FAIRVIEW PARK PROPERTY MANAGEMENT LTD v. SUN WAI CHUN

CACV 271/98 and 61/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 271 OF 1998 AND 61 OF 1999

(ON APPEAL FROM HCA 5782 OF 1994)

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D E C I S I O N

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Nazareth V-P:

1. This is an application by the defendant for leave to appeal to the Court of Final Appeal against the judgment of this Court given on 11 August 1999. It is made under s.22(1)(b) of the Court of Final Appeal Ordinance (Cap. 484) in respect of the discretionary power to grant leave both as a question of great general or public importance, and in the alternative as one that otherwise ought to be submitted to that Court for decision.

2. For the purpose of addressing the application, the material facts can be stated quite shortly. The defendant is the owner of a semi-detached house in Fairview Park, Yuen Long. One of her predecessors in title made substantial alterations to five walls of the house. The plaintiff company, which manages Fairview Park under a Deed of Covenant ("the DMC") has for some considerable time been attempting to secure reinstatement of the house to its original form. At least one of the defendant's predecessors in title, and indeed the defendant herself, have at different times agreed to effect such reinstatement and have sought additional time to do so from the plaintiff. Ultimately, the plaintiff commenced the present legal proceedings claiming injunctions to compel the defendant forthwith to effect the restorations in question, a declaration that the defendant indemnify the plaintiff against all damages resulting from the defendant's breaches, and in the alternative an order that the defendant allow the plaintiff to enter into the premises and itself to effect the work and recover the costs from the plaintiff. The action came before Waung J in the Court of First Instance. He found for the plaintiff and granted the plaintiff a prohibitory injunction restraining the defendant from hindering or preventing the plaintiff from entering into the house and carrying out the reinstatement works. He also ordered the defendant to indemnify the plaintiff in respect of the costs and expenses of carrying out the reinstatement works. Finally, he ordered the defendant to pay costs of HK$1,600,000 and HK$133,000 assessed by way of gross sum assessment under O62 r9(4)(b) of the Rules of the High Court.

3. Of the numerous grounds originally relied upon in the application for leave, Sir John Swaine SC, who with Mr Simon Yip appears for the defendant, and who came late into the case, relies upon only one: that upon a proper construction of the DMC and the Estate Rules ("the Estate Rules") made thereunder, it was only the owner who had made the alterations that was liable to restore them or in default to pay the costs of their reinstatement by the plaintiff ("the construction point"). It has to be said that prima facie those documents do appear to have the effect contended for and that upon that basis the defendant would be entitled to succeed. And that seems to be reflected in the relief granted by the judge by way of prohibitory injunction as opposed to mandatory injunction and in the partial reliance by this Court upon the construction point not having been pleaded. Sir John submits that the construction point is a question of great general and public importance.

4. For the plaintiff it is contended that the point was never pleaded. This, Sir John disputes, submitting that the point was pleaded by a general traverse. To properly consider his submission, it is necessary to see how the matter is said to have been pleaded. By its Re-Re-Amended Statement of Claim, the plaintiff pleaded that by provisions of the DMC and the Estate Rules which it specified, alterations were not to be made to the house without its written approval; that a particular provision of the Schedule to the DMC gave the plaintiff power to remove illegal structures and alterations and to demand and recover the costs and expenses of removal from the owner; that by the Estate Rules these powers can be enforced against the defendant; and that despite repeated demands and requests, the defendant and her predecessors had failed and refused to remedy the breaches.

5. In response to those detailed averments, what Sir John proffers as the defendant's pleading of the construction point is a bare traverse in the following terms in paragraph 3 of the re-amended defence:

"3. Paragraphs 3 to 8 of the Re-Re-Amended Statement of Claim are not admitted."

This, it is submitted, is a sufficient traverse of the plaintiff's detailed pleading and suffices to raise the specific point now relied upon, i.e. that the particular predecessor in title who effected the unauthorised alterations is liable and not the defendant. On appeal, this Court took the view that the point was not pleaded. It said so at p.9 of its judgment. Moreover, the point was not included in the summary or list of points in issue made by the judge. The defendant and her counsel had the opportunity of asking for its inclusion but did not do so. Consequently the judge did not address it, nor did the Court of Appeal.

6. Mr Ronny Wong SC, who with Mr Johnson Lam, also appeared for the plaintiff below, in strenuously opposing Sir John's reliance on the point, submits also that had the point been pleaded and taken, he would have adduced relevant factual evidence and made additional submissions. In particular, he referred to the defendant's acceptance that she was liable to make the restorations and to the extension of time that she had sought and obtained.

7. Taking another point, he submits that the construction point does not raise a question of great general or public importance. It seems to me that this must be right given the absence of any evidence that deeds of mutual covenant and similar estate or other rules so plainly deficient in their practical effect are common in Hong Kong. Their impracticality, in apparently confining liability and reinstatement obligations to the particular owner who effected the offending alterations, obviously thereby seriously undermining their enforceability, must suggest that they are unlikely to be used to any significant extent.

8. Sir John also had a second submission which ran thus. The proper construction of the DMC and the Estate Rules plainly shows that the defendant is not liable to reinstate the house or to indemnify the plaintiff for carrying out the reinstatement works. The position is so clear that there is a manifest injustice to the defendant, upon the basis of which the construction point is a question that ought to be submitted to the Court of Final Appeal for decision. In respect of that submission, Sir John also relied upon the following authorities. First, Archer v The Hong Kong Channel Ltd [1998]1 HKLRD 829, in reliance upon which he submitted that "an error of law is manifest upon the face of the Judgment" here in the defendant being held liable for the wrong of a predecessor contrary to the DMC, and that the defendant has suffered injustice. While the Appeal Committee of the Court of Final Appeal in their judgment in Archer did refer to an "injustice" characterising it as a "glaring injustice", and while it is manifest from their judgment that the result represented an error of law, I do not think those features identified by Sir John can be fairly regarded as the ratio of the Court's decision there. It seems to me to have been a decision that, with respect, was right for that Court, but one that was made in exercise of discretion upon the particular facts. I cannot see that the judgment assists the defendant, particularly in respect of the two features identified. Besides, I do not think it can be said that there was here clearly injustice to the defendant, a fortiori glaring injustice.

9. The other authorities relied upon, i.e. Halsbury's Laws, Vol 10 para 785; Yeo v Tatem "The Orient" [1871] LR 3 PC 696; and Karikari v Agyekum [1955] AC 640, are relied upon in support of the submission that special leave should be granted where there is a mistake on a matter of law which governs the costs. This relates to the last paragraph of the judge's judgment handed down on 9 February 1999 in which he said this:

"As for costs, having regard to the right of the Plaintiff under the Deed of Mutual Covenant to have its costs on an indemnity basis, ... I make an order of costs ... and hereby assess such costs by way of gross sum assessment ... at $1,600,000."

Sir John's submission is that since the judge was wrong to order the defendant to pay the costs of reinstatement pursuant to the DMC, he was wrong to invoke the DMC as justification for ordering costs against the defendant upon the indemnity basis. It can be seen that this submission, as formulated, relies upon the construction point, which was not pleaded, as its first essential component. It seems to me therefore that in this latter respect, also, the defendant ought not to be permitted to rely upon it. Upon that basis, Sir John's reliance upon the additional authorities does not avail. In addition, it also seems to me that the serious prejudice to which the plaintiff may be exposed is further good reason why the defendant ought not to be permitted to rely upon the construction point. I have to say, however, that notwithstanding that I remain firmly of the opinion that the defendant ought not to be permitted to rely upon the unpleaded construction point in the context of her appeal against the indemnity costs order, the conclusion I favour here does not emerge as clearly as it does in relation to the appeal proper. I recognise that if I am wrong here, it would presumably be good reason for discretion to be exercised in favour of leave being granted upon the second ground in s.21(1)(b), i.e. that the question is "otherwise" one that should be considered by the Court.

10. I would add that in the same way that a question to which the answer is perfectly clear would not be accepted as a question for which leave should be granted, a question which it is not permissible for the applicant to raise under the law (even though it be not permissible for failure to comply with a procedural requirement of the law) should not be accepted as a question for which leave should be granted. It is simply a question that does not arise in the first place. In that regard, I think it should be explained that the construction point was far from being among the issues relied upon at the trial and on appeal to this Court. The latter were issues arising out of the views of Mr Bing Choy, primarily that there were no building plans, that consequently there could be no illegal structures, and that the Authorities who should have had control over those matters had got it wrong as to which statutory regime applied.

11. In the result, I have come to the view that leave should be refused. In summary, first, because the construction point was neither pleaded nor taken before Waung J. Second, because that stance was compounded in the Court of Appeal by Sir John who chose to rely upon the general traverse and must be taken to have elected to continue upon pleadings that did not disclose that point. And, third, because the onus of showing that the point raises a question of great general or public importance must be on the defendant/applicant and she has, in my view, not discharged it. Indeed, it seems to me that such indications as there are suggest that the construction point is peculiar to the Fairview DMC and Estate Rules and further to the particular circumstance where the removal is sought of alterations made by a predecessor-in-title. In the result, it seems to me that if leave is to be granted at all in the foregoing context, a fortiori, when the applicant has actually declined to amend her pleadings to include it, it is appropriate that such leave should come from the Court of Final Appeal itself.

12. For the reasons I have endeavoured to give, I would refuse the defendant's application for leave to appeal. As to costs, I can see no good reason why these should not follow the event, and I would make an order nisi that the plaintiff is to have its costs of the application.

Keith JA:

13. I agree. In the course of oral argument on the application for leave, Sir John Swaine S.C. for the Defendant developed only one ground for saying that the Defendant should not have been required to pay the cost of restoring the house to its original form. The argument was that, on a proper construction of the Deed of Mutual Covenant and the Estate Rules, the power of the management company to require an owner of property in Fairview Park to remove unapproved alterations is a power which can only be enforced against the owner under whose authority or on whose instructions the unapproved alterations were made. That power, and any consequential power to recover the cost of removing unapproved alterations, cannot be enforced against that person's successor-in-title. I shall refer to this argument as "the construction argument".

14. The construction argument was not advanced before Waung J. in the Court of First Instance. It was advanced for the first time on the appeal to the Court of Appeal. It was not considered by the Court of Appeal on its merits (even though it was plainly arguable), because the Court of Appeal was of the view that it would not be right to consider it since it had not been pleaded. I remain of the view that the contention that the construction argument had been pleaded by virtue of the general traverse is simply not sustainable. The provisions of the Deed of Mutual Covenant and the Estate Rules on which the Plaintiff relied to establish that it had the power to require the Defendant (being the successor-in-title of the owner under whose authority or on whose instructions the unapproved alterations were made) to remove the alterations were expressly pleaded in the Re-re-amended Statement of Claim. Paras. 3 and 4 of the Re-amended Defence simply pleaded that the relevant paragraphs in the Re-re-amended Statement of Claim were not admitted. That merely required the Plaintiff to prove that the Deed of Mutual Covenant and the Estate Rules were indeed subject to the provisions pleaded. It did not put in issue the question whether, on a proper construction of those provisions, the Plaintiff had the power to require the Defendant to remove the alterations.

15. Accordingly, the Defendant's argument has to be that the Court of Appeal was wrong to regard the failure of the Defendant to plead the construction argument as preventing the construction argument from being argued in the Court of Appeal on its merits. In the Court of Appeal, it had been argued that the merits could not properly be addressed because, although the issue was one of construction, the Plaintiff would have wished to call further evidence if the issue had been a live one at first instance. In my view, although I was persuaded by that argument, I can see now, as I could see then, room for the view that the further evidence which the Plaintiff would have wished to call, and which related to the Defendant's earlier agreement to remove the alterations and her request for more time to enable her to do so,

(a) would not have added anything of significance to the evidence which the Plaintiff had called on those topics, and

(b) would not have assisted on the proper construction of the relevant provisions.

It is therefore arguable, in my opinion, that the Court of Appeal erred in not considering the construction argument on its merits, even though it had not been pleaded and was raised in the Court of Appeal for the first time.

16. The next question is whether, if the Court of Appeal erred in that respect, its failure to consider the construction argument on its merits raises a question of great general or public importance. The evidence was that Fairview Park consisted of some 5,000 houses. I acknowledge that the owners of all those houses are affected by the Deed of Mutual Covenant and the Estate Rules whose construction is the subject of the construction argument. If their predecessors-in-title effect unapproved alterations to their houses, their rights would be governed by a definitive ruling of the Court of Final Appeal as to the proper construction of the provisions in the Deed of Mutual Covenant and the Estate Rules to which the construction argument relates. But the Court of Appeal's failure to consider the construction argument on its merits does not prevent the owners of other houses in Fairview Park from relying on the construction argument in any litigation to which they are parties. No question of any issue estoppel can arise since the owners of other houses in Fairview Park were not parties to this litigation. The Court of Appeal's failure to consider the construction argument on its merits only affects the Defendant in the present case, and for that reason cannot be said to raise a question of great general or public importance.

17. The final question is whether leave to appeal should be granted on the ground that the case ought "otherwise" to be submitted to the Court of Final Appeal. The circumstances in which the Court of Final Appeal should consider a case which does not raise a question of great general or public importance must be extremely rare. On the whole, therefore, it is preferable for the Court of Final Appeal itself to decide whether leave to appeal should be granted on this ground. However, I recognise that the Court of Appeal itself has the power to grant leave to appeal on this ground if the circumstances can be described as truly exceptional or presenting a really unusual feature. I do not think that the present case does that. It may be that the Defendant has suffered an injustice by not having the construction argument considered on its merits, but the ultimate (if not the proximate) reason for that was the failure to take or plead the construction argument at first instance.

18. Finally, a number of other grounds for obtaining leave to appeal were relied on in the amended application for leave to appeal and in the skeleton submission of Mr. Simon Yip. Although Sir John did not abandon them, he chose not to develop any of the arguments orally. It is, I think, sufficient for me to state that they do not raise any argument which in my opinion is sufficiently arguable as to warrant their submission to the Court of Final Appeal for decision.

Chan CJHC:

19. I agree with the judgment of the Vice President.

20. The trial judge did not deal with the issue that on the true construction of the Deed of Mutual Covenants and the Estate Rules, the defendant was in breach by not rectifying (as opposed to making) the alterations in questions which were carried out by her predecessor-in-title. This was because the issue was not raised before him. At the time of the appeal before the Court of Appeal, the issue was raised as Ground 4 of the Grounds of Appeal. The Court of Appeal did not deal with it on its merits since this was never properly raised on the pleading and at the trial

21. At the hearing of the present application, Sir John Swaine S.C. had indicated to this Court that he was content with the present pleadings which he considered sufficient to put the construction issue before the court. In our view, it was not. Faced with this state of affairs, I fail to see how the construction issue can be a proper issue to be argued before the Court of Final Appeal. It is for the Court of Final Appeal to consider whether, notwithstanding the lack of proper pleadings and the failure to raise the issue in the lower courts, it is an issue which is worth considering and if it is, to grant leave to do so.

22. As to the question of whether this is an issue of great general or public importance, I am aware that there are about 5000 owners in Fairview Park and that a court decision on the relevant clauses in the DMC and the Estate Rules would be helpful to these owners. However, I do not think any of them would be bound by the judgment in this case, at least as far as the construction issue is concerned, particularly when it has not been properly pleaded or argued. In any event, if Sir John's argument on this issue is correct (and I hasten to say that it seems to be a very strong argument which Mr Ronny Wong SC for the respondent had not seen fit to answer), I am sure that other owners in the same estate would like to take this issue on a proper basis in an appropriate future case.

23. For the reasons given by the Vice President, I too would refuse leave.

24. The application for leave to appeal to the Court of Final Appeal is therefore refused. There will be an order nisi that the plaintiff shall have its costs of this application.