A A

HCA 1333/2011
B IN THE HIGH COURT OF THE B

HONG KONG SPECIAL ADMINISTRATIVE REGION

C C
COURT OF FIRST INSTANCE
D ACTION NO 1333 OF 2011 D

E E
BETWEEN
F 383HK LIMITED Plaintiff F

G G
and

H H
THE INCORPORATED OWNERS OF Defendant
TAK BO BUILDING
I I

J J

K K
Before: Deputy High Court Judge Burrell in Court
L Dates of Hearing:6 – 10 and 14 March 2017 L

Date of Judgment: 24 March 2017

M M

N N

JUDGMENT
O O

P P

Q 1. The Tak Bo Building is a 22 storey block situated opposite the Q

th nd
MacPherson Playground on Nelson Street, Mong Kok. The 5 to 22
R R
floors are residential. This case concerns the ground floor, in particular
S Shop 17. The ground floor is an arcade of 35 small shop premises. About S

15 of the shops (including number 17) have frontages on the streets around
T T

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the building. The remainder are in the corridors which form a T-shaped
B arcade inside the ground floor. B

C C
2. The central issue in this case concerns the supply of fresh
D water and drainage facilities to the ground floor. The occupation permit D

for the building was issued in 1979 and 30 years later, in 2009, the plaintiff
E E
purchased Unit 17, with vacant possession. The sole witness as to factual
F matters for the plaintiff has been its director, referred to as “Mrs Chan”. F

The plaintiff has been represented at trial by Mr Simon Chiu, leading

G G
Mr Kenneth Chung.
H H
3. The defendant is the incorporated owners of the building (“the
I I
IO”). Two witnesses as to fact were called on their behalf, the first being

J its chairman at the material time (2010 – 11) Mr Chan Kit Yan who has J
been a resident in the building since it was built and is now 75 years of
K K
age. Mr Ambrose Ho SC, leading Ms Becky Wong, were the IO’s counsel
L at trial. L

M 4. When the building was designed and built in the late 1970s, M

there were no provisions or facilities included for fresh water and drainage
N N
pipes to the individual shop premises on the ground floor. If shop owners
O required water they went to the toilets which formed part of the ground O

P
floor. There are approximately 10 toilet units in one particular area inside P
the arcade. The toilets are connected to the building’s main fresh water
Q Q
pipe and drainage pipe.

R R
5. The general nature of the type of small commercial premises
S S
which have done business in the Tak Bo shopping arcade since the early

T
1980s is, no doubt, partly due to the fact that the units are not connected to T

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the building’s water and drainage main pipes. A survey done in 2013
B describes about 50% of the shops as “printing” shops, others include car B

accessories, sports wear, etc.

C C

D Mrs Chan’s ownership of Unit 17 D

E 6. The plaintiff became the registered owner of Unit 17 in E

September 2009. It was purchased as an investment. In evidence

F F
Mrs Chan said that she had noticed some other shop units had water pipes
G to their premises. Mrs Chan believed that having water and drainage in her G

shop would increase its rental value. At that time she had no particular
H H
tenant lined up. The evidence, in fact, showed that 4 of the 35 shops had
I some such piping. One of the 4 was a hairdressing shop so it may be I

assumed that the water was actually used. Whether it was used in the other
J J
3 was not clear. Two of them were described as “printing shops”, the other
K “car accessories”. In any event, these pipings were not recent installations K

(even in 2010) but had been there some time. It was the IO’s case that
L L
none of them had resulted from consent being sought from the IO, none of
M them had been approved and none of them were legal. The plaintiff on the M

other hand submitted that the IO’s inaction in regard to these particular
N N
pipes provided weight to its argument that the IO’s refusal to consent to
O Mrs Chan’s request for fresh water and drainage was unreasonable. O

P P
7. On becoming the registered owner Mrs Chan asked the IO for
Q its consent to such an application. The IO considered the request but Q

refused it stating:
R R
“ The members unanimously agreed that shops can use the water
supply in toilet and that the installation of independent water
S meters would involve too many issues on the unified S
management of the building. Therefore, the Incorporated
Owners rejects the application from your company for
T T

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installation of independent water meter. We hope you can
respect our decision.”
B B

8. The plaintiff was not satisfied and 3 months later, in

C C
December 2009 wrote as follows:
D “ This is to notify the Incorporated Owners (the ‘Incorporated D
Owners’) that Shop No. 17 believes its installation of fresh water
E meter will not affect the interest of other owners and such E
installation is base on practical need and within the rights given
to an owner. Therefore, we, Shop No. 17, have already applied
F to the Water Supplies Department for installation of water meter. F
The installation work will be conducted in near future. We shall
be grateful if the Incorporated Owners can provide necessary
G G
assistance in the course of such work.”

H H
9. Thus, the plaintiff’s request had become a notification that the
I work would proceed regardless. Further, the plaintiff had, in fact, not I

applied to the Water Supplies Department (“WSD”) as stated in the above

J J
letter. The WSD informed the IO of this fact on 24 December 2009.
K K

10. When Mrs Chan did make an application to the WSD in

L L
January 2010 it was refused. Later in the year, in June 2010, the WSD did
M give its approval, but for a water metre only. Consent and approval for M

pipes was still lacking.

N N

O
11. By February 2010 the matter was in the hands of solicitors. O
By a letter of 8 March 2010 the IO’s position was stated as follows:
P P
“ We are instructed that a water tap has been installed in the
Q lavatory on the Ground Floor for supplying water to the owners Q
and/or their occupiers. Having considered that the water tap at
Ground Floor has been installed for supplying water to owners
R and/or their occupier of Ground Floor and your client is allowed R
to reasonable use for the water tap installed in the lavatory on the
Ground Floor without interruption, out client does not accept
S S
your client’s application for installing water pipe(s) and/or its
ancillary at the common parts of the Building.
T T

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Apart from that, we would like to draw your attention to
section 34I of the Building Management Ordinance (Cap. 344)
B that no owner is allowed to convert the common part into his B
own use without the prior consent of the management committee
of our client. Hence, our client has a right to refuse your client’s
C C
application.

D We are instructed that if your client insists on installing water D

pipe(s) on the common parts or any part thereof, our client has
no alternative but to commence legal proceeding against your
E client for tresspass. Our client also reserves its right to claim any E
loss and damages arising therefrom without further notice.”
F F

12. The matter came to a head in August 2010 when Mrs Chan

G G
engaged a licensed plumber to install water and drainage pipes to Unit 17
H to be connected up with the building’s main water and drainage pipes H

which were at the rear of the building.

I I

J 13. This work involved drilling two holes (one 40 mm in diameter J

for the drainage and one 25 mm in diameter for the fresh water and about
K K
15 mm apart) through the concrete canopy which ran around the outside of
L the building at the ceiling level of the ground floor shops. The plan was L

then to run the pipes along the surface of the canopy to the main pipes
M M
across the common areas of the building.
N N

14. It is agreed that these works commenced without the consent

O O
of the IO, without the consent of the WSD and without the consent of the
P Buildings Department (“BD”). It is further agreed by the plaintiff that, at P

the time, consent and approval by the BD was a requirement. It was also
Q Q
contrary to a circular which had been sent to all the owners in the building
R on 20 January 2010 which, inter alia, stated: R

S “ 2. It has been resolved by the Management Committee that, S

starting from 20 January 2010, pipes for seawater and fresh
water shall not pass through the exterior wall.”
T T

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and faced the risk of legal proceedings referred to in the earlier solicitor’s
B letter. B

C C
15. Unfortunately, the licensed plumber’s work was not
D completed because he inadvertently, in the course of his work, shut down D

all the water supply to the commercial premises in the upper floors. This
E E
caused immediate complaints and even the police were called. The work
F stopped, the plumber left the site and, later, Mrs Chan apologized for the F

inconvenience but nonetheless asked the IO to reconsider its application.

G G
The IO’s consent was not forthcoming and in 2011 it removed the piping
H that had been installed on the canopy but left the two pipes that had been H

installed through the drill holes in the canopy above the plaintiff’s shop
I I
having sealed them up.
J J

The situation in 2017

K K

16. In July 2011, after obtaining permission from the WSD,

L L
Shop 17 was connected to the public water supply, described by the
M plaintiff as being “nearby” in Nelson Street. Thus, the plaintiff has M

enjoyed a fresh water supply since July 2011 but still has no provision for
N N
drainage.
O O

The relief sought

P P

17. The plaintiff claims that on a proper construction of the Deed

Q Q
of Mutual Covenant (“DMC”) it has a right to access the main pipes of the
R building for water and drainage. It concedes that such an entitlement R

would be conditional upon no damage being caused to the building or

S S
inconvenience, nuisance or annoyance being caused to other occupiers.
T The plaintiff seeks a declaration to this effect. The prayer in the Amended T

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Statement of Claim also seeks an order directing the IO to give its written
B consent to the works and an injunction preventing the IO from interfering B

with the installations.

C C

D 18. A number of provisions in the DMC, which dates from 1980, D

are pleaded. The following are the key provisions:

E E

Clause 3 (c):
F F
“ 3. Each owner shall hold his part of the said building and the
said premises subject to and with the benefit of the
G following rights privileges and obligations namely:- G
…
H (c) The free and uninterrupted passage and running of water H
sewage gas and electricity from and to his part of the
I
said building through the sewers, drains, watercourses, I
cables, pipes, pumps, tanks and wires which now are or
may at any time hereinafter be in under or passing
J through the said premises and building or any part or J
parts thereof.”
K K
Clause 4 (t) (ii):

L “ (t) The Common parts services and facilities referred to in L

this Deed shall include the following:
…
M M
(ii) the sewers gutters drains watercourses, cables, wells,
pipes, pumps, tanks, wires, sanitary fittings, fire
N fighting and refuse disposal equipment and other N
apparatus and equipment used or installed for the
benefit of the said building as part of the amenities
O O
thereof and not by any individual owner for his own
use or purposes.”
P P
Clause 10 (b), (c) and (e):
Q “ 10. Each party hereto hereby covenants with the other as Q
follows:-
R … R
(b) Not to make any alteration to the water or gas pipes
electrical wiring or plumbing which may cause such
S S
damage or inconvenience as aforesaid.
(c) Not to cut or injure the cement concrete flooring
T T
columns beams external walls or girders of the said

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building or do anything whereby the structural strength
thereof may be affected.
B … B
(e) Not to use his part of the said building for any illegal or
C immoral purposes nor do or permit anything therein or C
thereupon which may create unnecessary noise or may
be a nuisance or annoyance to or may cause damage or
D inconvenience to the other occupiers of the said D
building.”
E E

19. In short, the plaintiff claims that the IO is in breach of the

F F
DMC by unreasonably withholding its consent to the proposed works (it
G being an implied term of the DMC that consent may not be withheld G

unreasonably).
H H

I The issues I

J 20. The plaintiff has listed 9 issues, which can be reduced to 6 J

following submissions at trial. They are:

K K

Issue 1 — Whether the plaintiff was entitled to obtain water and

L L
discharge waste water into the Main Pipes of the
M
Building (i) on a proper construction of the DMC, and/or M
(ii) based on the implied term of the DMC.
N N
Issue 2 — Further or alternatively whether the defendant is
O estopped from denying the plaintiff is entitled to obtain O
fresh water and discharge water into the Main Pipes
P through pipes installed on the common part of the P

Building.
Q Q
Issue 3 — If the piping has to go through or utilize the common part
R of the Building and the consent of the defendant is R

required, whether there is an implied term that the

S S
defendant must not withhold its consent unreasonably.
T T

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Issue 4 — Whether in the event that transpired prior to the
B commencement of the action, the defendant had in all the B

circumstances refused its consent unreasonably to the

C C
plaintiff’s applications such that it amounted to a breach
D of the implied term. D

Issue 5 — Whether the works that were carried out in August 2010

E E
which then required the consent of the BD would still
F require such consent now in view of the introduction of F
new statutory regimes (post 2010) designating “minor
G building works” and “designated exempt works” which G

may be carried out without such consent.

H H
Issue 6 — Damages.
I I

The IO’s case

J J

21. Briefly, the IO contends that:

K K
(i) the DMC does not confer a right on the plaintiff (whether
L L
absolute or conditional) to connect up to the building’s main
pipes for water and drainage by piercing the canopy and
M M
laying pipes around the common parts of the building;
N N
(ii) that if the plaintiff has a right as pleaded subject to the IO’s
consent, such consent was not withheld unreasonably;
O O

(iii) the 9 August 2010 installation works were in contravention of

P P
section 34I of the Building Management Ordinance (“BMO”);

Q
in contravention of clauses 10 (a), (b) and (c) of the DMC; did Q
cause damage to the building; were commenced without
R approval or consent and were illegal; R

S
(iv) if carried out today the work would not be “minor works” S
and/or “designated exempted works”; and
T T
22. in any event the plaintiff suffered no loss.
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Issue 1:  Whether the terms of the DMC and/or the implied term conferred
even a conditional entitlement on the plaintiff?
B B

23. I start with clause 3 (c) of the DMC. In my judgment reading

C C
this clause as a whole and not in a vacuum and keeping in mind the factual
D matrix (including the situation in 1980 in which the building was D

constructed with no water or drainage supply to the shop owners) its true
E E
and unambiguous meaning can be derived by summarizing the clause in
F the following way: F

G “Each owner” (including Mrs Chan and her G

predecessors in title) has “the benefit of … running

H H
water … to his part of the building through … pipes
I [etc] … which” I

(i) “now are” (in 1980) or (ii) “may at any time

J J
hereinafter” be … “passing through the … building”.

K K
24. In my judgment the expression “may at any time hereinafter”
L can only refer to the possibility that in the future the owners of the building L

(or the IO) decides to put in new piping, for whatever reason, anywhere in
M M
the building. Only then might the ground floor have the “benefit of
N N
running water” through pipes etc. Absent such new piping there are no

O
pipes etc from which the plaintiff can “benefit” to access a new water O
supply.
P P

25. Running water cannot be regarded as an “essential service” as

Q Q
over 90% of the shops have functioned perfectly well without water for
R R
37 years.

S S

T T

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26. Both counsel referred the court to a number of authorities on
B this issue, including: B

 Leung Nai Hang v The Incorporated Owners of Success

C C
Industrial Building  HCA 1570/2010;
D  The Incorporated Owners of Yee Fung Garden v Basic Tech D

Ltd  CACV 40/2003;
E E
 Cogi Enterprises Ltd v The Incorporated Owners of Malahon
F Apartments  HCA 816/2004 and CACV 108/2010; F

G  Lucky Hing Shing Estate Co Ltd v The Incorporated Owners G

of Genius Court  HCA 2048/2015
H H

27. Mr Ho relied on, inter alia, the Success case above in which
I I
Zervos J was dealing with a situation concerning, in similar circumstances
J to the present case, the supply of natural gas to an entire building which at J

the time had no such supply. Mr Chiu sought to distinguish that case on
K K
the ground that in our case the building already had a water supply,
L whereas in Success there was no (gas) supply at all. I agree with Mr Ho L

that this is not a valid distinction. The proper comparison is between the
M M
whole building (in Success) and the whole of the ground floor (in the
N present case). The plaintiff in our case is seeking a construction of the N

O
DMC which would confer the same right (albeit, as Mr Chiu carefully O
emphasised, which could be conditional) on the whole of the ground floor.
P P
Thus, it is the general principle in Success which is important and therefore

Q
useful to cite herein a lengthy extract: Q

“ 70. The key issue in this dispute is the construction of the

R R
meaning and effect of Clause 3. This requires considering the
language of the clause in the context of the purpose and
S provisions of the DMC. In the context of the present case, gas is S
specifically mentioned as an essential service that an owner is
entitled to have connected to his unit. However, connection of
T T
gas to the unit which is to be free and uninterrupted, is to be

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provided through the existing pipes or pipes which are
subsequently installed on the Land or Building. I interpret this
B provision to mean that an owner will be guaranteed the free and B
uninterrupted passage of essential services through the existing
or subsequent system in place for the supply or passage of the
C C
service. It is required, therefore, that the system in place should
provide the owner free and uninterrupted supply or passage of
D the service whether existing or subsequently installed. Where D
there is no system in place, it still requires the incorporated
owners to decide on a system to be installed in accordance with
E the decision making process as provided under the DMC. Once E
a system of pipes for the supply of gas has been decided to be
F and is installed, the plaintiffs are [then] entitled to the free and F
uninterrupted connection of gas under the system in place
whether now or in the future, but this still requires the
G incorporated owners to agree a system for the connection of gas G
to the units of the Building. It does not entitle an individual unit
owner to connect gas to his unit, unless a decision of the
H H
incorporated owners has been made for that to happen in
accordance with the provisions of the DMC. It entitles an
I individual unit owner the guarantee of free and uninterrupted I
passage of gas through the system put in place whether now or in
the future. It does not in my view guarantee as of right an
J J
individual unit owner the supply of gas through his own and
exclusive system of pipes on or over common areas of the
K Building, unless it is in accordance with the provisions of the K
DMC.

L 71. It comes to this. The plaintiffs wish to have gas L

connected to their unit. There is no system in place for the free
and uninterrupted passage and supply of gas. A system needs to
M M
be put in place which requires to be decided through the decision
making process as provided under the DMC. It is fundamental
N that the collective ownership of the units involves collective N
responsibility and decision making. Without this collective
responsibility and decision making, it would mean that each
O owner could install his own system to supply gas to the O
individual unit on or over common areas which would
P undermine the very purpose of the DMC and its provisions. As P
the present case illustrates, the farcical situation would arise
where each of the 122 unit owners could install their own system
Q for the supply of gas.” Q

R R

S S

T T

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28. The “Clause 3” referred to was effectively the same as
B clause 3 (c) in the current case. An almost identical clause was also in B

issue in the Cogi case (above). In that case the parties were reversed as it
C C
was the IO making the application. Nonetheless the same principles were
D adopted. The Court of Appeal cited Sakhrani J’s remarks with approval: D

E “ As a matter of the proper construction of the DMC I am unable E

to accept that in 1967 when the developer was wishing to sell
units in the building the first purchaser was agreeing to permit
F the developer or the manager of the building to run sewage pipes F
which were not there at the time through her property but could
G do so at any time thereafter. … G

…. under the DMC there is a right to run drainage and sewage

H pipes through the building or any part thereof which were in H
existence at the time of the DMC but it does not give an
unrestricted right to subsequently install new sewer and drainage
I I
pipes in different locations in shops offices and flats which have
been assigned to purchasers. …
J J
…. on a proper construction of the DMC as a whole it seems to
me that there was no right in the developer to install new pipes
K not in existence at the time of the DMC in premises the exclusive K
use and occupation of which have been assigned. It does not
L
give the developer any right to change the routing of the pipes if L
it involves going through premises the exclusive use and
occupation of which have been assigned.
M M
… It would be absurd in my judgment to construe clause 4 of
Part A of the First Schedule as giving a right to the IO an
N unreserved right to reroute the passage of sewage pipes in the N
building to go through premises which have been assigned with
O an exclusive right to occupy the same. Mr Wright submitted that O
the nature of the obligation imposed does not include an
obligation to allow additional pipes (which were not present at
P the time of the DMC) to be installed which would run through P
premises which have been assigned with an exclusive right to
occupy. I accept Mr Wright’s submissions.”
Q Q

R 29. These principles when applied to the factual matrix in our R

case (particularly that (i) the building plans specifically excluded water to

S S
the shop units, (ii) it is unknown and unclear how or when Shops 19, 21,
T 30 and 31 may have acquired a water supply, (iii) the installation at T

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Shop 17 in 2010 was illegal and (iv) any such piping would inevitably
B encroach on the common areas of the building) must lead to the same B

conclusion.
C C

D 30. Zervos J’s references to “to be decided through the decision D

making process as provided under the DMC” and “collective ownership …

E E
involves collective responsibility and decision making” is a natural
F consequence of section 34I of the BMO which provides that: F

G “ (1) No person may— G

(a) convert any part of the common parts of a building to
H his own use unless such conversion is approved by a H
resolution of the owners’ committee (if any);

I (b) use or permit to be used the common parts of a building in I

such a manner as unreasonably to interfere with the
use and enjoyment of those parts by any owner or
J J
occupier of the building; …” [Emphasis added]

K K
31. Thus the BMO does not contemplate a situation where a
L plaintiff acquires a right to encroach on the common part of the building. L

M M
32. To conclude on this issue the plaintiff has failed to establish
N that on a proper analysis the DMC provides for or entitles the plaintiff to N

the right contended for.

O O

P Issues 2 and 3 P

Q 33. Mr Chiu has largely abandoned issue 2 but I shall deal with it Q

briefly (as it retains some relevance with regard to issue 4) in the context
R R
of the implied term issue.
S S

34. The plaintiff submits that a term should be implied into the
T T
DMC that a shop owner such as the plaintiff has the ‘right’ contended for,
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namely, a right to water, drainage and the installation of pipes for the same,
B with the consent of the IO not being unreasonably withheld. B

C C
35. As a starting point, the fact that the DMC does not
D specifically provide for or entitle the plaintiff to a water and drainage D

supply does not, of itself, preclude or prevent the IO from agreeing to such
E E
an arrangement if it considers it to be consistent with the good
F management of the building. F

G G
36. In the pleadings both parties argue for an implied term: the
H plaintiff for a term that the consent to an application for water and drainage H

should not be unreasonably withheld; the defendant for a term that no

I I
consent should be given to any installation that is either illegal or in
J contravention of the DMC. J

K K
37. In my judgment the appropriate way of resolving these
L competing submissions is to deal with the last point first; namely, was the L

IO’s refusal to consent, in fact, unreasonable. If it was not unreasonable

M M
further analysis becomes unnecessary. If it was unreasonable it will
N become necessary to consider the legal consequences. N

O O
38. Issue 2 (estoppel) can be first disposed of briefly by reference
P to Mr Chiu’s concession as follows: P

Q “ Having reviewed the evidence given by the parties, and in Q

particular the admission by Ms. Woo that before purchasing
Shop 17, she had consulted her lawyer Mr. Wong who informed
R her that she should be able to have the water facilities installed R
under the DMC …, it is very difficult to reasonably argue that
S she had separately relied on the representation of the IO through S
the latter’s inertia or acquiescence over the removal of the pipes
in other shops which she observed to find an independent
T equitable right of estoppel to install the water and drainage pipes. T

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Accordingly we will not make further submission under this
head.”
B B

39. He adds, correctly, that the evidence on this matter is

C C
nonetheless relevant to the question of “unreasonableness”. It should be
D noted exactly what that “evidence” is. The high water mark is that Shops D

E
19 and 21 are believed to have installed a water pipe (when is not known) E
and Shops 30 and 31 have connected water and drainage pipes through the
F F
wall of the shops to the toilets. The only shop which it can be safely

G
inferred has used its water supply is Shop 31 which is (or at least was in G
2013) a hairdressing salon. There is no factual evidence that any of these
H H
pipes are connected to the building’s main pipes. It is also a fact that the

I IO did not consent to or approve of any such piping and there is no I

evidence that they were ever asked. Finally, it is agreed that the
J J
uncompleted works carried out by the plaintiff in August 2010 were illegal
K works. K

L L
Issue 4: Unreasonableness?
M M
40. The parties agree that the burden is on the plaintiff to show

N that the IO’s refusal to consent to the plaintiff’s request was unreasonable. N
The authority for this proposition is BG Global Energy Ltd v Talisman
O O
Sinopec Energy UK Ltd [2015] EWHC 110 (Comm).
P P
41. As to the correct test to be applied Mr Chiu refers the court to
Q Q
Ashworth Frazer Ltd v Gloucester City Council [2001] 1 WLR 2180 as an

R authority for the proposition that the IO’s reasonableness or otherwise must R
be measured in the light of what was stated at the time of refusal and that
S S
the IO is not permitted to rely on grounds which surface subsequently. In
T particular, in the present case, Mr Chiu submits that the IO cannot rely on T

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the fact that the 2010 works in fact required the BD’s consent and were
B therefore illegal, because this came to light later and was relied on by the B

defence after its consistent refusals in 2009 and 2010.

C C

D 42. If Ashworth is being cited as authority for the proposition that D

the illegality of the 2010 works cannot be relied on, I do not agree. The
E E
Ashworth case concerned a dispute under the Landlord and Tenant Act
F 1988 in the UK, where consent or refusal was governed by the terms of the F

statute. Moreover, even within that strict statutory regime (which does not
G G
apply to the facts of the present case) the judgment recognized the need for
H some latitude saying: H

I “ … Had the respondents continued the correspondence and I

elaborated their application in the light of the council’s reply,
then the council might well have developed their thinking in
J more detail. Of course, once the landlord has stated in writing J
the ground on which he refuses consent, he cannot later rely on
K any other ground. But that does not mean to say that, when K
seeking to show that it was reasonable for him not to consent on
the stated ground, he is confined to what he has said in his letter.
L Section 1 (6) (c) contains no such restriction. And rightly so. L
Otherwise, instead of being a straightforward practical
M
document, the notice containing the landlord’s reasons for M
withholding consent would soon become a battleground for
litigants and an increasingly sophisticated playground for
N conveyancers. Such cannot have been the intention of N
Parliament in enacting the legislation.”
O O

43. The judgment had earlier set out the overriding principles
P P
including:
Q “ … in any case where the requirements of the first principle are Q
met, the question whether the landlord'’ conduct was reasonable
or unreasonable will be one of fact to be decided by the tribunal
R R
of fact.”
and
S S
“ … the landlord’s obligation is to show that his conduct was
reasonable, not that it was right or justifiable. …. one ‘should
T T
read reasonableness in the general sense’. There are few

U U

V V
A A
expressions more routinely used by British lawyers than
‘reasonable’, and the expression should be given a broad,
B common sense meaning in this context as in others.” B

C C
44. Accordingly, the legality of the proposal must be a crucial

D
factor. I reject Mr Chiu’s submission that if the works are later found to be D
illegal the remedy is the repudiation of the consent by reason of mistake of
E E
law and the subsequent removal of the offending works. In my judgment

F the plaintiff fails to discharge the burden on it to prove that the IO was F
unreasonable when the request was for an illegal installation and was
G G
supported by an inaccurate plan. The only plan submitted at the time was
H prepared by the licensed plumber which showed the proposed pipes joining H

the building main pipes whereas, in evidence at trial, it was said that the
I I
new pipes went directly and independently into the gutter next to the main
J drainage pipe. J

K K
45. Also, as earlier stated, the application contained more
L inaccuracies than merely in the proposed plan. The plaintiff had stated that L

an application to the WSD had been made when it had not and, later, that
M M
the WSD had approved, when it had not.
N N

46. In addition to the above matters the following are factors

O O
which existed at the material time and when taken together amount to the
P IO’s decision being a reasonable one: P

Q (1) The plaintiff made 4 or 5 requests prior to commencing the Q

works in August 2010. All were refused. Save for the final
R R
one (which included the plumber’s drawings) none contained
any detail as to exactly what was intended.
S S

T T

U U

V V
A A
(2) The IO was concerned about the safety of the canopy. Any
B layman would be concerned about the drilling of holes in B

concrete cantilevered canopy at 1st floor level above the street.

C C
(3) It could not possibly be known whether or not other shop
D units with street frontages would follow suit having seen D

consent been granted to Unit 17. Expecting the IO to deal

E E
with each application on a case-by-case basis is unrealistic.
F Such a piecemeal approach would have been poor F
administration and management of the building by the IO.
G G
(4) The nature of the commercial enterprises at ground floor level
H had operated successfully since 1980. I do not regard it as H
unreasonable for the IO to decide that it was in the building’s
I I
interest for similar enterprises to rent the units in the future.
In 2013, 17 were printing shops, 5 sold car accessories, 5 sold
J J
sportswear and 3 sold bus tickets.
K K
(5) For all practical purposes it was impossible to install a system
of the type envisaged without running pipes across the
L L
common areas, in this case, on the cantilevered canopy.
M M
(6) The possible illegality of the proposal was alluded to by the

N
IO in its letter dated 12 July 2010 in which it reminded the N
plaintiff of clause 10 (b) of the DMC (not to make alterations
O which may cause damage) and clause 10 (e) (not to use the O

building for an illegal purpose). The letter also re-iterated its

P P
position that the installation of any pipes over the common
Q area would lead to legal proceedings. Q

(7) The plaintiff’s second witness of fact, Mr Wu Kun Wa, gave
R R
evidence of the Committee’s discussions through the minutes
S of its meetings. It is clear that any holes in the canopy would S

be opposed because of safety concerns. The committee

T T
members were clearly unwilling to give their approval to a

U U

V V
A A
scheme which lacked detail, which was not ‘in keeping’ with
B the established nature of the arcade’s business, which was a B

“one off” application and which involved a plumber drilling

C C
holes in the canopy.
D D
Mr Chiu submits that all the above (and other) matters were most

E unreasonable both individually and collectively. I am not persuaded that it E

has been proved to be unreasonable. On the contrary, an understandable
F F
degree of caution would be a better description.
G G
Issue 5:   Would the August 2010 works require the consent of the BD if
H carried out now? H

I 47. The plaintiff has asked the court to make a ruling on this I

question. I will accede to the request but nonetheless regard it as

J J
somewhat academic. Should the same or a similar situation arise again
K any prudent applicant would be well advised to submit detailed plans to the K

BD and ask the question “do we need your consent for these works or do
L L
they fall within the ‘minor works’ regime or ‘designated exempted
M works’”. In this case I have heard expert evidence from two helpful and M

well qualified structural engineers who hold opposite opinions on the

N N
matter.
O O

48. Making the ruling necessarily involves rejecting the evidence

P P
of one of the two experts. It would in my judgment be imprudent to reject
Q the evidence of the expert who opines that BD consent is still required if Q

the effect would be to usurp the function of the BD. In any event such a
R R
ruling would only be pertinent to the exact works which were in fact
S carried out in 2010. Thus, the ruling which would not bind the BD in any S

event is confined to the drilling of two holes, one 40 mm in diameter and
T T
one 25 mm, in the canopy above the plaintiff’s shop.
U U

V V
A A
49. The plaintiff’s expert was Mr Paul Kong Ming of Paul Kong
B & Partners Ltd, Design and Planning Consultant Engineers. He wrote 2 B

reports totalling 40 pages with 110 pages of exhibits. The defendant called
C C
Professor Fan Siu Kay, a registered structural engineer and Authorised
D Person, whose report was 43 pages with 150 pages of exhibits. They also D

produced a joint report in which there was minimal agreement. Their

E E
reports covered wider areas than the discrete question being addressed in
F this judgment. F

G G
50. At the beginning of 2011 a new statutory regime came into
H operation in which certain building works were exempted from the H

necessity of BD consent. Mr Chiu has helpfully set out the two areas of
I I
disagreement under the new regime, between the experts as follows:
J J
(1) Whether the drilling of the holes in the canopy above Shop 17
K meet the conditions set out in Part 2, item 1 in Schedule 2 to K

the Building (Minor Works) Regulations (Cap 123N) which

L L
states:
“ Part 2
M M
List of Designated Exempted Works

N Description of building works N

1. Formation of any opening in a slab, provided that—

O (a) the works do not result in any additional load to any O
cantilevered slab;
P (b) the works do not involve the alteration of any other P
structural elements;
Q (c) the distance between the 2 points that are farthest Q
away from each other within the area of the opening
is not more than 150 mm; and
R R
(d) if there is already an opening in the slab, the distance
between the centre of the opening to be formed and
S any other opening in the slab is not less than 450 S
mm.”
T T

U U

V V
A A
so that it is “Designated Exempted Works” (“DEW”) and
B thereby exempted from consent under section 41 (3B) of the B

Building Ordinance (Cap 123). It is agreed that for this

C C
provision to apply all four conditions, (a), (b), (c) and (d),
D must be satisfied. D

E
(2) Whether the drainage pipe work would meet the conditions E
set out in Part 3, item 3.23 of Schedule 1 to the Building
F (Minor Work) Regulation so that it is a Class III Minor Works F

and also exempt from Building Authority’s consent (under

G G
section 14AA of Cap 123). Item 3.23 states:
H “ 3.23. Erection, repair, alteration or removal of any H
aboveground drain, provided that—
I (a) the works do not result in any additional load to any I
cantilevered slab;
J (b) the works do not involve any main pipe, other than J
the replacement of components at existing
junctions;
K K
(c) the works do not involve any embedded pipe, other
than a pipe that passes through a wall or slab; and
L L
(d) the works do not involve any repair or replacement
of an internal branch pipe or sanitary fitment.”
M M

N
51. Guidance as to the proper approach to deciding whether an N
exemption applies in this context is found in Mariner International Hotels
O O
Ltd v Atlas Ltd (2007) 10 HKCFAR 1 per Bokhary PJ at p 26:

P
“ …. Mr Sumption submits that the exemption has to be construed P
narrowly in a manner consistent with the statutory scheme of
which it forms a part. I accept that submission. A purpose, if not
Q the purpose, of the approval scheme of our building legislation is Q
to protect the public by subjecting the matter of structural
acceptability to the scrutiny of the Building Authority. To widen
R R
the exemption would be to reduce such scrutiny. In my view,
Mr Sumption is right in his submission, on the first requirement,
S that building works added to a building involves its structure if S
they serve a structural function or are capable for some reason of
affecting the integrity of the structure. That is to be derived from
T purpose. And it is also to be derived from linguistic T

U U

V V
A A
consideration, for I think that Mr Sumption is right in
characterizing the word ‘involving’ as one of the broadest words
B of association known to the English language. Perhaps only B
phrases like ‘in relation to’, ‘relating to’ and ‘with respect to’ are
wider.”
C C

D (1) The drilling of holes in the canopy D

52. Professor Fan’s starting point was that the exemptions could
E E
never apply to a cantilevered slab. His reasoning being that it was
F impossible not to affect the “load” on a cantilevered slab if a hole is drilled F

through it. He said quite simply that this legislation does not apply to
G G
cantilevered slabs. There is some logic to this opinion on the basis that it
H is unlikely that the BD intended to permit the drilling of holes in concrete H

I
slabs which protrude over busy pavements without their approval. On the I
other hand there is some force in Mr Chiu’s submissions that
J J
“cantilevered” slabs are not excluded. He points out that if, for the

K
purposes of the legislation, the definition of “slab” meant all slabs other K
than cantilevered slabs, then it would have been easy for the legislature to
L L
say so in the definition section. Also, what 1 (a), above, must mean is that

M to be a DEW on a cantilevered slab it must suffer no additional “load”. M

Professor Fan’s point is that an additional “load” is inevitable.
N N

O 53. The experts also disagreed on how the word “load” should be O
construed. Both experts gave detailed consideration to this and many other
P P
issues. In my judgment it would serve no useful purpose in setting them
Q out at length. The question posed to the court is a narrow one. A decision Q

must be made. Adopting a cautious approach, I prefer Professor Fan’s

R R
opinion. “Load” should not be interpreted as extra weight, i.e. an
S increased physical load but in the sense of stress resulting from openings S

being made through the concrete. I accept that a reduction in the structural
T T
strength of the canopy must follow as a result of holes being drilled
U U

V V
A A
through it and that, in turn, redistributes and increases the “stress” or
B “load” on the canopy. B

C C
54. Thus, I am not satisfied that the plaintiff can safely say that
D 1 (a), above, in the Minor Works regime has been satisfied. If 1 (a) is not D

satisfied, then neither is 1 (b). Mr Kong agreed with this. However, even if
E E
the plaintiff’s submissions as to the meaning of “slab” and “load” are right
F the matter does not end there. F

G G
55. 1 (c) and 1 (d) deal with restrictions on drilling holes in slabs.
H In support for his opinion Professor Fan, inter alia, referred to the H

Guidance Notes (PNAP1 APP-68) to be followed when “cantilevered

I I
reinforced concrete structures” were being built in the first place. In
J particular: J

“ Every endeavour should be made to avoid penetration or

K K
embedment of pipes in cantilevered structures, especially slab
elements. If unavoidable, consideration must be given to any
L local reduction in structural strength affected by the surface L
drainage system or embedded service pipes and ducts. In this
regard, AP/RSE are reminded to make reference to PNAP APP-
M 105 on the requirements and guidelines of embedment of water- M
borne pipes inside reinforced concrete beams and slabs.”
N N

56. That safety is a paramount consideration of the BD was

O O
illustrated by reference to a recent letter written to the IO of Tak Bo
P Building which included the following: P

“…. Together with other factors, such as thickening the cement

Q Q
layer of the floor slab on the top of the canopy, improper
waterproof layer and problem with the water discharge system,
R erecting or attaching unauthorized works to the canopy, etc., the R
risk of canopy collapse will increase. Therefore, we strongly
advise you to appoint construction professionals to conduct
S S
regular inspection of the canopy and carry out the necessary

T 1 T
Practice Notes for Authorized Persons, Registered Structural Engineers and Registered
Geotechnical Engineers
U U

V V
A A
repair work as soon as possible in order to ensure that the canopy
is safe and there is no unauthorized structure erected on it.”
B B

57. The two holes drilled in the slab have a space of 15 mm
C C
between them. 1 (d), above, states that there should be a gap of 450 mm
D between a drilled hole and a hole which is already there. Professor Fan, D

E
construing this provision narrowly, was of the opinion that once a hole is E
drilled in the slab a second hole must be 450 mm away. The second hole
F F
in the present case was a mere 15 mm away. Or, if measured from the

G
outside edge of each hole it is still only 80 mm. G

H H
58. Mr Kong’s opinion was that when two holes are drilled at the

I
same time they should constitute a single hole and they must be at least I
450 mm away from any hole drilled on a previous occasion. A flaw in this
J J
approach is what if a third, fourth or fifth hole is drilled on the same

K occasion? Would 1 (d) still be satisfied? K

L L
59. Construing 1 (d) strictly, I think Professor Fan’s opinion

M
should prevail. Condition 1 (d) is not satisfied. M

N N
(2) The drainage pipe

O 60. As stated earlier, the plaintiff connected her shop to the public O

water supply in Nelson Street in 2012. We are only concerned now with
P P
the drainage pipe which ran from the opening in the canopy along the
Q Q
surface of the canopy to the main drainage pipe at the rear of the building.

R R
61. Mr Ho, for the defendant, submits that the proposed works do
S not satisfy 3.23 (b), above, namely that “the works do not involve any main S

pipe, other than the replacement of components at existing junctions”.

T T

U U

V V
A A
Mr Kong accepted that if the proposed drainage pipe was to be connected
B to the main drain it could not be an exempted work. The original plan B

showed that to be the intention.

C C

D 62. In the event this academic point became even more academic D

as a result of a concession made by Mr Chiu after careful consideration of

E E
section 41 of Cap 123 headed “Part 5 Exemptions”. I set out sections
F (3B) and (3C) (a) and (b): F

G “ (3B) Designated exempted works that are prescribed in the G

regulations are exempt from sections 4, 9, 9AA, 14 (1) and
21.
H H
(3C) Drainage works (other than minor works) in any building
are exempt from sections 4, 9 and 14 (1) if the works do
I I
not involve—

J (a) the structure of the building; J

(b) any drain or sewer into which there is discharged, or

K into which it is intended to discharge, any trade K
effluent, chemical refuse, waste steam, petroleum
spirit, carbide of calcium, acid, grease or oil;”
L L

M 63. The bulk of the expert evidence centred on whether (3C) (a) M

applied to the present case. Opinions differed. Mr Chiu does not concede
N N
that (3C) (a) is fatal to his case, he submits that the drainage pipes once
O secured to the building would not “affect its structure”. However, he very O

fairly acknowledges that (3C) (b) would apply to the plaintiff’s proposed
P P
works.
Q Q

(3) Did the installation works cause damage to the building?

R R

64. In the course of Professor Fan’s investigations a crack in the

S S
concrete was noticed running from near the drilled holes to the outer
T extremity of the canopy; in other words about 1 metre in length across the T

U U

V V
A A
canopy. Mr Kong had not noticed it beforehand. The competing opinions
B as to its cause were that, according to Mr Kong, it was likely to be a B

thermal crack unrelated to the installation and that, according to Professor

C C
Fan, it was likely to have resulted from the installation works. I consider a
D ruling from the court on this issue to be neither advisable nor possible. All D

that can be said is that given its location it would be risky to exclude
E E
Professor Fan’s opinion.
F F

65. In conclusion on Issue 5, the considerable volume of exhibits

G G
and the length of the experts’ reports demonstrates the comprehensive
H nature of their investigations and the thoroughness and care in forming H

their respective opinions, much of which has not been touched on in this
I I
judgment.
J J

66. The above matters however are sufficient, in my judgment, to

K K
answer the question posed in Issue 5 in the affirmative.
L L

Issue 6: Damages
M M

67. In view of the court’s finding hitherto this issue is also

N N
academic. I nonetheless consider it appropriate to, for the sake of
O completeness, make some findings which would have formed the basis of O

my calculation of damages had the plaintiff been successful in its claims.

P P

Q 68. Again both sides called expert evidence. Mr Leo S D Cheung Q

was the plaintiff’s expert and Mr Keith L H Siu the defendant’s. Again,
R R
the report and exhibits were voluminous and again, there was only sparse
S areas of agreement. S

T T

U U

V V
A A
69. The basic facts were that the plaintiff became the owner of a
B vacant unit in September 2009. (I shall use round figures throughout the B

following assessments.) The previous tenant had been paying $72,000 per
C C
month. The property remained vacant until 2012 when it was rented out at
D $82,000 per month (apart from a period of 10 months when Mrs Chan’s D

husband used the unit for storage in connection with his business and paid
E E
$30,000 a month). In 2014 the property was let again for $98,000.
F Mrs Chan had connected up to the public water supply in Nelson Street in F

August 2011. For all practical purposes therefore the lettings were with
G G
water but without drainage.
H H

70. The questions to be addressed are:

I I

(a) What rent might have been achieved when the property was
J J
empty had it had water and drainage?
K (b) For how much of the vacant period should the defendant be K

liable in damages?
L L
(c) Since August 2011 how much more rent would the plaintiff
M have received over and above the actual income, had the unit M

had the benefit of drainage in addition to the water which was

N N
then being supplied?
O O
The experts
P P
71. In order to answer these questions both experts used the direct
Q Q
comparables method. However their bases for selecting comparables were

R very different. Mr Siu for the defendant used location as the key factor R
whereas Mr Cheung chose comparables on the basis of the dates of the
S S
rental transactions. In other words with Mr Cheung’s comparables the
T leases commenced at the material time but their locations were further T

U U

V V
A A
afield and there was a greater variation in the nature of the businesses
B conducted in the different shops. Each expert then made numerous B

adjustments for a variety of factors including the size of the property, the
C C
age of the building, whether it has street frontage, the location and the
D nature of the business. The percentage adjustments varied from 0% to as D

much as 50%. It was accepted that the comparables exercise generally is a

E E
subjective one based on knowledge and experience.
F F

72. Mr Cheung studied more comparables than Mr Siu. For the

G G
early period he selected 5 premises in Mong Kok and for the post 2012
H period a different 6 premises. He explained that the new 6 comparables H

were necessary because of his basic method of choosing leases at the

I I
material time rather than based on location. Mr Siu chose 5 premises
J based on location. J

K K
73. Criticism of Mr Cheung’s method was made, inter alia,
L because of the big differences in rents in some of the properties. One was L

being let at $200,000 a month and was 42 square metres in size, another
M M
was considerably larger but the rental was only $50,000 per month. Even
N after the adjustments were made it was submitted that they provided only N

minimal assistance in answering the questions in issue.

O O

P 74. In any event, Mr Cheung’s comparables produced figures for P

rent (with water and drainage) for 2009 – 2012 at $95,000 per month and
Q Q
post 2012 at $123,000 per month. Mr Siu’s figures were $65,000 and
R $92,000 respectively. R

S S

T T

U U

V V
A A
75. In cross examination Mr Cheung confirmed the accuracy of a
B different exercise designed to gauge the accuracy of the comparables B

results, as follows.
C C

D 76. The best indicator of the subject property’s rental potential, D

with water, was the rents that were actually agreed (assuming they were
E E
arm’s length’s transactions) namely $82,000 in 2012 and $98,000 in 2014.
F Using these figures as benchmarks it is then possible to calculate what a F

fair rent would have been at either an earlier date or a later date by
G G
multiplying the benchmark figure by the appropriate multiplier in the
H Government’s “Private Retail — Rental and Price Indices”. The Indices H

for December 2009, August 2012 and May 2014 were 117.3, 154.4 and
I I
173.0 respectively. Thus by way of example if the rent in 2012 was
J $82,000 the rent in 2009 would have been 82,000 ÷ 154.4 × 117.3 = J

$62,000. Similarly if $98,000 is the benchmark for 2014 the same

K K
calculations for 2009 and 2012 are $66,000 and $87,000 respectively.
L Alternatively one could start with the earlier tenant’s rent (in 2009) of L

$72,000. Going forwards that produces figures of $94,000 for 2012 and
M M
$106,000 for 2014. All these figures would have to be adjusted
N downwards by a small amount to reflect rent free periods at the N

commencement of a lease.
O O

P 77. It was submitted, and I agree, that even making a further P

allowance for a drainage supply Mr Cheung’s figures of $95,000 in 2009

Q Q
and $123,000 for 2012 were unrealistically high.
R R

78. Mr Cheung further agreed that there was a correlation

S S
between a property’s rateable value and its rental value although he said it
T would not always result in an accurate figure. Nonetheless the rateable T

U U

V V
A A
value of the subject premises in 2015 was $876,000 or $73,000 per month
B in rent; a vastly different figure from Mr Cheung’s $123,000 in 2012. B

C C
79. With all these figures, methods, adjustments and calculations
D in mind, it seems to me that the loss of rent due to the property being D

empty was approximately $70,000 per month. Between September 2009

E E
and August 2011 the property was empty for 13 months and rented for 10
F months at $30,000 per month. In my judgment Mrs Chan could have let it F

out, albeit without water and drainage, for some of this period but she did
G G
not do so because she chose to wait, optimistically, for the water and
H drainage supply rather than mitigating her loss whilst the issue was being H

debated. In my judgment she became preoccupied with the water issue

I I
rather than maximizing her investment. I would have allowed a loss of rent
J for a 12 month period at $70,000 per month less $300,000 (the rent J

received) = $540,000.
K K

L 80. Finally, there is scant evidence that potential tenants of the L

ground floor units in the Tak Bo Building who would require water and
M M
drainage, such as a hairdresser or foot massage parlour, would pay more
N than the 30+ tenants in the arcade doing printing business or selling sports N

shoes. The pool of potential tenants to this particular building would be

O O
reduced but the nature of the arcade suggests that the reduction to that pool
P would be small. Equally the difference in rental potential between the P

reduced pool and the maximum pool is likely, on the available evidence,
Q Q
also to be small. Mr Cheung’s figure of $123,000 in 2012 for the unit with
R water and drainage seems unrealistic. The actual rent achieved, with R

S
water, was $82,000. Mr Cheung’s figure represents a 50% increase S
because of additional drainage. Two years later, in 2014, Mrs Chan was
T T
receiving $98,000 a month. This is clearly in the same general range as

U U

V V
A A
Mr Siu calculated to be appropriate. It should nonetheless be recognized
B that the unit with drainage is worth more than without. Thus, a small, B

possibly even token, increase would have been added to reflect this.
C C

D Counterclaim D

E 81. In the course of the hearing the value of the defendant’s E

counterclaim was pared down from a small sum to a tiny sum. All that is
F F
now claimed is $1,600 for the cost of dismantling the illegal pipework
G installed in 2010. Mr Chan’s evidence (for the IO) concerning this invoice G

was unclear. I dismiss the counterclaim with no order as to costs.

H H

I Conclusion I

J
82. There will be judgment for the defendant on the claim with a J
costs order nisi in the defendant’s favour and a certificate for two counsel.
K K

L L

M M

N N
(M P Burrell)
Deputy High Court Judge
O O

P Mr Simon Chiu and Mr Kenneth Chung, instructed by P

Sit, Fung, Kwong & Chum, for the plaintiff
Q Q
Mr Ambrose Ho SC, leading Ms Becky Wong, instructed by Chung & Kwan,
R R
for the defendant

S S

T T

U U

V V