FELAN INVESTMENT LTD v. SARWIN INDUSTRIES LTD AND ANOTHER

LDBM 7/2015

[2018] HKLdT 66

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 7 OF 2015

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REASONS FOR DECISION
(LEAVE TO APPEAL)

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1.  On 16 March 2018, this Tribunal handed down a decision on costs upon discontinuance of the Applicant’s (“A”) claim against both Respondents (“Rs” and individually “R1” and “R2”) and R1’s counterclaim against A. Basically, this Tribunal disagreed with the Rs’ costs proposals and ruled in A’s favour. The following costs orders were made:

i)   R1 do pay 90% of the A’s costs of its claim against Rs and defending R1’s counterclaim;

ii)   R1 do pay direct R2’s costs of defending A’s claim, suchcosts referred to (i) and (ii) above be on the    District Court scale, to be taxed if not agreed; and

iii)   A costs order nisi that Rs do pay A’s costs of the argument on costs, apportioned as to 80% be paid by R1 and 20% by R2, on District Court scale, together with certificate for counsel, to be taxed if not agreed.

2.  R1 took out the present summons of 28 March 2018 for leave to appeal against the Tribunal’s aforesaid decision, and this is the hearing of the summons.

3.  R2 did not participate in this hearing and, presumably, the intended appeal on the strength of R1’s written undertakings that, in the intended appeal, R1 will not put R2 in any “worse off” position than the original costs order of the Tribunal[1].

4.  At the conclusion of the hearing, this Tribunal dismissed R1’s application with costs on District Court scale, with certificate for counsel, and to be paid forthwith. The costs were summarily assessed at $50,840. I indicated brief reasons for decision would be handed down later, and they are set out as follows.

Brief Background

5.  Details of the background leading to the disputes between parties have been set out in the said decision. Suffice it to repeat that A and R1 are owners of shops of a composite building in Wan Chai subject to a DMC. A owned a shop on ground floor, the whole of the first floor and the external wall outside part of it has been converted to a display window. R1 is the owner of another shop adjacent to A’s shop on the ground floor. R2 is R1’s tenant occupying the said R1’s shop.

6.  The dispute arose when R1 erected air-conditioners for R1’s shop with the stack-up outdoor condensers blocking certain part of the said display window. This fact is not in dispute. A took out an Application in the Tribunal for injunctive relief and removal of the said condensers on grounds that certain provisions of the DMC have been breached. A said it has attempted to find out who was the owner of the air-conditioners but in vain. Both R1 and R2 were sued. It is not in dispute that R1 initially put A to strict proof of who had erected the said air-conditioners. Despite repeated requests for identity of the owner of these air-conditioners including asking for further and better particulars of pleadings, R1 still refused to answer positively. R1 eventually admitted it was the owner of the air-conditioners when it filed witness statements. A’s claim is referred to as “A’s Air-conditioner Claim” in the Tribunal’s decision.

7.  R1 raised several grounds of defence. It contended that A was not so entitled to enjoy the said part of the external wall according to the DMC; the display window was an unauthorized structure; it was in breach of user of the occupation permit; and that no disturbance, annoyance or obstruction as alleged was caused.

8.  In addition, R1 raised 2 counter-claims, namely, the display window being an illegal structure in breach of the DMC and Government regulations; and the 2 cabinets built by A on certain part of the said external wall to house some other air-conditioners being illegal structures in breach of Government regulations. It asked for declarative reliefs and their reinstatement/removal. These defences are referred to as “R1’s Display Window Counterclaim” and “R1’s Cabinets Counterclaim” in the said decision of the Tribunal. A’s position is that the conversion of the external wall to display window was approved by the Buildings Authority. Approved plans were exhibited. A admitted the cabinets were illegal.

9.  A then demolished the cabinets. It was followed by R1 relocating the condensers in questions to another part of the external wall. Thereafter, the parties discontinued against each other. They cannot agree on costs.

10.  At the hearing on costs, counsel of all parties basically embraced and invited this Tribunal to adopt the “successful party approach” in considering costs upon discontinuance. The principles have been more particularly set out in Famous Marvel Company Limited & Ors vs Conversant Group Limited & Ors[2] . It is essential to point out that according to the principles therein set out, the court is entitled to take a broad brush view by referring to all matters such as pleadings, witness statements, correspondence, etc. already laid before the court: see [21] of the said decision.

11.  A asked for its costs be paid by R1 and there be no costs between A and R2. If A was to pay R2’s costs, A asked for a Bullock or Sanderson order. Both R1 and R2 asked for their respective costs from A. They contended neither Bullock nor Sanderson orders should be made.

12.  For reasons set out in the Tribunal’s said decision, this Tribunal considered A being the successful party of the air-conditioner claim and display window counterclaim while R1 that of the cabinet counterclaim. Considerations referred to in section 12 of the Lands Tribunal Ordinance, Cap 17 (“LTO”), O.1A r.1 (underlying objectives) and O.62 r.5 (matters to be considered when exercising discretion) of the Rules of the High Court (“RHC”) have been taken on board. In coming to the Tribunal’s said decision, this Tribunal also takes the view that R1’s conduct of the proceedings is unreasonable and is inconsistent with the underlying objectives of the rules.

Legal Principles Applicable to Leave to Appeal

13.  Section 11(2) of the Lands Tribunal Ordinance, Cap 17 (“LTO”) provides that any appeal to the Court of Appeal (“CA”) against a decision of this Tribunal shall be on the ground that such decision is erroneous in point of law. Section 11AA(6) of LTO further stipulates:

“(6) Leave to appeal shall not be granted unless the Tribunal, the Court of Appeal or the registrar hearing the application for leave is satisfied that –

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appeal should be heard.”

14.  As I have said in First Kind Limited & Ors v Liu Keng Chor & Ors[3], the “reasonable prospect of success test” is the same as that stated in section 14AA(4) of the High Court Ordinance, Cap 4. Reasonable prospects of success involve the notion that the prospects of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable”: see SMSE v KL[4].It was explained by Chu J (as the learned JA then was) in Wynn Resorts (Macau) SA v Mong Henry[5] that by more than fanciful, an applicant is required to show more than just an arguable case, although he does not have to demonstrate that the appeal will probably succeed.

15.  This Tribunal will bear these principles in mind in considering R1’s application.

The Grounds of Appeal

16.  Again, this Tribunal does not intend to repeat its analysis here. The relevant paragraphs of the said decision will be referred to if and when necessary. Suffice it to say that the pleadings, the uncontroversial correspondence exchanged between relevant parties, witness statements have been considered. No additional documents were placed before the Tribunal for this leave to appeal application.

17.  After hearing and perusing Mr Wang’s submission and his draft Notice of Appeal filed on R1’s behalf, the grounds of R1’s intended appeal can be grouped under the following three broad heads:

i)   R1’s non-admission being the one who erected the air-   conditioners is irrelevant and/or immaterial to the    consideration of costs order (“non-admission ground”);

ii)   the Tribunal’s conclusion regarding breach of a    covenant prohibiting use, or permit to be done or    suffer the self-contained portion which may be or    become a nuisance or annoyance to others was wrong    (“nuisance and annoyance ground”); and

iii)   R1 is not a loser as held by the Tribunal. Instead, on a    proper analysis R1 should also be the winner of     A’s Air-conditioner claim. Accordingly, the costs order was wrong (“winning party ground”).

The Non-Admission Ground

18.  R1 did not deny it had adopted a non-admission stance until end of October 2015 when it filed the witness statement of Madam Wong. It is R1’s contention that although, at the costs argument hearing, A portrayed itself being in a difficult situation of who was to be sued because it did not know who was the owner of the air-conditioners, it is not the case as a matter of fact. Mr Wang submitted on a proper analysis of A’s conduct, A had all along intended to sue both from the outset.

19.  Mr Wang submitted thatat least after R1 filed the witness statement of Madam Wong by end of October 2015, A should have discontinued the proceedings as against R2 when the said doubt was removed. However, instead of discontinuing the proceedings as against R2, A chose to amend the pleadings by introducing a new paragraph 10A which purported to hold R2 liable as an occupier for a negative covenant under s.41(3) of the Conveyancing and Properties Ordinance, Cap 219 (“CPO”). The application was made on 11 January, order granted on 15 January and the amendment made on 19 January 2016. In addition, in the witness statement of one Mr Ling filed on A’s behalf, A said by using and enjoying the said air-conditioners, R2 should be liable for the annoyance and the nuisance so caused to A. All these show A intended to hold R2 liable anyway regardless.

20.  In [50] to [70] of the said decision, this Tribunal set out its analysis of the pleadings, contemporaneous correspondence exchanged between the relevant parties and the request for further and better particulars on the identity of the owner of the air-conditioner. These documents are not in dispute. The Tribunal comes to the conclusion it was R1 who maintained a difficult stance and uncooperative attitude. It intentionally made A hanging in the air as to who installed the said air-conditioners: see [60] and [69] of the said decision. In the Tribunal’s view, the evidence in support of A’s intention to know the identity of the owner before suing and R1’s deliberate withholding such information is overwhelming. Apart from causing an increase in costs, such uncooperative conduct is totally inconsistent with the underlying objectives of the rules of which this Tribunal disapproves, and therefore should be visited with an adverse costs order.

21.  As regards Mr Ling’s evidence, if one examines what he has said in the context of time, the part of his evidence referred to by Mr Wang may not help much.

22.  R1’s admission as the owner of the air-conditioner was made in Madam Wong’s statement dated 29 October 2015. It was filed with the Court on 30 October 2015[6]. On the other hand, Mr Ling on behalf of A stated that R2 should also be held liable as the one having the enjoyment and use of the air-conditioner in his statement dated 16 October 2015[7]. It was filed a few days later on 19 October 2015[8]. Obviously, when Mr Ling made such statement, he had no clue as to who installed the air-conditioners. It is not understood, as a matter of law, why he said by enjoying and using the said air-conditioner R2 would be caught liable. It is noted that when he said so he was still referring in the same paragraph to the inconsistency found in the defence of R1 and R2 as to the ownership of the air-conditioners. In the circumstances, a logical inference is that he might then wish to cast a net as wide as possible to catch R2 when he was unable to identify the owner of the air-conditioners. That may perhaps explain why he said those having the benefit of the air-conditioners should also be liable. It does not sound good legally. He did not say occupier (which will be caught by s.41 of CPO) should be liable. It therefore cannot be said that Mr Ling’s statement supports Mr Wang’s submission.

23.  In the Tribunal’s judgment, the evidence supporting A’s election dilemma, and that it was attributable to R1’s response, is very strong[9]. The original pleaded case against Rs was that it was R1 and/or R2 and/or their agent who installed the said air-conditioners. It is straight forward and simple claim. It showed A’s intention clearly. No occupier’s liability was raised. Mr Law cannot explain why after October, 2015, A appeared to have intended to widen the scope of the claim. He said it was certainly unwise. This Tribunal considers A’s subsequent amendment of pleadings insufficient to upset the Sanderson order now made against R1. It is because the documentary evidence in support of the Tribunal’s conclusion is contemporaneous, undisputable and overwhelming. Obviously, it has no bearing on the direct costs between R1 and A. A had already paid a price for its unwise move, or perhaps a change of mind out of anger, as it was required to shoulder the costs of and occasioned by the amendment. This issue had in fact been considered in [71] of the decision.

24.  Mr Wang seems to argue R1’s non-admission as to the air-conditioners’ ownership does not affect the costs much: see [13] and [14] of his written submission.

25.  This Tribunal disagrees. As said above, A’s case is rather straight forward as can be seen from pleadings. It intends to hold the one who installed the air-conditioner liable for breach of covenant. R1 put him to strict proof, and despite pre-action letters and repeated post-action moves including request for further and better particulars, such information is not forth-coming. As can be seen from the Tribunal’s decision, a lot of efforts have been spent on ascertaining the owner’s identity as well as setting out the circumstances under which it was installed. It is one of the key issues to be proved at trial. In the Tribunal’s decision, the wasted costs cannot be said to be insubstantial.

26.  R1 may disagree with the outcome of costs decision, but it is a decision which this Tribunal is perfectly entitled to come to upon exercise of a discretion. The Tribunal considers there is no reasonable prospect the CA will upset the Tribunal’s said decision on this ground.

The Nuisance and Annoyance Ground

27.  It is Mr Wang’s submission that the Tribunal should not hastily conclude that R1 has offended clause 10(c) of the DMC in that nuisance or annoyance have been proved. This mistake of the Tribunal affects the Tribunal’s conclusion on A’s air-conditioner claim and R1’s display window counterclaim.

28.  Despite the citing of a number of cases in Mr Wang’s written submission, it is fair to say that Mr Wang is not submitting the Tribunal has applied a wrong principle in assessing what amounts to nuisance or annoyance in the context of a breach of negative covenant. What he is driving at is the evidence relied on by the Tribunal is insufficient to show any reasonable disturbance to peace of mind of A. The common sense approach by saying heat dissipated at a distance of 6 inches, and a view obstructed is not good enough[10].

29.  One of the points raised by Mr Wang is the character of the neighbour[11].  He also submitted there is no actual evidence of such heat. One further point he raises is that the fan of the condenser, according to R2, blew towards the street instead of against the window. No electricity bill has been exhibited. The other part of the external wall in question housed several condensers. Accordingly, the conclusion that the heat generated by the said stack-up condensers cause nuisance or annoyance cannot be substantiated.

30.  What amounts to disturbance and nuisance is entirely a matter of degree. In the Tribunal’s decision, when the condensers are only 6 inches (which is what R1 had pleaded – 14 cm[12]) from the window, and is blocking part of the window which can be used for display of signs and/or advertisement[13], it is unarguable that there is no disturbance to peace of mind of the owner of the windowed premises. The fact that one may not suffer unbearable heat because the hot air is being blown away by the exhaust fan does not mean he suffers no disturbance, if the undisputable evidence is that the fan is just 6 inches away! In The Incorporated Owners of Fanling Centre v Wong Yu Ting Terrence and Others[14] referred to in my decision[15], no physical harm or discomfort needs be proved. The bar for breaching of the said restrictive covenant is low. Based on the uncontroversial evidence, the logical conclusion, on a balance, is that it has been breached. 

31.  It was argued by Mr Wang there is no pleading on the disturbance of the mind.

32.  It is noted that although there is no express pleading of the “magic phrase” disturbance of mind, A did plead, inter alia, the view of the window having been obstructed[16] and the air-conditioner having generated additional heat[17]. As a result, the A made complaints to the incorporated owners[18]. Mr Ling had in his witness statement stated his complaints. He also testified to the effect that he felt discomfort and disgusting[19]. The indoor air-conditioning has to be switched stronger. All the necessary indications, except the so-called magic phrase itself, for a disturbance of mind were there. It has to be remembered that we are not here playing with a game of semantics. This attack of Mr Wang is technical, and cannot be substantiated. Even though if the alleged pleadings point become relevant, this Tribunal believes, since strict rules of procedures will not be adhered to in proceedings in the Tribunal, the Tribunal would no doubt allow an amendment in order to do justice to the parties.

33.  Mr Wang referred this Tribunal to a number of authorities in support of his proposition that there is no right to a view as a matter of common law. Although it is A’s pleaded case that its view has been obstructed, A’s case is founded on a breach of a negative covenant prohibiting acts which amounts to a nuisance or annoyance to other occupiers/owners of the building. A derives its right under the restrictive covenants to which both of them are parties. It does not rely on common law nuisance. As suggested in my decision, as long as reasonable people has the subjective fear or would be aggrieved, or his mind being troubled like in the case of The Incorporated Owners of Fanling Centre (supra), it will be sufficient. As such, even if A cannot establish a common law right to a view, it is immaterial. In fact, this Tribunal has accepted as a matter of common law, there is no such right to a view: see [47] of the decision.

34.  Mr Law for A has referred the Tribunal to a long line of authorities, e.g. Davies v Dennis[20], So Kwok Yan Bernard v Lau Wing Chung[21], Tod-Heatly v Benham[22] and Great Source Enterprise Limited v Lam Ka On Allan & Another[23] in support of the proposition that obstruction of a view may constitute nuisance, annoyance, inconvenience. This Tribunal accepts his proposition and the authorities in support. This case is in fact one which is so caught by the restrictive covenant.

35.  Assuming (without accepting) R1’s argument on right to a view were valid, as long as the heat generated amounts to a nuisance or annoyance in the context of a restrictive covenant, R1 would be in breach. In the Tribunal’s view, Mr Wang’s argument is misconceived.

36.  In the Tribunal’s assessment, R1 does not have reasonable prospect to persuade the CA to overturn this Tribunal’s assessment under this ground.

The Winning Party Ground

37.  The gist of Mr Wang’s submission is this. The condensers were eventually relocated from outside the display window to another place of the external wall of the first floor. They were still on the said external wall to which A is entitled. It cannot be said a total success for A. Further, R1 was forced to erect the said air-conditioners at a position blocking the display window because A had erected the cabinets illegally, obstructing the proper place originally for the air-conditioners. At the end, R1 can keep the air-conditioners, and even outside A’s external wall. It is at least a win-win situation, and R1 cannot be regarded as a loser.

38.  From a perusal of R1’s Notice of Opposition and counterclaim, no matter the version before or after the amendment, it has never been R1’s pleaded case that it was forced to erect the air-conditioner at a place blocking the display window as now contended by Mr Wang. All the grounds contended for in the pleadings are either technical/legal, such as breach of relevant regulations, breach of DMC, breach of user in assignment and occupational permit, no right to a view, no entitlement to commercial value, etc; or factual totally unrelated to a forced move, e.g. the dimension and location of the condensers are such that there being no real obstruction. Even the lack of jurisdiction of the Lands Tribunal was raised. It is only in Madam Wong’s witness statement that R1 disclosed for the first time that R1 was forced to do so.

39.  Mr Wang explained forced erection was not a ground of defence and therefore was not pleaded. Be that as it may, there is a total lack of contemporaneous documents in support of Mr Wang’s submission in this respect. I have asked Mr Wang whether there is any and he could not produce any, after taking instruction.

40.  As a matter of fact, the old air-conditioners were originally installed at a place not in dispute. The dispute arose when R1 replaced the old ones and moved the new ones to the disputed position on technical grounds. It is not in dispute the said external wall belongs to the A. Logically, if R1 intended to attach the condensers to the said external wall, R1 should have consulted A. Correspondence requesting for a space, and its refusal must have been exchanged. It is also not in dispute that other air-conditioners not belonging to A have been allowed to be installed on the external wall formerly covered by the cabinets. Accordingly, if R1 had asked and been refused and thus this forced erection, it would have been able to produce evidence. None has been produced.

41.  In light of Mr Wang’s said submission I have read Madam Wong’s statement again. No part of her evidence has ever suggested she had ever asked when she relocated the condensers to the position which led to the present dispute. She simply did what she deemed right without consulting A. In the Tribunal’s decision, R1 is not entitled to rely on the forced erection ground. It had never asked. Neither was it entitled to put the condensers at a place not belonging to it and, in fact, belonging to A. Any accommodation is an indulgence and not an entitlement.

42.  The fact that A discontinued the action once R1 moved away the air-conditioner showed A’s main purpose of taking out the Application - to get rid of R1’s air-conditioners erected in front the display window. Now A has achieved what it intended to achieve. This Tribunal cannot see why A cannot be regarded the winning party of the Air-conditioner claim. R1 dropped its counterclaim for a declarative relief and reinstatement of the external wall. The Tribunal fails to understand why R1 cannot be regarded a losing party regarding its own display window counterclaim.

43.  Viewing the matter as a whole, A’s Air-conditioner claim and R1’s display window counterclaim have taken up most of the costs. Approved plans have to be retrieved and expert directions from the Tribunal sought. R1’s cabinets counterclaim is minor. A basically yielded and put up no resistance. The fact that A demolished the cabinets speaks for it.

44.  Relevant considerations have been taken into account and irrelevant factors not taken on board. Correct legal principles have been applied. In fact it is the parties who invited the Tribunal to adopt the agreed principles. It is the outcome of the exercise of the discretion that R1 is dissatisfied. It may feel too harsh but the decision is not outrageous that no reasonable tribunal will come to. It has to be remembered that it is R1’s conduct that attracts the costs liability in respect of R2. The Tribunal is also entitled to reflect its disapproval of a party’s conduct by imposing an adverse costs order. On a realistic assessment, this Tribunal does not consider R1 has a reasonable prospect in the appeal.

45.  R1’s application for leave to appeal against was therefore dismissed with costs.