THE INCORPORATED OWNERS OF BEAULIEU PENINSULA v. PERFECT CHINA INTERNATIONAL LTD

LDBM 96 of 2011

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION

NO. 96 OF 2011

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J U D G M E N T

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1.  The respondent is the registered owner of the property known as House No. 31 Beaulieu Peninsula, No. 2 Yu Chui Road, Tai Lam, Tuen Mun, New Territories, Hong Kong (“House 31”).  The applicant is the Incorporated Owners of Beaulieu Peninsula (“the Estate”).

2.  The applicant claims against the respondent for the removal of a banner posted at the exterior of House 31.  Upon the respondent’s undertaking not to post any banner outside House 31, an order is made on the first day of trial for the respondent to remove the banner on or before 20 March 2012, leaving the question of costs to be decided.

3.  This judgment only concerned with the counter-claim by the respondent for the failure of the applicant to perform its duty in the enforcement of the Deed of Mutual Covenant (“DMC”) and section 18(1)(c) of the Building Management Ordinance (“BMO”).

Undisputed Facts

4.  It is common ground that there are illegal building works (“the UBW”) erected at House 30 of the Estate including :

(a) additional structures on the Ground Floor in the garden area (photo at page 43 Bundle A);

(b) an extension from the 1^st Floor level (photo at page 44 Bundle A);

(c) a high wall with burglar bars in the garden area between House 30 and House 31 (photo at page 45 Bundle A);

(d) concrete structures with retaining wall, platforms and staircases at the south westerly side of the garden which extends onto the slope down to the sea front (photo at page 46-47 Bundle A).

5.  The respondent’s Director Mr. Stephen Lam (“Mr. Lam”) started complaining to the Manager of the Estate about the UBW at House 30 since January 2010 :

(a) telephone complaint on 28 January 2010 concerning the burglar bars;

(b) letter from its solicitor dated 1 April 2010 (page 376-384 Bundle A) concerning the UBW and requested both the applicant and the Manager to take immediate action;

(c) complaint in person to representative of the Manager about the building of the retaining wall on 2 December 2010 and asking to see the Chairman of the applicant;

(d) meeting representatives of the applicant and the Manager on 7 December 2010 asking for action to be taken to enforce the DMC;

(e) letter from its solicitor dated 10 December 2010 enclosing photographs showing the state of House 30 and asking for immediate action to be taken (page 388-398 Bundle A);

(f) meeting the vice chairman of the applicant at House 31 on 16 December 2010 complaining the construction work of UBW at House 30 was still in progress.

6.  According to the statement of the applicant’s witnesses and the written record kept by the applicant (page 205-218 Bundle A), the following actions had been taken in answer to the respondent’s complaint:

(a) arrange and attend meetings between Mr. Lam and Mr. Chan, the owner of House 30 (“Mr. Chan”) on 28 January 2010;

(b) liaison between the two owners for the removal of the burglar bars between 28 January 2010 and 8 February 2010;

(c) letter to owner of House 30 on 13 April 2010 asking for inspection but declined by Mr. Chan;

(d) reply letter dated 27 April 2010 to the respondent’s solicitor (page 224 Bundle A) indicating advisory letter had already been issued to House 30 but will not take any enforcement action unless there is concrete evidence showing a breach;

(e) 7 telephone calls to owner of House 30 asking for inspection between 18 May 2010 and 4 November 2010, all declined by Mr. Chan;

(f) after attended House 31 on 2 December 2010 and saw workers working at the retaining wall, called Mr. Chan advising him to remove the extended part but refused by Mr. Chan;

(g) respective meeting with Mr. Lam and Mr. Chan on 7 December 2010 where Mr. Chan refused to demolish the extended part of the sitting room and the retaining wall;

(h) meeting with Mr. Chan on 11 December 2010 in which Mr. Chan refused to demolish the retaining wall;

(i) the management committee agreed on 11 December 2010 to issue letter to House 30 and 31 asking for inspection and if necessary, seek assistance from the relevant government department (page 233 Bundle A);

(j) letter to House 30 dated 13 December 2010 asking for inspection but met with no response;

(k) letter to House 30 dated 16 December 2010 asking to stop the construction work and allowed entry for inspection (page 239 Bundle A) but met with no response;

(l) letter to Buildings Department (“BD”) dated 24 December 2010 (page 244 Bundle A) asking the BD to follow up on the UBW at House 30 and House 31;

(m) management committee resolved on 5 March 2011 that the UBW at House 30 were to be followed up by BD (page 277 Bundle A);

(n) follow up with the BD about the progress of investigation by phone and by letter (page 161, 174 and 180 Bundle A).

7.  The BD had visited House 30 on 26 April 2010, 10 May 2010 and 31 December 2010.  By letter dated 18 March 2011 to the Manager (page 431 Bundle B) and to the respondent’s solicitor (page 558 Bundle B), the BD informed both parties that the BD had not been able to gain entry to House 30 but by “observation in front of the building, it was revealed that 2 yard structures were erected at the front and 1 yard structure was erected at the side of the building.  The rear of the building could only be observed from a far distance.  A 2-storey structure was noted at the back of the building and some platforms/retaining structures were erected on the slope behind the building.  According to the information of this Department, those building works on private land had not been approved by this Department and hence they were UBW” (page 558 Bundle B). 

8.  It is also stated in the said letter that the BD would issue advisory letter to the owner concerning one of the yard structures at the front of the building.  If no response were to be received from the owner, removal order would be issued to follow up.  And no enforcement action would be contemplated for the other 2 yard structures since no obvious or imminent danger to life or property was envisaged.  For the structures on private slope, professional advice would be sought in order to determine whether further enforcement action needed.  As for the 2-storey structure at the back of the building, entry to the premises for close inspection was required in order to determine whether follow-up action was necessary.

9.  By another letter dated 18 November 2011 to the Manager (page 449 Bundle B), the BD had confirmed that removal order had been issued on 3 October 2011 (“the Removal Order”) to the owner of House 30 in respect of certain building work and extension work and the owner appealed against the Removal Order so the execution of it was suspended pending the result of the appeal.  And the BD had still not been able to arrange for an inspection with the owner of House 30 and would arrange for such to be done.

10.  As of today, the UBW within House 30 is still there and had not been removed.

The Counter-Claim

11.  The respondent is claiming for :-

(a) A declaration that the applicant has failed or refused to perform its duty and obligation under Clause 7(a) and paragraph 1(d) of the Third Schedule of the DMC and section 18(1)(c) of the BMO;

(b) A mandatory injunction requiring the applicant to forthwith take such actions including legal actions against the registered owners of House 30 as far as the illegal structures are concerned.

The Relevant Provisions of the DMC

12.  For easy reference, the relevant provisions of the DMC are copied herein.

13.  Clause 7 (a) of the DMC

“… the Manager shall be responsible for and shall have the full and unrestricted authority to do all such acts and things as may be necessary or requisite for or in connection with the said Land and any of the buildings thereon and the management thereof and shall do everything within its power to ensure that all the requirements and provisions relating to management of the said Land contained in the New Grant shall be observed and complied with. Without in any way limiting the generality of the foregoing, the Manager shall have the powers and obligations set out in the Third Schedule hereto.” (page 405 of Bundle B)

14.  The Third Schedule of the DMC

“(1) The Manager shall have the following powers :-

(d) To remove any structure or installation, ... or anything in or on any building, or the said Land or any part thereof which is illegal unauthorized or which contravenes the terms of these presents or any of the provisions of the New Grant and to demand and recover from the owner by whom such structure or other thing as aforesaid was erected or installed the costs and expenses of such removal and the making good of damages caused thereby to the satisfaction of the Manager. (page 418-419 Bundle B)

(l) To commence proceedings for the purpose of enforcing the observance and performance by any Owner of any Unit and any person occupying any Unit through under or with the consent of any such Owner of the covenants conditions and provisions of this Deed and any provisions of the Estates Rules and of recovering damages for the breach, non-observance or non-performance thereof. (page 420 Bundle B)

(2) The Manager shall have the following obligations:-

(d) To take such steps as may be necessary to enforce the terms of these presents and the Estate Rules.” (page 420 Bundle B)

Legal Principles

15.  According to the terms of the DMC quoted above and Section 18(1) of BMO, the applicant is placed under a duty to do all things reasonably necessary for the enforcement of the obligations contained in the DMC.  “When the incorporated owners find that there is breach of covenant being perpetrated by one of the owners, it is not only their right but their duty to seek to enforce the covenant” (The Incorporated Owners of Hoi Luen Industrial Centre & Anor v Ohashi Chemical Industries (Hong Kong) Ltd [1995] 2 HKC 11 at page 13).  “It is clear that the Respondent [the incorporated owners] has a legal duty both under the BMO and the DMC and the House Rules, and the Respondent cannot pass resolutions either at the owners’ meetings or the management committee’s meetings to override this duty”  (Sunbeam Investments Ltd v The Incorporated Owners of Villa Veneto LDBM 175/2009 at paragraph 16).

16.  “The overall duty imposed on the Respondent [incorporated owners] by the Deed of Mutual Covenant is one of ‘proper’ management.  Such management entails doing all that is reasonably required of a manager in the circumstances” (Lo Yuk Chu v Hang Yick Properties Management Ltd [1996] 4 HKC 278).  “The obligation imposed by the DMC on the Respondents [incorporated owners] to maintain the roof and the external walls cannot be an absolute duty on the part of the Respondents to ensure nothing would go wrong.  As long as the Respondents have acted reasonably in the circumstances of the case to manage the Estate properly, the Respondents are not in breach of the DMC” (李月明v 秀企業有限公司 LDBM 452/2007 at paragraph 12).  And “no doubt, the duty is not absolute but the Respondent has to do what is ‘reasonably necessary’ in the circumstances” (Sunbeam Investments Ltd supra at paragraph 34).

17.  Parties had no argument with the legal principles stated above and the sole issue in this case is whether the applicant had done what is reasonably necessary in dealing with the UBW of House 30.

Whether the applicant had done what is reasonably necessary

18.  The applicant contends that it had not turned a blind eye to the respondent’s complaint nor had it acquiesced to the UBW of House 30.  The applicant had performed its duty and obligation under the DMC by taking appropriate and reasonable steps to follow up and enforce the breach by the owner of House 30.  In any event, since the BD had already issued the Removal Order compelling House 30 to remove the UBW, this is not an appropriate case for an injunction to be imposed against the applicant.

19.  The respondent submitted that the applicant had not done all things necessary to enforce the DMC.  The applicant’s duty is not discharged by the actions taken by the BD. Even if this is so, the Removal Order only concerned the yard structures at the front of House 30 whilst the UBW complained of in this case are those at the back of the house.  Moreover, the execution of the Removal Order was suspended due to appeal and there is no guarantee that the UBW will be removed without the matter further dragged on.

20.  Having considered the undisputed evidence and the submission, I found the applicant had not done what is reasonably necessary in the circumstances in the discharge of its duty under the DMC and BMO in relation to the UBW at House 30.

21.  All in all, what the applicant had done can be categorised into 3 main heads, namely liaison work between Mr. Lam and Mr. Chan; request made to Mr. Chan for entering House 30 for inspection of the UBW and follow up work with the BD.

22.  I found the liaison work cannot be treated as something done in the enforcement of the DMC as far as the UBW is concerned.  It fell short of the kind of action to make sure that the terms of the DMC are being complied with, i.e. for the removal of the UBW at House 30. 

23.  The request to enter House 30 for inspection is apparently something the applicant has to do in order to ascertain if there was any merit in the complaint before it decide what action should be taken.  But upon the repeated refusal by Mr. Chan for an inspection, the applicant had done nothing further.  Not until 24 December 2010, the Manager then sent a letter to the BD notifying it of the UBW and urging the BD to take action.  By then, 12 months had lapsed since the first complaint by the respondent.  This cannot be proper management by the applicant to allow the UBW to be there without taking any active action of its own in accordance with the DMC.  The applicant had not even sent letter to the owner of House 30 to request for the UBW to be demolished.  The fact that the Manager had not been able to gain entry into House 30 for inspection is not an excuse since the UBW were all there and could be seen from House 31.

24.  And instead of taking enforcement action against House 30, the applicant decided to shove its responsibility to the BD by just writing to alert it of the UBW.  Even after the BD had confirmed in its letter dated 18 March 2011 that there were a 2-storey structure at the back of House 30 which were unauthorised building work but the BD still required an inspection before any action will be taken, the applicant still had not taken any action.  The confirmation by the BD that there were UBW at the back of House 30 already justified an action against House 30 in the removal of the same.

25.  Up till today, the BD still failed to gain entry to House 30 and this is crystal clear to the applicant as revealed in the letter from the BD dated 18 November 2011. Yet the applicant still maintained that it is reasonable for the applicant to wait for the BD to take action against the UBW.  This is utterly unacceptable. The submission that the Removal Order may also include the UBW involved in this case cannot hold water.  Even though the letter from BD indicated that certain structures and extension work were required to be demolished under the Removal Order, those UBW at the back of the building cannot be the subject of the Removal Order since the BD had not even had the opportunity to enter the premises for inspection.

26.  I cannot see how the applicant can rely on the Removal Order to say that the UBW in this case had been dealt with by it.  I agreed with Mr. Lam that the Removal Order only concerned those unauthorised building work in the front of House 30 whilst the UBW complained of in this case were those at the back of the house which the BD had not decided to take action due to the fact that no inspection could be arranged.  The applicant just relied on the Removal Order, the detail content of which is unknown to the applicant, to say that it had done all is reasonably necessary in the circumstances can never be accepted.  The fact that the Removal Order is subject to appeal and is being suspended should be a fact for the applicant to decide to take immediate action of its own instead of sitting there and wait for the result of the appeal.  Again, nothing had been done.  And since the Removal Order doesn’t concern the UBW in this case, I cannot see how the result of the appeal is relevant to the applicant’s decision to take action.

27.  Furthermore, the BD’s decision whether to take action cannot be a valid reason for the applicant not to take action of its own.  The consideration by the BD as to whether to take action will not coincide with that to be considered by the applicant.  One thing which is beyond doubt is that terms of the DMC is not something the BD will bear in mind in its decision as to whether to take action since it is not within the ambit of its concern.  The decision by the management committee of the applicant to leave the UBW to the BD is plainly wrong and unreasonable. Hence, their follow up action with the BD cannot be considered as a discharge of the applicant’s obligation to enforce the DMC and BMO.

28.  I found the applicant had not done what is reasonably necessary in the enforcement of the DMC and BMO against the UBW at House 30 and had been in breach of its duty and obligation under Clause 7(a) and paragraph 1(d) of the Third Schedule of the DMC and section 18(1)(c) of the BMO. 

The Order

29.  It is ordered that :-

(a) The applicant do forthwith take such action, including but not limited to legal action against the registered owner of House 30 for the UBW concerned;

(b) Cost order nisi that the applicant do pay the respondent costs of the counter-claim, with certificate for counsel, to be taxed if not agreed at District Court scale;

(c) Cost order nisi that the respondent do pay the applicant costs of the claim, with certificate for counsel, to be taxed if not agreed at District Court scale;

(d) Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.