THE INCORPORATED OWNERS OF HAIPHONG MANSION v. JAMES S. LEE & COMPANY (KOWLOON) LTD AND ANOTHER

LDBM 138/2021

[2025] HKLdT 15

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 138 OF 2021

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BETWEEN

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J U D G M E N T

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INTRODUCTION

1.  There has been a large advertising sign spanning two sides of the 1^st floor of Haiphong Mansion at the corner of Nathan Road and Haiphong Road in the heart of Tsim Sha Tsui since the 1960s. This application concerns that advertising sign (“Sign”).

2.  The applicant is the incorporated owners (“IO”) of Haiphong Mansion at 99-101 Nathan Road, Nos. 53, 54 and 55 Haiphong Road and No. 52 Lock Road, Tsim Sha Tsui, Kowloon (the “Building”). The Sign has been erected on the external walls of the 1/F of the Building.

3.  The 1^st respondent is the registered owner of Shops Nos. 2 and 3 on G/F (“G/F Premises”), and Apartments Nos. 1 to 5 and a portion of flat roof on 1/F of the Building (“1/F Premises”; together with G/F Premises, “Premises”).

4.  The 2^nd respondent carries on a jewellery trading business under the trade name of “Luk Fook Jewellery & Goldsmith Company (六福珠寶金行)” and/or “Luk Fook (六福)” (“Luk Fook trade names”). It has been the tenant of the Premises since March 2010.

5.  The IO claims that the Sign was installed in breach of the Deed of Mutual Covenant of the Building dated 10/4/1961 (“DMC”) and section 34I of the Building Management Ordinance (Cap. 344) (“BMO”). It asks the respondents to remove the Sign, reinstate the relevant parts of the external walls and pay mesne profits. The crux of the dispute concerns whether the respondents are entitled to claim acquiescence, estoppel and/or lost modern grant in respect of the Sign.

6.  The IO is represented by Mr Lewis Law and Mr Steve Cheung. The 1^st respondent and the 2^nd respondent are represented by Mr Bernard Man SC and Mr Harrison Miao.

FACTUAL BACKGROUND

7.  The parties submitted a Statement of Agreed Facts which include the following.

8.  The IO was incorporated and registered on 10 February 1971. Yick Tat Property Management Company Limited (“Yick Tat”) was appointed by the IO as the management company of the Building.

9.  By an assignment dated 8 November 1979, the 1^st respondent became the registered owner of units of the Building, the 1/F Premises, namely Apartment No. 1 on 1/F with a portion of flat roof and Apartments Nos. 2, 3, 4 and 5 on 1/F and the G/F Premises, Shops Nos. 2 and 3 on G/F.

10.  The registered owners of the Premises consisted of, inter alios:

(1) James Smith Lee (“Mr Lee”), who was assigned the Premises between December 1960 and September 1961;

(2) James S. Lee Company Cloth Mill (HK) Limited (“HK Co”), a company controlled by Mr. Lee, was assigned the Premises by Mr Lee on 8 October 1977;

(3) The 1^st respondent was assigned the Premises by HK Co on 8 November 1979.

11.  Between 1960s and 1980s, Mr Lee and HK Co used the G/F Premises Shops Nos. 2 and 3 on G/F as a retail shop for a tailoring business operating under the names of “James S. Lee & Co.” and “James S. Lee & Co. Ltd.”, whereas 1/F Premises, Apartments Nos. 1 to 5 were used for storage and office for the said business.

12.  After the Premises were assigned to the 1^st respondent, the 1^st respondent continued to use the Premises to operate the said tailoring business until the early 1980s.

13.  Since the early 1980s, the 1^st respondent has let the Premises to tenants. The Premises were used for, inter alia, the following purposes:

(1) Between early 1980s and 1984, the Premises were used to operate a garment business under the name of “Bang Bang”;

(2) Between September 1984 and March 2010, the Premises were let to Watson’s The Chemist Limited. The Premises were used to operate a pharmacy and cosmetic and health products retail business under the name of “Watsons”, and a cosmetics retail business under the name of “Marionnaud Paris”.

(3) Between around 16 March 2010 to date, the Premises were let to the 2^nd respondent. The 2^nd respondent is part of the Luk Fook group of companies (the “Luk Fook Group”) and operated a jewellery retail business under the name of “Luk Fook Jewellery & Goldsmith Company (六福珠寶金行)” and “Luk Fook (六福)” from the Premises.

14.  The various businesses referred to above shall be referred to as the “Businesses”.

The signage

15.  Over the years there have been signs of different types and dimensions at various positions on the outside of the Building. The Notice of Opposition (“NOO”) attaches photographs of such signs, designated by a letter to identify the position on the outside of the Building and a number, starting at 1 for the earliest in time, for the sign at that position (“Attachment 1”). The material Sign is at position A. In the earliest photograph from the 1960’s the Sign is identified as “Sign A-1”. The IO describes the Sign as an “L-shaped advertisement board and its supporting metal racks installed on the 1/F external walls”. The board and the racks are referred to as “Unauthorised Structures” in the Notice of Application (“NOA”) and marked “A-1” to “A-16” in Attachment 1. The Businesses installed various signage at the exterior 1/F Premises, position A, including:

(1) Between the 1960s and 1980s:

(i) a display showing two “James S. Lee Co.” names and which spanned across a horizontal strip on 1/F of the Building stretching from the side of the Building facing Nathan Road to the side facing Haiphong Road (Sign “A-1” in Attachment 1);

(ii) two signs showing “James S. Lee Co. Ltd” hanging above Nathan Road and Haiphong Road respectively at the external walls next to the windows of the 1/F Premises (Sign “B-1” and Sign “C-1” respectively in Attachment 1);

(2) From around early 1980s to around 1984:

(i) various displays showing logos of “Bang! Bang!” which were located along the horizontal strip on 1/F of the Building stretching from the side of the Building facing Nathan Road to the side facing Haiphong Road (Sign “A-2” in Attachment 1);

(3) From around 1984 to 2010:

(i) various advertising boards of “Watson’s”, “Marionnaud Paris”, products sold by Watson’s and/or advertising boards of other businesses which spanned across a horizontal strip on 1/F of the Building stretching from the side of the Building facing Nathan Road to the side facing Haiphong Road (Signs “A-3”, “A-4”, “A-5”, “A-6”, “A-7”, “A-8” and “A-9” in Attachment 1);

(ii) signs showing “Watson’s” or “Marionnaud Paris” and hanging above Nathan Road or Haiphong Road at the external walls of the 1/F Premises (Signs “B-2”, “B-3”, and Sign “D-2” in Attachment 1);

(4) From around 2010 to date:

(ii) various advertising boards of “六福珠寶”, “Lukfook Jewellery” which spanned across a horizontal strip on 1/F of the Building stretching from the side of the Building facing Nathan Road to the side facing Haiphong Road (Signs “A-10”, “A-11”, “A-12”, “A-13”, “A-14”, “A-15” and “A-16” in Attachment 1);

(iii) sign showing “六福/Lukfook”, “六福珠寶/Luk Fook Jewellery” and “Longines” hanging above Haiphong Road at the external walls of the 1/F Premises (Signs “C-3”, “C-4” and “C-5” in Attachment 1);

16.  The 1^st and 2^nd respondents first entered into a lease for the Premises on 19 March 2010. The 2^nd respondent, who carried and still carries on business under and by reference to the Luk Fook trade names, is the current registered tenant of the Premises.

17.  Mr. Chan Hon Keung (“Mr Chan”) worked as an Estate Officer at the Management Office of Haiphong Mansion (“the Management Office”) from around 2012. Mr. Lo Ki Hong (羅琪康，“Mr Hamilton Lo”) was the Manager of Yick Tat between 2010 and 2018, and was promoted to Senior Property Manager in 2018. He was the supervisor of Mr Chan until Mr Chan’s resignation in May 2024.

18.  The IO issued four letters on or about 13 June 2012 to the 1^st respondent, requiring payment of a licence fee in the sum of HK$2,200 per month, with effect from 1 July 2012, in respect of the following four advertising signs on the external wall of the Premises:

(1) The sign of “Omega” (the “Omega Sign”);

(2) The sign of “六福珠寶 LUKFOOK JEWELLERY” (the “LUKFOOK JEWELLERY Sign”);

(3) The sign of “VIP fashion” (the “VIP fashion Sign”); and

(4) The sign of “LONGINES” (the “LONGINES Sign”)

(collectively “the 2012 Advertising Signs”)

The IO informed the 1^st respondent in the 13 June 2012 letter that if it refused to pay the licence fee, it would be required to remove the 2012 Advertising Signs on or before 1 July 2012.

19.  On or about 18 July 2012, the IO received a letter from International Peaceful Interests Limited (“IPIL”) as the agent of the 1^st respondent objecting to the new licence arrangement.

20.  Three of the 2012 Advertising Signs were found at the external walls of the Ground Floor of the Building. While the LONGINES Sign was located at the First Floor, but concerned a different location from the Sign.The IO later decided not to pursue the licence arrangement for the Omega Sign, the LUKFOOK JEWELLERY Sign and the VIP fashion Sign, situated outside the external wall at the Ground Floor level of the Building. The IO informed the 1^st respondent by three letters dated 9 August 2012 of the decision not to charge a licence fee for those three 2012 Advertising Signs.

21.  On 20 August 2012, IPIL issued a letter to the IO in respect of the LONGINES Sign.

22.  Between November 2012 and March 2013, the IO (through its legal representatives and management company) demanded the 1^st respondent pay a fee for the LONGINES Sign. On 20 November 2012, Messrs. S.H. Chan & Co., on behalf of the IO, issued a letter to the 1^st respondent stating that it was a final notice to demand payment of a fee, but only for the LONGINES Sign. On 8 February 2013, Yick Tat, on behalf of the IO, issued a letter to IPIL demanding payment of a fee. On 14 March 2013, the IO issued a further letter to IPIL demanding payment of a fee. The IO now claims that the 2^nd respondent has been paying a licence fee for that sign between July 2012 and May 2019. In or around July 2019, the LONGINES Sign was replaced by a smaller “六福/Lukfook” sign marked as Sign C-5 in Attachment 1.

The building orders

23.  On 13 May 2016 and 28 June 2016, the Buildings Department issued two building orders (No. UBF/CS05-0001/13 and CL01/SU/001747/16/K) in respect of “a signboard and the associated supporting frame bearing the main inscription of "六福珠寶LUKFOOK JEWELLERY" attached to the external wall facing Nathan Road and Haiphong Road at 1/F” and “a signboard including the associated supporting frame bearing the main inscription of "六福珠寶 LUKFOOK JEWELLERY" attached to the balcony of 1/F facing Nathan Road and Haiphong Road” respectively. The building orders stated that the said building works had been carried out without having first obtained from the Building Authority approval of building plans and consent for commencement of building works under section 14 of the Building Ordinance. There is no dispute but that the building orders refer to the A Signs.

24.  An application was made to the Buildings Department for the removal of the relevant signage and for the putting up of a new sign at the same location in around October 2017. The relevant building works were completed in September 2018. That new sign at position A is the Sign, the subject matter of the present dispute.

Negotiations

25.  It was not until 6 June 2019, after the Sign was erected, that the IO demanded the reinstatement of the external walls or an application to it for the retention of signs on the external walls by letter from Yick Tat, on behalf of the IO to Luk Fook Jewellery & Goldsmith (HK) Company Limited.

26.  From December 2019 onwards, Mr Cheung Chi Keung Darwin (“Mr Darwin Cheung”), Deputy Senior Property Director of Luk Fook Holdings Company Limited (“LFH”) for the 2^nd respondent began negotiating with Mr Chan, an Estate Officer at the management office of the Building for the licensing of the Sign. Mr Darwin Cheung informed Mr Tse Kwok On (“Mr Tse”), the Property Director of IPIL for the 1^st respondent, of the 6 June 2019 letter, who in or about December 2019, advised Mr. Darwin Cheung to negotiate with the IO for a licence to use the external walls of 1/F of the Building.

27.  On 17 December 2019, Mr Darwin Cheung replied to Mr Chan by way of email (copied to Mr Hamilton Lo) stating that the 2^nd respondent understood the area was not owned by the 1^st respondent, that the 2^nd respondent was willing to rent the area for use; and that, due to the social incidents in 2019, the Luk Fook Group wished to put the matter on hold until peace returned to Hong Kong. It also asked for the understanding of the management office of the Building

28.  On 8 June 2020, Mr Darwin Cheung sent an email to the IO (copied to Mr Hamilton Lo) and reiterated that the 2^nd respondent was willing to use the external wall of 1/F of the Building for display purposes pursuant to a contract. However, due to the impact of the social events since June 2019 and the COVID-19 pandemic in early 2020, the economy and the retail industry of Hong Kong were affected at an unprecedented level, there was a significant drop of the sales volume to 10% of the original value and the shop located at the Premises could not even support the basic salary of the employees working there. As such, they hoped to enter into a user agreement with the management office of the Building after everything returned to peace, asking for the IO’s understanding.

29.  On 9 June 2020, Mr Chan texted Mr Darwin Cheung via WhatsApp, asking Mr. Darwin Cheung to put forward the details of the terms of the licence agreement as soon as possible. Mr Darwin Cheung replied that it was highly likely that the 2^nd respondent would not approve any extra costs for running the business.

30.  On 24 September 2020, Messrs. Waller, Ma, Huang and Yeung, on behalf of the IO, issued a letter to “Lukfook Jewellery” and the 1^st respondent. It demanded the removal of advertising signs / billboards at the external wall(s) spreading across the 1/F Premises.

31.  Some time before 7 October 2020, Mr Darwin Cheung made a proposal to Mr Chan to pay a licence fee of HK$10,000 per month to the IO. On 7 October 2020, Mr Chan replied to Mr Darwin Cheung’s proposal by way of WhatsApp, that the IO would like to be informed whether the 2^nd respondent was willing to pay the licence fee of HK$10,000 per month calculated from 6 June 2019 until the parties reached an agreement.

32.  Mr Darwin Cheung replied that the 2^nd respondent only wished the agreement to cover the period from 1 November 2020 to 31 October 2021. He also said that the 2^nd respondent would prepare a draft licence agreement for the IO’s consideration.

Meeting on 22 October 2020

33.  On 22 October 2020, upon Mr Darwin Cheung’s request, Mr Tse arranged a meeting between the IO, the 1^st and 2^nd respondents. At the said meeting, Mr Darwin Cheung provided the IO with a draft agreement and proposed to rent a specific area of the external walls of the 1/F of the Building for the hanging or displaying of poster(s) between 1 December 2020 and 30 November 2021 for the monthly rent of HK$10,000.00, and to remove any poster, sign and supporting frame upon the end of the lease and reinstate the external walls.

Proceedings

The parties did not ultimately reach an agreement for the Sign. On 23 July 2021 the IO issued the NOA and commenced these proceedings.

THE ISSUES

34.  The List of Agreed Issues are:

(1) Whether the IO has the right to take out the present proceedings.

(2) Whether the advertising boards (being part of the Unauthorised Structures as defined in paragraph 7 of the IO’s NOA) shown as “A-1” to “A-14” in Attachment 1 to the respondents’ NOO (from 1960s to 2018) were unauthorised building works (“UBW”) under the Buildings Ordinance (Cap. 123) (“BO”).

(3) Whether the installation of the aforesaid advertising boards amounts to a “structural alteration” under clause 8 of the DMC at Haiphong Mansion.

(4) Whether the IO could legally assent, lay by or acquiesce in the construction, erection or retention of the Unauthorised Structures.

(5) Whether the IO has been estopped by proprietary estoppel to enforce the DMC and/or the BMO against the Unauthorised Structures.

(6) Whether the 1^st respondent has obtained a legal or quasi-easement to put up signs and displays at the relevant part of the external walls by the doctrine of lost modern grant.

(7) Whether the Tribunal should refuse to grant any injunctive reliefs by reason of the doctrines of acquiescence, laches, proprietary estoppel and/or lost modern grant in the circumstances of this case.

(8) Whether the IO should be entitled to mesne profits or damages arising from the respondents’ breach of the DMC and/or the BMO.

35.  Issues 1, 2 and 3 may be disposed of shortly.

36.  Issue 1 was not pursued by the respondents. The IO has authority to bring the proceedings.

37.  Issue 2 has been resolved on the basis of an agreement. Leave had been granted for experts to opine on two main issues, namely, (i) the compliance of the pre-2018 A Signs and post-2018 A Signs with the BO and subsidiary legislation or codes of practices, and (ii) whether or not the pre-2018 Signs were unauthorised building works. The parties have reached the common ground that:

(1) the pre-2018 A Signs were illegal for the purpose of the BO;

(2) the post-2018 Signs were legal.

38.  The experts were not called to give evidence but their reports were admitted into evidence.

39.  Issue 3, the respondents maintained that the A Signs did not amount to structural alteration and are not wrongful displays as prohibited by clause 8 of the DMC. Whether the installation of the Unauthorised Structures or A Signs amounts to a “structural alteration” under clause 8 of the DMC, was not pursued by the IO. Having reviewed their expert Mr Kan’s report and the DMC, the IO accepts that the installation of the A Signs at 1/F external walls did/does not amount to “structural alternation” within the meaning of this phrase in the first prohibition of clause 8 of the DMC. The IO accepts that the advertising boards were not structural alteration under clause 8 of the DMC.

40.  However, the IO maintains that clause 8 is still relevant. The IO alleges that the respondents have breached the latter prohibitions in clause 8 of the DMC. Clause 8 provides:

None of the parties hereto shall make any structural alterations in his part of the said Building or any alteration of the water or gas or steam pipes electrical conduits or plumbing nor to cut or injure any of the floors main walls or beams thereof and not to cut of injure the cement concrete flooring columns beams or girders of the said Building and not to display or cause or permit or suffer to be displayed any notices signs or any other things in the corridors staircases and landings or any part of the said Building used in common by the parties hereto.”. (bold emphasis added)

41.  The IO’s case is that the installation of the A Signs would in any event still amount to a breach of the clause 8 prohibition that a party to the DMC shall not display or cause or permit or suffer to be displayed any notices signs in any part of the Building used in common by the parties.

42.  There is no dispute that the respondents had displayed, or caused to be displayed, the A Signs over the years. There has never been any resolution of the IO permitting the 1^st respondent and/or the 2^nd respondent to erect or install the same on the 1/F external walls, which are common parts of the Building. Therefore, subject to acquiescence or the defences there should be no issue over the interpretation of clause 8 of DMC and section 34I of the BMO. The IO’s construction of clause 8 is that it prohibits any signs in or on any part of the Building used in common.

43.  The respondents contend that clause 8 has no application in the present case. First, the IO now accepts that there was no structural alteration within the meaning of clause 8.

44.  Second, clause 8 only restricts displays “in” any part of the said Building used in common by the parties. The Sign is attached to the external walls and located outside of the Building. It is not a display in any part of the Building.

45.  The issue is one of construction. In Jumbo King v Faithful Properties Ltd & Ors (1999) 2 HKCFAR 272 Lord Hoffmann NPJ, construing the DMC, held at 296 D-I:

The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well. Their language may sometimes be careless and they may have said things which, if taken literally, mean something different from what they obviously intended. In ordinary life people often express themselves infelicitously without leaving any doubt about what they meant. Of course in serious utterances such as legal documents, in which people may be supposed to have chosen their words with care, one does not readily accept that they have used the wrong words. If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other. … But the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean. Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail.

46.  When construing a DMC the Tribunal should seek to give effect to the intended meaning.

47.  I have construed clause 8 of the DMC. I have considered the words in clause 8 and in context of the DMC as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. In my view it is tolerably clear that the objective intention was to prohibit display of any and all signs in or on common parts, including on the exterior of the Building that are common parts. The parties to the DMC are “not to display or cause to be displayed any notices or signs in the corridors staircases and landings”. The word “in” refers to signs in 3 places namely corridors, staircases and landings. Those areas are inside the Building so it is linguistically appropriate to use the word “in”. After expressly identifying those specific areas clause 8 continues by adding “or any part of the said Building used in common by the parties”. The respondents’ construction restricts the prohibition to being “inside” the Building. If the clause had also provided the word “on” to read “in or on any part” the clause would be clearer. However, construction is not to be approached from the position of a “pedantic lawyer”: per Lord Hoffmann Jumbo King at 296I. Particularly construction of a DMC. In my view the purpose and practical object that it was intended to achieve was to prohibit any signs at common parts. The prohibition is extended to any part of the building used in common, being all common parts. The exterior walls, in particular the material area of the exterior of the 1^st Floor of the Building, is a common part. The clause 8 prohibition extends to the area where the A Signs have been displayed. The respondents have breached clauses 8 of the DMC.

THE PARTIES’ RESPECTIVE CASES

The IO’s case

48.  It is the IO’s case that both the respondents have been in breach of section 34I of the BMO and clauses 8, 11 and 17 of the DMC by installing the A Signs encroaching upon the 1/F external walls and displaying (or causing to be displayed) signs on the 1/F external walls, which are the Building’s common parts. The installation has effectively converted the 1/F external walls to the respondents’ own use, while the IO has never passed any resolution consenting to such use.

49.  Furthermore, the construction of the L-shaped advertisement board and the relevant metal racks were UBW before an attempt to rectify this problem in 2018 by the minor works under the BO. The minor works were undertaken by the 1^st respondent and/or the 2^nd respondent without obtaining the IO’s specific approval.

50.  Having regard to the DMC and the BMO, the respondents accept that the external walls of the Building belong to the common parts of the Building.

51.  The IO is seeking, inter alia, an injunction to compel the respondents to remove the Sign and to reinstate the affected parts at their own costs, and to restrain the respondents from erecting further advertisements or signage on the external walls of the Building without the IO’s authorisation. The IO seeks declarations, mandatory and prohibitory injunctions and damages or mesne profits against the respondents. The prayer for relief seeks:

(1) A declaration that:

(i) The erection of the Unauthorised Structures on the external walls of Apartments Nos. 2, 3 and 4 of the 1/F of the Building amounts to an unauthorised conversion of the common parts of the Building by the respondents contrary to section 34I (l)(a) of the BMO and the DMC;

(ii) The erection or use of the Unauthorised Structure on the external walls of the Building amounts to use by the respondents of the external wall in such a manner as unreasonably to interfere with the use and enjoyment of those parts by any owners or occupier of the building;

(iii) The unauthorised use of the external walls of the Building amounted to trespass by the respondents since 12 December 2018;

(iv) The 2^nd respondent is in breach of clauses 8 and 17 of the DMC and more generally section 341(2) of the BMO; and

(v) The 1^st respondent is liable for every act of the 2^nd respondent by virtue of clause 11 of the DMC;

(2) An order compelling the 1^st respondent and the 2^nd respondent to forthwith remove or to procure the removal of the Unauthorised Structures which the respondents have permitted to be erected or erected on the external walls of apartments Nos. 2, 3 and 4 of the 1/F of the Building and reinstate the affected parts at their own cost and to the satisfaction of the IO, at the cost of the respondents;

(3) Upon compliance, the respondents, whether acting by themselves, their directors, officers, servants, agents or employees or any of them or otherwise howsoever be restrained, and an injunction be granted permanently restraining the respondents, from doing, procuring, causing, authorising or permitting any of the following acts:

(i) erecting signs / billboards on, obstructing or in any way trespassing the external walls of Apartments Nos. 2, 3 and 4 of the 1/F of the Building without the authorization of the IO;

(ii) making structural alterations to any common parts of the Building without authorisation by the IO; and

(iii) obstructing, interfering with and/or causing nuisance or inconvenience to the IO and any other owners' right in common to use, occupy and enjoy the common parts of the Building by any means;

(4) Mesne profits, from 12 December 2018 until the removal of the Unauthorised Structures and reinstatement of the affected parts of the external walls, to be assessed;

(5) Costs of this Application, with certificate for counsel.

52.  Mr Law submits that the crucial dispute is not as to the IO’s right and the interpretation of the BMO/DMC, but the law of acquiescence, laches, proprietary estoppel, and creation of an enforceable right to put up signs and displays by the doctrine of lost modern grant.

53.  He considers that the most important determinations are (1) whether the construction of the A Signs (including the L-shaped advertising board and the relevant metal racks) were UBW under BO before 2018; and (2) if the A Signs had been UBW, then even if they were rectified by the 2018 minor works under the BO’s regime, whether IO could have legally assented, lain by or acquiesced in their construction and erection before 2018 and/or their retention after 2018. The parties have agreed (1), the A Signs were UBW before 2018.

54.  Mr Law says that the IO’s case is simple: as the 1/F external walls are the common parts of the Building, it is regulated by section 34I of the BMO and the regime under clauses 8, 11 and 17 of the DMC. It is the duty of IO to enforce the provisions of the BMO/DMC, and IO has never assented to the construction, erection or retention of the Sign.

55.  As the A Signs had been UBW from 1960s to at least 2018, it was/is not within the power of the IO to permit the A Signs to be constructed/erected, and consequently it was/is not within the power of the IO in law to acquiesce in their retention.

The respondents’ case

56.  Since the 1960s, the Premises have been in use by the 1^st respondent, its predecessors-in-title and tenants. Various signage has been installed at the external walls of the Premises over time. In particular, various iterations of a large advertising board which spanned across the side of the Building facing Nathan Road and the side facing Haiphong Road had been installed, namely the A Signs.

57.  The IO’s complaint relates to the Sign, that is an advertising board of “六福珠寶 / Lukfook Jewellery” erected at the external walls of the 1/F Premises, which was erected in 2018 (and its subsequent replacements) and which occupied a similar area as the previous large advertising boards, or A Signs. The Sign was constructed by the 2^nd respondent after the Building Authority issued building orders dated 13/5/2016 and 28/6/2016 in respect of the previous version of the large advertising board. The certificate of completion of minor works in respect of the Sign was submitted to the Building Authority on 27/9/2018.

58.  There is no dispute that the Sign is legal. The respondents say the real complaint now is that the IO wants to charge licence fees on the ground that the Sign used common areas.

59.  The IO first demanded the 1^st respondent pay licence fees for the use of signage at the Building in 2012, but not for the A Signs.

60.  The respondents say this is classic case where the IO’s claims should be rejected:

(1) There is no dispute that various signage has been installed at the external walls of 1/F of the Building since the 1960s. During these 60 years, the signage has been used by the 1^st respondent’s predecessors-in-title, the 1^st respondent as well as the 1^st respondent’s tenants.

(2) It is clear from photographic and witness evidence that the signage was prominent and could be seen by any casual observer. The IO must have been aware of their existence.

(3) The IO did not demand a licence fee for, or otherwise object to, the signage until the 2010s.

(4) The IO claimed that the previous signage erected before 2018 was illegal structures. Mr Man SC maintained that this is irrelevant, not least because there is no dispute that the present Sign was authorised by the Building Authority. Indeed, the fact that the IO is seeking to charge licence fees over it shows that it is not harbouring the slightest concern about its legality.

61.  Further, Mr Man SC says that the claim for damages is hopeless. There is no evidence of quantum, while the licence fee demanded for all 4 of the 2012 Advertising Signs was only HK$2,200 per month.

62.  The respondents submit that the IO’s claim is ill-considered and must be dismissed. The respondents argue, inter alia, that:

(1) The IO is barred by acquiescence, proprietary estoppel or laches from enforcing the putative breaches.

(2) The 1^st respondent has also obtained the right to put up signs at the external walls through lost modern grant.

63.  In response, the IO argues that the previous signs erected at the external walls on 1/F were UBW. The illegality would defeat the defences of acquiescence, estoppel, laches and lost modern grant.

Statutory provisions

64.  Section 34I of the BMO, Cap 344. provides:

34I. Common parts

(1) No person may—

(a) convert any part of the common parts of a building to his own use unless such conversion is approved by a resolution of the owners’ committee (if any);

(b) use or permit to be used the common parts of a building in such a manner as—

(i) unreasonably to interfere with the use and enjoyment of those parts by any owner or occupier of the building; or

(ii) to cause a nuisance or hazard to any person lawfully in the building.

(2) Any person who contravenes subsection (1) shall be deemed to be in breach of an obligation imposed on him by the deed of mutual covenant in respect of the building

65.  Section 14 of the BO, Cap.123 provides:

14. Approval and consent required for commencement of building works, etc.

(1) Save as otherwise provided, no person shall commence or carry out any building works or street works without having first obtained from the Building Authority—

(a) his approval in writing of documents submitted to him in accordance with the regulations; and

(b) his consent in writing for the commencement of the building works or street works shown in the approved plan. (Amended 68 of 1993 s. 6)

(2) Subject to section 28B(4), neither the approval of any plans nor the consent to the commencement of any building works or street works shall be deemed— (Amended 41 of 1982 s. 3)

(a) to confer any title to land;

(b) to act as a waiver of any term in any lease or licence; or

(c) to grant any exemption from or to permit any contravention of any of the provisions of this Ordinance or of any other enactment.

Equities legal principles

Acquiescence

66.  Acquiescence arises if:

(1) There is an assent or lying by to the acts of another person; and

(2) In view of the assent or lying by and consequential acts, it is unjust in all the circumstances to grant the relief in question: Freder Centre (IO) v Gringo Ltd [2016] 2 HKLRD 190, §26 per Chu JA.

67.  The plaintiff (i.e. the party in the position of the IO, against whom acquiescence is contended) should also have knowledge of the other person’s acts:

(1) The degree of knowledge required depends on the circumstances.

(2) It is sufficient that at the relevant time the party concerned knew of the facts or matters that gave rise to his right to equitable relief, even although he may not have fully understood, as a question of law, the rights that he possessed.

(3) It is ordinarily sufficient that the plaintiff has been put on suspicion, that is, that he is aware of sufficient matters to raise in his mind a doubt whether an infringement of his rights has taken place: Yick Fung Holdings Ltd v Sandwood Ltd [2009] 2 HKLRD 573, §28 per Le Pichon JA.

68.  The IO also relies on The Incorporated Owners of Ming Yuen Mansion 及 Lam Yuk Lan Grace (unreported, LDBM 185/2011, 7 November 2011) in respect of acquiesce/encouragement where, at §26, it was held that although under equity, the court may prevent the incorporated owners from exercising their legal rights if allowing them to do so would cause unfairness to the respondent, equity will not find that the incorporated owners acquiesced in the respondent's actions if the incorporated owners could not expressly allow such actions in the first place. The incorporated owners have no authority to permit actions that violate the deed of mutual covenant, and the respondent cannot rely on arguments of permission, acquiescence, or delay as a defence for breaching the deed of mutual covenant.

69.  Mr Law refers to Snell’s Equity (34^th Ed.) at §18-041:

A claim to an injunction may also be barred by the claimant’s acquiescence or laches. Acquiescence primarily means conduct from which it can be inferred that a party has waived his rights. Mere inactivity is insufficient, for “quiescence is not acquiescence”. The test for acquiescence appears to be the same whether the right protected is legal or equitable; it is established by showing that it has become unconscionable on the part of the owner of the right to press for its enforcement. But acquiescence in a small breach will not bar proceedings to restrain a wider breach. Lapse of time is an important element in considering whether there has been acquiescence, but there may be acquiescence even without any delay. ….

Proprietary estoppel

70.  Mr Law relies on the extensive discussion of the doctrine of proprietary estoppel by the Court of Final Appeal in Cheung Lai Mui v Cheung Wai Shing (2021) 24 HKCFAR 116, at 128 §§21-23:

21. In the current, 21st, edition of Hanbury and Martin: Modern Equity (Glister and Lee eds) [30-022], it is said that the doctrine of proprietary estoppel has developed rapidly in the past half century. That may be so, as illustrated by the numerous cases decided in Hong Kong, the United Kingdom and Australia to which the parties to this appeal referred the Court.

22. But the foundation decision of Dillwyn v Llewelyn 1 was decided in 1862. There, a father, having made an incomplete gift of land to his son for the express purpose of the son building a house on the land, thereafter assented to and approved of the son proceeding with the building; the father’s conduct after making the incomplete gift, with the expenditure by the son thereby induced, supported the Court of Chancery obliging the father’s executors to convey the land to the son.

23. Put shortly, the requirements of equity to recognise and give relief based on proprietary estoppel are: (a) a representation or assurance made to the claimant; (b) reliance thereon by the claimant; and (c) detriment to the claimant in the consequence of that reliance.

71.  Proprietary estoppel consists of the following elements:

(1) A representation or assurance which is sufficiently clear and unequivocal is made to the representee;

(2) Reasonable reliance by the representee;

(3) Detriment to the representee which is sufficiently substantial in consequence of his/her reasonable reliance: Cheung Lai Mui (CFA) at 116, §23 per Ribeiro PJ and per Gummow NPJ.

72.  Silence or acquiescence may amount to representation or “passive encouragement” for the purpose of proprietary estoppel: Summit Court (IO) v Full Surplus Investment Ltd (No 2) [2005] 1 HKC 662, 678-681; Kung Wong Sau Hin v Sze To Chun Keung [1996] 3 HKC 292, 630B-C.

73.  Silence or acquiescence would give rise to proprietary estoppel if:

(1) The representee adopts a particular course of conduct in reliance on a mistaken belief as to his concurrent rights;

(2) The owner, knowing both of the representee’s belief and the existence of his own right, fails to assert the right against the representee, and

(3) The representee would suffer a detriment if the owner would be free to enforce the rights: Snell’s Equity, §12-034.

74.  Proprietary estoppel may arise, inter alia, through encouragement or unilateral mistake:

(1) Encouragement covers the situation where the parties have consistently dealt with each other in such a way as to reasonably cause the defendant to believe that he would acquire some rights in the plaintiff’s land: Goo and Lee, Land Law in Hong Kong (5^th edn), §3-10.

(2) Unilateral mistake arises where the defendant has made a mistake about his right and has acted on such a mistaken belief to his detriment, but the plaintiff has wilfully stood by and allowed the defendant to suffer such detriment: Goo & Lee §3-12; Snell’s Equity §12-034.

75.  Both types of cases may be based on the representor’s silence. It is possible by words or conduct to encourage another to believe or assume that he has a right or interest over property when what is encouraged is only consistent with him having some such right. Thus, overt acts by the representee, coupled with silence on the part of the representor, could amount to encouragement to the representee to hold the belief which it did: Hoyl Group Ltd v Cromer Town Council [2015] EWCA Civ 782 §§53, 73, 75 per Floyd LJ; Summit Court (IO) §82.

76.  As for the element of detriment:

(1) Detriment must be judged at the moment when the person who has given the assurance seeks to go back on it;

(2) Detriment is not a narrow or technical concept. It need not consist of the expenditure of money or other quantifiable financial detriment and may consist of manual labour;

(3) The court would look at the matter in the round and undertake a broad inquiry as to whether repudiation of an assurance is unconscionable in all the circumstances;

(4) There need not be a relationship of proportionality between the level of detriment and relief awarded: Cheung Lai Mui (CFA), §24.

77.  If the estoppel is made out, the starting point in granting relief is to give effect to the promisee’s expectations. As explained in Guest v Guest [2022] 3 WLR 911, §§75-76 per Lord Briggs:

(1) The starting assumption is that the simplest way to remedy the unconscionability is to hold the promisor to their promise.

(2) The burden is on the promisor to show that specific enforcement of the full promise would be out of all proportion to the cost of the detriment to the promisee.

(3) If so, the court may limit the extent of the remedy. But this does not mean the court will instead seek to compensate the detriment to the promisee. It will simply seek to put right a disproportionality which is so large such that specific enforcement would not do justice between the parties.

78.  Thus, the court will only seek to satisfy the equity in a more limited way if realising the promisee’s expectations in full would be disproportionate to the detriment suffered; even then, the court will not abandon its attempt to fulfil those expectations to an appropriate degree: Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1, §70 per Ribeiro PJ.

79.  Mr Law submits that it is also well-settled that the doctrine of proprietary estoppel, like any other, cannot apply if its operation would stultify the operation of a statute, or be otherwise inconsistent with a statutory scheme: Snell’s Equity §12-046.

80.  Therefore, the IO’s say even if there is any mistaken belief (which is denied) of the respondents, equity will not avail them as there is no power for the IO to acquiesce in the unlawful erection of the advertising boards by the respondents in the first place.

81.  In any event, he who comes into equity must come with clean hands. In view of the unlawful erection of the advertising boards, there could be no equitable relief granted to the respondents.

82.  Regarding the requirement for a representation, the author of Snell’s Equity stated at §12-035 that:

The representation-based strand thus consists of a true form of estoppel, as its effect is to preclude A from denying the truth of A’s representation … then it does not operate, in itself, as a cause of action, as, in contrast to the acquiescence and promise-based strands of proprietary estoppel, it does not impose any liability on A. … On the view taken here, then, if B wishes to use proprietary estoppel as a cause of action, B needs to show that the requirements of either the acquiescence or promise-based strands have been met, for example by showing that, given the context in which it was made, A’s statement that “this land is yours”, amounts to a commitment that A will not seek to assert an inconsistent right to that land.

83.  The IO submits that there has never been any representation, express or implied, from the IO to the 1^st respondent and the 2^nd respondent. On the facts as set out in the NOO, no representation can in fact be identified. Without any representation, there could not have been any detrimental reliance. The detriment must be one that would be suffered by the respondents and result from the respondents’ reasonable reliance: Snell’s Equity, §12-044.

84.  As to the specific type of proprietary estoppel by acquiescence (or standing by), DHCJ Marlene Ng (as she then was) in Lee Bing Cheung v Secretary for Justice [2013] 3 HKC 511 at §§42-43 referring to Fry J’s judgment in Willmott v Barber (1880) 15 Ch D 96 held as follows:

42. Fry J in Willmott v Barber (1880) 15 Ch D 96, 105 formulated the 5 ‘probandas’ or usual elements for considering a proprietary estoppel of this kind:

(a) the plaintiff must have a mistaken belief as to his legal rights;

(b) the plaintiff must have expended money or done some act on the faith of his mistaken belief (ie detrimental reliance);

(c) the defendant must know of the existence of his own legal right which is inconsistent with the right claimed by the plaintiff;

(d) the defendant must know of the plaintiff’s mistaken belief of his legal rights;

(e) the defendant must have encouraged the plaintiff in his expenditure of money or in the acts which he has done, either directly or by abstaining from asserting his legal rights.

43. But such is the nature of the equity under the doctrine of proprietary estoppel that the true test is whether it will be unconscionable for the defendant to deny that which he has allowed or encouraged the plaintiff to assume to his detriment rather than ‘whether the circumstances can be fitted within the confines of some preconceived formula serving as a universal yardstick for every form of unconscionable behaviour’. Nevertheless, Rogers JA in Tong Tim Nui & Ors v Hong Kong Housing Authority [1994] 4 HKC 466, 495 accepts that ‘the more formalised test of Fry J ... remains a good starting point’.

85.  To determine whether the IO had knowledge of its rights, HHJ Winnie Tsui (as she then was) in Tsang Woon Ming v Tsan Hing Tat Heidi and Others [2018] HKDC 845 at §§25-26 made the following observations:

25. In estoppel by acquiescence cases, it is incumbent on the claimant to establish that the landowner had knowledge of the former’s mistaken belief that he had or would acquire some interest in the land. Mr Chan cited the following passage in Ramdsen v Dyson (1866) LR 1 HL 129 at 140-141:-

“If a stranger begins to build on my land supposing it to be his own, and I, perceiving his mistake, abstain from setting him right, and leave him to persevere in his error, a Court of equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land was his own. It considers that, when I saw the mistake into which he had fallen, it was my duty to be active and to state my adverse title; and that it would be dishonest in me to remain willfully passive on such an occasion, in order afterwards to profit by the mistake which I might have prevented.”

26. The above concerns the landowner’s knowledge of the claimant’s mistaken belief. In addition, it must also be established that the landowner was aware of (a) his own proprietary rights, and (b) the claimant’s expenditure or other detriment: see Megarry & Wade, The Law of Real Property (8^th ed) at 16-009. (I should note at the outset that the knowledge of item (a) is not in issue in this application.)

86.  Mr Man SC submits that even in cases of unilateral mistake, the five probanda expounded in Willmott at 105 should not be treated as an inflexible rule and a broader test whether the assertion of strict legal rights would be unconscionable should apply: Li Kwok Ching v Secretary for Justice, HCA 1303/2010, 31/3/2015, §§96-97 per G Lam J (as he then was); Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133, 148E-G per Oliver J. This is supported also by the observations of the Court of Final Appeal in Cheung Lai Mui at §24. The doctrine of proprietary estoppel should not be treated as being subdivided into three or four watertight compartments. The Tribunal must look at the matters in the round and see whether repudiation of an assurance is unconscionable in all the circumstances.

Laches

87.  Laches consists of a substantial lapse of time coupled with the existence of circumstances which make it inequitable to enforce the claim: Man Hong Apartments (IO) v Kwong Yuk Ching & Ors [2001] 3 HKC 116, 124A-E per Mayo VP.

88.  Such inequity may arise where, due to the party’s conduct and neglect, even if it has not waived the remedy, it has put the other party in a situation which would not be reasonable to place it in if the remedy were afterwards to be asserted: Beijing Hantong Yuzhi Convention Centre Ltd v Lao Yuan Yi [2018] HKCFI 1030 §105 per Recorder Linda Chan SC (as she then was).

WITNESSES

89.  The IO called Mr Hamilton Lo. The respondents called Mr Kiang Robert Chee Man (“Mr Kiang”), Mr Wan Chi Hung (“Mr Wan”), Mr Tse and Mr Darwin Cheung. Their witness statements stood as their evidence in chief.

90.  I have considered the evidence, both written and oral. This includes whether each witness gave evasive or argumentative answers, gave self-contradictory evidence or internally inconsistent evidence and whether their evidence was contradicted by other evidence that was undisputed or indisputable. Where there was any conflict of evidence I have referred to objective facts proved independently of their testimony and referred to the documents as well as to their motives and the overall probabilities, to assist in ascertaining the truth.

91.  Mr Hamilton Lo, the only witness called for the IO, joined Yick Tat in 2007. He is currently Senior Property Manager. He works at Yick Tat’s Head Office and is assigned to manage approximately 20 buildings, including the Building. His responsibilities included supervising subordinate colleagues serving as Estate Officers of the Building. From 2012 to August 2023, this was Mr Chan in managing the IO’s affairs. Initially Mr Chan was to be the only factual witness for the IO however, he resigned and left Hong Kong so Mr Hamilton Lo prepared a witness statement and gave evidence in his place. Mr Hamilton Lo had to rely on the documents and what he was told by Mr Chan on material matters. Other matters known to him personally were less material, did not affect the issues one way or the other and were consistent with the agreed facts. However, his direct knowledge was limited. For example, he did not attend the meeting on 22 October 2020. Where his evidence differs from that of the respondents’ witnesses who had personal direct knowledge of facts I prefer the evidence of those witnesses to that of Mr Hamilton Lo, as set out below.

92.  Mr Kiang is a director of Majestic Dragon Limited, the corporate director of the 1^st respondent. He began working for Mr Lee in 1955, at the age of 18. He was assigned to work overseas in 1961 but returned to Hong Kong in May 1961 and worked at the Premises for 6 months as a store manager. The Building had just been completed. The Premises has always been directly or indirectly owned or controlled by Mr Lee and, after his passing, by his descendants.

93.  Mr Kiang worked for Mr Lee’s tailoring businesses in Japan from 1961 to 1984, but came to Hong Kong for one or two months at least once a year and attended general meetings as well as to other matters in respect of Mr Lee’s business. Every time he was in Hong Kong he stayed in an apartment in Nathan Road and would walk across the road to the Premises to conduct Mr Lee’s business. He was able to confirm that the photographs in the Attachment to the NOO showing the signage, including the A Signs, reflect the actual situation of the Premises at the relevant time. There was some inconsistency between his witness statement and his oral evidence. However, I found him to be an honest witness doing his best to recall matters that occurred over the decades. He had first-hand knowledge of the Building and, in particular the A Signs, since the 1960s. I did not find his evidence limited by the fact that he has not been in Hong Kong constantly. He has since the 1955 been working for and or been involved with the late Mr Lee and his businesses right up to date, first as an employee and now as a director.

94.  Mr Tse joined IPIL (now known as Oxford Asset Management Limited (“OAM”)) in September 2013, part of the Oxford Group. When he joined the Oxford Group he was Assistant Leasing Manager and is now in the role of Property Director. The IO submitted, inter alia, that Mr Tse was an evasive witness. I did not find Mr Tse to be an evasive witness. Overall I accept his evidence which is addressed more particularly below.

95.  Mr Wan is a director of OAM. He joined an associate company of the Oxford Group as a leasing officer in 1999. Corporate and property agent changes have occurred, but he is also manager of the 1^st respondent, which is a property holding company. His main responsibilities included inspection of the 1^st respondent’s properties and he would, if necessary, negotiate with tenants and deal with incorporated owners of the properties. He gave evidence in a straight forward manner. His evidence was credible. Overall I accept his evidence, subject to findings below.

96.  Mr Darwin Cheung is the Deputy Senior Property Director of Luk Fook Holdings Company Limited, the parent company of the 2^nd respondent, having joined the company in 2010. He did not take part in the negotiation for the 2010 lease between the respondents. He believed at the time that putting up signs on the external walls of the Premises was permissible or acceptable. He was able to give evidence with direct knowledge of the 2^nd respondent. He was not able to speak for the 1^st respondent. The 1^st respondent and the 2^nd respondent are clearly independent companies. They have a professional arms-length landlord and tenant relationship. He was not privy to the operations of the 1^st respondent. He provided particulars of the sums incurred by the 2^nd respondent in putting up and maintaining the A Signs, since taking up the 2010 lease. The total sum was HK$786,200. This was not disputed. His evidence was largely consistent with the documents. I accept his evidence of facts, subject to matters specifically found below.

97.  The expert witnesses were not called but their reports were admitted by agreement.

Issue 4 – Whether the IO could legally assent, lay by or acquiesce in the construction, erection or retention of the A Signs

The respondents’ case

98.  The A Signs had been in place since as early as the 1960s. The IO had not raised any objection at least until 2012. The respondents’ say that the IO has hence assented and lain by, and is barred by acquiescence from enforcing against the breaches. They also claim that it would be unjust if the IO is able to enforce against the erection of the A Signs.

The IO’s case

99.  The IO submits that the first and foremost question is whether the IO could assent or acquiesce in the construction/erection of the A Signs, at least A-1 to A-13, which the IO says were UBW.

100.  Recorder Rimsky Yuen SC in Hollywood Shopping Centre Owners Committee Limited v The Incorporated Owners of Wing Wah Building Mongkok Kowloon (unreported, HCA 1582/2007, 16 August 2010) answered that question in the negative. The Recorder cited The Incorporated Owners of Champion Court v Pang Ping Fan Peter (unreported, CACV 317/2006, 23 May 2008) per Yuen JA at §55 and the principle at §§ 58 and 65(3):

55. … incorporated owners cannot acquiesce in the retention of illegal structures is by now well-established. The rationale is that since it is not within the power of incorporated owners to expressly permit illegal structures to be constructed, it is consequently not within their power to acquiesce in their retention, ...

58. … If a party cannot do an act expressly, he cannot do it impliedly or consent to have it done by someone else.

65. … (3) on the other hand, if the breach of mutual covenant in question is beyond the power of the incorporated owners to acquiesce, the defence of acquiescence will not be available since the incorporated owners cannot acquiesce in acts which they in law cannot do.

101.  The IO’s position is that as the A Signs were UBW before 2018, they could not acquiesce in the construction/erection of the A Signs before 2018.

102.  Such position has also been confirmed by Deputy Judge Michelle Soong (as she then was) in 永利工業大廈業主立案法團 及 順隆置業有限公司 [2021] HKLdT 26. At §§64-66 the position of the applicant incorporated owners was summarised as follows. The respondent acknowledged that the signboard had never received consent from the applicant. In addition to sending letters to the respondent, the applicant had also verbally communicated its objections and requested the respondent to remove the signboard on multiple occasions. The applicant had never endorsed the signboard or turned a blind eye to it, nor waived its right to pursue the respondent for violating the DMC and/or the BMO. Therefore, the respondent could not rely on the applicant’s endorsement and/or inaction as a defence. In order to successfully invoke acquiescence as a defence, it must be inferred based on the conduct of the party giving acquiescence. The respondent could not rely solely on the applicant’s failure to take action to establish acquiescence. The applicant also cited The Incorporated Owners of Hoi Luen Industrial Centre and Another v Ohashi Chemical Industries (Hong Kong) Limited [1995] 2 HKC 11, pointing out that the incorporated owners have no authority to acquiesce in any act that violates the DMC. It was held that the applicant had no power to acquiesce in the construction of the signboard, which was an unauthorised building works: at §67. The approach was consistent with that taken by the Court in Hollywood Shopping Centre Owners Committee Limited.

103.  In The Incorporated Owners of Ming Yuen Mansion Deputy Judge Angela Kot (as she then was) expressed agreement with Ohashi. The incorporated owners did not have the authority to acquiesce in the respondent's violations. Under section 18(1)(c) of the Multi-storey Buildings (Owners Incorporation) Ordinance (Cap. 344) incorporated owners were under a statutory duty to do all things reasonably necessary for the enforcement of the obligations contained in the DMC. When they found that there was a breach of covenant by one of the owners, it was not only their right but their duty to seek to enforce the covenant. It followed that the plaintiffs were bound to take proceedings for the enforcement of the covenants. They could not have granted expressly to the defendant or any other owner of any unit the right to act in contravention of the DMC as the defendant had done: at 13C-D. Equity would not hold a plaintiff bound by acquiescence to allow something which he could not have allowed by express grant: at 13D-E. Therefore, even though the incorporated owners had been aware of the respondent’s violations for many years, they still do not have the authority to acquiesce in such actions: at §24. The financial burden raised by the respondent did not constitute a valid argument for unfairness. Otherwise, the incorporated owners would only be able to enforce the DMC when the unit owners are financially capable, which would be contrary to the responsibilities of the incorporated owners.

104.  The IO submits, first, although the existence of the signage at the L-shaped position since the 1960s is not disputed, they were all along UBW and could not be acquiesced in. The IO, as a body bound to observe the DMC and the applicable statutory laws including the BO, could not have granted to the respondents or any other owner any right to act in contravention of the law.

105.  Secondly, in reply to the respondents’ argument that it would be unjust for the IO to enforce against the erection of the Sign and that the IO is barred by laches from enforcing the DMC or the BMO, the IO relies on, 永利工業大廈業主立案法團 at §§70-71, where regarding the respondent's claim that ordering the respondent to remove the signboard would cause unfairness to the respondent, the applicant relied on the principle of detrimental reliance as stated in Fisher v Brooker and Ors. The applicant asserted that the respondent has failed to provide evidence on this matter. Furthermore, §79 states:

… They cannot show any prejudice resulting from the delay, and, even if they could have done so, they have no answer to the judge’s finding … that the benefit they obtained from the delay would outweigh any such prejudice.

Similarly there, even if the applicant's delay has caused unfairness to the respondent, the unfairness faced by the respondent was far less than the benefit the respondent had gained from continuing to use the signboard due to the applicant's delay (if any).

106.  Mr Law submits that the situation in the present case is similar. In Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, Lord Selborne stated at page 239 that laches would only apply when “it would be practically unjust to give a remedy", and that, in every case where a defence “is founded upon mere delay … the validity of that defence must be tried upon principles substantially equitable”. What had to be considered were “the length of the delay and the nature of the acts done during the interval, which might affect either party, and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.”

107.  The IO answers the respondents’ unfairness/prejudice claim thus:

(1) The undertaking by the 1^st respondent under its lease with the 2^nd respondent does not concern the IO; and

(2) The 1^st respondent was assigned the Premises in 1979, and had since the early 1980s let the Premises to a number of tenants. The tenants of the Premises had also displayed various advertising boards at the 1/F external walls since then. The huge commercial gain must have significantly outweighed any prejudice (if any but which is denied) that the 1^st respondent and the 2^nd respondent claimed to be suffering shall the IO enforce against the construction of the signage.

Issue 5 - Whether the IO has been estopped by proprietary estoppel from enforcing the DMC and/or the BMO against the Sign

108.  The respondents rely on proprietary estoppel as a defence to the IO’s claim, namely that the IO is estopped from enforcing against the respondents the DMC and/or the BMO in respect of the Sign.

Evidence to establish proprietary estoppel

109.  The IO submits that there is insufficient evidence to establish proprietary estoppel and to support the respondents’ claim that there had been any passive encouragement, representation, mistaken belief and/or detrimental reliance. Moreover, even if there had been a mistaken belief on the respondents’ part, the IO was not aware of it.

No passive encouragement/ representation

110.  The respondents’ rely on Summit Court, a case involving an IO building communal water facilities on a roof owned by the defendants. There is nothing in this case to match the kind of “passive encouragement” in that case, including the extensiveness of the installation works in the defendant’s privately-owned area, the defendant’s identity as an architect, the defendant’s signing of letters to apply for separate water meters and wide circulation of information about the facilities: at §88. The IO also refers to Shiu Fung Mansion (IO) v Wong Yuk Ming, LDBM 341/2014, 30.12.2016 at §57 on the insufficiency of silence/inaction to constitute an assurance or promise.

111.  It is common ground that the IO requested a licence fee to be paid for signage, at the 1/F external walls, Sign C-4 in as early as 2012. Mr. Darwin Cheung of the 2^nd respondent said he began to be doubtful about the 1^st respondent’s ownership of the 1/F external walls at that time. Moreover, the IO followed up on the request for licence fee with IPIL (the 1^st respondent’s agent) and sent the S.H. Chan & Co letter dated 20 November 2012 asserting ownership of the 1/F external wall as follows:

Pursuant to the Deed of Mutual Covenant of the Building dated 10th April 1961, the right to put on advertisements upon the outer or external parts of the walls of the Building had been…reverted to common ownership…Therefore, our client [i.e. the IO] retained the exclusive right to put on advertisements or signboard on the external wall of the upper floors of the Building.

112.  Mr Wan confirmed in evidence that was received by the 1^st respondent. The 2^nd respondent’s doubt and the subsequent agreement by its shop staff to pay the licence fee, as well as the communication of the IO’s position to the 1^st respondent in 2012/2013, all point to the lack of passive encouragement on the IO’s part.

113.  The respondents can only point to the conspicuousness of the A Signs and the IO’s inaction to establish “passive encouragement”. In the IO’s submission, this is not enough. The respondents’ case on proprietary estoppel by acquiescence fails at step one.

No mistaken belief

114.  The respondents rely on Mr Kiang’s evidence to establish a long-term belief in the 1^st respondent’s right over the 1/F external walls. However, Mr Kiang lived in Okinawa, Japan from 1961 to 1984, after which he went to Canada to take care of his wife. He later retired and has settled in Vancouver, Canada for most of the time. He only occasionally returned to Hong Kong every one or two years. He was also not responsible for the day-to-day management of the Oxford Group (including the 1^st respondent) as he just returned to Hong Kong for Annual General Meetings and board of directors meetings. He could not have known whether the IO had ever made any complaints or asserted any ownership over the 1/F external walls any time prior to 2012. However, the IO has not adduced evidence of any complaint or issue being taken prior to 2012, as set out in the agreed facts. Mr Kiang’s knowledge is said to be limited, and cannot be relied on to establish the 1^st respondent’s substantive belief.

115.  Mr Law submits that other evidence should carry more weight. First, the lease entered between the 1^st respondent and the 2^nd respondent on 19 March 2010 regarding the Premises. Clause 2(ee) reads:

The Tenant shall maintain the advertisement signs, neon lights, banners and/or spotlights erected and/or installed on the external walls of the premises facing Nathan Road and/or Haiphong Road (the “Signs”) and keep the Signs in proper repair and condition and shall make good any damage to the walls of the premises caused by the installation and/or posting of all such Signs. The Tenant … shall remove the Signs upon the request of the Owners’ Committee, the Manager of the Building … at the Tenant’s own cost…

116.  The same clause was reproduced in the renewed lease in November 2015. The IO submits that, the 1^st respondent and the 2^nd respondent, being contractual parties to the leases, anticipated the risk that the IO (or its management company) would request the A Signs on the 1/F external walls to be removed. When such risk arises, the 2^nd respondent “shall” remove the Signs, not argue with the IO or the manager, assert the 1^st respondent’s right and/or undertake to defend any action, claim or proceedings from the IO. The drafting of this clause is consistent with recognition of the IO’s right, and inconsistent with the alleged mistaken relief that the 1^st respondent was the owner.

117.  Mr Wan testified that the leases were drafted by the 1^st respondent’s staff in the leasing department and cleared with their lawyers. The IO points out that:

(1) Clause 2 was a clause dealing with the tenant’s obligations during the term of the lease. Its many sub-clauses were suggestive of the obligations to comply with requests from competent authorities such as the Building Authority, but not how liabilities were allocated on matters of mere possibilities (such as fire and storm). The latter situations were separately dealt with under clause 4(b) of the leases;

(2) Moreover, clause 2(ee) was specific, with the location and use of the “Signs” clearly identified. It does not look like a clause dealing with the kind of remote and less foreseeable risks Mr Wan referred to.

118.  Although Mr Darwin Cheung was not involved in the drafting of the 2010 lease, he agreed he cannot disassociate himself from the 2015 lease. It was his understanding in 2015 that the IO might ask the 2^nd respondent to take down the A Sign because it might be UBW. When he was asked why the IO would ask the 2^nd respondent to remove such UBW, he said he could not answer. He did not question the 1^st respondent why the IO would request the 2^nd respondent to remove the A Signs in future.

119.  In the IO’s submissions, clause 2(ee) was carefully drafted with lawyers. If the 1^st respondent were indeed under the mistaken belief that the 1/F external walls had become effectively owned by the 1^st respondent, it would be unreasonable for the 1^st respondent to include such a specific clause in the lease. The 2^nd respondent would have disputed or at least queried why the risk of being requested by the IO to remove the A Signs should emerge as an obligation.

120.  Secondly, the respondents’ conduct following the receipt of the 2012/2013 letters from the IO showed not only that the IO had not passively encouraged, but the respondents had also understood the IO’s position over the 1/F external walls.

121.  The S.H. Chan & Co letter dated 20 November 2012 asserted ownership of the external walls of the upper floors of the Building. No rebuttal on the legal position was issued. This should be contrasted with IPIL’s eagerness to raise the position of adverse possession (which is not adopted in this action) in the previous letter dated 18 July 2012. When the management office continued to request the 1^st respondent to pay a licence fee in February 2013, Mr Wan claimed that he did not query the IO.

122.  If the 1^st respondent was still under the same mistaken belief that the external walls were effectively its property so that further consent from the IO would not be required, it should have reiterated its position or at least referred to its previous letter. Upon receipt of this letter the 1^st respondent could no longer be mistaken in its belief. It should have doubted the previous mistaken belief (if any) or objectively, it was no longer reasonable for the 1^st respondent to subscribe to the belief. In any event, the letter also shows that in continuing its use of the A Signs, the 1^st respondent no longer relied on its previous belief.

123.  As regards the 2^nd respondent, Mr Darwin Cheung claimed that it was not until he had read Mr Chan’s statement that he came to know that the 2^nd respondent has been paying a licence fee for the Longines Sign (C-4), which was also attached to 1/F external walls. It does not matter when Mr Darwin Cheung discovered this because his colleague Mr Chow , an employee of the 2^nd respondent representing the 2^nd respondent in dealing with the IO, paid it. He did not pay the licence fee at the first moment he received the invoice but started making such payment in 2013. There must have been a thinking process over this matter.

124.  The IO submits that by paying the licence fee for the Longines Sign, the 2^nd respondent had acknowledged the IO’s ownership over the 1/F external walls. Even if the 2^nd respondent had had any belief that the owner of the 1/F external walls was the 1^st respondent, such belief was extinguished by the time the 2^nd respondent started paying the licence fee. Mr Darwin Cheung clarified in re-examination, the management office issued receipts upon receiving the fee. Mr Law submits that there is no way that the 2^nd respondent was not aware of the IO’s interest over the use of the 1/F external walls.

125.  Thirdly, Mr Darwin Cheung joined the 2^nd respondent in 2010. As no plan showing the place for signage on the external walls was attached to the 2010 lease, the evidence of the 2^nd respondent’s contractual entitlement to signage was merely Mr Darwin Cheung’s evidence of following “Watsons’ entitlement”. However, Mr Darwin Cheung himself, when reviewing and questioned on the A-6 to A-8 Signs, doubted if the part with electronic products was indeed put up by Watsons. The 2^nd respondent’s “mistaken belief” as to which part of the external walls was effectively owned by the 1^st respondent is unclear.

126.  Fourthly, the proposal for the 2^nd respondent to pay a licence fee regarding the Sign to the IO in 2020 was evidence that both the 1^st respondent and the 2^nd respondent no longer believed that the 1^st respondent was the owner of the 1/F external walls.

127.  When the IO demanded the 2^nd respondent pay a licence fee for the Sign, Mr Darwin Cheung told Mr Chan on 23 October 2019 by WhatsApp that the 2^nd respondent was in the course of studying with the 1^st respondent “who have the title”. Mr Darwin Cheung said that, the first thing he did was to report to Mr Tse of the 1^st respondent.

128.  After repeated demands from Mr Chan, Mr Darwin Cheung notified Mr Chan on 17 December 2019 that the Sign area is not owned by the 1^st respondent, and that the 2^nd respondent was willing to rent the area.

129.  Following rounds of negotiation, Mr Darwin Cheung told Mr Chan that the 2^nd respondent would draft a “contract” for the use of the 1/F external walls on 7 October 2020. The draft contract was then produced to the Chairman of the IO in a meeting on 22 October 2020.

130.  The IO submits that this conduct since the payment of the licence fee in respect of the Longines Sign suggests that the 2^nd respondent had never believed the 1^st respondent to have owned the 1/F external walls. Other conduct of the respondents’ during the negotiation between the IO and the 2^nd respondent in 2019 to 2020 also warrants attention.

131.  Upon learning that the IO had decided to charge a licence fee for the Sign in 2018, Mr Darwin Cheung approached Mr Tse of the 1^st respondent. Mr Tse must have known about the IO’s request. Mr Law put to Mr Darwin Cheung that, if the 1^st respondent thought the external walls were effectively its property, the 1^st respondent would naturally argue with the IO (like IPIL initially had in 2012) as to why the IO could charge. But Mr Darwin Cheung said the 1^st respondent did not do so. It was the same position after Mr Tse learnt about the IO’s intention to charge a fee for the entire Sign, but not merely the upper rim of the Sign, the “excessive height”.

132.  The IO says that if ownership of the external walls was important to them, it is unimaginable the 1^st respondent would simply defer the matter to the 2^nd respondent but not check with the IO directly.

133.  The IO submitted that Mr Tse was evasive when giving evidence; the Tribunal can observe his demeanour. The internal inconsistency and inherent improbability of his evidence also cast doubt on the reliability of his testimony:

(1) First, when asked the first time he knew about the IO’s position that the external wall belonged to the IO, he first said it was not until the trial of these proceedings. He later changed his answer to it might probably be some time prior to the meeting in October 2020 when Mr Darwin Cheung told him. However, when shown the WhatsApp conversation between Mr Chan and Mr Darwin Cheung, he further changed his answer to probably in October 2019;

(2) Second, while Mr Tse was trying to demonstrate that he (or the 1^st respondent) did not know much about the IO’s position, he was shown the email from Mr Darwin Cheung to Mr Chan on 17 December 2019, in which Mr Darwin Cheung confirmed that the Sign area was not owned by the 1^st respondent. At first, Mr Tse said he was not aware of the existence of this email. However, when shown the email was copied to him, he failed to produce a convincing answer;

(3) Third, in Mr Tse’s witness statement and his oral evidence, he said the only purpose for him to participate in the October 2020 meeting was to introduce Mr Darwin Cheung to the members of the IO. However, under cross-examination, it turns out that Mr Tse did not know anybody in the IO or its management committee. He did not even know who from the IO would attend that meeting. It is submitted his explanation was simply incredible; and

(4) Lastly, when being ask if the 2^nd respondent ever asked for reimbursement or reduction of rent if an agreement with the IO was reached, Mr Tse said no. This contradicted Mr Darwin Cheung’s evidence.

134.  Mr Law submitted that Mr. Tse took an evasive position in an attempt to delay the existence of 1^st respondent’s knowledge about the IO’s assertion of ownership over the 1/F external walls. But in fact, Mr Wan already knew about it as early as in 2012.

135.  Further, it was improbable that the 1^st respondent did not question the 2^nd respondent on the terms of the draft contract, after knowing that the 2^nd respondent was going to sign that contract directly with the IO and that Mr Darwin Cheung had a different understanding. Mr Tse knew of that in around December 2019 as evidenced by the email and confirmed by him under cross-examination.

136.  Furthermore, while Mr Tse says that he did not participate in the drafting of the contract between the IO and the 2^nd respondent, and he did not look at it, it was suspicious why he did not directly challenge the IO’s representative in that meeting on the basis for charging a licence fee.

137.  The respondents’ reactions, including the 1^st respondent’s delegation of the negotiation with the IO to Mr Darwin Cheung of the 2^nd respondent, shows that they had operated under the belief that the external walls of the Building, a common part, were the IO’s property before formal legal disputes broke out. It can be inferred from such reactions that, institutionally, the respondents did not have a mistaken belief that 1/F external walls belonged to the 1^st respondent.

The IO’s lack of knowledge of the respondents’ mistaken belief

138.  Mr Law submist that even if the Tribunal finds that there had been a mistaken belief of the respondents, the evidence shows the reason for the IO’s inaction was due to Mr Chan’s “counter-mistaken belief” that the A Signs at the 1/F external walls were part and parcel of the Convey advertisement signs, and Convey was at the material time a licencee paying licence fees for putting up signs at the external walls. Mr Chan’s “counter-mistaken belief” had influenced members of the IO’s management committee and other members as they counted on the management company to discharge such duties. As Mr Hamilton Lo said, the position only became clear after Convey discontinued the licence in or about 2017 and the IO’s dispute with Convey on the deposit was settled in mid-2018.

139.  Looking at the photographs showing the Convey Sign and the A Signs, it is probable that such a misunderstanding would be held by Mr Chan. On the one hand, part of the A-6 to A-9 Signs showed the advertisement of electronic products, while the Premises were then occupied by Marionnaud of Watsons Group selling perfume and cosmetics products. There was no obvious connection between that part of the A Sign and the business of the Premises. Mr Wan did not know the relationship. When this was pointed out to Mr Darwin Cheung he said it was doubtful if that part with electronic products was put up by Watsons.

140.  On the other hand, jewellery and watch products were prominently promoted on the Convey signage. An ordinary passer-by would think these products were related to the shop underneath, which has since March 2010 been occupied by “Luk Fook Jewellery”. Luk Fook did market Longines watches.

141.  The IO claims that the state of affairs could really lead people in Mr Chan’s position to believe that the A Signs were part of the Convey signage above: (a) at one time Watsons Group had rented part of the Convey signage at the position of the A Sign from Convey, and the other part of the A Sign was sub-let by Convey to others; or (b) at the other time Luk Fook had rented the entirety of the Convey signage, inclusive of the A Sign, from Convey. In Mr Hamilton Lo’s words, the constant changes of advertising images and products promoted made people confused.

142.  As Tsang Woon Ming found, to establish knowledge of the mistaken belief, it must be for the IO to perceive the respondents’ mistake, abstain from setting them right and leave them to persevere in the error. Given Mr Chan’s misunderstanding, the IO had never perceived the respondents’ mistaken belief that the 1/F external walls belonged to the 1^st respondent, until the Convey signage was removed in 2018. The IO was under the “counter-mistake belief” that it had been receiving licence fees of the A Signs from Convey. Hence, it did not know about its rights to request the respondents to remove the A Signs or pay a licence fee before 2018. This also explains why the IO only attempted to charge a licence fee for the four protruding signs but not the A Sign in 2012. The IO’s conduct has been consistent.

No detrimental reliance

143.  Further, it is submitted for the IO that any mistaken belief that the 1^st respondent was the owner of the 1/F external walls flows from the respondents’ own misunderstanding but not the IO’s acquiescence or inaction. The respondents did not rely on the IO’s position to incur the alleged detriment.

144.  Mr. Kiang’s evidence was that the late Mr Lee had always believed he (or the 1^st respondent that he had control of) was the owner of the 1/F and G/F Premises, without regard to the IO’s position. The interpretation is that the late Mr Lee thought himself to be the legal/paper owner of the 1/F external wall. This was plainly possible because the DMC reserved the G/F external wall advertising right to the owner of the G/F premises. He assumed the 1/F external wall’s position to be the same as the G/F external wall, given he owned both premises on both floors. The mistaken belief that the 1^st respondent was the owner of 1/F external walls (if any) stemmed from their own misconception and lack of checking of the legal instrument, not the IO’s acquiescence/inaction. Before 2012, they might not have even thought about the IO’s position. There was no reliance.

145.  Mr Wan, head of the property management section and responsible for liaison with the 2^nd respondent, confirmed his belief that the late Mr Lee (or his company) was the owner of the 1/F external walls. He agreed the right of the 1^st respondent to put up the advertising boards on the 1/F external walls did not depend on the IO’s attitude.

146.  As to the claim that the 1^st respondent would have sold the Premises had it known that the IO would enforce against the erection of the A Signs, Mr Kiang confirmed that this was at best speculation or an after-thought, but not an actual detriment suffered in reliance on the so-called passive encouragement or mistaken belief in previous years. Mr Lee had never mentioned to Mr Kiang any intervention from the IO when he was alive, and so it was impossible the IO’s position had influenced Mr Lee’s decision to hold or sell the Premises. After Mr Lee’s passing in 2009 (but before the commencement of this action), Mr Kiang said it was not his responsibility to decide whether to sell the Premises; he could not comment whether it had anything to do with the position of the IO. So his witness statement is not actually his evidence.

147.  Even if there had been any reliance, the IO says that such reliance was not detrimental to the 1^st respondent. The 1^st respondent was assigned the Premises in 1979, and had since the early 1980s let the Premises to a number of tenants. Mr Kiang agreed that the advertising boards had brought substantial commercial value to the tenants. The respondents must have enjoyed the business advantage or rental income by their infringement of the DMC and the BMO for decades.

148.  The IO also submits that there could be no detrimental reliance by the 2^nd respondent on the IO’s inaction. The state of Mr Darwin Cheung’s mind can be divided into several stages: (1) When he joined the 2^nd respondent in 2010, it was his understanding that the right to put up the A Signs had nothing to do with the IO. It was simply permissible and/or acceptable to the landlord as he was told that the signs previously used by the Watson’s Group could continue be used by the 2^nd respondent; (2) Between 2010 and 2012, he understood the 1^st respondent to be the owner of the 1/F external walls, and he also understood the 1^st respondent could grant the 2^nd respondent the right to use the walls because it was the owner; (3) In mid-2012, the IO started to request a licence fee be paid for the Longines Sign. He became doubtful about the 1^st respondent’s ownership of the 1/F external walls, wondering why the 2^nd respondent could use fewer signs as compared with Watson’s Group; (4) In cross-examination he agreed that during 2010-2018, the 2^nd respondent had used the A Signs because the 2^nd respondent thought the 1^st respondent was the owner of the 1/F external walls, and such a use was not based on the IO’s position; (5) Upon receiving the letter from the IO demanding a licencee fee in December 2018, he was responsible for the negotiation with Mr Chan in 2019 until 2020. During the negotiations he had never asserted to Mr Chan that the IO did not have power to charge the 2^nd respondent as it had already lost its ownership of the 1/F external walls because of passage of time. (6) Since the IO was asserting ownership over the 1/F external walls, he chose to clarify with the landlord. Upon confirming that the IO was the real owner of the 1/F external walls, the 2^nd respondent proposed to directly rent the 1/F external walls from the IO.

149.  Mr Law submitted that obviously, it was not until October 2019 that Mr Darwin Cheung (or the 2^nd respondent) discovered that the 1/F external walls were not the 1^st respondent’s. Prior to that, it had always been acting on the assumption that the 1^st respondent was the owner of the external walls and had erected the A Signs over the years. The 2^nd respondent’s understanding was that they were permitted by the 1^st respondent to erect the Sign had nothing to do with the IO’s position.

150.  The IO continues that, after discovering the truth that the 1^st respondent was not the owner, the 2^nd respondent proceeded to drafting a licence agreement with the IO. This shows no representation or encouragement from the IO that it could erect the signs without the IO’s approval. Even if there had been reliance, it was reliance on the 1^st respondent, but not on the IO’s action.

151.  As to detriment, it could hardly be said that by taking up the lease of the Premises with the 1^st respondent, that the 2^nd respondent had suffered detriment. The 2^nd respondent must have enjoyed great commercial gain by wrongfully displaying the A Signs at the prime location in Tsim Sha Tsui for years. It would not be unjust or unconscionable for the IO to be granted relief, as such prejudice (if any, which is denied) must be outweighed by the benefit the 2^nd respondent had obtained: 永利工業大廈業主立案法團 at §§70-71, and The Incorporated Owners of Ming Yuen Mansions at §21.

152.  Based on the above, the IO’s submit that the respondents’ claim for proprietary estoppel should be rejected.

The respondent’s’ case – proprietary estoppel acquiesce and laches

153.  The respondents point out that the IO does not seriously dispute that no objections have been raised to the erection of signage at the external walls of the 1/F Premises from the 1960s until the 2010s, as stated in the agreed facts. I find that there is no evidence of any objection until 2012 and even then, it was only in respect of the 2012 Advertising Signs, which was ultimately limited to the Longines Sign, never the A Signs.

154.  Mr Man SC submits that as is well recognised in the authorities, such persistent silence by the IO and the other owners’ constitutes a representation or assurance that it would consent to the display of signs at the area. There was an assent or lying by to the same, and a substantial lapse of time in the enforcement of the relevant provisions in the DMC and BMO:

(1) All of the signs installed outside the Premises could be clearly seen.

(2) The IO never denied that it was aware of the signs, and of its right to enforce the DMC and BMO section 34I.

(3) The respondents say that the long existence of the signs itself reflects that the owner(s) and occupier(s) of the 1/F Premises had continued to put up signs under the mistaken (even assuming mistake) belief that they had the right to do so, and that the IO was aware of their mistaken belief.

(4) In the circumstances, the IO’s persistent failure to raise objections communicated a clear and unequivocal representation or assurance to the respondents that it would consent to the erection of signs in the area.

(5) For example, in Freder Centre (IO), nearly all owners and occupiers of other ground floor and basement units had for years been committing similar breaches by affixing or exhibiting shop names, sign boards or product brand names at the external walls, and that the incorporated owners had not taken enforcement action against them. The breaches were prevalent and had over the years been tolerated by the incorporated owners. The Court of Appeal concluded in the circumstances that there had been lying by on the part of the incorporated owners, and that it could reasonably be taken by the respondents as a representation that exhibiting or affixing trade names or business signs on the external wall would be tolerated by the applicant: §§28, 33 per Chu JA.

(6) The reasoning in Freder Centre (IO) squarely applies to the present case, where similar breaches committed by the 1^st respondent and its predecessors over the same area of the external walls had not been met with any protest or objection by the IO over the years.

155.  Further, it is clear that the respondents have reasonably relied on the representation, assurance or acquiescence:

(1) The 1^st respondent’s predecessors had incurred expenses in installing signs in the 1960s without interruptions from the other owners.

(2) The 1^st respondent became the owner of the 1/F Premises in 1979 and has continued to install or permit the occupiers of the 1/F Premises to install and replace signs over the years.

(3) Thus, the 1^st respondent is entitled to rely on the IO and other owners’ non-objection to the signs erected since then to set up its own defences of acquiescence and laches as well as estoppel: cf. ER Ives Investment Ltd v High [1967] 2 QB 379, 405 per Neuberger LJ (as he then was); cf. Grand Power International Ltd v Chan Sing Hoi Enterprises Ltd & Ors [2020] 2 HKLRD 142, §49 per Kwan VP.

(4) Insofar as is necessary, the 2^nd respondent itself has relied on the non-objection in putting up signs at the external walls of the 1/F Premises in taking up the lease with the 1^st respondent and incurred substantial expenses to engage an authorised person, structural engineer, and contractors to replace the previous signs with the Sign.

156.  The respondents would also suffer detriment if the IO were able to go back on its representation, assurance or acquiescence, and it is unjust and unconscionable in the circumstances for the IO to request the removal of the Sign:

(1) The respondents would have to incur costs in removing the Sign.

(2) The 1^st respondent had been organising its affairs on the basis that the use of the external walls would be reflected in the rental income chargeable from its tenants.

(3) Similarly, the respondents had been using the 1/F Premises on the basis that they would be able to make use of the external walls to display signs to promote the business carried out in the premises.

(4) If the IO were allowed to assert its claim against the respondents, these well-established assumptions in the conduct of the respondents’ businesses in respect of the 1/F Premises would change completely: Lee Bing §§200-201 per DHCJ Marlene Ng (as she then was).

(5) Similarly, in Hollywood Shopping Centre Owners Committee Limited Recorder Rimsky Yuen SC found that acquiescence could be made out in circumstances where the management company had been organising its affairs on the basis that advertising income would form part of its income. If the incorporated owners were allowed to assert its claim for breach of mutual covenants, it would become difficult for the management company to deal with the situation: §§88-90; upheld in Hollywood Shopping Centre Owners Committee Ltd v Wing Wah Building Mongkok Kowloon (IO) [2011] 4 HKLRD 623, (CA) §73 per Chu JA.

157.  Mr Man SC submits that the following matters are beyond dispute:

(1) Various signage has been installed at the external walls of the 1/F of the Building on a continual basis since the 1960s. This included the large L-shaped signs spanning from the side of the Building facing Nathan Road to the side facing Haiphong Road, Signs A-1 to A-16 in Attachment 1, namely the A Signs.

(2) The signage, especially the A Signs, were large and conspicuous and could not have escaped the IO or the other owners’ notice.

(3) The signage related to the businesses being carried out in the Premises over the years, and must have been put up by the occupiers of the Premises, the 1^st respondent’s predecessors-in-title, the 1^st respondent and the 1^st respondent’s tenants.

(4) The IO did not object to or demand a licence fee for the signage until 2012. Even then, it did not make any demand or objection to the A Signs until December 2018.

(5) It is now common ground that the post-2018 A Signs are legal structures in that they are compliant with the BO.

158.  In summary, the respondents’ case is that it follows from the prolonged, prominent and undisturbed display of the signage, in particular the A Signs that acquiescence, proprietary estoppel, laches and lost modern grant would be established on the facts.

159.  The historical illegality of the pre-2018 A Signs had no significance, and could not operate to defeat the respondents’ defences. The IO complains that the respondents had converted common areas, and it is and was entirely within the IO’s and the owners’ power (as they did) to consent such conversion.

Status of the signage

160.  I find that there are four distinctive features of the signage.

161.  First, the signage has been in continual existence for an exceptionally long period:

(1) It is not in dispute that various signage has been installed at the 1/F external walls since the 1960s. Mr Kiang’s unchallenged evidence is that the A Signs had been in existence since 1961.

(2) They included the A Signs and inter alia various signs protruding from the external walls facing Haiphong Road namely, Signs C-1 to C-5 in Attachment 1.

162.  Second, the signage has been on prominent display throughout. It is plain from the photographic evidence that the signage, especially the A Signs, were both large and conspicuous. There is no doubt that any casual observer, not least the other owners of the building and the IO, would have been aware of their existence. Indeed, Mr Law has described the A Signs as “huge” and “giant”.

163.  Third, it is obvious that the signage, including the A Signs, were put up by the 1^st respondent’s predecessors, the 1^st respondent or by the 1^st respondent’s tenants:

(1) It is common ground that, from 1960s onwards, the 1^st respondent’s predecessors, the 1^st respondent and its tenants had been operating different businesses out of the Premises.

(2) Further, the changes in the signage, including the A Signs, over the years matched with the changes of businesses being operated.

(3) As seen from the terms of the lease between the 1^st respondent and the 2^nd respondent, the 1^st respondent would expressly permit its tenant to use the signage at the 1/F external walls.

164.  Fourth, the signage, including the A Signs, were clearly connected with the business carried out in the Premises contemporaneously:

(1) First, between 1960s and 1980s, the A Signs consisted of a large display showing two “James S Lee Co” names (A-1). At the time, the Premises were used by the 1^st respondent and its predecessors as a retail shop, storage and office of a tailoring business operating under the names of “James S Lee & Co” and “James S Lee & Co Ltd”.

(2) Second, between early 1980s and 1984, a series of displays showing “Bang! Bang!” logos were seen (A-2). The Premises were then used to operate a garment business under the name of “Bang! Bang!”.

(3) Third, between 1984 and 2010, various advertising boards showing “Watsons”, “Marionnaud Paris”, and other products were found at the location (A-3 to A-9). During this period, the 1^st respondent had let out the Premises to Watson’s The Chemist Limited. The Premises were used to operate a pharmacy and cosmetic and health products retail business under the name “Watsons” and a cosmetics retail business under the name “Marionnaud Paris”.

(4) The IO put in cross-examination of Mr Darwin Cheung and Mr Wan that some of the signs seen between July 2009 and March 2010 showed cosmetic and digital products, namely Signs A-6 to A-9. I accept that:

(i) There is no evidence to suggest that Watsons or Marionnaud did not sell these products.

(ii) To the contrary, Mr Darwin Cheung also stated his own belief that the signs were displaying products sold by these businesses.

(iii) As Mr Darwin Cheung noted, it was a common phenomenon that the products sold by Marionnaud would be advertised by the signboard above. This is supported by the A-5 and A-9 Signs, which clearly show the Marionnaud logo alongside the products being promoted.

(iv) If Watsons and Marionnaud had used the signs to promote products not sold by them, it would mean that these retailers had become advertisers between July 2009 and March 2010 to advertise products sold by others. The respondents submit that it is inherently incredible that Watsons and Marionnaud would have made such a substantial shift in their use of the signs. There is no evidence called by the IO suggesting that. Nor of any license from Convey.

(5) Fourth, after 2010, the A Signs consisted of signs showing “六福珠寶” or “Lukfook Jewellery” (A-10 to A-16). At the same time, the 1^st respondent had let the Premises to the 2^nd respondent to carry on a jewellery retail business under the names of “Luk Fook Jewellery & Goldsmith Company” and/or “Luk Fook” since 2010.

IO’s lack of objection

165.  I find that the IO has not raised any complaint or demand for a licence fee for the A Signs until 12 December 2018. By then, the A Signs had already been in existence for 57 years.

166.  The IO’s lack of objections must be considered against the features highlighted above. The IO has continued to lay by as the 1^st respondent or its tenants continued to put up large and prominent displays at the 1/F external walls for over 50 years. I accept that this prolonged silence encouraged the 1^st respondent to form the view that it was allowed to install and permit to be installed the signage at the 1/F external walls.

167.  It is also relevant that, even before the 1^st respondent had become the owner of the Premises, the other owners had not raised objections to the 1^st respondent’s predecessors’ installation of signage either. I have no hesitation in finding that the lack of objection to the continuous breaches by the 1^st respondent’s predecessors and the 1^st respondent could reasonably be taken as indicating that the installation of signage, in particular the A Signs, on the 1/F external walls would be tolerated: Freder Centre (IO) §§32-33.

168.  Further, in my view the IO’s demand for a licence fee for the LONGINES Sign in November 2012, Sign C-4 in Attachment 1, does not assist the IO, and would indeed fortify the respondents’ case:

(1) The LONGINES Sign was not part of the A Signs. The IO’s demand for a licence fee for the LONGINES Sign could not be treated as an indication that it would no longer tolerate the installation of the A Signs.

(2) To the contrary, the fact that the IO left out the A Signs from the 2012 demand would only have reinforced the respondents’ belief that the IO would tolerate the A Signs.

(3) Further, the fact that the shop manager of the Premises had paid the licence fee for the LONGINES Sign did not show that the 2^nd respondent had understood that it would not be allowed to install the A Signs, and in any event did not impugn the 1^st respondent’s understanding as to its entitlement to install signage at the 1/F external walls.

169.  Mr Man SC submits that it is plain from the persistent use of the 1/F external walls to display signage by the 1^st respondent or its tenants that they had relied on the IO’s tolerance of such display. The 1^st respondent has repeatedly stated that it believed that it was the owner of the 1/F external walls or it was entitled to put up signage there. That was caused or encouraged by the IO’s conduct:

(1) The fact that the other owners and the IO had not objected for half a century contributed to the 1^st respondent’s belief. If the other owners or the IO had protested at an early stage, there would at least have been a disagreement causing enquiries or investigations to be made. Mr Man SC says, put simply, the fact that everyone appears to agree with you for 57 years would obviously make you more convinced that your position is right.

(2) As Mr Kiang explained in his witness statement:

“[g]iven the lack of objections of the Applicant and indeed any other co-owners of the Building throughout the years, the 1^st Respondent has long understood that it (or any of its tenants or other occupiers of the Premises) would be allowed to erect the Signage (or similar signage) at the external walls of the Premise”

(3) Mr Kiang further explained during cross-examination that, if the IO had intervened, it probably would lead Mr Lee to decide to sell the Premises. However, there had been no such intervention all along. He admitted he did not have express discussions on sale.

(4) Similar to Freder Centre (IO) and Hollywood Shopping Centre, I find that in the circumstances where the 1^st respondent has continually put up signage at the 1/F external walls without any objections from the IO, it is entirely reasonable for the 1^st respondent to form the belief that it would be allowed to do so.

170.  The respondents case is that the 2^nd respondent relied on the 1^st respondent’s grant in the leases to put up signage at the 1/F external walls:

(1) The 1^st respondent could only have made the grant because it believed that it was entitled to put up signage at the 1/F external walls and to permit its tenants to do the same. Thus, the 2^nd respondent’s erection was derived from the 1^st respondent’s belief induced by the IO’s conduct.

(2) The IO points to clause 2(ee) of the leases between the 1^st respondent and the 2^nd respondent and questioned why the parties would have envisaged a possibility that the IO would request the removal of the signage. In my view the clause does not undermine the respondents’ reliance on the IO’s assurance:

(i) The leases are agreements between the 1^st respondent and the 2^nd respondent only. The IO is not a party to the agreements. It merely allows the 1^st respondent to demand the 2^nd respondent to remove the relevant signs if required by the “Owners’ Committee, the Manager of the Building, the Building Authority or any other competent Government Authorities” at the latter’s own costs. The clause thus protects the landlord and ensures that the risks would be borne by the tenant alone.

(ii) As Mr Wan explained, it is a common practice for parties to provide for certain risks (even if unlikely) in a contract. For example clause 4(b) of the same lease. The contractual clause thus absolves the landlord from such risks.

(iii) Mr Wan’s explanation also tallies with Mr Darwin Cheung’s understanding. Mr Darwin Cheung explained that the clause was included as the IO might require the A Signs to be removed, for example, if they were unauthorised building structure. I accept that evidence.

(iv) Thus, clause 2(ee) is similar to force majeure clauses (like clause 4(b)) which are regularly included in contracts to allocate the risks between the parties. However it is not a standard clause. On balance, the inclusion of the clause does not mean that the parties contemplated that a request for removal from any of these parties would be a realistic possibility even if not UBW, still less that they had not understood the IO to be allowing them to install signage at the 1/F external walls.

(3) In any event, Mr Man SC submits that so long as the 1^st respondent has relied on the IO’s encouragement, the respondents would be able to establish the defences to bar the IO’s claim. It is not necessary for the 2^nd respondent to establish a separate reliance on the IO’s assurance. I accept that submission.

171.  The respondents submit further, even if Luk Fook’s shop manager paid a licence fee for the LONGINES Sign to the IO since 2013 this would not affect the longstanding tolerance of the IO over the signage. I find that:

(1) By the time when the shop manager paid the licence fee in 2013 the signage, including the A Signs, had been in existence for over 50 years.

(2) The licence fee related to the LONGINES Sign only. It would not undermine reliance on the IO’s assurance in respect of the A Signs. Indeed, it would fortify the reliance on the IO’s assurance in respect of the A Signs.

(3) Further, the 1^st respondent’s position could not be affected by the payment by the 2^nd respondent’s shop manager. Mr Darwin Cheung confirmed the payments were made by the 2^nd respondent to Yick Tat (acting on behalf of the IO). The 1^st respondent was never consulted or notified of the same.

(4) This is corroborated by the 1^st respondent’s witnesses. Mr Kiang and Mr Wan both confirmed that they had only learned about the 2^nd respondent’s payment of the licence fee recently:

(i) There is also nothing (not least documentary evidence) to show that the 1^st respondent had been aware of the payment of licence fees for the LONGINES Sign.

(ii) If Mr Darwin Cheung of the 2^nd respondent only knew about it after he filed his first witness statement, it would be highly unlikely that anyone from the 1^st respondent would have known about it before.

(iii) Thus, the payment could not negate the 1^st respondent’s impression that it would be allowed to install signage at the 1/F external walls.

(iv) Further, the 2^nd respondent, only made the payment to avoid unnecessary disputes with the IO. Mr Darwin Cheung explained during cross-examination that unknown to him at the time, his colleague had paid the fees against the invoices issued by Yick Tat, given that the fees were relatively small and were seen as simple expenses.

(v) I accept Mr Darwin Cheung’s account. There is no suggestion that his account was untrue. The licence fees only ranged between $2,200 and $2,420 per month. They were insignificant compared with the prevailing monthly rents payable by the 2^nd respondent to the 1^st respondent for the Premises, ranging from $2.4 million to $3.45 million, and must have been modest as compared with the potential costs involved in any disputes with the IO.

172.  Similarly, I find that the 2^nd respondent’s attempt to negotiate with the IO between 2019 and 2020 does not undermine the respondents’ reliance on the IO’s assurance:

(1) First, by 2019, the A Signs had been standing without objection for some 58 years.

(2) Mr Darwin Cheung explained the 2^nd respondent’s motive in engaging in the negotiation as follows: if the fee was not a very large sum, he could report to Luk Fuk and there was a chance that the amount could be accepted. This does not mean that the 2^nd respondent was conceding that the IO was right to demand the removal of the relevant A Sign, but only that it preferred to resolve the issue by paying a modest sum to the IO as a licence fee. It was a commercial decision and pragmatic response by a tenant of retail premises. This is entirely credible. Prior to that it had believed the 1^st respondent could allow it to erect the A Signs.

(3) In any event, I accept on the facts the 2^nd respondent’s position does not adversely affected the 1^st respondent.

(4) The 1^st respondent and the 2^nd respondent’s witnesses confirmed that the 1^st respondent had left it to the 2^nd respondent to negotiate with the IO.

(5) The 1^st respondent’s witnesses, Mr Wan and Mr Tse, also explained that it remained of the view that it had the right to install signage at the 1/F external walls, and that it had communicated that view to the 2^nd respondent.

(6) I accept their explanation, which is credible and is also supported by the contemporaneous records:

(i) Mr Tse explained that he had understood the IO’s concern to relate to the fact that the relevant A Sign had exceeded the height of the 1/F external walls. This was why he asked Mr Darwin Cheung to deal with the IO after receiving the IO’s complaint.

(ii) Mr Tse was able to provide a detailed account of the bases of his understanding. He (i) had discussed with Mr Wan and learnt that the 1^st respondent never had to pay a licence fee, (ii) had compared photographs and Mr Wan noted that there might be a chance that the relevant A Sign had overshot the height of 1/F, and (iii) had conducted site inspection and discovered that there was in fact overshooting.

(iii) As seen from Mr Chan and Mr Darwin Cheung’s WhatsApp exchanges, Mr Chan also shared the same understanding. In his message dated 29/10/2020, 4:38 pm, Mr Chan noted that after checking an older photograph, it could be seen that the 2^nd respondent installed a smaller signboard at the position as early as in 2012. However, when it was replaced by the new signboard in 2018, “people’s nerves were stimulated, probably because it is bigger in size, it projects from the external wall and it is actually a whole series of signboards. This has caused the Incorporated Owners to be very firm with their position”.

(iv) While Mr Tse was later informed by Mr Darwin Cheung that the IO’s concern related to the entire sign, rather than the excessive height only, Mr Darwin Cheung also indicated that he would negotiate with the IO to avoid costly and tedious litigation.

(v) Further, Mr Tse also confirmed during re-examination that the 2^nd respondent had never suggested that the 1^st respondent would have to reimburse it for the licence fees that might become payable to the IO if an agreement could be reached. Given that the 1^st respondent had already left it to the 2^nd respondent to deal with the IO, and he believed that the 1^st respondent would not have to pay for any agreement that the 2^nd respondent might ultimately reach with the IO, it is not surprising that the 1^st respondent would not intervene, even if it was of the view that it was entitled to install the signage.

(7) I have considered Mr Darwin Cheung’s email to Mr Chan dated 17/12/2019. In the circumstances it does not undermine the 1^st respondent’s understanding:

(i) Mr Darwin Cheung noted in the email that, “after consultation with [R1], [R2] understand[s] that this area [i.e., 1/F external walls] is not owned by the owner of our shop”.

(ii) The email did not state that the understanding was communicated by the 1^st respondent to the 2^nd respondent.

(iii) As Mr Tse explained, this understanding recorded in the email only represented Mr Darwin Cheung’s own understanding, but it was not what Mr Tse had told him. This explanation was credible. The 2^nd respondent / Luk Fook was well placed to seek their own legal advice, and could have reached a different understanding from the 1^st respondent.

(iv) In any event, the IO never challenged Mr Darwin Cheung on the basis of his understanding recorded in the email. Mr Darwin Cheung frankly noted that he had doubts over whether the 1^st respondent really was an owner of the 1/F external walls. It was probable for him to have reached a different understanding after discussions with the 1^st respondent, and recorded the same in the email to Mr Chan.

(v) Even if Mr Tse had been copied to the email, he explained that he was not aware of the email. In any event, I accept that the fact that the 1^st respondent did not step in to state its own position was consistent with it leaving the negotiations to the 2^nd respondent. The 1^st respondent was still maintaining it’s position

173.  I find in all the circumstances that the respondents had suffered detriment as a result of the IO’s assurance:

(1) The 1^st respondent had not sold the Premises in the belief that it was entitled to put up signage at the 1/F external walls. The IO does not challenge the 1^st respondent’s account that there had been inquiries for purchase of the Premises over the years.

(2) Further, as Mr Kiang explained, the A Signs were important to the late Mr James Lee. It was clear that they took pride in the A Signs and their prominence, all the while maintaining them. If the IO had opposed the installation of the signage, a decision would or could have been made to sell the Properties Although Mr Kiang readily admitted he was not privy to express discussions in this regard, I infer that the 1^st respondent and its predecessors-in title had arranged their affairs around the A Signs. He agreed that part of his evidence was speculation. However, his views are based on over 6 decades of knowledge, from being an employee of Mr Lee to now, in the capacity as a director.

(3) The 1^st respondent’s passed up the opportunity to sell the Premises, at least in part, in reliance on the belief that it would be entitled to put up signage at the 1/F external walls and this meant that it had lost the opportunity to redirect the funds to other uses or investment opportunities. The business model was in part dependant on the unrestricted use of the wall for the A Signs, for which it was responsible.

(4) Further, the fact that the 1^st respondent has been conducting its business in relation to the Premises in this manner also means that, if the IO is allowed to resile from the assurance, the 1^st respondent would have to change its well-established assumptions completely.

(5) The 2^nd respondent in particular had expended costs in installing the signage over the years. This part of the evidence remained unchallenged.

Acquiescence, proprietary estoppel and laches

174.  Mr Man SC submits that the respondents have satisfied all elements of the equitable defences. Mr Law has gone through the evidence to show otherwise.

Acquiescence

175.  Acquiescence is shown if (i) the IO has assented to or lain by the respondents’ acts, and (ii) in view of the assent or lying by and consequential acts, it is unjust in all the circumstances to grant the relief: Freder Centre (IO), §26.

176.  The IO only had to know of the facts or matters that gave rise to its rights to equitable relief in the sense that it was aware of sufficient matters to raise a doubt in its mind as to whether an infringement had taken place; it needed not to have fully understood, as a question of law, the rights that it possessed: Yick Fung §28.

177.  In this case the IO had obviously assented to or lain by as the 1^st respondent continued to put up, or to permit others to put up, signage at the 1/F external walls for over 50 years before it had raised any objections.

178.  The 1^st respondent’s conduct in putting up the signage at the 1/F external walls followed the practice of its predecessors-in-title.

179.  I find that it is also clear that the IO had possessed the requisite knowledge for acquiescence to arise:

(1) The IO must have known about the facts giving rise to its rights under the DMC and BMO.

(2) The IO must also have known about the facts giving rise to its entitlement to the common areas of the Building, including the 1/F external walls.

(3) The IO’s claim that Mr Chan had mistakenly believed that the A Signs were part of the Convey licence. Mr Chan did not give evidence, but even if true, it is immaterial.

(4) First, the IO knew all the facts giving rise to their rights. The IO’s own mistake of law is irrelevant.

(5) Second, it is not in dispute that Mr Chan only started working at the Building in around 2012. Mr Chan’s mistake cannot explain the owners’ and the IO’s inaction for the preceding 50 years, and cannot stop acquiescence from arising.

(6) Third, Mr Man SC takes a further point, that the IO never pleaded that Mr Chan’s (who was an officer of the management office engaged by the IO) mistaken belief was attributable to the IO. If a pleader asserts that an individual’s knowledge should be attributable to a corporate entity, such attribution must be specifically pleaded: Kwong Yi Ling v Lau Kwun Leung & Ors [2021] HKCFI 2303, §28(1) per Linda Chan J. It was not.

(7) Fourth, the mistake was only a result of Mr Chan’s failure to make proper inquiries:

(i) Mr Lo confirmed during examination that the Convey licence only covered three signboards.

(ii) It is readily apparent from the photographic evidence that only the signboards above the 1/F external walls bore Convey’s marks. A cursory view of the signboards at the time would at least cast doubt as to whether the A Signs were covered by the Convey licence. Mr Lo himself agreed that it could be seen from the photographs that the A Signs did not fall within the Convey licence.

(iii) Mr Lo claimed that he had not looked at the Convey licence, even up to this day.

(iv) Thus, had the IO or Mr Chan looked into the matter properly, it would have been clear that the A Signs were not covered by the Convey licence. In fact, Mr Lo agreed that had Mr Chan looked at the documents properly, he would have found out that he was wrong about the A Signs being covered by the Convey licence. And if looking at the documents was too taxing, they could simply have asked Convey.

180.  I find that in all the circumstances it would be unjust to grant relief to the IO:

(1) The owners and IO have not opposed the installation of signage for over 50 years. The A Signs have been present for the entire working life of the Building.

(2) Mr Man SC submits that it lies ill in the IO’s mouth to suggest that it is in the public interest that illegal structures should not be tolerated. Here the IO has shown no interest in enforcing against illegal structures. It only opposed the A Signs for the first time after the illegality had already been rectified. It was interested in extracting a licence fee from the 2^nd respondent for the A Signs rather than in investigating the legality of the A Signs.

(3) In contrast, the respondents have been relying on the IO’s assent or lying by in arranging their affairs and to their detriment. In particular, in the case of the 1^st respondent, the IO’s prolonged silence has caused or contributed it turning down opportunities to realise the value of the Premises, and to pursue other uses or investments.

(4) I accept that the 1^st respondent’s detriment is irreversible. There is no guarantee that the 1^st respondent would still be able to realise the Premises at the same value, especially as the Premises have aged and the market changes. In any event, the opportunities to use the funds for other purposes were lost forever.

181.  The facts of this case are particularly striking when juxtaposed with the decision of the Court of Appeal in Freder Centre (IO). In that case, other owners or occupiers of the basement and ground floor units of the building had affixed or exhibited shop names, signboards or product brand names on the external walls 30 years before the IO’s complaint, and where the tenant has affixed business signs on other parts of the external walls for 14 years, the lack of objection or enforcement actions in the face of such prevalent and prolonged breaches could reasonably be taken as representation that exhibiting or affixing trade name or business sign on the external walls would be tolerated by the IO. The IO was thus barred by acquiescence from enforcing against the tenant’s signs: at §§28, 32, 33.

182.  In several respects the present case is a fortiori of Freder:

(1) The A Signs in the present case have been put up for more than 50 years, as opposed to 30 years by other owners and 14 years by the 2^nd respondent in Freder.

(2) In Freder, the other breaches relied on were other trade names or signs which were put up at different times and at different parts of the external wall: §§29, 32, 33.The Court of Appeal held that they were relevant and determinative in showing that the IO had acquiesced in “the particular kinds of breach”: §28. In the present case, in addition to the other signs on the 1/F of the external wall, the A Signs at the same location had not been objected to until December 2018.

183.  I hold that the IO has acquiesced in the presence of the A Signs on the exterior 1/F of the Building, including the Sign.

Proprietary estoppel

184.  I find that first, it is clear that the IO has through its prolonged silence made an assurance to the respondents that it would allow signage to be installed at the 1/F external walls:

(1) The signage was recurring, extensive and conspicuous. It is clear that the IO was aware of the breaches and has failed to assert its right.

(2) The IO’s prolonged silence gave rise to the respondents’ belief that they would be allowed to install the signage, and thereby encouraged the respondents to continue to display signage for over 50 years.

(3) As illustrated by Summit Court (IO), the fact that the representor has stood by silently while the representee carried on building works which were known to the representor could amount to passive encouragement by conduct: §82. It is not necessary for the representor to come under a duty to inform the representee of its lack of approval: §89 per Chung J

(4) Similar to acquiescence, Mr Chan’s mistake would not affect the IO’s assurance.

(i) The respondents acquiescence points are also material.

(ii) Further, in circumstances where the representor has encouraged the representee’s conduct, even if the representor had done so without full knowledge, or under error, the mistake would at most be taken into account as a factor and would not automatically defeat the defence: Spencer Bower: Reliance-Based Estoppel (5^th edn), §12.86.

(iii) As Lord Shand put it in Sarat Chunder Dey v Gopal Chunder Laha (1892) LR 19 IA 203 per PC

It may in the result be unfortunate for [the representor], but it would be unjust, even though he acted under error, to throw the consequences on [the assure] the person who believed his statement and acted on it as it was intended that he should do.

(5) Even if it were necessary to show that the IO had knowledge of the respondents’ mistaken belief as to their rights and their own inconsistent right under the five probanda in Willmott v Barber, and that the IO had been under a duty to correct the respondents, Mr Man SC submits that in the circumstances the requirements would be satisfied:

(i) It is not necessary for the IO to have actual knowledge of the respondents’ belief; constructive knowledge or a suspicion of the true position would suffice: Hoyl §73; Taylors Fashions Ltd, 147C.

(ii) The persistent use of the 1/F external walls to put up signage was obvious to the IO. This itself is sufficient to put the IO on notice that the respondents were operating on the mistaken belief that they were entitled to put up the signage.

(iii) Further, in spite of the IO’s reliance on Mr Chan’s alleged mistake that the A Signs had been part of the signs licenced to Convey, the IO never claimed that it was unaware of its rights in relation to the common parts and in enforcing the DMC and BMO.

(iv) The duty to speak out is generated where the IO is aware of the respondents’ mistaken belief and failed to correct it: Wilken & Ghaly §11.36.

(v) In other words, once the material fact of prolonged and prominent display of signage at the 1/F external walls has been established, it must follow that the putative knowledge and duty requirements would be satisfied.

185.  Second, as set out above I am satisfied that the respondents had relied on the IO’s assurance and acted to their detriment. It is also of note that:

(1) The IO’s assurance need not operate as the single or primary motivating factor behind the respondents’ actions; it would suffice if the assurance induced or influenced the respondents’ decision to perform the relevant acts: Wilken & Ghaly §11.54.

(2) But for the IO’s long silence, the 1^st respondent would not have acted in the mistaken belief of its entitlement and continued to put up, or to permit others to put up, the A Signs at the 1/F external walls.

(3) The IO argues that the respondents had not suffered detriment as they had had the benefit of displaying the signage for a long period of time.

(4) The respondents reply however, it is necessary for the Tribunal to approach the matter on the basis of a broad inquiry. Detriment is not a narrow or technical concept that is confined to the expenditure of money. There is also no need for a relationship of proportionality between the level of detriment and relief awarded: Cheung Lai Mui §24. While countervailing benefits would be taken into account in judging detriments, the Tribunal should not embark upon a quantified comparison of the benefits received and the detriments suffered by the party: Mak Ho Fung v Mak Kai & Ors CACV 246/2011, 5/12/2013, §37 per Cheung JA.

(5) On the above facts I accept that the respondents have suffered detriment in their reliance on the IO’s assurance. In particular, due to the longstanding passive encouragement of the IO, the 1^st respondent has been acting on the assumption that it was allowed to use the 1/F external walls to display signage, and has thus passed up opportunities to sell the Premises to unlock its funds for other uses or investments. If the IO was allowed to resile from its assurance, this basic assumption on which the 1^st respondent has been assessing the utility of its property would be completely destroyed.

186.  Third, the respondents case is that the proprietary estoppel should be satisfied by allowing the respondents to continue to put up signage at the 1/F Premises:

(1) The starting point in granting relief is to give effect to the representee’s expectations. The simplest way to remedy the unconscionability is to hold the representor to its representation.

(2) The burden is on the representor to show that specific enforcement of the full promise would be out of all proportion to the costs of the detriment. Only then may the court limit the extent of the remedy: Guest §§75-76; Luo Xing Juan §72.

(3) The IO’s long silence encouraged the 1^st respondent to operate under the belief that it was entitled to put up, and to permit others to put up, signage at the 1/F external walls. The starting point to give effect to the 1^st respondent’s expectations is to give it a proprietary right to enforce the IO’s assurance.

(4) Apart from noting that the respondents have enjoyed the benefit of displaying signage, the IO has not pointed to anything to show that the specific enforcement of its assurance would be out of all proportion to the detriment.

(5) In the circumstances, I find that there is no basis to depart from the starting point; the Tribunal should give effect to the equity by giving the 1^st respondent the assured right, namely the ability to put up the Sign without objection from the IO, subject to the illegality issue.

187.  The respondents have established proprietary estoppel. They rely on the doctrine as a defence. They have not brought a counterclaim or sought any declaratory or other relief. Therefore, subject to the illegality issue, the Tribunal should give effect to the assurance by refusing the IO’s claim. The effect would be to maintain the status quo.

Laches

188.  Laches requires a substantial lapse of time coupled with the existence of circumstances which make it inequitable to enforce the claim: Man Hong Apartments (IO).

189.  First, on any view, the delay of over 57 years in enforcing the claim over the signage is a substantial lapse of time.

190.  Second, in light of the matters above, regardless of whether the IO has otherwise given up its claim, the enforcement of its claim would put the respondents in an unreasonable position.

191.  In all the circumstances, I find that it would be inequitable to allow the IO to enforce the claims, subject to the illegality issue. On balance I hold that the laches defence is made out.

ILLEGALITY

192.  The Supreme Court in Patel v Mirza [2017] AC 467 held that the Tinsley v Milligan [1994] 1 AC 340 test for the defence of illegality should no longer be applied and provided the range of factors test. In Hong Kong the Court of Appeal in Monat Investment Ltd v All Persons in Occupation [2023] HKCA 479 held that Patel now represents the common law on the defence of illegality, and that accordingly the “range of factors approach” based on the trio of necessary considerations should be adopted in Hong Kong.

193.  In Monat Yuen JA explained at §§27 – 28:

27. The “reliance approach” was applied by the House of Lords in 1993 in the case of Tinsley v Milligan. It has been regarded as establishing as a general rule that a person should not be granted a remedy where he has to rely directly on unlawful conduct to succeed.

28.1. This led to a concentration on the procedural aspects of a claim for relief, the focus being on the state of the pleadings to see if the cause of action is founded on an illegal act, rather than on the merits of the claim.

28.2. More importantly, even though historically the rationale of the maxim was one of public policy, the courts have applied the reliance approach “mechanically” once the pleading shows reliance on an illegal act, even though no public interest would be served by the denial of the remedy.

194.  Yuen JA addressed the public policy nature of the defence, including at §31.1:

31.1. Then in 2014, Lord Wilson in the UKSC held in Hounga v Allen (Anti-Slavery International intervening) (where the claimant, a Nigerian minor, was illegally employed prior to being dismissed in discriminatory circumstances) that the application of the defence of illegality to a claim in tort was based on the public policy of preserving the integrity of the legal system by not allowing a claimant to profit from wrongful conduct, and that the test was whether the claimant’s claim was so closely connected or inextricably linked to her illegal conduct that, by permitting her to recover compensation, the court might appear to condone the illegality. Baroness Hale and Lord Kerr agreed.

195.  Yuen JA considered Patel, including at §§36.1 to 36.5:

36.1. The main judgment in Patel v Mirza was given by Lord Toulson JSC, with whom Baroness Hale, Lord Kerr, Lord Wilson and Lord Hodge agreed. By way of introduction, he stated the maxim at §1, the issue being:

- on the one side, whether the court must give no assistance to a party which has engaged in any form of illegality; or

- on the other side, whether the above approach would not advance the public policy which underlies the maxim.

(In respect of the public policy underlying the maxim, at §§126 and 129, Lord Kerr added that the maxim has been recognised as an expression of policy, rather than a principle).

36.2. Lord Toulson discussed Tinsley v Milligan (at §§17 - 20), the subsequent Law Commission review (§§21 - 49), the approach in Australia and Canada (§§50 - 61), the conflicting decisions in the UK (§§67 - 81), “the law at a crossroads” (§§82 - 94), and the way forward (§§95 - 121).

36.3. At §120, he held:

“The essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system ...”.

36.4. At §101, Lord Toulson held that, in place of a merely mechanistic process, a court should consider the following “trio of necessary considerations” found in case law to determine whether it would be harmful to the integrity of the legal system to allow a claim involving an illegal act:

“(a) consider the underlying purpose of the prohibition which has been transgressed [e.g. in our case, s.14 BO];

(b) consider conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim [e.g. in our case, the justification of adverse possession in the use of land as a natural resource, and in discouraging stale claims];

(c) keep in mind the possibility of overkill unless the law is applied with a due sense of proportionality”.

36.5. At §109, he said:

“The courts must obviously abide by the terms of any statute, but I conclude that it is right for a court which is considering the application of the common law doctrine of illegality to have regard to the policy factors involved and the nature and circumstances of the illegal conduct in determining whether the public interest in preserving the integrity of the justice system should result in denial of the relief claimed”.

196.  Yuen JA held at §§52.2 and 57:

52.2. Since the common law on the defence of illegality is now expounded by the UKSC in Patel, applying the same stare decisis rule, it would only be logical that Patel is followed in the absence of any local circumstances that render it inappropriate.

…

57. … For the reasons set out in Section E5 above, I take the view that Patel now represents the common law on the defence of illegality, and for the reasons in Section E6 above, that accordingly the “range of factors approach” based on the trio of necessary considerations should be adopted in Hong Kong.

197.  The Court of Appeal determined the appeal applying Patel. Yuen JA held at §§62.2 – 62.3:

62.2. The judge did not articulate what he considered to be the underlying purpose of s.14 BO (the first consideration in Patel). I tend to agree with the 2^nd defendant’s submission that it was to ensure public safety in the construction of buildings by ensuring that plans are submitted and approved before building takes place. In our case, the brick house was built by the father, not by the mother or by the 2^nd defendant. The plaintiff has not proved that mere occupation by the mother and the 2^nd defendant would be in breach of s.14 BO. In any event, implicit in the judge’s focus on the lack of enforcement action over the past 40 years is the concept that the underlying purpose of the BO was not to penalize squatters. A person can of course be in adverse possession of property without erecting a building on it. Erecting or maintaining a fence would be sufficient. The underlying purpose of adverse possession (the second consideration) is plain and has been articulated by the judge in §62 of the Judgment. In light of the first two considerations, he was clearly entitled to hold in favour of the 2^nd defendant on the third consideration.

62.3. I therefore consider that applying the Patel test, the judge’s findings of fact were sufficient for him to hold that the maxim did not apply to this case.

198.  The Supreme Court in Henderson v Dorset Healthcare University NHS Trust [2021] AC 563 determined how Patel should be applied in circumstances where there is already a body of case law. Lord Hamblen JSC considered that an important issue which arose in the appeal concerned the width of the application of Patel and how it applies in relation to existing case law: at 619 §73. Mr Man SC relies on Henderson to submit that Patel does not represent “year zero”. Lord Hamblen JSC held at 620 §77:

77. Thirdly, that does not mean that Patel represents “year zero” and that in all future illegality cases it is Patel and only Patel that is to be considered and applied. That would be to disregard the value of precedent built up in various areas of the law to address particular factual situations giving rise to the illegality defence. Those decisions remain of precedential value unless it can be shown that they are not compatible with the approach set out in Patel in the sense that they cannot stand with the reasoning of Patel or were wrongly decided in the light of the reasoning. Lord Toulson JSC made it clear in Patel that the principles identified were to be found in the existing case law: see, for example, paras 42, 99 and 102-106.

199.  Lord Hamblen JSC also held that reliance will often be a relevant factor, at §120:

120. In considering the issue of consistency and coherence in the law, the closeness of the connection between the claim and the illegal act may well be of relevance. The closer that connection is, the greater and more obvious may be the inconsistency and consequent risk of harm to the integrity of the legal system. The rejection by the majority in Patel of reliance as the test of illegality did not mean that reliance was thereby rendered irrelevant to the policy based approach. It may not provide a satisfactory test of illegality, but it will often be a relevant factor.

200.  Lord Hamblen JSC found that centrality will often be an important factor, at §124:

In relation to proportionality, at para 107 Lord Toulson JSC identified four factors which were likely to be of particular relevance, namely: “the seriousness of the conduct, its centrality [to the transaction], whether it was intentional and whether there was marked disparity in the parties’ respective culpability”. Lord Toulson JSC refrained from saying anything about the potential weight of such factors, no doubt to avoid being prescriptive. I would, however, suggest that centrality will often be a factor of particular importance. When considering the circumstances relating to the illegality, whether there is a causal link between the illegality and the claim, and the closeness of that causal connection, will often be important considerations.

201.  The equitable defences of estoppel, acquiescence and laches and also lost modern grant can be set up against a claim for breach of the DMC or section 34I of the BMO if the nature and type of the breach is one within the IO’s power to acquiesce in: Hollywood Shopping Centre (CFI) §65.

202.  Thus, the defences can apply to:

(1) A breach of the DMC if the IO had the power to approve the act in the first place: Freder Centre (IO), §24; Champion Court (IO) v Pang Ping Fan Peter [2008] 5 HKC 312, §§15, 17 per Yuen JA; Chungking Mansion (IO) v Shamdasani, CACV 199/1991, 26.02.1993, p.9 per Godfrey J; cf. Ohashi, §6 per Godfrey JA.

(2) A breach of section 34I(1)(a) BMO, as the owners’ committee is permitted to give approval to a co-owner to convert a common part to his own use: Hollywood Shopping Centre (CA), §§67-69; Freder Centre (IO), §24.

Illegality – the IO’s case

203.  The IO argues that it cannot acquiesce in the construction or retention of illegal structures: Champion Court (IO) §§15, 17; Hollywood Shopping Centre (CFI) §§53-56.

204.  Mr Law explains the authorities on illegality as follows. In Monat Yuen JA highlighted the problem of the Tinsley “reliance” approach at §28.1. It led to a concentration on the procedural aspects of a claim for relief, focusing on the state of the pleadings to see if the cause of action is founded on an illegal act, rather than on the merits of the claim. At §30, Yuen JA cited the earlier authority of Parking Eye that:

… [w]hat is required in each case is an intense analysis of the particular facts and of the proper application of the various policy considerations underlying the illegality principle so as to produce a just and proportionate response to the illegality.

205.  The underlying principle was encapsulated at §31.1 – a party should not profit from wrongful conduct. When a claim is so closely connected or inextricably linked to illegal conduct, but the court still allows the claimant to recover compensation, the court may appear to condone the illegality. The Supreme Court’s decision in Patel changed the direction of the common law. The “trio of necessary considerations” and “range of factors approach” adopted by the majority in Patel was stated by Yuen JA at §36.1, adding insertions in square brackets.

206.  Applying the approach to the case of adverse possession, Yuen JA set out the purpose of BO section 14, being to protect public safety in the construction of buildings by ensuing that plans are submitted and approved before building works commence. The trespasser’s continuous possession of the relevant brick house did not infringe the law. The purpose of the BO was not to penalise trespassers. A person can be in adverse possession of a piece of land without erecting any building on it; erecting and maintaining a fence would be sufficient. Therefore, the paper owner’s attempt to defeat the adverse possession claim by virtue of illegality under BO section14 failed.

207.  Mr Law submits that this case is entirely different:

(1) Adverse possession is about private property rights, whereas the IO’s control over the common parts was both its contractual and statutory power and responsibility: BMO section 18. The IO has an indispensable role to ensure that high-rise buildings are safe and compliant with the BO;

(2) The number of cases in which BO compliance was litigated or discussed in the building management context is telling. Mr Law prepared a summary of authorities (“IO Annex”) to show there is a general consensus amongst legal practitioners that BO, BMO and the IO’s governance role are closely connected;

(3) It follows that, when the A Signs were in existence before the 2018 minor works, the IO was incompetent to give approval to sanction its existence or continuous use. If there was no power to approve, there was no power to acquiesce; and

(4) To make good the proposition, when the brick house on agricultural land in Monat fell down (the danger of not complying with the BO – the purpose of the prohibition), it was highly likely the ones to suffer or be injured would only be the trespassers themselves. If the A Signs fell down from 1/F to the pavement of Nathan Road and/or Haiphong Road, one of the busiest districts in Hong Kong, the risk of hurting people other than the 1^st respondent’s own tenants or Luk Fook’s own employees/customers was much higher. Even they, who did not use the UBW, ought to have been protected.

208.  The respondents emphasised that Patel did not represent “year zero” for illegality and previous decisions would remain of precedential value unless they are not compatible with the approach set out in Patel: Henderson at 620D-E per Lord Hamblen JSC. Mr Law submits that the IO Annex summary of authorities since Senfield shows that the Yick Fung approach was highly influenced by the technicality of pleadings, with no reference to the connection between the claim/defence and the statutory prohibition, either because the illegality was touched upon only during costs argument, a matter not in contention between the parties or not made out by evidence. However, in my view the IO has not shown that that those decisions are incompatible with the approach in Patel in that they cannot stand with the reasoning of Patel or were wrongly decided in light of the reasoning.

209.  The IO applies the “range of factors” approach as follows. For the first step of the trio of necessary considerations, Yuen JA has identified the statutory purpose of the prohibition against UBW under the BO. Mr Law considers that in this case, there is no counter-public policy that will be rendered ineffective by denial of the respondents’ acquiescence, estoppel, laches or lost modern grant defences. Unlike the potential of putting many adverse possession cases in the New Territories to an end if the Court of Appeal in Monat found breach of the BO defeated adverse possession in general, there will be no ending of the specific equitable or property law doctrines sought to be relied on by the respondents in this case; neither would their extent of application be severely limited. Mr Law submits that the second step is not engaged.

210.  On the third step, due sense of proportionality, the IO submits that it is not overkill to revert the control of the relevant external walls to the IO by denying the respondents’ claim on the ground of the past illegality of the A Signs:

(1) The IO highlights that it took swift action after the 2018 minor works, after it ceased to be incompetent to acquiesce;

(2) The Tribunal must not forget the extent of the illegality. According to the original design in the general building plan, the 1/F was designed for domestic use; all the units were provided with requisite window openings for natural lighting and ventilation and had balconies that cantilevered from the structure of the Building to cover the public pavements;

(3) That was why the Sign A-1 was smaller in height, with a row of windows immediately above, than the subsequent signs starting from Sign A-3. The upper rim of Sign A-1 must be still on 1/F as Sign C-1 was pleaded to be next to the windows of the 1/F Premises;

(4) One can therefore say Sign A-1, albeit still UBW, was a lesser illegality because it was completely erected on the surface of what had been designed as concrete wall in structure;

(5) Starting from Sign A-3, which was said to be taken in 1990s, Watson’s enclosed the windows above with the advertising board. Leaving aside whether this was against the domestic usage of the 1/F Premises at that time (before the Amended Plan 2007 converting those premises to non-domestic use), the larger size of the board plainly would have led to greater concern if the attention of the Buildings Department or the IO had been drawn to it at that time. They also enclosed all the windows and would not have been permitted under the Building (Planning) Regulation (subsidiary legislation under BO) before the 2007 conversion to non-domestic use;

(6) Over the years until 2018, no building plan and no engineering calculation had been submitted to the Building Authority to assess the A Signs’ risk to public safety and other building matters such as ventilation/lighting. The lack of submission and public record was the reason why the building orders were issued in 2016;

(7) There is no evidence whether the A Signs, since Sign A-3, were equal to the post-2018 Sign in terms of design, structure and materials. Even the experts cannot judge because they did not have documents showing the features of the UBW before 2018. All they had are the photos, and they could only say the exterior appearance was similar; and

(8) The A Signs have been huge and located in one of the busiest areas in Hong Kong. It helped the respondents derive great commercial gain. Although the leases suggest insurance should be purchased by the 2^nd respondent, there is no evidence insurance policies specific to the signs had been purchased. Given the A Signs were UBW, an insurer may not have been willing to cover claims relating to it. Moreover, if there was an accident and the IO was sued (given it was on common parts legally owned by the IO), there was no guarantee the claim against the IO would have been covered. Although no accident had taken place, this does not mean the respondents could benefit from the conduct of putting up the A Signs without regulatory approval, and rely on them to defend the IO’s claim against breach of the DMC.

211.  Mr Law points out at §210 (7) above that even the experts could not judge whether particular A Signs design, structure and materials were equal to the post-2018 Sign. I am not prepared to make any findings on material differences in the A Signs on the basis of the photographs when the experts could not judge from the photographs and, they could only say that the exterior appearance was similar. The parties have agreed that the pre-2018 A Signs were illegal and the post-2018 Sign is legal. I decline to find degrees of illegality.

212.  The submission at §210 (5) above, that starting from Sign A3, the larger size of the board would have led to greater concern if the attention of the IO had been drawn to it at the time is somewhat hollow where the IO also submits that the A Signs were “huge”. The IO members or a co-owner simply needed to look up any time they approached the Building and they would see the A Signs.

213.  As to the commercial gain, the evidence did not actually address particulars of the value or gain in financial terms derived by the respondents. To the contrary, there was even evidence adduced by the 2^nd respondent as to the financial difficulty suffered during the period a licence fee was sought for the Sign.

214.  The IO submits that it is not overkill to “revert the control of the relevant external walls to the IO”. The reality is that the IO has never had exclusive control of that part of the external wall for advertising purposes. The DMC is dated 23 June 1961. Mr Lee was assigned the Premises between December 1960 and September 1961. He as owner of the Premises put up the first A Sign in the 1960s, long before the IO was incorporated in 1971. Mr Kiang confirmed that the A Sign was there since 1961. The A Signs have been in existence on the external walls for the entire working life of the Building. The IO seeks to change that status quo, not revert to a previous position where the IO had control. The IO or other co-owners have never derived any financial benefit therefrom.

215.  Mr Law submits that applying the above considerations, it is plainly proportional to refuse the respondents’ defence by reason of the illegality concerned. The claim to enforce the DMC should prevail. The respondents have already gained so much from the A Signs and have not accounted for their gain. Against such illegality, the respondents cannot establish a permanent waiver or abandonment of right under DMC/BMO (considering its high threshold).

216.  The IO submits that the same result can be arrived at under the equity considerations of the various doctrines specifically pleaded by the respondents.

Illegality – the respondent’s case

217.  Mr Man SC replies that however, the Sign is legal, so the IO’s argument must fail. Thus, the only argument of substance is whether the historical illegality of the pre-2018 A Signs would preclude the application of the defences. He submits that it is clear from the authorities that the respondents’ defences would not be defeated on the ground of the historical illegality.

218.  There are numerous authorities to the effect that if the illegality only emerged as part of the background, it would not preclude the party from raising a defence such as acquiescence so long as the party was not forced to plead or rely on the illegality as part of its defence against a claim of breach of DMC: Yick Fung §24 per Le Pichon JA (acquiescence); Hong Kong House (IO) v Senfield Ltd, CACV 117/2003, 10.10.2003, §§16-17 per Ma CJHC, as he then was (acquiescence, estoppel, waiver, laches); Shiu Fung Mansion (IO), §71 per Judge K W Wong (acquiescence); Kam Luk Building (IO) v Poon Mui Sang [2018] HKDC 1493 §§120–122 per HHJ Andrew Li (acquiescence); Li Lap Wai v Lee Tin Choi [2021] HKCFI 3923, §§173-182 per Au-Yeung J (proprietary estoppel).

219.  The respondents’ case is that this conclusion is not affected, and is indeed fortified, by the development of the doctrine of illegality in other areas of the law. Even if the previous signs constituted illegal structures, they would not prevent the respondents from setting up the defences of estoppel, acquiescence and laches.

220.  First, the IO does not dispute that the Sign is not an illegal structure. It is within the IO’s power to permit the construction and retention of the Sign:

(1) The proposition that the IO may not acquiesce in the construction or retention of illegal structures is based on the rationale that since it is not within the IO’s power to expressly permit the construction of illegal structures, it is not within their power to acquiesce to their retention: Champion Court (IO) §17; Ohashi, §6; Hollywood Shopping Centre (CFI) §64.

(2) There can be no question that the IO and the other owners have power to permit the respondents to put up a sign which complies with the requirements in the Buildings Ordinance. In fact, the owners have granted advertising rights to Kiu Fung and owners of G/F Premises in clause 17 of the DMC, and the IO is seeking to charge licence fees for so doing.

(3) The respondents need not contend that the IO and other owners had acquiesced in, or had been barred by estoppel and laches from challenging, the erection of the previous signs. This is not litigation about the previous signs. It suffices for the respondents to show that the IO is barred by the defences from enforcing against the existing Sign, which is not an illegal structure.

(4) The IO’s persistent lack of objections to the previous signs only demonstrated that the IO would not object to the putting up of any signs at the external walls of the 1/F Premises. The non-objection gave rise to the relevant representation, assurance, assent or lying by with respect to the erection of the Sign. It might well be that if the Sign were illegal, then the IO’s assent would not be sufficient. But that cannot matter, as the Sign is legal.

(5) It is thus within the IO’s power to consent to the Sign, and the defences of estoppel, acquiescence and laches can be validly set up against the IO’s claim: Hollywood Shopping Centre (CFI) §§64-66.

(6) The present case can be distinguished from 永利工業大廈業主立案法團 on the same basis. 永利工業大廈業主立案法團 concerned the retention of a sign which had always been an illegal structure since its erection: §§63, 67. It was not concerned with the construction or retention of a structure which amounted to a breach of the deed of mutual covenant but was otherwise legal.

(7) The other cases relied upon by the IO do not concern illegal structures at all:

(i) In Ohashi (referred to in 永利工業大廈業主立案法團 and Ming Yuen Mansion (IO)) the subject matter of the dispute related to an air-conditioning cooling tower erected in breach of the deed of mutual covenant. There is no discussion of whether the cooling tower was an illegal structure.

(ii) Hollywood Shopping Centre (CFI) also did not concern illegal structures: §73. The Court also expounded a more nuanced approach which reconciled Ohashi and a conflicting line of authorities. Incorporated owners do not lack power to consent to any breach of mutual covenants; whether or not the defences are applicable depends on whether the breach is of such nature and type that it is within the incorporated owners’ power to consent to: §65.

(iii) In Ming Yuen Mansion (IO), there was likewise no discussion of whether the subject matter of the dispute, i.e., a canopy, was an illegal structure. Deputy Judge Angela Kot (as she then was) only referred to Ohashi, and held that the incorporated owners could not acquiesce in a breach of the deed of mutual covenant. There was no consideration of the discussions in Hollywood Shopping Centre (CFI).

221.  Second, Mr Man SC submits that the illegality would at most emerge as part of the background and would not preclude the defences from operating:

(1) If the claim concerns breaches of mutual covenants, the fact that illegality such as a breach of the BO emerged as part of the background would not preclude a party from raising the defences: Yick Fung §§18, 23, 24; Hollywood Shopping Centre (CFI) §59.

(2) The respondents do not have to refer to or rely on the illegality to set up its defences of estoppel, acquiescence and laches. The respondents are only contending that the IO had been consenting to the display of signs at the external walls of the 1/F Premises, and not the specific act of display of signs which had not been duly approved under the BO. This would not stop the defences from operating: Shiu Fung Mansion (IO) §71.

(3) The above cases are based on the traditional Tinsley test on illegality, such as Yick Fung, §24. Mr Man SC submits that nonetheless, the cases remain good law despite the endorsement of the Patel test in Monat, §52.2 per Yuen JA.

(i) Cases decided before Patel remain of precedential value unless it can be shown that they are not compatible with the “range of factors” test in that they cannot stand with the reasoning of Patel or were wrongly decided: Henderson §§77 per Lord Hamblen JSC.

(ii) Under the Patel test, the range of factors approach based on the trio of necessary considerations requires the Tribunal consider each applied to the present facts: Patel §101.

(iii) The underlying purpose of the BO is to ensure public safety in the construction of buildings by ensuring that plans are submitted and approved by the Building Authority before building takes place: Monat §62.2. It is not to penalise co-owners of buildings who rely on the assurances / acquiescence of the other owners in maintaining signage at the building.

(iv) Put shortly, it cannot be the purpose of the BO to defeat the respondents’ argument to defend a sign which is fully compliant with the BO. The position must be even more straightforward under Patel.

(v) The fact that the act could have been performed without engaging the relevant statute was deemed to be an indication that the statutory provision was not directed at prohibiting a specific act in Monat §62.2. A co-owner could have affixed signs at a building without erecting any building structure and engaging the operation of the BO, for example, by painting its brand name at the exterior wall.

(vi) On the other hand, the defences of acquiescence, laches and estoppel reflect the fundamental principle that equity is concerned to prevent unconscionable conduct: Elite Garden v Shun Ho Energy Development Co Ltd [2022] HKLdT 28, §41 per DDJ Michelle Soong (as she then was).

(vii) The fundamental principles which underlie these long-standing rules in equity would be done away with if owners are allowed to sleep on their strict legal rights and seek to frustrate the long and peaceful enjoyment of the land by another by invoking legal provisions which they had no interest in enforcing. Mr Man SC submits that it is difficult even to articulate any reason why the policy of the BO would require this.

The IO’s claim

222.  The starting point is that the IO’s claim is not based on any covenant to comply with the BO:

(1) The IO claims in respect of (i) the display of advertisements at the external walls, and (ii) structural alterations to the external walls, which was not pursued.

(2) The claim for display of advertisement does not concern non-compliance with the BO. This is made clear from the provisions relied on by the IO, NOA §§11-14:

(i) BMO section 34I, which inter alia concerns conversion of common parts: NOA §15.

(ii) DMC clause 8, which concerns structural alterations (which is no longer in issue) and displays of signs in common parts.

(iii) DMC clause 11, which concerns an owner’s responsibility to ensure due performance and observance of the DMC terms and conditions by its tenant or lessee;

(iv) DMC clause 17, which concerns the right to put up advertisement on the external walls of the Building.

223.  Mr Man SC submits that it is therefore natural that the respondents’ defences would answer those claims, and do not contend that past signs were illegal (or legal):

(1) There is no dispute that the Sign is now legal for the purpose of the BO. It follows that the IO is fully empowered to allow conversion of the common parts by the erection of the Sign: Freder Centre (IO) §24.

(2) Further, the respondents contend that the IO is by its conduct barred from enforcing the relevant provisions: NOO §§16 (chapeau), 17 (chapeau), 18. Given that the provisions do not concern illegality in the sense of compliance with the BO, it would logically follow that the respondents do not contend that the IO has assented to non-compliance with the BO.

(3) Put simply, it is not part of the respondents’ case that the IO has been tolerating contraventions of the BO and is barred from enforcing against such contraventions.

(4) Further, lost modern grant gives the 1^st respondent a quasi-easement to put up signs and displays at the external walls of the 1/F Premises: NOO §19. The 1^st respondent is also not claiming a right to put up illegal signs or displays.

224.  Numerous authorities, including those of the Court of Appeal, have established that the respondents’ defences would be available in these circumstances:

(1) In Cheung Yuet & Anr v Oriental Gardens (IO) [1979] HKLR 536, the IO argued that the defendants acted in breach of the DMC by extending their kitchens and causing alteration to the façade of the block. In circumstances where other co-owners had previously extended their flats by the addition of a room, the IO was found to have acquiesced in the erection of extensions of the façade and not to erection of extension without approval of the Building Authority. Thus, the defendants did not have to rely on an illegality to set up their defence of acquiescence, and were entitled in rely on the defence: at 540 per Higgins JA.

(2) In Yick Fung, the developer argued that the installation of doors by the defendant amounted to a breach of a DMC provision which prohibited alteration of the shape of the exterior walls: §9. As Le Pichon JA noted, the pleaded claim was not about contraventions of the BO or any regulations made thereunder. Hence, even assuming that the installation contravened the BO, the fact that the illegality emerged as part of the background would not preclude a party from raising a defence such as acquiescence so long as the defendant is not forced to plead or rely on the illegality as part of its defence: §§23-24.

(3) Yick Fung is on point. The IO here is also suing for breaches of the DMC and BMO in the form of conversion of the common parts, not any breach constituted by breach of the BO.

(4) The fact that the plaintiff in Yick Fung was a developer rather than an IO makes no difference:

(i) The fact that the IO is under a duty to enforce against breaches of BMO does not mean that the IO has no power to acquiesce in all breaches of the DMC.

(ii) Hollywood Shopping Centre (CFI) highlights the importance of discerning the breach complained of. If the breach of covenant is one for which the IO is in a position to approve an act, there is no objection to the IO making the approval impliedly or allowing some other party to perform the act: §§58-59.

(iii) Cases subsequent to Yick Fung establish unequivocally that the IO has power to approve conversion of common parts and is thus capable of acquiescing or assenting to the breaches complained of in this action: Freder Centre (IO) §24; Hollywood Shopping Centre (CA) §§67-69; see also observations in Hollywood Shopping Centre (CFI) §§62-63.

(iv) Thus, where the breaches complained of are of a kind which the IO is empowered to approve, the fact that illegality such as breach of the BO emerged as part of the background would not preclude a defence of acquiescence: Hollywood Shopping Centre (CFI) §§58-59; Hong Kong House (IO) & and Senfield Ltd §§14, 17.

(v) Further, as Le Pichon JA also noted in Yick Fung, breaches of the BO are a matter for the Building Authority: §23. Absent an express covenant in the DMC whereby an owner undertakes to comply with the BO, the IO is in no position to enforce against an owner for breach of the BO. It makes no difference whether the plaintiff is the IO or a co-owner.

(5) The above legal principles were illustrated in Shiu Fung. The IO complained about the respondents’ conversion of common areas in contravention of the DMC and section 34I of the BMO: §8. The IO argued that it could not acquiesce in the conversion because inter alia the restoration of the floor slab had never been authorised by the Building Authority and was in contravention of the BO: §66(ii). Applying Yick Fung, HHJ K W Wong held that the IO had acquiesced in the conversion of the space for the respondents’ own use, but not the re-marking of the floor slab without the approval of the Building Authority. Hence, even assuming that the restoration of the floor slab was in contravention of the BO, the illegality only emerged as part of the background and would not defeat the defence of acquiescence: §71.

(6) Shiu Fung illustrates that the focus of the inquiry is on the subject matter of the IO’s acquiescence or assent. That question is in turn dependent upon the pleaded breach, which would normally be the subject matter of the pleaded acquiescence or assent. While the IO is not capable of acquiescing in the erection or installation of illegal structures, it is fully capable of acquiescing in the conversion of common parts and the installation of advertising signs. On that basis Mr Man SC concludes that the defences of estoppel, acquiescence and laches are fully applicable to the breaches in the present case.

225.  Mr Man SC submits that the same distinction applies to lost modern grant, which is addresses below.

Patel v Mirza

226.  The most significant issue is whether the respondents can still rely on the equitable defences in light of Patel and Monat. The difficulty faced by the respondents is that the above authorities were based on the Tinsley test, namely, whether the defendant is required to plead or rely on the illegality as part of its defence: Yick Fung §24.

227.  Mr Man SC submits that nonetheless, the authorities should remain good law under the Patel approach:

(1) It is wrong to treat Patel as presenting a clean slate such that all subsequent cases should be considered afresh. To do so would be to disregard the value of precedent built up in various areas of the law to address particular factual situations giving rise to the illegality defence: Henderson §77.

(2) To the contrary, these decisions remain of precedential value unless it can be shown that they are not compatible with Patel in the sense that they cannot stand with the reasoning in Patel or were wrongly decided in light of the reasoning: Henderson §77.

(3) The observations apply with particular force in the present case. Various levels of courts in Hong Kong have since 1979 applied a distinction between a claim or defence which concerns a breach to which the IO has power to consent, and an illegality to which the IO has no power to do so. It is only in circumstances where the defendant is arguing that the IO has consented to an illegal act that the defences would be defeated. This is a body of authoritative, respectable and valuable local jurisprudence.

(4) These decisions reflect that where the illegality is not sufficiently connected with the defences, for example, where it only emerged as part of the background and is not a constituent element, the law should not operate to defeat the defences.

(5) The underlying rationale of these decisions still plays an important role even under Patel:

(i) As Lord Hamblen noted in §72 of Henderson, Lord Sumption warned in his dissenting judgment in Patel, the Patel range of factors test devalues the principle of consistency by relegating it to the status of one of a number of evaluative factors. In particular, it discards any requirement for an analytical connection between the illegality and the claim, and makes the nature of the connection simply one factor in the broader evaluation of individual cases and offering no guidance as to what sort of connection might be relevant: §262.

(ii) Ma CJ shared similar concerns with allowing judicial discretion in the test for illegality in Ryder Industries Ltd v Chan Sui Woo (2015) 18 HKCFAR 544, §1 (obiter):

Both the lower courts applied a proportionality test, this being the test advocated by both parties based on their reading of ParkingEye. I am not in favour of applying this test as the applicable test for illegality since it appears to suggest that some kind of judicial discretion to be exercised. It seems to me that the question of illegality must be based on firmer principle and policy, although I accept that the facts in any given case will inevitably differ.

(iii) These concerns justify Lord Hamblen’s approach to previous cases in Henderson §77.

(iv) First, in considering the issue of consistency and coherence in the law, the closeness of the connection between the claim and the illegal act may be relevant. The closer the connection is, the greater and more obvious may be the inconsistency and consequent risk of harm to the integrity of the legal system: Henderson §120.

(v) Further, in relation to proportionality, centrality of the illegality to the transaction is a factor of particular importance. Hence in considering the circumstances relating to the illegality, whether there is a causal link between the illegality and the claim, and the closeness of the causal connection, will often be important considerations: Henderson §124.

228.  Mr Man SC submits that even applying the Patel test, the illegality of the pre-2018 A Signs should not defeat the defences: Patel §101 per Lord Toulson.

229.  I apply the Patal test as follows.

(1) First, the purpose of the BO is to provide for the planning, design and construction of buildings and associated works, to make provisions for the rendering safe of dangerous buildings and land, to make provision for regular inspections of buildings and the associated repairs to prevent the buildings from becoming unsafe, and to make provision for matters connected therewith: BO, long title; Monat §62.2 per Yuen JA.

(2) The statutory purpose is given effect by, inter alia, allowing the Building Authority to order the cessation, demolition, removal, alteration or closure of buildings or building works: BO, sections 23, 24, 24AA, 24B, 26, 26A, 27, 32, 39C, and by imposing sanctions for non-compliance with such order: BO section 40.

(3) In my view there is nothing in the purpose of the BO which requires the respondents’ defences to be defeated, such that a legal sign need be taken down.

(4) Second, on the other hand, the denial of the defences would unsettle the rights between the parties.

(5) The equitable defences and lost modern grant represent the legal policy that long-established state of affairs should not be disturbed if it would be inequitable to do so. To allow the historical illegality to disapply these defences in respect of a legal sign would frustrate the policy. These public policies may be rendered less effective. Analogous to adverse possession, some similar policy concerns arise, denial would be to encourage stale claims.

(6) Third, I do find that it would be disproportionate to disapply the equitable defences based on the past illegality in these circumstances:

(i) The illegality has already been rectified. The Tribunal is asked to disapply the defences based on historical illegality of the pre-2018 A Signs, and to order the removal of a legal sign in circumstances where it has decided that such removal would be unjust.

(ii) The illegality has no substantial connection with the defences. It was no more than part of the background of the use of the 1/F external walls to display signage. As noted in Henderson, the centrality of the illegality to the defences is a factor of particular importance. The lack of causal connection shows that it is disproportionate to disapply the defences for illegality in these circumstances.

(iii) Here the disproportionality is especially glaring given the IO’s course of conduct, which shows that it was completely disinterested in enforcing against unauthorised building works in the Building:

(1) Neither the IO nor other owners raised any objections to the A Signs while they had come into existence for over 50 years.

(2) It was not until the illegality was rectified that the IO finally raised a demand.

(3) Even then, the IO was only focusing on extracting a licence fee. There was no indication that it was satisfied that the illegality had been rectified. To the contrary, the IO did not accept that the post-2018 Sign was compliant with the minor works regime until the trial of these proceedings.

230.  Applying the Patel test I hold that the past illegality does not defeat the equitable defences of acquiescence, estoppel and laches. Further, in my view the past decisions are not incompatible with the approach in Patel in that they cannot stand with the reasoning of Patel or were wrongly decided in light of the reasoning. They remain a valuable body of case law. The jurisprudence in this area, crucially the Court of Appeal decisions, provide essential guidance and ensure consistency of decisions in this jurisdiction. It is necessary to consider each sides’ case but that is not to concentrate on procedural aspects or to mechanically rely upon the pleaded case to the exclusion of the public policy considerations and merits on the facts. In my determination the public interest in preserving the integrity of the justice system does not require denial of the equitable defences. There is no question of the Tribunal appearing to condone illegality. The Sign is a legal sign.

Issue 6 - Whether the 1^st respondent has obtained a legal or quasi-easement to put up signs and displays at the relevant part of the external walls by the doctrine of lost modern grant

Legal principles – lost modern grant

231.  Co-owners of a multi-storey building may enjoy a “quasi-easement” over the common parts of the building even though they cannot have a real easement over their own property. This type of quasi-easement (or contractual quasi-easement) functions for all practical purposes as if it was an easement: Jumbo King Ltd v Faithful Properties Ltd & Ors (1999) 2 HKCFAR 279, 297D per Lord Hofmann NPJ ; Kung Ming Tak Tong Co Ltd v Park Solid Enterprises Ltd (2008) 11 HKCFAR 403 §41 per Li CJ .

232.  The doctrine of lost modern grant means that, if a person can show that he has enjoyed an easement for at least 20 years, there is a presumption that a grant of easement has been made by deed during that period, but that deed has been misplaced or lost: Goo and Lee, §12-92.

233.  The use must not be by force, stealth or licence of the owner of the dominant tenement, and must have continued without interruption for at least 20 years: China Field Ltd v Appeal Tribunal (Buildings) (No.2) (2009) 12 HKCFAR 342 §71 per Lord Millet NPJ; Yik Wai Pong v Yick Pak Kin §73(2) per W Chan J.

234.  Lost modern grant can be rebutted only by proof that throughout the period of user relied on, the servient owner was incapable of making the grant: China Field Ltd §48.

The 1^st respondents’ case

235.  First, the right to put up advertisements at the external walls of the Building (“Advertising Right”) constitutes a quasi-easement.

236.  The IO does not dispute that the Advertising Right constitutes a quasi-easement. This must be correct given that advertising rights were granted under the DMC. The IO’s objections are that the right to put up signs / displays was only exercised with permission from the owner, and that the claim for lost modern grant is tainted by illegality.

237.  Mr Man SC submits that here the Advertising Right “accommodates” the “dominant tenement” (i.e., the 1/F Premises) in the sense that it is connected with the normal use of the 1/F Premises as business premises:

(1) The 1/F Premises have been used to carry out various businesses since 1960s.

(2) It is not in dispute that various signage was affixed to the external walls of the 1/F Premises over the same period. The display of advertising signs outside of the 1/F Premises, would benefit the business carried out in the 1/F Premises.

(3) In particular, the signage was invariably connected with the businesses being carried out at the 1/F Premises.

238.  The signage therefore served as invitations to the public for the specific businesses being carried out at the 1/F Premises, and was connected with the mode in which the occupants had been using the 1/F Premises.

239.  Similarly, in Moody v Steggles (1879) 12 Ch D 261, a right to hang a signboard on an adjoining house pointing towards a public house was held to be an easement. The easement was connected with the mode in which the dominant tenement was used (i.e., as a public house), and was convenient if not necessary for the enjoyment of the dominant tenement: 264-266 per Fry J.

240.  Second, there is no question that the putting up of signs at the 1/F Premises was done nec precario.

(1) The nec precario requirement means that there must not be a specific grant of a licence. If there is an actual grant, there is no need for a presupposed grant arising by prescription: Odey v Barber [2008] Ch 175, §§19-20 per Silber J.

(2) It is beyond dispute that the IO (or other owners of the Building) never granted a licence for the Sign or the previous A Signs found in the same area.

(3) The respondents’ attempt to negotiate with the IO is irrelevant. It does not change the fact that no actual licence was given during the requisite 20-year period.

241.  Third, similar to the analysis above, the alleged illegality would not prevent a lost modern grant from arising:

(1) Lost modern grant can be presumed even if the user was in breach of a statutory provision if the grant would have been lawful for the landowner to make: Bakewell Management Ltd v Brandwood [2004] 2 AC 519, §47 per Lord Scott.

(2) The cases relied on by the IO all concern instances where the easements alleged were themselves forbidden by the statute:

(i) In Neaverson v Peterborough Rural District Council [1902] 1 Ch 557, the alleged easement was one to let the herbage on the road for depasturing cattle and horses, when the statute forbid pasturage of any stock except sheep: at 563.

(ii) Similarly, in Hulley v Silversprings Bleaching and Dyeing Co Ltd [1922] 2 Ch 268, the alleged easement was to pollute a stream, which constituted a criminal offence: at 281.

(3) However, in the present case, the right contended is one to put up signs at the external walls of the 1/F Premises. There is nothing illegal for the IO or owners to make such a grant.

(4) In fact, as noted above, the owners had made a similar grant to the G/F owners and Kiu Fung under the DMC: clause 17.

The IO’s case

242.  The 1^st respondent claims that the 1^st respondent and its predecessors have since 1960s enjoyed as of right and without interruption an entitlement to put up signs and displays on the 1/F external walls, and claims the right to do so as a quasi-easement by virtue of a grant by deed which has since been accidentally lost or destroyed .

243.  First, Mr Law emphasised that there can be no legal easement. The Court of Appeal confirmed in Hollywood Shopping Centre Owners Committee Ltd at §60:

… a co-owner in a multi-storey building cannot have a real easement over the common parts, as one cannot have a real easement over one’s own property (Jumbo King Ltd. v. Faithful Properties Ltd., at 297D; Kung Ming Tak Tong Co. Ltd. v. Park Solid Enterprises Ltd ., at para. 22).

244.  In Kung Ming Tak Tong Co Ltd, the Court of Final Appeal (at §§18-19) referred to the Hong Kong system of dealing with multi-storey buildings in multi-occupation. This does not result in the creation of separate tenements capable of sustaining a legal easement. Therefore, it is not open to the 1^st respondent, as a co-owner of the Building, to claim legal easement over common parts of the Building. It does not.

245.  As to “quasi-easements” in its contractual sense (a shorthand description of the rights arising between co-owners by express/implicit agreement), given the DMC has expressly prohibited the display of signs at the common parts of the Building, no such quasi-easement to display can arise to benefit the 1^st respondent. Even if there was any implied quasi-easement derived from clause 2 of the DMC, such quasi-easement could only be extended to the use the common entrance, halls, staircases, lifts, etc. The use of the 1/F external walls, by way of installing advertising boards, was of a very different nature. The 1^st respondent would have to establish that the use of 1/F external walls was “continuous and apparent” for it to be implied as a contractual quasi-easement as such.

246.  The IO relies upon principles as to how an easement can be acquired by prescription or loss of modern grant summarised by W Chan J in Yik Wai Pong at §73, including:

“73. …

(1) If the owner of land uses a road as a means of access to, and egress from, his land for more than 20 years “as of right…

(2) Whether the use is “as of right” depends on the claimant showing that it had been nec vi (without force), nec clam (without stealth) and nec precario (without permission from the owner). ”

247.  Here the 1^st respondent has agreed by the Statement of Agreed Facts at §26 that the representative of the 1^st respondent, Mr Tse, had advised Mr Darwin Cheung for the 2^nd respondent to negotiate with the IO for a licence to use of the 1/F external walls; Mr Darwin Cheung then did follow up on that. Such situation will go to whether the 1^st respondent’s alleged acquisition of the right to put up signs/displays was indeed nec precario.

248.  Furthermore, the 1^st respondent’s claim of lost modern grant is tainted by illegality, and the presumption of such a grant must be rebutted. As Lord Millett NPJ pointed out in in China Field Ltd at §48:

Despite what was said by Cockburn CJ in Charles Dalton v Henry Angus & Co, it was for a long time far from clear that the court was bound, and not merely entitled, to presume the grant from long enjoyment for the requisite period … It can be rebutted only by proof that throughout the period of user relied on the servient owner was incapable of making the grant, as in Barker v Richardson, Company of Proprietors of the Rochdale Canal v Radcliff (where the owner of the servient land was a corporation with limited powers of grant) and Neaverson v Peterborough Rural District Council (where the grant would have been illegal).

249.  In Neaverson the first sentence of the headnote succinctly states the holding thus:

A lost grant cannot be presumed where such a grant would be in contravention of a statute.

250.  Collins MR further explained, at pp. 563–564 and p.573, that:

If such a grant could not have had a legal origin, then it is not competent for us to presume its existence. On the other hand, if it could have had a legal origin, then we ought to presume the existence of such a grant, when there is evidence of user for such a long period …

… such a grant as is here suggested would have been illegal, whoever is supposed to have made it

251.  Neaverson was later cited by Eve J in Hulley at 282 as authority for the proposition that:

A lost grant cannot be presumed where such a grant would have been in contravention of a statute, and as title by prescription is founded upon the presumption of a grant, if no grant could lawfully have been made, no presumption of the kind can arise, and the claim must fail …

252.  Mr Law submits that given the A Signs were all UBW before 2018 and their construction was in contravention of the BO, the 1^st respondent’s claim for the presumption of a lost modern grant would have to be rejected.

253.  For lost modern grant to succeed, the respondents must prove their continuing occupation period for 20 years, which means the period must overlap with the pre-2018 period when the A Signs was illegal.

254.  In Bakewell Management Ltd, the House of Lords held at §§46-47:

“46. (…) It is criminal only because it is a user of land for which the landowner has given no “lawful authority”…

47. In my opinion, if an easement over land can be lawfully granted by the landowner the easement can be acquired either by prescription under section 2 of the 1832 Act or by the fiction of lost modern grant whether the use relied on is illegal in the criminal sense or merely in the tortious sense… ”

255.  Bakewell, concerns owners of a number of adjoining properties openly gaining access to their homes by driving vehicles on a road over the common without obtaining the consent of the landowner, which constituted a criminal offence. However, as long as there is a grant or a consent given by the landowner, the act could have been made legal.

256.  Mr Law submits that the facts in this case can be readily distinguished from Bakewell. The grant (if there had been one) could not have made the construction of a UBW lawful. The IO could not have granted any rights to carry out UBW. If the grant could not be deemed to have been made 20 years ago, there is no question as to whether the doctrine of lost modern grant can run in this case.

Lost modern grant defence

257.  Lost modern grant arises if a person can show that he has enjoyed an easement for at least 20 years. In that case, it will be presumed that a grant of easement has been made by deed during that period, but that deed has been misplaced or lost: Goo & Lee, §12-92.

258.  The presumption cannot be rebutted by proof that no such grant had in fact been made. It can only be defeated if, throughout the period of user, the servient owner was incapable of making the grant: China Field Ltd, §48.

259.  The respondents’ case is first, it is beyond dispute that the 1^st respondent has put up signage at the same position on the 1/F external walls (by itself or its tenant) for at least 20 years before the claim for lost modern grant is made in the NOO dated 11/10/2021. In fact, the 1^st respondent had been enjoying the easement for 60 years by then. I have so found.

260.  Second, I accept that the 1^st respondent’s right to put up signage at the 1/F external walls could constitute a quasi-easement:

(1) The IO does not argue that the putative right to put up signage cannot constitute a quasi-easement.

(2) The 1^st respondent’s right over the common parts of the Building may constitute a quasi-easement. In the present case, the “servient tenement” is the 1/F external walls, which falls within the common parts of the Building; and the “dominant tenement” is the Premises including the 1/F Premises. Such a right functions for all practical purposes as if it was an easement: Kung Ming Tak Tong, §41.

(3) The right also “accommodated” the dominant tenement. The signage was consistently used in connection with the businesses operated out of the Premises, and the products sold therein. The signage thus served as invitations to the public for the businesses being carried out, and was connected with the mode in which the occupants had been using the Premises: Moody, 264-266.

261.  The IO argues that lost modern grant cannot apply as the signage was not put up nec precario. However, I find that there had been no actual grant for the 1^st respondent to put up the signage. It had been putting up the signage nec precario: Odey, §§19-20.

262.  Mr Man SC primarily relied upon acquiescence as the defence, submitting that doctrine was the clear way through for the respondents. Not to suggest he formally abandoned the lost modern grant case. In my view the defence is more problematical for the defendants. I would agree with Mr Law’s submission that the grant must have been legal from the outset. The parties have agreed that the pre-2018 A Signs were illegal. As with the equitable doctrine case of the respondents, Mr Man SC makes the distinction that the grant was not to put up unlawful signs. It is important to focus on the subject of the grant. In the present case, the grant is only for the right to put up signage at the 1/F external walls, and not a right to put up illegal signage: NOO §19.

263.  In these proceedings the respondents are not making any counterclaim or seeking any relief. I have found that the defence of acquiesce is made out. So to the other equitable defences. It is unnecessary to also determine the lost modern grant claim, when no relief is sought on that basis. It is pleaded as an additional defence. That issue is better determined in a case where there is a claim for relief on that basis. Therefore, I shall not determine these proceedings on the basis of the claim for lost modern grant.

Issue 7 - Whether the tribunal should refuse to grant any injunctive relief by reasons of the doctrines of acquiescence, laches and proprietary estoppel in the circumstances of this case

264.  The IO prays that the respondents’ defence based on the equitable doctrines be rejected, judgment be entered for the IO and the pleaded relief granted.

265.  I hold that the equitable defences acquiescence, laches and proprietary estoppel operate as a complete bar to the IO’s claim. I decline to grant the declarations, injunctions and mesne profits sought. The IO’s claim is dismissed.

The IO’s alternative remedy

266.  The IO closing submission proposed an alternative, that the judgment should not be understood as the respondents having adversely possessed the 1/F external walls. There can be no such risk, given that adverse possession was never the basis of any claim by the respondents. The respondents have defended the IO’s claim. They have not brought a counterclaim or sought any declaratory or other relief.

267.  The IO continues, alternatively, if the Tribunal finds that there had been acquiescence by the IO, but estoppel and lost modern grant are not made out, the judgment of the Tribunal should not be misunderstood as the 1^st respondent having adversely possessed the 1/F external walls or that the IO must permit the respondents to erect and retain the advertising boards in future. The IO refers to Hollywood Shopping Centre (CFI) at §98 finding that the defendant in that case should be granted appropriate relief in respect of the plaintiff’s breaches that took place after the original term of contract expired (30 November 2008), but not before: see §99.

268.  The IO acknowledges that an injunction is a discretionary remedy and that the respondents may show that it would be unjust and inequitable to require the IO to restore the position. However, the Tribunal must take into account the fact that a significant period has lapsed since 2018. The respondents have not shown any special circumstances or significant hardship that would render such relief unjust and unconscionable. In particular, even if some expense might be incurred, that would have been well covered by the benefits received by the respondents over the years.

269.  Therefore, if the Tribunal is of the view that there had been acquiescence by the IO, it suggested that, inter alia, relief similar to Hollywood Shopping Centre of delaying the operation of the mandatory injunction for a short period of time should be granted.

270.  Mr Man SC objects to this unpleaded alternative being raised in closing submissions. The IO does not plead an alternative basis for acquiescence confined by time nor a prayer for any alternative relief. If the IO had an alternative case that the acquiescence was not in respect of signs after or during a certain period that case should have been pleaded. The respondents would then have been able to address that case in evidence and during the hearing. Further, and in any event the new alternative is unsustainable. In Hollywood Shopping Centre the relevant period was 6 years in respect of the advertising board, not the more than 5 decades acquiesced in here. Each case must depend on its own facts.

271.  In my view the IO has not established a factual foundation to grant relief but with a “short delay”. For reasons set out by the respondents I decline to grant the alternative relief. In any event the facts also satisfy the other equitable defences.

272.  Mr Man SC has asks that a photograph of the post-2018 Sign be attached to this judgment. I attach the photograph of the Sign identified as A-16 in the Attachment to the NOO taken in or about August 2021.

Issue 8 Whether the IO should be entitled to mesne profits or damages arising from the respondnets’ breach of the DMC and/or the BMO

273.  Lest I be wrong, I set out my findings on the IO’s claim for mesne profits.

274.  If the Tribunal accepts the IO’s case that the 1^st respondent and the 2^nd respondent have been in breach of the DMC and/or the BMO and have no defence, the IO seeks mesne profits from 12 December 2018, being the date of a warning letter issued by the IO’s representative which fell within the limitation period counting backward from the date of commencement of action, until the removal of the Unauthorised Structures, the Sign and reinstatement of the affected parts of the 1/F external walls.

275.  The IO’s position is that it should be entitled mesne profits to be paid by the respondents because it could not use the external wall as the respondents did. The principle that the defendant is bound to pay a reasonable price for the use of the land or chattel for trespass regardless of whether the plaintiff has found use in the land or chattel is well settled: Attorney General v Blake and Another [2001] 1 AC 268 at 278D-279F . It is not open to the respondents to say that the applicant suffers no loss and thus no damages are payable. In any event, having a metal frame and a giant advertising board installed on the 1/F external walls, thus defacing the Building, is itself a detriment to the owners of the Building. The owners could not use the 1/F external walls in the manner which they wished, namely an appearance free of the A Signs or licensing the advertising rights to receive promising licensing fees. Mr Law submits that there is no reason why the IO should not be allowed mesne profits for the respondents wrongful occupation of the 1/F external walls since 12 December 2018.

276.  The measure of damages is not compensatory but based on the price a reasonable person would pay for the right of user. The damages or mesne profits that the IO is entitled to recover from the respondents represent the price a reasonable person would pay for the use of a property: per HHJ M Wong in The Incorporated Owners of Percival House v Fusion Advertising Solution Limited [2012] 5 HKC 94 at §9.

277.  The IO suggests the mesne profits should be assessed at the rate of “at least $10,000 per month”, this being the price Mr Darwin Cheung (for the 2^nd respondent) proposed to the IO when negotiating for the licence fee for the L-shaped advertising board.

278.  The party seeking mesne profits bears the burden to prove the quantum of his claim. He has to put forward sufficient and reliable evidence to do so: 黎偉雄 v Sino Estates Management Ltd & Anr [2023] HKLdT 23, §40 per DDJ S H Lee (as he then was).

279.  Mr Man SC submits that the claim for mesne profits suffers from an additional defect that the IO has not discharged its burden of proof for quantum. The IO has adduced no evidence to prove the reasonable price payable for the use of the 1/F external walls for advertisement: cf. A-G v Blake at 278E per Lord Nicholls. The IO’s reliance on the licence fee proposed by the 2^nd respondent in the course of its negotiations is unwarranted. As Mr Darwin Cheung explained, the 2^nd respondent only made the proposal to avoid disputes or costly and tedious litigation with the IO. There is no basis to suggest that the proposed licence fee represented the reasonable price payable for the use of the 1/F external walls to display the Sign.

280.  The IO claims that mesne profits should be assessed at the rate of “at least” HK$10,000 per month. There is no explanation or evidence on what any higher rate should be. An offer may, in certain instances, be some evidence of market value at time of offer. There is no other evidence, such as comparables or from the Rating and Valuation Department, much less of a valuer or expert. The mere fact that the 2^nd respondent proposed a certain licence fee in the course of negotiations with the IO did not mean that it was the reasonable price payable for the benefit at that time. The 2^nd respondent had different considerations in putting forward the proposal. In the present circumstances the $10,000 offer cannot be relied upon as proof of value or the reasonable price. I find that the IO has failed to discharge its burden of proving the reasonable price payable for the use of the 1/F external walls or a basis to assess mesne profits. The IO has not established the quantum for any mesne profits.

COSTS

281.  I make a costs order nisi that the IO do pay the costs of the respondents taxed on the District Court scale with certificate for leading counsel (1 counsel). Any party may apply to vary the costs order nisi within 14 days hereof, failing which the order nisi shall become absolute.