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Additech Ltd v Tai Cheung Management Co Ltd

Judgment Cited authorities 4 Cited in Precedent Map Related
Vincent
Judgment Date09 November 2020
Neutral Citation[2020] HKCA 902
Year2020
Judgement NumberCAMP204/2019
Subject MatterMiscellaneous Proceedings
CourtCourt of Appeal (Hong Kong)
CAMP204/2019 ADDITECH LTD v. TAI CHEUNG MANAGEMENT CO LTD

CAMP 204/2019

[2020] HKCA 902

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 204 OF 2019

(ON AN INTENDED APPEAL FROM LDBM 224 OF 2018)

_______________

BETWEEN
ADDITECH LIMITED Applicant

and
TAI CHEUNG MANAGEMENT Respondent
COMPANY LIMITED

_______________

Before: Hon Barma and Au JJA in Court
Date of Hearing and Judgment: 6 August 2020
Date of Reasons for Judgment: 9 November 2020

________________________________________

REASONS FOR JUDGMENT

________________________________________

Hon Au JA (giving the Reasons for Judgment of the Court):

A. Introduction

1. The applicant is the owner of the 1st to 8th floors (“the Applicant’s Property”) of Peninsula Square (“the Building”) at Sung On Street, Kowloon. The respondent is the Manager of the Building.

2. On 19 October 2018, the applicant filed a Notice of Application in the Lands Tribunal, claiming against the respondent for its breach of the deed of mutual covenants dated 27 August 1993 (“the DMC”) in failing to grant consent sought by the respondent to carry out alteration works within the Applicant’s Property.

3. On 3 December 2018, by way of a summons (“the Striking Out Summons”), the respondent applied to strike out part of the applicant’s claim in relation to its claim for damages.

4. On 12 June 2019, after hearing the parties, H H Judge S Lo (“the Judge”) dismissed the Striking Out Summons with oral reasons. The respondent then applied by summons dated 24 June 2019 for leave to appeal against the Judge’s dismissal of the striking out application.

5. On 13 August 2019, the Judge further handed down his written reasons for the decision to dismiss the Striking Out Summons (“the Written Reasons for the Decision”). On the same date, the Judge also handed down his decision refusing to grant the respondent leave to appeal.

6. By way of summons dated 23 August 2019, the respondent renewed its leave application before this Court.

7. On 15 July 2020, we directed that there would be an oral hearing for a rolled-up hearing of the respondent’s leave application. After hearing the parties on 6 August 2020, we refused to grant leave to the respondent with costs to the applicant. We gave brief reasons for our decision at the end of the hearing, and indicated that we would give our detailed written reasons in due course. This is what we do now.

B. Background

8. As mentioned above, the applicant is the registered owner of the Applicant’s Property of the Building.

9. Pursuant to paragraph 3 of the Second Schedule to the DMC, the applicant needed to obtain consent from the respondent to carry out its planned alteration works to convert part of the 8th floor from car parking purpose into office use.

10. It is the applicant’s case that it first applied to the respondent for the necessary consent on 24 August 2011, and over the course of seven years, it had continued to pursue the application on 7 May 2014, 16 June 2017 and 25 May 2018 after addressing all the concerns raised by the respondent each time. Notwithstanding this, the respondent had, in breach of its duty under the DMC, still failed to give the consent as sought. It is also apparently the case that the respondent has never formally refused the consent application. Indeed, at the hearing, upon the court’s inquiry, we were informed by the parties that the latest position of the application was that the respondent had asked the applicant itself to seek to convene an owners meeting to discuss its application.

11. In light of the above, the applicant commenced its action in the Lands Tribunal on 19 October 2018, claiming that the respondent in breach of its duty under clauses 9(A)(d) and 9(B)(35) of the DMC had failed to grant the consent. The applicant claims for a declaration that (a) it is entitled under Paragraph 3 of the Second Schedule of the DMC to carry out the subject alteration works; (b) the respondent has a duty to grant the consent as sought. It also claims, among other things, for damages to be assessed, which includes the loss of rental income that it could have received from the converted offices if the respondent had discharged its properly duty by granting the consent as sought[1].

12. On 3 December 2018, the respondent applied to strike out the applicant’s claim for damages.

C. The Written Reasons for Decision

13. As stated at [12] of the Written Reasons for the Decision, the respondent’s striking out application was premised principally on the contention that, even if it was in breach of its duty under the DMC in failing to give the consent as alleged, as a matter of legal principle it was not liable for damages.

14. The Judge disagreed and dismissed the striking out application for the following reasons:

(1) He rejected the respondent’s submissions that the applicant was not entitled to claim damages against the respondent even if the respondent was found to be in breach of the DMC. He applied 383 HK Ltd v IO of Tak Bo Building [2017] 4 HKC 142 and held that the incorporated owners is liable for damages suffered by an owner of a building if such owner can prove the breach on the part of the incorporated owners or managers and the actual loss suffered: see [12] - [15] of the Written Reasons for the Decision;

(2) The Judge also found that the majority of the authorities cited by the respondent’s counsel were irrelevant to the issues of the present proceedings and counsel had failed to cite any direct binding Hong Kong authorities to support his contention: see [16] of the Written Reasons for the Decision;

(3) In any event, the Judge considered Great Source Enterprise Ltd v Sino Estates Management Ltd (CACV 253/2003, unreported, per Cheung, Yeung and Yuen JJA, 7 May 2004) at [14], and held that the informal nature of the Lands Tribunal proceedings provided a more fundamental reason for the claim for damages not to be struck out: [17] of the Written Reasons for the Decision.

D. The intended grounds of appeal

15. Section 11AA(6) of the Lands Tribunal Ordinance (Cap 17) (“the LTO”) provides that leave to appeal should not be granted unless the court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.

16. In the Draft Notice of Appeal, the respondent advanced the following grounds of appeal:

(1) The Judge erred in law in holding that, in the event that the respondent is to be found by the Lands Tribunal in breach of clauses 9(A)(d) and 9(B)(35) of the DMC by unreasonably withholding the consent (if any) from the applicant, the applicant would be entitled to damages (“Ground 1”);

(2) The Judge erred in law to hold that the striking out application should be dismissed by reason of the informal nature of proceedings at Lands Tribunal in reliance of section 10(5) of the LTO and thereby unduly fettered his discretion to allow the striking-out application (“Ground 2”);

(3) There are other reasons in the interests of justice that the appeal should be heard (“Ground 3”).

E. Discussion

17. In support of all these proposed grounds of appeal, the fundamental plank of the contentions advanced by Mr Chan (together with Mr Fan) for the respondent is this. Counsel submits there is a principle in law (established in landlord and tenant context) that, where there is covenant in the lease prohibiting the lessee from subletting the premises or assigning the lease without first obtaining the lessor’s consent (I will refer this as an “alienation covenant”), and where it is further provided that the lessor shall not withhold its consent unreasonably, the lessee would have no right in law to claim for damages against the lessor even if the latter does indeed withhold consent unreasonably. This is so as such an alienation covenant does not create an independent positive obligation on the lessor not to withhold consent unreasonably and thus does not give rise to an action for damages. Mr Chan conveniently refers to this principle in his submissions as the “No Damages Doctrine”, and says this is well established and supported by a line of authorities (principally, Treloar v Bigge (1874) LR 9 Ex 151, Ideal Film Renting Co Ltd v Nielsen [1921] 1 Ch 575, Meager v Luke Healy Pharmacy Ltd [2010] 3 IR 743, Taylor Marine Ltd v Taylor Marine (Brokers (2005) Ltd) [2007] 3 NZLR 413, Rendall v Roberts 175 EG 265, and Rose v Gossman 201 EG 767).

18. Mr Chan then further submits that this principle should apply equally in the context of the DMC. Consequently, those clauses in the DMC now relied on by the applicant in this action relating to consent as a matter of law do not create an independent obligation on the respondent not to withhold consent unreasonably. The applicant therefore does not have a right to damages even if it can show that the respondent had withheld consent unreasonably as alleged. This part of the claim is unsustainable and should be struck out.

19. In light of the “No Damages Doctrine”, Mr Chan says that it must at least be reasonably arguable that the Judge erred in law in refusing to strike out the applicant’s claim for damages for the respondent’s alleged breach of the DMC.

20. In any event, given that there is no direct authority in Hong Kong that has considered the No Damages Doctrine, it is in the interests of justice that leave to appeal should be granted for that to be clarified by the Court of Appeal.

21. Given Mr Chan’s above contentions, it is plain that whether the respondent’s proposed grounds of appeal have arguable merits depend fundamentally on whether Mr Chan is correct in saying that those authorities establish (or arguably establish) the purported principle in law that...

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