The Taikoo Shing (Management) Ltd. v. Trillon (H.K.) Ltd.

For Circulation

Building Management Case No. 35 of 1995

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HEADNOTE

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Building Management - Deed of Mutual Covenant - Unauthorized Structures - Interpretation and Construction of Covenants - Waiver, Acquiescence and Estoppel - Deed of Mutual Covenant - Building Manager.

The applicant is the estate manager of Taikoo Shing. The estate has no owners' incorporated. The respondent is the owner of a top floor flat with the roof above in the estate. The balcony of the flat which was not previously encased is completely enclosed by window and glazing. The roof of the flat which was previously bare had a partially enclosed structure anchored on and stretches over almost the entire roof. The applicant sought a mandatory injunction order for the removal of the roof structure and the balcony enclosure on the ground that they were in breach of a number of provisions in the deed of mutual covenant. The respondent opposed on the numerous points of interpretation which in sum suggest that the provisions in the deed of mutual covenant do not have the effects contended by the applicant. Moreover, because the Building Ordinance Office has approved the roof structure as is, the applicant cannot seek to ban it. In addition, although by recent Hong Kong authority an owners' incorporated with statutory duty to enforce a deed of mutual covenant cannot acquiesce at breaches of the deed, the respondent contends that the equitable defence of waiver, acquiescence or estoppel can be set up against the applicant as estate manager per se.

Held: (1) On the true construction of the various provisions in the deed of mutual covenant, the roof structure and the balcony enclosure constitute breaches of the deed of mutual covenant. (2) In respect of the roof structure approved by the Building Ordinance Office, the government applies a standard deemed to be in the public interest. The applicant, on the other hand, applies a standard that is contractual. There is no principle of law that says that contractual standards cannot be higher than that may be enforced on society at large. (3) In respect of the applicability of the equitable defence of waiver, acquiescence or estoppel, the distinction between owners' incorporated and building manager has no legal consequence. The Building Management Ordinance, Cap. 344 has made it possible, despite entrenched obstacles in the DMC, for small owners of buildings and estates to incorporate themselves. There is nothing to prevent the owners of the estate from forming an owners' incorporated which, according to prevailing authority, is not affected by the equitable defence of acquiescence. It would be absurd to hold that for now the respondent and other owners with similar breaches are immune from action by the applicant when at any time later the Tribunal is obliged to grant injunction orders for the same breaches on application by an owners' incorporated of the estate. (4) Bearing in mind the law does provide for limitation periods, the Tribunal cannot lightly come to the conclusion that the breaches by the respondent had been condoned or that the applicant has acquiesed in the breaches by not taking positive, aggressive action before the relevant limitation period has lapsed. This is not to say that waiver, estoppel or acquiescence can never be set up before the limitation period has expired, but the court must be slow to find waiver, acquiescence or estoppel on the basis of silence or tardiness on the part of the applicant. (5) Disregarding the inherent powers of an owners' incorporated enforcing the deed of mutual covenant with statutory authority, the applicant as the estate manager operating solely under the deed is a trustee, not an agent, of the interests of all the owners in the estate. As such, the applicant cannot waive or lay to waste the rights of all the owners in the estate that are enshrined in a deed of mutual covenant. (6) Even if the applicant is treated as agent, in the absence of clear evidence to the contrary, it would be perverse to hold that all the owners of the estate would authorize the agent to suffer breaches of their rights enshrined in the deed of mutual covenant. (7) Accordingly, judgment for the applicant with injunction order in terms as sought.

L.T. Case No. BM35 of 1995

IN THE LANDS TRIBUNAL OF HONG KONG

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JUDGMENT

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The applicant is the manager of the private housing estate known as Taikoo Shing ("the Estate"). The respondent is the registered owner since 1993 of Flat 28H on the 28^th Floor and roof H thereabove of Maple Mansion ("the subject premises") within the Estate. The respondent's immediate predecessor in title is another company named Takearn Investment Limited ("Takearn") which acquired the subject premises in 1989. It is not disputed that one Mr. Hoo is a director and shareholder of both the respondent company and Takearn.

2. There is effectively no dispute between the parties as to many of the crucial facts. Some time in 1989, Takearn started to do some work on roof H and the balcony of the subject premises. The Building Ordinance Office took exception to the work on the roof and, in due course, went so far as to issuing statutory orders and closure orders directed against the work on the roof. Eventually, the work on the roof was modified to the satisfaction of the Building Ordinance Office and, undeniably, now there is a partially enclosed metal frame that is anchored on and stretches over almost the entire roof H and the flat balcony totally enclosed with window frames and glazing.

3. The applicant seeks a mandatory injunction requiring the removal of the roof structure and the balcony enclosure on the ground that they constitute breaches of the Deed of Mutual Covenant applicable to the subject premises ("the DMC") and had been erected without approval. The respondent obviously says that there is no breach and that, even if there is any breach, there has been acquiescence, waiver or estoppel. At my invitation, counsel for each party has submitted very thorough written final submissions.

The DMC

4. Counsel for both parties have referred to a number of clauses in the DMC which are:-

"Clause 18(a)

(i) Except as hereinafter mentioned in the case of shops in respect of advertising, or in the case of chimneys or window boxes affixed by the said Company as hereinafter mentioned, no external signs, signboards, notices, advertisements, flags, banners, poles, cages or other projections or structures whatsoever extending outside the exterior of the said buildings or any boundary walls shall be erected, installed or otherwise affixed or projected from the premises of any owner or any part of the said buildings in common ownership and no washing, clothing or other articles shall be hung, dried or otherwise exposed outside any of the said buildings except in the places specifically provided for such purposes.

(ii) Save as is hereinbefore expressly authorised no owner shall do or permit to be done any act or thing which may or will alter the external appearance of any of the said buildings."

"Third Schedule

Paragraph 2

No external shades, awnings, window guards, signs, aerials, fittings or structures shall be installed erected or used in or about any of the said buildings on the said Land until such shall have been approved in writing by the Management Company. No owner shall paint the outside of any building or do or permit to be done anything which would in any way alter the facade or exterior appearance of any of the said buildings on the said Land."

"Third Schedule

Paragraph 19

No owner shall without the prior written consent of the Management Company erect or build or suffer to be erected or built on or upon the roof of any of the said buildings any structure whatsoever either of a permanent or temporary nature."

"Third Schedule

Paragraph 21

No owner shall erect or build or suffer to be erected or built on the verandahs of the said buildings any walls, windows, gates, doors, curtains, external awnings, canopies, partitions or any other structures whatsoever either of a permanent or temporary nature so that the said verandahs will be enclosed or partitioned either in whole or in part and no owner shall without the prior written consent of the Management Company erect or build or suffer to be erected or built on the said verandahs any security bars, protective grilles or other similar structures and where such installations have been approved in writing by the Management Company the same shall be erected in accordance with designs approved ..."

5. At first sight, all these clauses and paragraphs seem to operate against the roof structure and the balcony enclosure of the subject premises. Indeed this is the applicant's case. Upon closer examination, one cannot fail to notice that there are two types of prohibitive provisions in the DMC. Some provisions and part of other provisions in the DMC simply say that an owner cannot do this and that. These may be called strict prohibitions. Paragraph 19 in the Third Schedule is an example of this type. The other type is prohibitions which may be relaxed with approval. For instance, Paragraph 21 in the Third Schedule reproduced verbatim above can be broken down into two parts, the first part being a strict prohibition against enclosure or partitioning of the balcony whereas the second part allows approved security fixtures on the balcony. Similarly, the two sentences in Paragraph 2 in the Third Schedule in effect impose respectively two different types of prohibitions.

6. In my view, Clause 18(a) does not apply to the present case. The list of prohibited articles or things there, i.e. external signs, signboards, notices, advertisements, flags, banners, poles, cages or other projections or structures, defines a genus of advertising devices. The present roof structure and the balcony enclosure clearly do not belong to such genus.

7. The first sentence in Paragraph 2 in the Third Schedule is irrelevant but the second sentence which says "no owner shall paint the outside of any building or do or permit to be done anything which would in any way alter the facade or exterior appearance of any of the said buildings", I believe, covers the roof structure and the balcony enclosure. The "do or permit to be done anything (emphasis added)" cannot be coloured by the earlier paint; otherwise anything is meaningless. Not gifted as counsel for the respondent, I am hard put to imagine any action which is not paint but which, as counsel argues in submission, can be regarded as belonging to a genus of action called paint. Doing the best I can, one would recall elementary physics that colour is the effect of reflection of light. If paint is taken to mean any action that would alter colour, window and glazing enclosing the balcony is paint because the glass panes do alter the reflection of light as can be seen from the photographs. The roof structure appears to a viewer from a distance to be grid or patch marks which can be regarded as the result of paint even though no actual painting has been done on the roof on which the structure stands.

8. Counsel for the respondent ingeniously contends that to consider whether there has been alteration to the exterior appearance of the building, one must have comparison with the original pristine appearance of the building. It is true that the applicant has not formally adduced evidence on the appearance of the building before the roof structure and the balcony enclosure were installed. However, one can still have a clear picture of what the roof and the balcony were like previously by looking at the units nearby which do not have the structure or the enclosure complained of. Having studied the photographs (Exhibit F), I have no doubt that both the roof structure and the balcony enclosure alter the exterior appearance of Maple Mansion. In other words, the roof structure and the balcony enclosure are in breach of Paragraph 2 in the Third Schedule.

9. Also as a matter of literal interpretation, unless prior written consent of the applicant has been obtained, the erection or building of any kind or shape of structure is a breach of Paragraph 19 in the Third Schedule. I would go further to hold that even if the applicant is minded to given consent to the respondent under Paragraph 19 to put up a roof structure, the approved structure cannot contravene Paragraph 2 which imposes a strict prohibition, i.e. such structure cannot be of the kind or shape that would alter the exterier appearance of the Maple Mansion.

10. Counsel for the respondent says that Paragraph 21 of the Third Schedule does not apply to the balcony enclosure of the subject premises because that paragraph refers to verandahs, not balcony. I suspect verandahs, like thugs, is one of those words that found their way into the English vocabulary in India. It has a narrow import which does not apply to multi-storey buildings. Nowadays, verandah is synonymous with balcony. Since the first sentence in Paragraph 21 of the Third Schedule strictly prohibits any kind of structure on the balcony, the existing balcony enclosure, irrespective of whether it amounts to an alteration of the exterior appearance of the building within the meaning of Paragraph 2 in the Third Schedule, is in breach of Paragraph 21 in the Third Schedule.

11. Counsel for the respondent also says that in order to be in breach, the structure or enclosure complained of has to be protruding beyond the external wall of the building. With respect, I cannot see the basis for such interpretation. A building is three dimensional with opennings as per design. I should think the preservation of the appearance of buildings viewed from the top or any elevation is the object of Paragraphs 2 and 21 in the DMC. The roof structure of the subject premises clearly rises above the roof level. The window and glazing enclosure seals off an openning and turns the balcony of the subject premises into some sort of living space. If such additions and renditions do not alter the exterior appearance of a multi-storey building, I do not know what will. It does not assist the respondent by drawing an analogy with balcony metal grilles that may be approved. Such grilles are for improved security without converting the exterior appearance of the building. Window and glazing enclosing the balcony gives the appearance that the flat unit so endowed has living space extending to the frame of the external wall whereas metal grilles still preserve a balcony in appearance. It has also been suggested that window and glazing is more expensive and beautiful, hence acceptable. In my view, as a matter of literal interpretation, anything that alters the exterior appearance of the building, whatever asthetic enhancement such thing may bring to a building, is strictly prohibited.

12. Counsel for the respondent says, moreover, that because the Building Ordinance Office has approved the roof structure as is, the applicant cannot seek to ban it. This is obviously a non sequitur. The government applies a standard deemed to be in the public interest. The applicant, on the other hand, applies a standard that is contractual. There is no principle of law that says that contractual standards cannot be higher than that may be enforced on society at large.

Acquiescence, Waiver or Estoppel

13. Other than general allusion to illegal structures, the applicant had not expressly denounced the present roof structure and balcony enclosure until 1994. The record shows that by a letter dated 21^st February 1994 the applicant had protested to the owner of the subject premises about the breaches and in September 1994 solicitors for the applicant issued a letter before action to the respondent. The photographs (Exhibit F) admitted into evidence by consent show that a number of units in the same and other buildings in the Estate do have their balconies enclosed by windows and glazing in more or less the same manner as found in the subject premises. By failing to enforce the DMC earlier and by tolerating breaches before 1994, so counsel for the respondent argues, the applicant has acquiesced in the breaches or is estopped from enforcing the DMC now. Counsel relies on, inter alia, Cheung Yuet and another v. The Incorporated Owners of Oriental Gardens [1979] HKLR 536 where the Court of Appeal upheld the equitable defence of acquiescence against the owners' incorporated and set aside an injunction order granted at first instance.

14. On the other hand, the applicant has never given explicit approval to the roof structure or the balcony enclosure. There is on record owners' manuals and circulars issued by the applicant to all the owners in the Estate enjoining them not to put up illegal structures. Counsel for the respondent believes that illegal is different from unauthorized, the former refers to contravention of the Buildings Ordinance and the latter to breach of the DMC. I am unable to see such fine distinction. The respondent says that there is some sort of policy of tolerance of unauthorized structures well known to some roof owners' committee of which Mr. Hoo of the respondent is a member. I do not know what legal status is to be accorded to that committee. I find it strange that the alleged policy is not evidenced by any memorandum binding on the applicant. In any event, in the light of the jurisprudence I will refer to in due course, I do not think the policy, if it existed, has any effect. There is evidence that the applicant took issue with Takearn and the respondent on the roof structure right from the beginning, but only in respect of the design objected to by the Building Ordinance Office. One might say, in the ideal situation, the applicant should have taken action sooner. But it is common sense that there is a practical limit on resources (such as funding for legal services and litigation) available to the manager of a housing estate for the purposes of enforcement of the DMC. How can one penalize a patient or even overly cautious estate manager who does not go to court until the situation seems to be getting out of hand? Bearing in mind the law does provide for limitation periods, I cannot lightly come to the conclusion that the breaches by the respondent had been condoned or that the applicant has acquiesed in the breaches by not taking positive, aggressive action before the relevant limitation period has lapsed. I am not saying that waiver, estoppel or acquiescence cannot be set up before the limitation period has expired, but I should think the court must be slow to find waiver, acquiescence or estoppel on the basis of silence or tardiness on the part of the applicant.

15. More importantly, in The Incorporated Owners of Hoi Luen Industrial Centre v. Ohashi Chemical Industries (Hong Kong) Ltd. [1995] 2 HKC 11 the Court of Appeal held that since an owners' incorporated has a statutory duty under the precursor to the Building Management Ordinance, Cap. 344 to enforce the DMC, the equitable defence of acquiescence cannot be held against such corporation. This decision, apparently, was made without reference to the earlier contradictory one in Cheung Yuet and another v. The Incorporated Owners of Oriental Gardens [1979] HKLR 536. Since then, the High Court in Hong Yip Service Co. Ltd. v. Candela Co. Ltd. [1997] 1 HKC 273 has followed the latter decision of the Court of Appeal. In the circumstances, it would be safe to follow the latest decision of the Court of Appeal. However, my task has been made more complicated by a submission for the respondent that the present case is distinguishable because the applicant is the estate manager and there is no owners' incorporated for the Estate. On reflection, I think the distinction should pose no legal consequence. The Building Management Ordinance, Cap. 344 has made it possible, despite entrenched obstacles in the DMC, for small owners of buildings and estates to incorporate themselves. There is nothing to prevent the owners of the Estate from forming an owners' incorporated which, according to prevailing authority binding on me, is not affected by the equitable defence of acquiescence. It would be absurd to hold that for now the respondent and other owners with similar breaches are immune from action by the applicant when at any time later the Tribunal is obliged to grant injunction orders for the same breaches on application by an owners' incorporated of the Estate.

16. Furthermore, disregarding the inherent powers of an owners' incorporated enforcing the DMC with omnicompetent statutory authority, I am inclined to think that the applicant as the estate manager operating solely under a DMC is a trustee, not an agent, of the interests of all the owners in the Estate. As such, the applicant cannot waive or lay to waste the rights of all the owners in the Estate that are enshrined in the DMC. In fact, all the English authorities so often relied upon as applying the equitable defence of acquiescence seem to involve disputes between parties who are principals of their respective rights. I have not yet been able to discover any reported English authority which considers the position of acquiescence by a collection of principals against their individual private rights through proxy or agency. Even if the applicant is to be treated as agent, in the absence of clear evidence to the contrary, it would be perverse to hold that all the owners of the Estate would authorize the agent to suffer breaches of their rights enshrined in the DMC.

17. In the premises, there should be judgment for the applicant. I make an order in terms as formulated in the written final submission by counsel for the applicant.

Dated this 8^th August, 1997