Acquiescence: Is a history of non-enforcement of DMC terms relevant?

In Freder Centre (IO) v Gringo Ltd ([2016] HKEC 418, CA) the owners of units in a commercial building placed a sign with a trade name on part of the external wall of the building. This was a breach of a term of the DMC prohibiting the placing of signs anywhere on the building except in spaces assigned for that purpose (the sign was not in an assigned space). It was also a breach of the covenant implied by section 34I of the Building Management Ordinance not to convert any common part to private use without the consent of the owners’ corporation.

In its defence, the owner of the units relied on acquiescence. The terms were of such a nature that acquiescence was possible; the space could have been made an assigned space, the owners’ corporation could have consented to the private use of the common part. The question was whether there had been acquiescence. The owners’ corporation had informed the owner of the units of its objection as soon as it learned of the breach. Looking at the incident in isolation, they could not be accused of standing idly by when the breach was committed. Gringo Ltd, however, pointed to the fact that the corporation had a long history of tolerating such breaches. It was this history that it relied on as amounting to an acquiescence. The owners’ corporation said that its limited resources meant that it could not bring proceedings in respect of all of the past breaches at once; it had a policy of concentrating on recent breaches.

The owners’ corporation’s argument had succeeded at first instance but was rejected on appeal. Chu JA giving the Court’s judgment said:

‘In our view, the fact that nearly all the other owners or occupiers of basement and ground floor units have for many years committed similar breaches, and the applicant has never taken any enforcement action or proceedings against them suggests that the breaches are prevalent and have over the years been tolerated by the applicant. This is directly relevant and germane to whether there is assent or lying by on the part of the applicant and whether it is unjust to grant the injunctive relief against the respondents.’ ([28]).

There had been acquiescence and  it would be inequitable to grant the injunction sought.

Michael Lower

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