the question of the likely effect on the shop-owners in the building who were not represented in this action. There has been no evidence as to whether or not the air-conditioner can be relocated although the judge below clearly considered that it may be difficult. If the shop-owners however consider that the effect on them of an injunction will be so damaging that it should not be granted, there is nothing to prevent them coming to the Court to seek to have the injunction set aside.

36. For these reasons, the appeal should be allowed and the appellant granted a permanent injunction from operating the air-conditioner so as to cause a nuisance to the appellant. The order of damages should also be varied and the appellant awarded damages to be assessed by a Master against the 1st respondent for the nuisance caused to her from the time she completed the purchase of flat 3B to the date the nuisance ceases and against the 2nd respondent from 10th August 1987 again until the cessation of the nuisance.

37. The 1st respondent's cross appeal is dismissed.

38. The appellant is entitled to the costs of this appeal and we will hear counsel on the form of the order to be made and as to the question of a suspension of the injunction granted.

Godfrey, J.A. :

39. The operation of this rogue air-conditioning plant (illegally constructed by the first defendant, and now operated by the second defendant) for the benefit of the shops in Pearl House, is clearly a real annoyance and discomfort to the plaintiff in her occupation of her flat, not merely in a subjective sense, but according to proper objective standards as to the sort of noise which the occupier of a flat in Pearl House might reasonably be expected to tolerate. It is accordingly an actionable nuisance.

40. The judge in his judgment recorded the plaintiff's evidence. She said that the plant was very noisy. She could hardly hear the telephone, radio or television. She switched the radio or television off rather than trying to hear them. To cut down on the noise, she kept her windows closed and that cut down on the ventilation of the flat. She did not find it easy to sleep. Her son could not concentrate on his homework. The noise forced her family to move out. The flat was rented to tenants for a short while but they too moved out when they found the noise unbearable.

41. The judge did not find the plaintiff to be a very impressive witness; but nevertheless, by and large, he accepted her evidence. There is no reason why this court should interfere with his findings and the only question of any significance is whether the judge ought to have granted an injunction to restrain the continuance of this actionable nuisance.

42. He said he was unwilling to do so. He put it as follows in a paragraph at the end of his judgment:

"I am unwilling to grant the injunction for demolition sought by the plaintiff. I believe that damages will provide an adequate remedy. I am also concerned that in fact there may now be severe problems in putting the air- conditioning plant elsewhere."

43. I am for my part unable to follow the judge's reasoning. The judge seems to have regarded this as a case in which the only way of dealing with the matter was to grant a mandatory injunction for the demolition of the air-conditioning plant. That is not so.

44. So far as the nuisance by noise is concerned, the nuisance can perfectly well be abated simply by ceasing to operate the plant. Its demolition is unnecessary. I appreciate that, in relation to some smaller matters, such as interference with the plaintiff's light and view, only a demolition would be an effective solution. But the primary complaint of the plaintiff, as the judge found, was the complaint of nuisance by noise. For that purpose, a mandatory injunction to demolish the plant is not in fact necessary (as I have pointed out). But, more important than that, the judge's finding that damages would provide an adequate remedy is not, so far as I can discern, supported by any reason at all.

45. It will be rare that damages will be an adequate remedy for a nuisance which the defendant proposes to continue unless restrained by injunction from doing so. Remedies at law are especially unsuitable where reliance on them renders it necessary to bring repeated proceedings for damages, such as where continuing wrongful acts are expected to take place. In such cases, the right to obtain an injunction is particularly valuable: see Hanson v. Gardiner (1802) 7 Ves. 305; and the more recent Australian case of Cam & Sons Pty. Ltd. v. Chief Secretary of New South Wales (1951) 84 C.L.R. 442 at p.456; and see also the American case Wheelock v. Noonan (1888) 108 N.Y. 179, 15 N.E. 67 (U.S.).

46. For my part, it seems to me that this is a plain case for the grant of a perpetual injunction to restrain the continuance of this actionable nuisance. I appreciate there are factors which do militate against the grant of such an injunction, not because the injury to the plaintiff is trivial (which it plainly is not) nor because damages would be an adequate remedy (which they plainly would not be), but because of the injury the grant of the injunction may do to the 152 owners or tenants of the commercial units in Pearl House which are now enjoying the benefit of the air-conditioning.

47. This air-conditioning is no doubt a valuable amenity for the 152 shops, which will, unless alternative arrangements are made, now be deprived of that benefit.

48. Counsel for the first defendant was asked, during the course of the appeal, how many, if any, of the shop owners had been called to give evidence in support of the first defendant's case that no injunction ought to be granted to restrain the continuance of this actionable nuisance. He replied, to my considerable surprise, that not one of them had been called to give any such evidence.

49. The court cannot speculate as to how serious a problem the injunction will be for the 152 shop owners. It may be that it will be easy to make alternative arrangements for the air-conditioning of their units. It may be that it will be difficult. It is not for this court to say.

50. The 152 shop owners are not parties to the action. What then can be done to protect their interests? Fortunately, it is established by authority that where an injunction has been granted in an action which affects someone who is not a party to the action, he can apply in the action for the discharge of that injunction without himself being made a party to the action: see Bourbaud v. Bourbaud (1864) 12 W.R. 1024; Daniell's Chancery Practice, 8th ed. (1914), vol. II, p. 1343, footnote (i); Kerr on Injunctions, 6th ed. (1927), p. 662. (These authorities were recently followed in Cretanor Maritime Co. Ltd. v. Irish Marine Ltd. (1978) 1 WLR at p. 966; see especially per Buckley L.J. at p. 978.)

51. It follows that if this court does grant a perpetual injunction, the shop owners if so advised will be able to apply to the High Court for discharge or variation of the injunction. In those circumstances the interest of the shop owners is in my judgment sufficiently protected.

52. The injunction should go to prevent the defendants from operating the air-conditioning plant so as to cause a nuisance. If the plaintiff insists on an injunction to demolish the air-conditioning plant altogether, I should require to hear further argument on that matter. At present I would not be disposed to grant such an injunction.

53. There remains only the question of damages. The plaintiff has suffered annoyance and discomfort from this actionable nuisance for many years, starting in 1981 and continuing to this day. It is of course unfortunate that it has taken so long for her complaint to be ventilated before the courts. But her delay was not due to inaction or acquiescence. It was due to the fact that, quite understandably, she sought all sorts of other ways in which to have this nuisance abated rather than by launching litigation in the High Court. I do not regard this delay as having caused the defendants any prejudice (indeed, they have benefited from it). She should receive an award of damages to compensate her for the annoyance and discomfort up with which she has had to put since 1981, when the first defendant created the nuisance. (The second defendant will of course be liable only for the damage suffered by the plaintiff since the date of the second defendant's incorporation and adoption of the nuisance.)

54. How are the damages to be assessed? The plaintiff gave no evidence of pecuniary loss and in my judgment her damages ought to be assessed on the analogy of damages for loss of amenity in personal injury cases: see Bone v. Seale [1975] 1 W.L.R. 797.

55. These are general damages. This court is in no position to assess them. Nor indeed was the judge, who directed that the damages be assessed by the master. I too would for my part refer the matter of assessment of these general damages to the master, who should assess them following the principle to which I have referred adopted in Bone v. Seale (above).

56. Apart from these observations, I agree with everything that has fallen from my Lord Mr. Justice Penlington, Justice of Appeal, and I too would allow the appeal.

Nazareth, J.A.:

57. I agree that for the reasons given by my Lords Penlington and Godfrey JJ.A. that the appeal should be allowed. I would endorse the approach which my Lord Godfrey J.A. has indicated he would adopt in relation to the injunction which I also would be disposed to grant.

58. There is nothing I would wish to add, save that insofar as that may be material, if at all, I would reject Mr Chan's submission that Area K is a common part by virtue of the definitions of "common parts" and "flat" in s.2 of Cap.344 via items 10 and 11 of the First Schedule to that Ordinance.

59. As I understand the position, with reference specifically to paragraph (a) of the definition of "common parts", Area K is shown in the deed of mutual covenant that has been registered in the Land Office as an area that has been designated for the exclusive use of the 1st defendant. Upon that basis, it is excluded from the definition of "common parts" and therefore cannot be brought back by recourse to the definition of "flat". Upon that basis, I also would reject the submission that Area K was part of the common parts of the building.

60. There remains the matter of the awards of damages which the judge restricted to 50% in each case. That is a matter upon which we should hear counsel.