PC FORTUNE CO LTD v. THE INCORPORATED OWNERS OF KWONG FU BUILDING

DCCJ 360/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 360 OF 2007

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J U D G M E N T

1.  PCF, the Plaintiff, complains about damage to its property on the top floor of Kwong Fu Building in Mongkok, Kowloon, as a result of water seepage from the roof above and the external wall of the building.  The incorporated owners of the building, the IO, is the Defendant.  PCF claims, among others, injunction and damages.

2.  Besides denying liability, the IO counterclaims against PCF for breach of the deed of mutual covenant in respect of the building (the DMC) and seeks various injunctions against PCF.

Background

3.  This is a residential building.  The DMC was dated back in 1966.  The property in question is on the 13^th Floor right below the roof of the building (“the Property”).  The Property used to be owned by the family members of Madam Cheng Po Chu.  In 1994, PCF became the registered owner of the Property.  Cheng was and still is the shareholder and director in control of PCF.  Cheng does not live there and the Property has actually been sub-divided into various units for letting.  PCF’s case is that since about 1999, there had been water seepage from the roof and the external wall into the Property.

4.  The building used to be managed by an Owners’ Welfare Association (“the Association”).  In early February 2000, PCF, through its solicitors, complained in writing to the solicitors for the Association about the water seepage problem.

5.  The IO was formed on 6 April 2000 when it also took over the management of the building from the Association.  In the same month, PCF stopped paying management fees and again, through solicitors, complained about the water seepage problem.  Through its then solicitors, the IO denied responsibility.

6.  In November 2002, PCF commenced legal action against the IO for loss and damage caused by the water seepage as a result of the failure or negligence of the IO to maintain the roof (DCCJ Action No. 6931/2002).  This action was settled by a private agreement between the parties in writing dated 9 December 2002 (“the 2002 Settlement Agreement”).  The IO agreed to repair the roof of the building and the damaged parts of the Property while PCF agreed to pay the management fees in arrears.

7.  There is dispute as to whether the roof had been repaired pursuant to the 2002  Settlement Agreement.  Since June 2003, PCF had again refused to pay management fees.

8.  In June 2006, the IO filed its claim at the Small Claims Tribunal against PCF for the management fees in arrears whereas PCF counterclaimed for loss and damage as a result of the allegedly continuing water seepage problem (Case No. SCTC 36565/2006).  In November 2006, on a “without admission of liability basis”, PCF agreed to settle the management fees in arrears and to discontinue its counterclaim.

9.  Meanwhile, during the period between 2004 and 2006, the owners of the building resolved to carry out major renovation works to the building.  The works were commenced in late 2006 and completed in 2007.

10.  On 18 January 2007, PCF commenced the present action.  The IO put forward a counterclaim alleging that PCF had made a door opening on the corridor wall of the Property and installed an iron-gate there as well as installed water pipes on the external wall of the Property.  Both the corridor wall of the Property and the external wall of the building are common parts of the building.

Issues

11.  The above background is not in dispute.  The major issues for determination are:

(1) whether there was water leakage from the roof or the external wall of the building causing damage to the Property;

(2) if yes, whether the IO is liable for the damage;

(3) whether PCF is entitled to injunction or damages (and, if yes, how much) in respect of the damage against the IO;

(4) whether PCF has been in breach of the DMC by installation of the iron-gate and water pipes;

(5) whether the defence of waiver, acquiescence or estoppel is available to PCF; and

(6) whether the IO is entitled to the injunctions sought against PCF.

Water leakage and damage

12.  According to Cheng, since the water seepage emerged in about 1999, she and the tenants of the property had complained about the problem.  In particular, she had complained to Mr Chan Kau, who was the then Vice-Chairman of the Association.  The IO disputes that.

13.  Irrespective of the dispute, the fact was that, as mentioned above, in February 2000, PCF through its then solicitors did complain about the seepage from the roof and demanded repair by the IO.  After the IO was formed in April 2000, PCF again through its then solicitors complained to the solicitors for the IO about the same problem.  According to Cheng, PCF refused to pay management fees in protest about its repeated demands being ignored by the IO.  This led to DCCJ 6931/2002 mentioned above.

14.  The 2002 Settlement Agreement contained what the parties agreed after a joint inspection conducted on 29 November 2002.  The IO acknowledged the result of inspection and agreed to repair the seepage portion of the roof and the affected parts of the Property.  PCF in return agreed to pay the management fees in arrears.

15.  The case of the IO is that the repair to the roof had been completed pursuant to the 2002 Settlement Agreement.  PCF disputes that.  PCF produced numerous photographs depicting the condition of the roof and the affected parts of the Property dated after the 2002 Settlement Agreement.  As Mr Cheung appearing for PCF pointed out, these photographs are quite self-explanatory of the condition of the Property then.  It suffices for me to say the apparent damage was not minor.

16.  PCF also produced numerous invoices dated between April 2003 and July 2006 which evidence the repair and renovation of the ceiling and interior of the Property affected by the seepage from time to time as well as the inspection and repair of the roof.

17.  FCP also relied on the surveyor’s report dated 18 December 2006.  Mr Cheung Hoi Tat Peter of the surveyor gave evidence and explained his findings upon his inspection on 11 December 2006.  The then existence of recent water seepage and water stains was confirmed.

18.  Mr Lam Yui Ming used to be a committee member of the Association during the period between 1989 and 1999.  He has been a committee member of the IO since its inception.  Lam confirmed in court that the condition of the roof in 2002 and 2006 (before the major renovation of the building) was more or less the same.  And in 2006, the minutes of the owners’ meeting dated 20 October 2006 actually recorded that there were then many spots of damage on the roof necessitating repair and waterproof work as well as heat insulation installation.

19.  The IO relied on the evidence of Mr Wong Kwok Keung, who inspected the roof and the Property in late August 2007, i.e., after the major renovation of the building had been completed.  However, his report came to existence on 30 September 2008, i.e., more than a year later.  Somehow, his report was apparently prepared by him and the management company of the building together.  All these put this court on guard as to how much weight should be attached to it, let alone whether his opinion could be adduced as evidence at all.

20.  Referring to Wong’s evidence as that of fact, I do not find that it helps the IO.  Wong reported that he could still see stains on the ceiling and other parts of the Property at the time of his inspection but they were completely dry.  This, if accepted, could only support an inference that the seepage had stopped by the time of his inspection.  This does not contradict PCF’s case about the persistent seepage after the repair in 2002 and prior to the completion of the major renovation in 2007.

21.  According to Cheung, PCF’s surveyor, the probability of the roof being the source of the seepage to the Property was 80%.  Specifically, he noticed the surface channel on the roof connecting to an external drainpipe and considered that to be a probable leakage point to the Property.  He attributed 20% probability to the external wall because it was observed to have been cut out for repair during the major renovation.  He ruled out other possible cause of the seepage.

22.  As pointed out by Mr Cheung for PCF, the surveyor’s evidence and opinion was not effectively challenged.  I accept his evidence.

23.  Considering all the evidence, including those discussed above, I find that the water seepage problem as alleged by PCF still existed since the 2002 Settlement Agreement and at the commencement of this action.  On balance, I am also satisfied and find that the seepage came from the roof.

Liability of the IO

24.  There is no dispute that the roof is a common part of the building.  Under section 18 of the Building Management Ordinance, Cap. 344 (“the Ordinance”), the IO is under the duty to maintain the common parts in a state of good and serviceable repair and clean condition.  As a result of the 2002 Settlement Agreement, the IO became under a further and independent contractual obligation to repair the roof.  It is also indisputable that the IO was under general duty not to create or allow nuisance from the common parts to the other parts of the building exclusively occupied by the owners.  The pleaded case of PCF is that the IO was in breach of these duties.

25.  The evidence shows that the IO did engage a contractor to carry out repair to the roof as a result of the 2002 Settlement Agreement.  According to the quotation dated the same date of the agreement, the IO engaged the contractor to carry out repair work to a few spots of the roof said to have seepage and the ceiling of the Property affected by the seepage.  Such work cost HK$3,200.  The cracks in the kitchen of the Property would also be repaired at the cost of HK$800.  The receipt issued by this contractor evidences that the IO paid such cost of repair in late December 2002.

26.  Cheung of the surveyor gave evidence that the proper and adequate way to remedy the seepage problem should be to remove the existing cement surface of the roof and to install a waterproof membrane, which should run up to a certain level of the parapet, before cementing the surface again.  This would be costly even back in 2002.  A cheaper alternative would be to lay the waterproof membrane on top of the existing cement surface of the roof, though this would be undesirable for the membrane would be exposed to damage easily.  What the IO chose to do after the 2002 Settlement Agreement was nowhere near either option.  The work and the cost of HK$3,200 was also insignificant, if not negligible, when compared with the waterproof work on the roof during the subsequent major renovation of the building in 2006-2007.

27.  The comparison discussed above reflects the inadequacy of the patchy repair work carried out by the IO in 2002.  As I find above, the repair after the 2002 Settlement Agreement was ineffective as the seepage problem persisted.

28.  Mr Poon for the IO argued that the IO had done what its resources allowed it to do.  In my view, reasonableness of the step taken by the IO has no place in considering whether the IO has discharged its contractual obligation under the 2002 Settlement Agreement.  Repair that did not remedy the seepage problem was simply not effective performance and therefore not discharge of what the IO agreed to do under the agreement.

29.  Reasonableness should however be considered in the context of the other causes of action.  Mr Poon for the IO referred to 李明月and秀企業有限公司&美孚新邨第七期業主立案法團, LDBM 452/2007 where the learned Presiding Officer applied the principles in Lo Yuk Chu v Hang Yick Properties Management Ltd [1996] 4 HKC 278.  Essentially, an obligation imposed by the deed of mutual covenant on the incorporated owners to maintain the common facilities is not an absolute duty.  As long as the incorporated owners have acted reasonably in the circumstances, the duty is discharged.  Liability may arise if there if there is fault or if, having been made aware of a defect which requires remedy, the incorporated owners failed to take reasonable and appropriate steps.  I see no dispute as to the principles.  The issue is whether the IO has failed such duty in the present case.

30.  In as early as May 2000, i.e., well before the dispute between the IO and PCF, the IO was already faced with a building order in respect of the building issued by the BD.  The building order was subsequently registered against the building in June 2003.  According to the IO, the BD further issued a letter in October 2004 requesting the IO to carry out repair to the common parts of the building.

31.  According to Cheng, both she and the tenants had complained to the management, in particular the then Vice-Chairman of the IO, Mr Ng For Kan and later the Chairman, Mr Kwun Wing Hong, about the persistent water seepage from the roof since 2003.

32.  The IO disputes that, relying on the lack of record of such complaint in the logbook kept by the management office.  It could be seen that quite a substantial part of the logbook contained the caretaker’s record of his patrol.  There were indeed other records.  But the maker of the records did not come forward to explain how the logbook was kept.  An inference that what was not recorded by the caretaker in the logbook did not happen as a matter of fact would not be a safe one.  This was especially true in respect of the complaint made by Cheng directly to the committee members of the IO.

33.  Indeed, according to Cheng, she wrote to Kwun in July 2003 complaining about the persistent seepage problem and the damage caused to the interior of the Property throughout the years.  Photographs depicting the condition complained about were enclosed.  PCF demanded action by the IO.  Copies of that letter and the enclosures were produced during the trial.  2 days later, Kwun wrote to Cheng that he alone could not make any decision.  Kwun was supposed to contradict Cheng and has actually filed his statement.  Eeventually, he did not come forward to testify.  Disregarding his statement, I also have no reason to doubt Cheng’s evidence in this respect.  I find that she had complained to members of the management committee since 2003.

34.  Besides lodging complaint, PCF again refused to pay management fees in June 2003.  According to Cheng, she did that in protest about the persistent seepage problem. As mentioned above, this eventually led to the IO’s claim against PCF in SCTC 36565/2006 in June 2006.

35.  It was not until 7 November 2004 did the IO resolve to invite tender for the intended major renovation work.  Lam in court acknowledged that.  Further, this was done only as a result of the BD’s further notice to IO a month earlier.  The authorised person was appointed in late November 2004.

36.  In March 2005, the owners resolved to carry out major renovation works including waterproof work to the roof.  However, the owners rejected the tenders from the contractors and resolved to have another round of tender.  While that per se might not mean failure of duty, the fact was that nothing significant happened afterwards until more than a year later.

37.  In May 2006, the owners finally resolved to appoint another authorised person for the major renovation works.  In October 2006, the owners resolved to appoint the contractor to carry out the major renovation works including repair of the roof.  As mentioned above, it was acknowledged in the minutes of the meeting that there were many spots of damage on the roof that necessitated repair, waterproof and heat insulation installation.

38.  Notwithstanding the building order in 2002 and its registration against the building in 2003, the IO had done nothing such as at least meeting to discuss whether professional should be engaged to inspect the building and whether major renovation should be carried out.  The repair as a result of the 2002 Settlement Agreement proved to be ineffective.  PCF had had to repair the ceiling and the interior of the property affected by the seepage from time to time.  I am not surprised, in view of the kind of contractor engaged by the IO, the cost of the repair and the opinion of PCF’s expert mentioned above.

39.  In view of the history of the matter, I find the expediency in which the IO had acted upon awareness of the problematic condition of the roof fell short of what the Tribunal accepted in the factual circumstances of the李明月case cited by Mr Poon above.  I find what the IO had done or omitted to do was not reasonable in the circumstances.  Breach on the part of the IO is established.

40.  Before leaving this issue, I deal briefly with an episode in late 2006 when PCF together with some other owners requisitioned a general meeting proposing to remove the management committee members and the major renovation consultant.  According to Cheng, this had to do with how, not whether, the renovation should be carried out.  In any event, the general meeting resolved against such proposal so that the major renovation in progress actually continued.  There was no suggestion or evidence that this episode has affected the major renovation work in any material way.  In my view, this episode is immaterial to PCF’s claim.

Injunction and damages

41.  PCF seeks an injunction to restrain the IO from effectively continuing the water seepage and an injunction to compel the IO to take steps to remedy.  There is no dispute that the major renovation of the building included repair and waterproof work to the roof.  The IO contended that such work was completed in March 2007.  PCF’s case is that such work was completed only in April 2007.

42.  The work progress was actually reported in the architect’s certificates issued during the period between December 2006 and April 2007.  Comparing the certificates issued in January and April 2007, one can see that the work to the roof was not certified to have been completed until April 2007.  In July 2007, the contractor informed the BD that the major renovation works were completed on 28 June 2007.  PCF’s contention is correct.

43.  Nevertheless, as at the date of the commencement of the present action, the major renovation was still in progress and the IO had committed to carry out the repair to the roof. In my view, injunctive relief was not called for as at the date of writ.

44.  In her evidence, Cheng agreed that the situation had improved after the major renovation in 2007.  But she suggested that there was still some dampness on some spots inside the property.  In my view, her evidence of such condition of the property is not specific.  Nor is her suggestion supported by Cheung, the surveyor, who conducted the inspection when the work on the roof was yet to be completed.  In court, Cheung seemed to agree that the items of work to the roof during the major renovation were appropriate.  In answering the specific question put forward by the IO’s solicitors then, PCF’s former solicitors wrote on 1 August 2008 suggesting that the water seepage had apparently subsided after completion of the major renovation in 2007.  In his submission, Mr Cheung acknowledged that his hands are tied in respect of PCF’s proof of the condition of the property after the major renovation.  The factual basis to justify the granting of an injunctive relief at today is not established either.

45.  In my view, any loss and damage suffered by PCF as a result of the seepage problem in the past until the problem was remedied in the major renovation should be adequately compensated by way of damages.

46.  According to the pleading, PCF claims damages under 3 heads: (1) cost of repair incurred; (2) loss of rental; and (3) loss of value to the property as a result of the damage caused by the water seepage.  During the trial, PCB abandoned the last of these 3 heads.  The incidental valuation report was not adduced into evidence.

47.  Earlier on, I referred to the receipts evidencing the cost of repair incurred by PCF during the period between 2003 and 2006 in the total sum of HK$249,219.50.  The evidence was not effectively contradicted during the trial and I accept it.

48.  As mentioned above, PCF complains that as a result of the damaged condition of the property, its tenants had refused to pay rent or abandoned the property during 2005 and 2006.  PCF had also been forced by the circumstances to reduce the rent for the tenancy since August 2006.  These are particularised in the pleading and adjusted in the schedule to Cheng’ statement.  The total sum is HK$38,966.12.

49.  During the trial, it was suggested to Cheng that the property had the history of someone committing suicide by jumping out of the property.  Cheng did not deny that, but emphasized that the reason given by the tenants was invariably the water seepage problem and the condition of the property.  In my view, so long as this was the dominant and effective cause, this did not have to be the sole cause of the conduct of the tenants.  On balance, I accept Cheng’s evidence.

50.  The IO did not put in issue mitigation of PCF’s loss.  In any event, apart from repairing the interior of the Property from time to time and trying to let the Property, PCF should not have been expected to take the risk of litigation by commencing legal proceedings against the tenants who had refused to pay the rent or abandoned the Property in repudiation of their tenancy agreements.

51.  I find that PCF is entitled to be compensated for the repair cost incurred and the loss of rental as claimed.  The damages will be HK$(249,219.50 + 38,966.12) = HK$288,185.62.

The iron-gate and water pipes

52.  The IO alleges that PCF had opened an extra door on the corridor wall of the Property and installed an iron-gate there.  Further, PCF had installed on various parts of the external wall of the building water pipes connecting to the Property.  These alterations and installations were identified by the pleading and the photographs produced at the trial.  Their existence is not in dispute.  The IO complains that these were carried out without the prior consent of the IO or the BD.  PCF was said to be in breach of the DMC.

53.  The IO relied on the following provisions of the DMC:

Clause 8

 “Each of the parties hereto shall not make any structural alteration to the said buildings or to the shop/flat of which he is entitled to the exclusive use, occupation and enjoyment and shall not make any alteration to any installation or fixture so as to affect or likely to affect the supply of water, electricity or gas and shall not cut or damage any of the main walls or beams of floors of the said buildings.”

Clause 10

 “Each of the parties hereto shall not use or cause or suffer or permit to be used the shop/flat of which he is entitled to the exclusive use, occupation and enjoyment or any part thereof for any illegal, unlawful or immoral purpose.”

54.  The IO also claims that PCF is in breach of section 34I of the Building Management Ordinance, Cap.344 (“the Ordinance”) which provides that:

“(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.”   

55.  Apparently to substantiate the alleged breach, the IO had instructed an architect to comment on the door opening on the corridor wall and the water pipes on the external wall of the building.  But the IO elected not to call the architect.  Mr Cheung for PCF submitted that there was nothing to show that the extra doorway and the pipes were contrary to the building plans or that they were structural alterations.

56.  In my view, it is more likely than not that the corridor wall and the external wall of the building belong to the main walls of the building.  Alterations and installations that were made by cutting into these walls are prohibited by clause 8 of the DMC.

57.  I do not think clause 10 of the DMC is relevant.  What the clause prohibits is the illegal, unlawful or immoral use of the Property, rather than the alterations and installations which might have been made in contravention of the law.

58.  According to Cheng, the opening of the corridor wall of the Property and the iron-gate had already existed prior to PCF’s acquisition of the Property.  She must know as the immediate predecessors in title of the Property were her family members.  After acquiring the Property in August 1994, Cheng had also approached Chan of the Association and enquired about keeping the configuration as it was.  She met with no objection.

59.  Cheng also admitted that PCF caused the water pipes to be installed at the external wall of the building in late 1994.  But according to her, this was done only after she had consulted Mr Chan of the Association and in the absence of objection by the Association.

60.  Cheng’s above evidence was not effectively contradicted at the trial and I accept it.  However, a resolution of the Association or the owners’ committee sanctioning these alterations and installations never existed.  There was prima facie breach of clause 8 of the DMC and section 34I of the Ordinance.

61.  PCF alleges waiver, acquiescence and estoppel.  In any event, PCF says that it would be unjust and inequitable to grant the injunctions sought by the IO.

Waiver, acquiescence or estoppel

62.  In Cheung Yuet & Anor v The Incorporated Owners of Oriental Gardens [1979] HKLR 536, the court of appeal considered that the breaches of covenant by other owners were no less grave than the breaches committed by the defendants and that the incorporated owners had acquiesced in the particular kinds of breach which the defendants had committed.  It would be inequitable to grant an injunction against the defendants to undo what they had done.

63.  The use of the term ‘acquiescence’ in this connection by the court in Cheung Yuet was apparently not approved by Godfrey J (as he then was) in Incorporated Owners of Dagon View v Nalpak Ltd [1989] 1 HKC 549.  The court was again faced with a situation where over the years, the owners had done much in the way of visible alterations to the building including what the defendant in that case did.  However the court (at 552G-H) considered that that was not a representation by the incorporated owners that anybody who took a flat was entitled to ignore his obligations under the deed of mutual covenants; nor was it ‘acquiescence’ in any sense known to the law (despite the use of the term in this connection in Cheung Yuet).

64.  Having said that, the court recognised that the grant of an injunction is a discretionary remedy and the grant of a mandatory injunction is a particularly strong remedy.  Therefore it is always open to a defendant to show that it would be unjust and inequitable to require him to restore the position to what it was before he embarked on the works complained of (at 552B-C).  The circumstances of that case showed that arbitrarily to restrain one owner from doing what so many other owners have done in the past, whether, with or without consent, or indeed with or without the knowledge of the management committee, could lead to an unjust and unfair result (at 552I).  The court therefore refused to grant the injunction after all.

65.  Mr Poon for the IO relied on The Incorporated Owners of Hoi Luen Industrial Centre & Anor v Ohashi Chemical Industries (Hong Kong) Ltd [1995] 2 HKC 11. Now Godfrey JA in that case made clear (at 13D-E) that the IO was not only entitled to but also bound to take proceedings for the enforcement of the DMC.  Equity would not hold him bound by acquiescence to allow something which he could not have allowed by express grant.  It should be noted that in that case, the learned Judge expressly stated that his decision would have been the same even if he were wrong about the defence of waiver and acquiescence in this context as a matter of law.  This was because of the primary findings that there was no acquiescence in that case as a matter of fact.

66.  While his Lordship effectively stated that the defence of waiver and acquiescence is not available to an owner in action by the incorporated owners against him for breach of a negative covenant, his Lordship acknowledged (at 13E) what was already stated in his earlier judgment in Dragon View, namely, that equity will sometimes restrain a plaintiff in exercise of his legal rights because it would be unjust and inequitable in all the circumstances to allow him so to exercise those legal rights.

67.  The state of law presented by the authorities cited by counsel is that the circumstances which would have otherwise amounted to acquiescence or waiver do not give rise to such defence in the context of an enforcement action by the incorporated owners or manager against an owner for breach of deed of mutual covenants.  Nevertheless, the court could, and should, still consider all the circumstances of the case, including those which would have otherwise given rise to the defence of waiver or acquiescence in another context, in the exercise of discretion whether to grant equitable remedy such as injunction.

Injunction

68.  What PCF had done should be considered in the context of the altered appearance of the premises since 1966: see Dragon View at 553B-C.

69.  The existence of the extra door and the iron-gate to the Property is obvious.  According to Cheng, Kwun, the Chairman of the IO, resides on the same floor opposite the Property.  As mentioned above, no action had ever been taken by the IO in respect of the extra door and the water pipes.  Nor had there been any notice or warning issued to PCF.  It seems no concern about these alterations or installations arose at the time when the IO planned the major renovation in 2006-2007.  The pipes on the external wall of the building survived the major renovation.  Not only had the IO not threatened legal action against PCF, but Lam also agreed in court that had it not been for PCF’s claim, the IO would not have put forward the present counterclaim on the basis of PCF’s breaches.

70.  Mr Cheung submitted that PCF was clearly singled out because of this action.  He referred to similar structures and installations also apparently unauthorised.  Examples could be seen from the photographs produced.  But there is no evidence that the Association and subsequently the IO had done anything about them.  In his evidence, Lam acknowledged that the IO had no plan regarding these other possible breaches.

71.  The only written notice issued by the management company to an owner demanding the removal of unauthorised structures was dated as late as July 2008, i.e., after the commencement of this action and the counterclaim.  But that notice concerned the erection of large signboards outside the external wall and even the construction of a hut on the podium on the 1/F.  The reason for the IO’s notice was actually stated in the notice, namely, in response to the notice by BD to all buildings to remove all unauthorised structures following a recent incident where such structures fell and crushed pedestrians to death.  This was hardly an instance of the IO’s action in respect of the kind of structures and installations that we are discussing.  Notwithstanding the alleged concern about these unauthorised structures, Lam in court suggested that he did not pay attention and had no idea whether these structures still existed today.

72.  Godfrey J (as he then was) in Dragon View had the following comment (at 553H-554A):

“ …… The whole matter is made much more difficult if the management committee does not itself properly discharge its duties.  If it allows or suffers numerous breaches without complaint over the course of the years, it is not surprising that after that, no one really knows where he stands.  Of course, the officers of the management committee are frequently, as in this case, volunteers.  But once they assume the duties of membership of the management committee, they must carry them out; and that means seeing to it that the provisions of the deed of mutual covenant are performed and observed by all the individual owners.”

73.  Contrary to Mr Poon’s submission, the circumstances of the present case do not reflect the IO’s resource constraint to take action but its stance and attitude towards the breaches of the DMC on the part of the owners.

74.  Mr Cheung went further and subjected the IO’s own conduct to scrutiny.  In Hong Yip Service Company Limited v Candela Company Limited, HCA 6706/1994 (10/1/1997), the court rejected a similar argument because there was simply no evidence that the manager arbitrarily chose to enforce the covenants against the defendant: see p.19.  But in the present case, there is such evidence.

75.  There is no dispute that the IO had also erected and still maintains a structure on the roof containing even a toilet.  It was called a clubhouse during trial but was in reality an office used by the IO and its Chairman.  There was no suggestion or evidence that the structure was erected with the BD’s approval; yet according to Lam, the IO had no intention of removing it.  Mr Cheung submitted that the management committee of the IO acted against the principle that he who seeks equity must do equity.  I agree.  Not only did the IO fail to take action to prevent breach of the covenants (as explained by the court in Dragon View), but it also did quite the opposite.  Equity does not come to its assistance in the circumstances.

76.  It is clear to me that it would be unjust and inequitable to accede to the request of the IO to grant the injunction.  I refuse to grant the injunction.

Declaration

77.  Mr Poon’s fallback position is based on what the court did in Dragon View.  Refusing to grant an injunction, the court decided that the right course was to declare that in respect of each of the matters complained of by the plaintiff, the defendant was in breach of the relevant provisions of the deed of mutual covenant.

78.  In my view, while the court may do so, it is not a must especially when the IO apparently has to rely on “further or other relief” in the prayer of its claim for such a request.  Mr Cheung referred to Biss v Smallburgh RDC [1965] Ch 335 where Pearson LJ (at 361) sent a reminder that he who seeks a declaration must make up his mind and set out in his pleading what that declaration is.  His Lordship added that a plaintiff ought not to be allowed to ask the court to make a declaration covering whatever area the court shall after an inquiry conclude ought to be counted as within the Act.  I agree.

79.  In any event, a declaration is a discretionary remedy.  In Dragon View, the court accepted (at 551G) that the prime concern of the incorporated owners in bringing the action was to establish a point of principle in the better management of the building.  The court wished to vindicate the incorporated owners to the extent that it came to the court in order to establish the principle (at 553G).  As Mr Cheung pointed out, the circumstances surrounding how the IO came to put forward the counterclaim in the present case are simply different from those in Dragon View.

Order

80.  I give judgment to PCF in the sum of HK$288,185.62.  Interest from the date of writ to full payment runs at the judgment rate.  The counterclaim is dismissed.

81.  PCF should have costs.  As PCF abandoned the head of claim for diminution in value of the Property, the valuation report dated 16 January 2007 becomes redundant.  The IO should not be made to bear the costs incidental to the preparation of such report.  I therefore make a nisi order that PCF shall have the costs of this action, including those of defending the counterclaim and any costs reserved but excluding the costs of and incidental to the preparation of the valuation report mentioned above.  In the absence of any application within 14 days, the costs order shall become absolute.