THE INCORPORATED OWNERS OF ELITE GARDEN v. PROFIT MORE CO. LTD.

CACV 3622/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 3622 OF 2001

(ON APPEAL FROM LDBM NO. 344 OF 1998)

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REASONS FOR JUDGMENT

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Hon Le Pichon JA:

1. This was an appeal from the judgment dated 30 October 2001 of Deputy Judge Tong sitting as the Presiding Officer of the Lands Tribunal, declaring that the applicant, the Incorporated Owners of Elite Garden, was entitled to enforce its rights against Profit More Company Limited ("the respondent") under the provisions of the Deed of Mutual Covenant registered with Memorial Number 226226 at Tuen Mun New Territories Land Registry and directing the respondent to reinstate the exterior walls of the first floor of Elite Garden ("the building") within three months from the date of the order. At the hearing the appeal was dismissed. Written reasons were to be handed down later. This we now do.

2. The respondent is the registered owner of the first floor of the building. It had opened windows on the external walls of the first floor in 1994 and in 1997. In November 1998, the applicant instituted proceedings for a declaration and an order for reinstatement against the respondent.

The covenant

3. This appeal centred on one issue only, namely, whether the opening of the windows by the respondent constituted a breach of the covenant contained in para. 3(d) of the Second Schedule to the Deed of Mutual Covenant. By clause 5 of the Deed of Mutual Covenant, the owner or owners for the time being of each of the undivided shares in the building agreed to be bound by and observe the covenants contained in the Second Schedule. Para. 3(d) provided as follows:

"(d) Not to make any structural alteration to any unit of which he is the owner nor cut, maim, injure, damage, alter or interfere with any part or parts of the said Building or any of the sewers, drains, watercourses, conduits, pipes, cable, wiring, fixtures, equipment, apparatus or services of the said land and the said Building Provided Always that each owner may take or install in his own unit at his own expense any additions, improvements, lights, fittings, fixtures or decorations which can be installed, fixed and removed without structural alterations or damage and each such owner shall have the right to remove the same at his own expense."

It is to be noted that there are two limbs to the covenant, the first relating to "structural alternation" and the second to acts affecting the building.

4. The basis of the Presiding Officer's decision in favour of the applicant was that the opening of the windows in 1994 and 1997 was a "structural alteration". In reaching this conclusion, the Presiding Officer followed the approach of Cheung J (as he then was) in Incorporated Owners of Tuen Mun Hung Cheung Industrial Centre v United Hong Kong Ltd., HCMP 2991 of 1998. In that case, the defendant, the owner of a ground floor unit in an industrial building made openings in two external walls to install roller gates as additional means of access to the unit. It was held that those alterations were structural alterations prohibited by the deed of mutual covenant governing that building. The defendant had relied on an architect's letter stating that the opening of the walls "had no effect on the structure" of the building. Cheung J held (at page 5O-6C):

"In my view, in construing the terms of the DMC, one should take the ordinary literal meaning of the words. After all, the incorporated owners are required to enforce the terms of the DMC. It would be imposing an impossible burden on their task if every time when they see alterations to the building, they have to consult an architect first to ascertain whether the altered part forms part of the structure of a building before they could commence proceedings which very often have to be made on an urgent basis. Chung Kwok Yiu does not support the Defendant's argument that the opinion of an architect must be obtained first. In the context of the DMC, structural alteration clearly means alteration to the structure of the Building. The external walls which enclose the Building clearly form the structure of the Building."

The first limb - "structural alteration"

5. Leading counsel for the respondent submitted that the Presiding Officer was wrong in holding that the opening of the windows was a "structural alteration" within the meaning of para. 3(d) of the Second Schedule. It was submitted that the word "structural" referred to the type as opposed to the subject matter of the alteration and that it had to do with the stability of the building for otherwise the word "structural" would be redundant. Therefore "structural" had to be given the technical meaning such as that accorded to it under the Buildings Ordinance. As there was no evidence that the opening of the windows required approval from the Building Authority, the respondent could not have been in breach of the first part of para. 3(d) to the Second Schedule.

6. Sir John Swaine SC relied on Bickmore v Dimmer [1903] 1 Ch 158. That case concerned the meaning of a covenant under a lease not to make any "alteration" to the demised premises without prior written consent. The question which arose for consideration was whether the affixing of a clock to the exterior of wall by means of bolts driven into it was a breach of the covenant. Both Vaughan Williams and Cozens-Hardy LLJ were of the view that "alteration" was limited to something which "alters the form or structure of the building." The affixing of the clock did not have that effect: all it amounted to was the abstraction of a few cubic inches from the wall of the house and that was not an alteration within the meaning of the covenant. How that decision assists the respondent is not readily apparent. It was not suggested that the meaning given to the word "alteration" by the court was wrong. The "form" of a building has to do with its appearance or visual aspect. That was clearly what the Lord Justices had in mind. From that standpoint, the opening of windows was inarguably an "alteration" to the building. The question then is whether the addition of the adjective 'structural' changed the meaning fundamentally. It was suggested that by the respondent it did and that it imported a requirement of something that affected the stability of the building. This would appear to be a deduction made from Bickmore v Dimmer although the basis of that deduction is far from clear.

7. In Granada Theatres Ltd. v Freehold Investment Limited [1959] Ch 592, Vaisey J had to consider the meaning of "structural repairs". He agreed with the meaning given to it by the judge below whose judgment he cited (at 603), namely:

"The writer of [Woodfall on Landlord and Tenant] submits ... that 'structural repairs' are those which involve interference with, or alteration to, the framework of the building, and I would myself say that 'structural repairs' means repairs of, or to, a structure."

Then in Pearlman v Keepers and the Governors of Harrow School [1979] 1 QB 56 in construing the expression "structural alteration" in Schedule VIII to the Housing Act 1974, Geoffrey Lane LJ observed (at 72G):

"'Structural' in this context means, I believe, something which involves the fabric of the house as opposed to the provision merely of a piece of equipment. It matters not whether the fabric in question is load-bearing or otherwise, if there is any substantial alteration, extension or addition to the fabric of the house the words of the schedule are satisfied."

Whilst the Granada case concerned a covenant to repair and the Pearlman case dealt with the construction of a provision of the Housing Act, it is to be noted that the meaning given to the word "structural" was its natural and ordinary meaning rather than some special or technical meaning. In my view, that is the approach to be adopted in construing the meaning of the covenant contained in para. 3(d).

8. Nothing in para. 3(d), nor its context requires some special technical meaning to be ascribed to the word "structural". The opening of windows undoubtedly pertains to the framework or structure of the building and affects its visual aspect. That being so, the holding of the Presiding Officer that the opening of windows constituted a structural alteration was plainly correct.

The second limb

9. As to the second limb of the covenant, i.e. not to cut, maim, injure, damage, alter or interfere with any part or parts of the building, it was the respondent's submission that in contradistinction to the first limb of the covenant which dealt with what was in private ownership, it related solely to the parts of the building which were not privately owned. It was submitted that as the respondent was the owner of the exterior walls of the first floor, it was at liberty to open windows so long as that did not affect the stability of the building. Therefore, there was no breach of the second limb of para. 3(d). Hope Brothers Limited v Cowan [1913] Ch D 312 was cited in support of the proposition that the owner of a unit or flat also owned the exterior walls of that unit or flat. That case concerned the demise of an office situated on the first floor of the plaintiffs' leasehold premises. The plaintiffs failed in their action to restrain the tenant from affixing three flower boxes to the outer wall. The court held that there was nothing to exclude the operation of the general rule which was that the demise comprised both sides of the outside wall.

10. That decision is of no assistance when one is here dealing with the system of landholding in mutli-storey buildings which is peculiar to Hong Kong. When analysed, what is owned are undivided shares in the land with exclusive possession to a particular unit. True it is that the respondent is the owner of the surface of the exterior walls, but that is not to be equated to the exterior walls themselves.

11. For my part, I am not persuaded that the exterior walls of the building are "owned" by the owners of the unit bounded by such exterior wall or walls. Even if they were, the question remains whether or not the exterior walls nonetheless formed part of the "building" for the purposes of the second limb of para. 3(d). If the respondent is right in its contention that the second limb dealt only with what was not in private ownership and the owner of a unit bounded by exterior walls owned such walls, what would be left could hardly constitute a building as commonly understood. In my judgment, the construction advocated by the respondent is unwarranted. The exterior walls are plainly an integral part of the building for the purposes of the second limb and the opening of windows was plainly a breach of that part of the covenant.

12. In the result, the opening of windows by respondent breached both limbs of the para. 3(d) covenant.

Hon Yeung JA:

13. I have had an opportunity of reading and considering the judgment of Le Pichon JA, and I fully concur with her. I just wish to add the following.

14. The main issue in this appeal was whether the opening of windows on the exterior wall of the first floor constituted "structural alteration" to the unit. The window openings were extremely large as demonstrated by the photographs taken of the building. It that regard, it was fair to say that the appearance of the building had been significantly altered as a result.

15. Mr. Swaine SC suggested that only works affecting the safety of the building amounted to structural alteration and therefore unless it could be established by admissible expert evidence that the opening of windows in question affected the load- bearing members of the building, there was no breach of paragraph 3(d) of the Second Schedule to the Deed of Mutual Covenant in question.

16. In construing the relevant provision, it must be borne in mind that the purpose of a Deed of Mutual Covenant is to regulate the rights and obligations of the owners of a building for their common interests. Such common interests must include inter alia, the appearance of the building.

17. The opening of windows involved a good deal of tampering of the structure of the building by making large holes in the exterior walls and the installing of the window frames with glass panels.

18. The notion that structural alteration must involve the load-bearing fabric of the building was rejected in Pearlman v Harrow School [1979] 1 Q.B. 56.

19. In my view in the context of the Deed of Mutual Covenant in question structural alteration must include permanent physical alteration to the fabric of the building affecting the common interests of the owners.

20. The judge was right in following the decision of Cheung J (as he then was) in Incorporated Owners of Tuen Mun Hung Cheung Industrial Centre (Phase 1) v United Hong Kong Limited HCMP 2991 of 1998.

21. The judge was right in concluding that the appellant was in breach of paragraph 3(d) of the Second Schedule.

22. The appeal had to be dismissed.

Hon Rogers VP:

23. I agree with the judgment of Le Pichon JA.