THE INCORPORATED OWNERS OF SHATIN 33 v. LEE WONG TIM AND ANOTHER

LDBM 107/2017

[2018] HKLdT 91

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 107 OF 2017

_______________

_______________

_______________

JUDGMENT

_______________

Background

1.  The applicant is the incorporated owners of Shatin 33, whereas the respondents are the owners of both Flats 1B and 2B of Block 2 (Phenix Heights) of Shatin 33 (collectively “the House”).

2.  Under the deed of mutual covenants of Shatin 33 (“DMC”), “S.T. 33 Management Limited” is appointed as the manager of Shatin 33 (“Manager”), and is empowered to manage the housing estate and enforce the provisions under the DMC.

3.  Clause 38 of Section IV Part B of the DMC (“Clause 38”) sets out the Manager’s power and duty concerning dog-keeping as follows:

“…Without in any way limiting the generality of the foregoing the Manager shall have the following powers and duties:-

……

(38) To ensure that no dogs are kept in any part of the said buildings except such dogs (if any) as shall be required and kept by the Manager for the security of the said buildings.

…..”

4.  On 8 June 2011, the applicant passed a management committee’s resolution (“June 2011 Resolution”) in respect of dog-keeping by the individual owners as follows:

“ 3. 個別單位飼養狗隻事宜

由於本苑部份住戶於家中飼養狗隻，一直以來，法團明白各狗主對其寵物之愛心，因而採取較寬鬆的態度處理狗隻問題。但管理公司客戶服務部收到不少住戶投訴，個別單位狗主及女傭讓狗隻在本苑公眾地方逗留、隨意奔跑及便溺，對他人造成滋擾及引致驚嚇。

管理公司指出，根據大廈公契第四章B部第38條，本苑範圍內嚴禁飼養狗隻。因此，必須制定處理狗隻問題的流程，建議內容如下:

3.1 屋苑管理處人員接獲住戶投訴某單位養狗，令其受到滋擾及影響。

3.2 管理員落簿記錄及知會上層，並開始跟進投訴，留意觀察某單位是否存在狗隻。

3.3 如發現某單位存在狗隻屬實，由管理處通知單位業戶，大廈公契列明不准養狗。

3.4 如持續收到投訴，管理處知會法團後將會發出警告信予單位業戶，大廈公契列明不准養狗，需限期將狗隻遷離，並於法團會議中匯報。

3.5 如發現養狗業戶未有限期內遷離狗隻，管理處將知會法團及總公司，由總公司發出最後通知信，表示再不遷離狗隻將隨即展開法律行動，並於法團會議中匯報。

3.6 如養狗業戶仍無視勸告，經法團通過後將要求律師樓出信予此業戶，表示再不遷離狗隻，將入稟法庭，法庭會向業戶發出傳票 / 告票，傳召上庭(一經判決業戶敗訴，所有律師費用將由業戶承擔)。

3.7 律師樓會待判決後一併向法庭申請禁制令，禁制此單位再有狗隻存在，如有違反即屬犯法。如養狗業戶仍無視禁令，將會被控藐視法庭，業戶自身需要承擔判監入獄的風險。

另外，經委員商議後，贊成確立以上處理狗隻投訴流程，以履行公契規定，避免不必要的法律責任。但礙於人道立場，委員不贊成即時取締及清除住戶所有狗隻，管理公司建議，可參考房屋署做法，將住戶現存所有狗隻登記，待狗隻去世後嚴禁飼養新狗隻，或再有新狗隻遷入。如狗隻被其他住戶投訴，管理公司會按以上處理流程跟進。如有單位買賣或新業主 / 租戶遷入，管理公司亦會致函通知公契不准養狗的規定，促使狗隻數量減少直至再沒有狗隻，以符合大廈公契要求。” (斜體強調)

5.  Eventually, in around April 2012, the “Dogs Control and Registration System”[1] (“the System”) was implemented, which required the then dog owners to register their dogs by 1 May 2012. The System comprises the following components:-

(i)   There is a complaint procedure.  In gist, if the management company receives complaints about disturbances caused by dogs, it would conduct investigation.  If the complaints continue, the management company will issue a warning letter (and a final warning) to the dog owner to request for the removal of the dogs.  If the dogs are not removed, a legal letter would be issued, which will be followed by legal action.

(ii)   Dog owners would need to abide by the codes (“Codes”), which sets out various restrictions and obligations in respect of dog owners.  Among others, clause 9 of the Codes provides that no new dogs would be allowed after the registered dogs die.

6.  Dog owners would need to sign a letter of undertaking and to register their dogs under the System.  The respondents then signed and returned the required form (with undertaking) on or about 2 May 2012[2] in respect of two dogs, named Pumkin and Token.  Pumkin passed away in February 2016, and Token still remains in the House.

7.  On 15 May 2012, the applicant passed another management committee’s resolution (“May 2012 Resolution”) in respect of dog-keeping as follows:

“ 3.4 討論個別業主建議於業主大會上修改公契准許屋苑內養狗事宜。

由於有個別業主建議提案修改公契准許屋苑內養狗，法團於是日會議中作出討論。管理公司指出，根據建築物管理條例，修改大廈公契須全體業主(百分百之業權)通過才可修過公契，因此，議案基本難以通過，經商議後，管理委員會最終議決不會提出動議作修改公契准許屋苑內養狗。

根據大廈公契第四章B部第38條，本院範圍內嚴禁飼養狗隻(除管理公司用作保安用途之狗隻外)。一直以來，法團對嚴禁飼養狗隻之立場與公契要求一致。但在情理上，由於本苑部份住戶於家中飼養狗隻多年，法團明白各狗主對其寵物之愛心，因而採取較包容的態度處理狗隻問題。法團亦明白有部份業主對狗隻之存在感到不滿，故 管理委員會於之前多次會議均有討論狗隻處理方案。最終，管理委員會通過一系列措施逐步清除現有狗隻及防止新狗隻遷入，並制定處理狗隻投訴流程。以管制現有狗隻問題。

鑑於人道立場，法團暫不即時取締及清除住戶所有狗隻。但將要求住戶必須嚴格遵守法團訂立的飼養狗隻守則，如業主違反飼養狗隻守則，本法團將採取進一步行動而不作另行通知。

飼養狗隻的業主 / 住戶亦需為狗隻進行登記，並簽署遵守《碧霞花園狗主自律守則》之承諾書。直至本年五月一日登記限期，本苑所有狗隻已完成登記。法團亦會加強執行有關規定，減少狗隻問題對住戶滋擾，及逐步清理狗隻以達公契規定。” (斜體強調)

8.  On 25 January 2016, the applicant resolved in meeting to abolish the System with immediate effect. Then the residents were notified in writing of the applicant’s decision as well as enforcement actions pursuant to Clause 38 were to follow, if they did not remove their dogs within 3 months. On 18 February 2016, notice to the residents were also put up.

9.  On 13 October 2016, another Building Management Application (LDBM 350 of 2015) was heard at the Lands Tribunal. It was an application by a dog owner at Shatin 33 against the applicant, for a declaration that the DMC did not prohibit dog-keeping. On 24 November 2016, judgment of LDBM 350 of 2015 was handed down, in which it was held that Clause 38 prohibits dog-keeping at Shatin 33 and that despite the existence of the System, the applicant never waived its rights to enforce Clause 38.

10.  On 20 January 2017 and 10 May 2017, letters were issued to the respondents to demand the removal of their dog(s) within 14 days of the letter, failing which legal action would be taken without further notice.  Despite repeated requests and demands by the Manager, the respondents failed to remove their dog(s). The applicant hence commenced the present action on 9 June 2017 seeking a mandatory injunction against the respondents to remove their dogs out from Shatin 33 permanently.  To this day, the respondents are still keeping dog(s) in the House.

Applicant’s case

11.  Ms Chan for the applicant relied on Hollywood Shopping Centre Owners Committee Limited v The Incorporated Owners of Wing Wah Building Mongkok Kowloon  HCA 1582/2007 (16 August 2010) (at paras. 63 to 66)[3] and submitted that although Clause 38 was drafted in a way to “impose a duty” on the Manager, in effect, it acts as a general prohibition against “dog-keeping” in any part of Shatin 33 with only one exception - i.e., where the dog is being kept by the Manager for the security of Shatin 33. In short, the applicant could not permit the respondents to do something the DMC forbids. If the Tribunal takes the same view, the defence of waiver, acquiescence, estoppel or even laches would not avail the respondents.

12.  Accordingly, the System must be invalid as the applicant has no power to allow the respondents to keep dogs pursuant to Clause 38.  Alternatively, the System only amounted to a bare licence and even if valid, it is revocable with reasonable notice.  

13.  Since the implementation of the System, the Manager still received complaints against dog-keeping and apparently, the situation was not getting any better as originally intended.  As a result, it was resolved by the applicant to abolish the System.

14.  In any event, there was no waiver, acquiescence or estoppel because (i) there was no clear and unambiguous representation as contended by the respondents, and/or (ii) there was no detrimental reliance.

Respondents’ case

15.  Mr Siu for the respondents submitted that the System cannot possibly constitute a bare license.  He accepted that the legal principles as set out in paras. 63 to 66 of the judgment of Mr Recorder Yuen SC in Hollywood Shopping Centre’s case stand as good laws.

16.  However, all the owners could tolerate a breach of mutual covenants through the incorporated owners, if neither the incorporated owners nor the owners have done anything about the breach.

17.  The respondents relied on the defences of waiver, acquiescence, estoppel and even if they cannot be established, the Tribunal shall not exercise the discretion to grant the mandatory injunction to remove Token who is a “home-dog” of 8 years old with poor health condition.

Insofar as Clause 38 is concerned, whether the applicant is capable of giving acquiescence and/or granting waiver?

18.  To start with, it is necessary for the Tribunal to determine the above question because if the breach of Clause 38 is beyond the power of the applicant to acquiesce, the defence of waiver, acquiescence, estoppel will not be available to the Rs.

19.  In Hollywood Shopping Centre’s case, Mr Recorder Yuen SC who seems to draw the analogy from the doctrine of “ultra vires” in the company law said as follows:

“64. It is well established that no estoppel can be set up against a party if the effect is to compel that party to perform an act which he does not have power to do. A contract beyond the powers conferred on a statutory body cannot be validated by the application of an estoppel. Similarly, no estoppel can confer upon a company power that goes beyond those conferred by its memorandum of association. On the other hand, if the act in question is within a company’s power to perform, it is trite that an estoppel can be validly set up as a defence. See : Spencer & Bower, Estoppel by Representation, 4^th edn., para. VII.1.1, VII.2.1 & VII.6.1; and Patrick Parkinson, op. cit., paras. [720] to [721] at pp. 241 to 243.

65. In summary, the position can be stated as follows :

(1) whether or not acquiescence can be set up as a defence to a claim for breach of mutual covenants (whether express or implied by reason of section 34I(2) of the BMO) depends on the nature or type of breach in question;

(2) if the breach of mutual covenants in question is within the power of the incorporated owners to acquiesce, acquiescence can be a valid defence provided all the requisite elements giving rise to acquiescence are established; and

(3) on the other hand, if the breach of mutual covenants 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.” (emphasis added)

20.  Mr Siu reminded me that the doctrine of “ultra vires” has been abolished by section 115 of the Companies Ordinance (Cap. 622) in about 2014, which gives companies the capacity of a natural person.  Section 116(5) thereof further provides that an act by a company is not invalid only because the company does the act in contravention of its articles of association.  As Mr Siu has conceded that the legal principles in the judgment of Mr Recorder Yuen SC in Hollywood Shopping Centre’s case are good laws, I do not think that it is necessary for me to consider the effect of such abolishment by the legislature in the context of the company law.

21.  Turning to the interpretation of Clause 38, Mr Siu relied on a recent judgment in Lucky Hing Shing Estate Company Limited v The Incorporated Owners of Genius Court HCA 2048/2015 (unreported, 7 April 2016), DHCJ Marlene Ng has considered the above principles at para. 46 in her judgment.  Her Ladyship then proceeded to say at para. 47 as follows:-

“The first question is what amounts to a ‘breach of mutual covenants in question [that] is beyond the power of the incorporated owners to acquiesce’. Mr Liu takes a narrow view and says the IO cannot acquiesce breaches of unqualified covenants in the DMC, ie those covenants that do not contain proviso for the incorporated owners or manager to relieve compliance, and can only acquiesce breaches of qualified covenants, eg covenants that allow the incorporated owners or manager to give ‘prior written consent’ not to comply with such covenants. But a consideration of the cases cited in footnote 36 above (discussed in more detail in paragraphs 52-62 in Mr Recorder Yuen SC’s judgment) does not necessarily support such narrow construction.” (emphasis added)

22.  Mr Siu submitted that the test of whether the incorporated owners can acquiesce to a breach of mutual covenants does not depend on whether the covenant is qualified or unqualified.

23.  In my view, Lucky Hing Shing Estate’s case can be distinguished as it concerned an application for summary judgment and was decided on the basis that it has a triable issue.  The rationale of this case is that the learned judge did not agree the narrow approach for the construction of the covenants which contain or do not contain the words “prior written consent”. In other words, whether the covenant is qualified or unqualified is not the test for deciding whether the incorporated owners can acquiesce to a breach of mutual covenants.

24.  In Wing Ming Garment Factory Ltd v Wing Ming Industrial Centre (IO) [2014] 4 HKLRD 52, G Lam J ruled that the incorporated owners could give consent to the alteration to the external wall, so it had power to acquiesce to the breach but further said in para. 140 of the judgment:-

“Even if the IO is correct in contending that the Manager’s written consent was insufficient to authorise any alteration to the external wall, and that DMC cl.IV.4 is the overriding provision, my conclusion on acquiescence would have been the same because a breach of that clause was simply a breach of covenant that could be acquiesced in by the IO, which is the embodiment of the owners in relation to their rights in respect of the common parts.”

25.  In my view, the learned judge simply made the alternative ruling that based on his interpretation of the overriding clause IV.4 in the subject deed, he came to the same conclusion that the incorporated owners could acquiesce the breach of a particular clause in respect of the unauthorized use of the common parts.

26.  In the present case, unlike the breach concerning the unauthorised use of the common parts, I am of the view that Clause 38 contains a prohibition which the Manager would have no power to grant to the owners the right to keep dogs in contravention of this clause since it is the duty of the Manager under such clause to ensure no dog to be kept except for security of Shatin 33 only. If the Manager has no such power, I fail to see how the applicant can be said to have such power.  It is ultra vires for both of the applicant and the Manager to implement the System at the very beginning.  If Clause 38 has to be amended, the only way to do so is to obtain the unanimous consent of all the owners of Shatin 33, instead of simple majority.

27.  In fact, the topic to amend the DMC concerning dog-keeping has been discussed in the May 2012 Resolution.  However, no consensus among the committee members was reached and no resolution was passed.  Even according to the oral evidence given by Mr Lee for the respondents, he agreed that some owners accepted dog-keeping but some not.  Mr Siu for the respondents tried to argue that all the owners of Shatin 33 (as opposed to the majority of the owners) via the applicant had given the consent to allow the dog-keeping.  With respect, I cannot agree.

28.  In the circumstances, it is not necessary to consider the respondents’ defences of waiver, acquiescence and estoppel which are bound to fail.

Whether the defences of waiver, acquiescence and estoppel are established

29.  In case I am wrong in the above, it is then necessary to consider the respondents’ defences of waiver, acquiescence and estoppel.

30.  The permeable (前言) of the form signed by the respondents on or about 2 May 2012 expressly states that pursuant to Clause 38, dog-keeping at Shatin 33 is strictly prohibited (“根據大廈公契第四章B部第38條，本苑範圍內嚴禁飼養狗隻”) and that the System was only introduced as a temporary measure (暫緩方案).  In other words, it is not a permanent measure.  It is further expressly stated the applicant and the Manager reserve all the rights to take enforcement actions to execute the terms of the DMC (“法團及管理公司亦保留一切權力處理及執行大廈公契的規定”). In my view, these express terms is binding on the respondents.  

31.  In June 2011 Resolution and May 2012 Resolution, it was clearly stated that based on humanitarian grounds, the applicant would not immediately take action to remove all the dogs temporarily (“鑑於人道立場，法團暫不即時取締及清除住戶所有狗隻”), with the ultimate goal of “eliminate dog-keeping in Shatin 33” (“通過一系列措施逐步清除現有狗隻”) in accordance with Clause 38.  In other words, the applicant also made a representation that it is always possible for the applicant to take action to remove the dogs in the future.

32.  It is not in dispute that the dog owners including the respondents who registered their dogs under the System were fully aware of the 2 resolutions. In the circumstances, I share with the learned judge’s decision in LDBM 350/2015 that the applicant has never waived its right to enforce Clause 38 against the relevant owner including the respondents. I also disagree with the submission of Mr Siu that there is a representation embodied in the System that owners who registered their dogs would be allowed to have their dogs staying in Shatin 33 until the end of the dogs’ lives, so long as the dog owners comply with the Codes.   Mr Siu cannot simply cherry-pick some paragraphs in June 2011 Resolution which may be in favour of the respondents but ignore the rest of the said resolution. 

33.  Even if there is such a representation in June 2011 Resolution as alleged, it must be read together with and subject to the express terms of the form signed by the respondents in May 2012, in particular the applicant’s right to take action to remove the dogs in the future.  These express terms must be binding on them.  Accordingly, I consider that the alleged representation, even exists, have been subsequently superseded by these express terms and that their defences of waiver, acquiescence and estoppel are doomed to fail.

34.  It is unnecessary for me to determine the issue of whether the System amounts to a bare licence or a licence coupled with an equity (as per Lord Denning M.R. at paras. 36 to 37 in Inwards & Ors v Baker [1965] 2 QB 29 (13 January 1965)). 

Whether the Tribunal shall exercise the discretion to grant the mandatory injunction to remove Token

35.  Mr Siu for the respondents cited the House of Lords case, Redland Bricks Ltd v Morris & Anor [1970] AC 652 at 665F-G and submitted that:-

(i)   The grant of a mandatory injunction is entirely discretionary and unlike a negative injunction can never be “as of course.”  Every case must depend essentially upon its own particular circumstances.

(ii)   A mandatory injunction can only be granted where the plaintiff shows a very strong probability upon the facts that grave damage will accrue to him in the future.  It is a jurisdiction to be exercised sparingly and with caution but in the proper case unhesitatingly.

36.  He further submitted that the respondents have been complying with the Codes.  The keeping of Token, a “home dog”, causes no harm or damage to anyone.  No grave damage can conceivably be caused to other owners. 

37.  On the other hand, Ms Chan for the applicant submitted that since dog-keeping has been a problem at Shatin 33 for many years, the applicant and the Manager have been finding ways to deal with the problem.  Nonetheless, the System was proved a failure and the applicant, as the incorporated owners, has a paramount duty to ensure strict compliance of the DMC.  Further, the respondents have been given ample time to remove Token.

38.  Ms Chan further submitted that factors such as “sentimental value” and “emotional ties” with the dog should not be a reason to refuse equitable relief in the present case and relied on景田苑業主立案法團v Pang Wah For & Leung Chin Wan LDBM 312/2013 (6 June 2014) per Deputy Judge T Chan at paras. 14 to 18 of the judgment, in particular:-

“16. ……答辯人等與小狗的感情，本席亦可理解，分離當然會導致他們傷心難過，但這 “困苦” 不是申請人有責任替他們承擔或抒解，而是他們應自行解決的，本席亦不能接納這說法成為拒絕頒發兩項禁制令的理由，否則公契條款便會因各業主的情感需要失去約束力。”

39.  Since I have already decided that it is beyond the power of the applicant to allow dog-keeping by the individual owners under the DMC, I consider that it is illogic for me to refuse to grant the mandatory injunction.  Otherwise, the Tribunal is making an order indirectly compelling the applicant to do something which is ultra vires or beyond its power.  Even if I have such discretion, I will still refuse to exercise as I consider that damages must be an insufficient remedy to the applicant and that no substantial hardship is caused to the respondents.  In my view, the respondents are financially capable of renting an apartment or house, in which dog-keeping is allowed and they can move in together with Token.  I fail to see any good reason as to why they have to insist to reside with Token in the House but not the other suitable place.

Conclusion

40.  In the circumstances, taking into account of the poor health condition of Token, I make the order that:

(i) the respondents and/or their agent(s) and/or their servant(s) shall remove all their dog or dogs out from Shatin 33 on or before 17 December 2018;

(ii) should the respondents fail to comply with the above, the applicant and/or its agent(s) and/or its servant(s) be authorized to enter the House for the purpose of moving the dog or dogs out from Shatin 33;

(iii) an order nisi that the respondents do pay costs of these proceedings including all costs reserved, if any, to the applicant with certificate for Counsel, to be taxed on the District Court scale, if not agreed, which shall become absolute unless any of the parties apply to vary the same by way of summons within 14 days.

41.  Lastly, I thank Counsel for their helpful assistance to the Tribunal.