XCHRX WING MING GARMENT FACTORY LIMIED v. THE INCORPORATED OWNERS OF WING MING INDUSTRLAL CENTER AND ANOTHER

1993, No. A8805

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The Plaintiff's claim against the 1st Defendant is for a variety of injunctions, principally mandatory in nature, and for damages for trespass and/or breach of agreement. Its claim against the 2nd Defendant is also for injunctive relief, principally mandatory in nature, and for damages for trespass. The Plaintiff has applied by summons in the action for the injunctive relief. There is really no dispute that, if that relief is granted, it will have the effect of deciding the action between the parties.

2. The Plaintiff was the owner of land in Cheung Yiu Street, Cheung Sha Wan. About 20 years ago, it erected an eleven-storey factory building which it called Wing Ming Industrial Centre on the land. About 3 years ago, the Plaintiff decided to sell off parts of the building. For this purpose, the land and building were divided into 1,323 equal undivided shares. A Deed of Mutual Covenant (DMC) dated 2nd March 1991 was entered into between the Plaintiff, the 1st Purchaser and Essman Construction Company Limited (Essman). Essman was by this DMC made the management company of the building for a period of 6 years. The DMC, as far as I can tell, followed the now customary form. The 1st Purchaser was given the exclusive right to hold use occupy and enjoy two floors of the building. The Plaintiff reserved the right to sell off further undivided shares together with similar exclusive rights of use in relation to other designated parts of the building. The Plaintiff also reserved the right to construct a cockloft over car-parking spaces 2, 3 and 4 on the ground floor of the building.

3. Other parts of the building have since been "sold off". The Plaintiff, however, still retains exclusive rights of occupation in relation to, inter alia, part of the ground floor, including car-parking spaces 3 and 4, and the basement. Car-parking space No. 2 has been disposed of to another purchaser. Although there was some issue about it on the pleadings, it is no longer in dispute, as I understand it, that the Plaintiff has successfully reserved to itself the right to construct the cockloft over all 3 parking places provided there is left a minimum clear head room of at least 7 feet 6 inches. The Plaintiff applied for and obtained from the Building Authority the necessary approval for the construction of the cockloft and other works. The totality of the work involved will provide the Plaintiff with approximately 3,000 sq. ft. of storage space on or over the ground floor of the building which the Plaintiff estimates could produce a monthly rental of about $167,000,00.

4. In the meantime, relations between the Plaintiff and the 1st Defendant have become strained. The degree of such strain and the causes therefor will be matters to be investigated at trial, if trial there be. Suffice it to say, the Plaintiff and Essman are connected. Mr. Yuen Man Hui is managing director of the Plaintiff and a director of Essman. He owns 99 out of 5,000 shares in the Plaintiff and 2,800 out of 3,000 shares in Essman. In 1992, Essman advised the owners committee (now the management committee, following changes in the law in 1993) that an overhaul of the Fire Services installations was necessary. It presented the committee with two quotations for the cost of overhaul and advised the committee that, unless it heard to the contrary, it would assume it was authorised to accept one of the quotations and proceed with the work. There appears to have been no objection from the committee. Equally, it appears Essman took no action.

5. In July 1993, the committee took its own action. It obtained a quotation from the 2nd Defendant, and in early August 1993, had the repair work carried out by the 2nd Defendant. This action by the 1st Defendant was in spite of protests by Essman which maintained that it should be responsible for signing the necessary contract and for supervising the work in its capacity as management company.

6. Crucial to the repair work was the replacement of the main water supply pipe which ran under the ground floor and which had been found to be leaking. It is unclear when the need for such replacement became apparent because there is certainly no mention of it in the quotations obtained by Essman. At all events, the 2nd Defendant, which has become the unwitting and unwilling party to the dispute between the Plaintiff and 1st Defendant, determined that locating, excavating and replacing the buried pipe, would be difficult, costly and inconvenient. It came to the conclusion that a new pipe should be routed along the ceiling of the ground floor and down into the basement to the pump-room. It was concerned amongst other things to ensure a minimum number of bends in the pipe in order to avoid an unacceptable reduction in mains pressure. The pipe was therefore routed straight across the ceiling of the ground floor, through the space above car parks 2, 3 and 4, down one wall of the ground floor, through the floor slab, across a small part of the basement ceiling and through a wall into the pump- room from where water is pumped round the building to sprinklers on the various floors in the case of an emergency.

7. When the Plaintiff discovered what happening, it immediately protested. These protests fell on deaf years. There was a flurry of solicitors' letters. Ultimately, the Plaintiff commenced these proceedings, in which the 1st Defendant is contemplating joining Essman as third party because it maintains Essman in breach of its duties under the DMC failed properly to supervise the carrying out of the work by the 2nd Defendant. At the same time, Essman is threatening action against the 1st Defendant for usurping its functions under the DMC. I have to say that, on the face of it, the 1st Defendant's complaint against Essman is breath-taking.

8. The Plaintiff's claim against both Defendants is in trespass. Against the 1st Defendant, it is also in tort for wrongful interference with its contracts with third persons and in contract for breaches of the DMC. I say at once that the claim for wrongful interference with contract is wholly misconceived. The contracts in question are the assignments to other purchasers of the building. Under those assignments, the purchasers as co- owners have no positive obligations to perform but simply an obligation not to stop the Plaintiff building its cockloft. No individual owner has done anything to prevent the Plaintiff building its cockloft. In my judgment, it is not to the point to say that the 1st Defendant, representing the owners collectively, has somehow interfered with that obligation by constructing or permitting to be constructed a pipe through the space reserved to the Plaintiff.

9. It is not in dispute that the court may grant an interlocutory mandatory injunction in normal cases provided it feels a high degree of assurance that, at trial, it would appear that the injunction was rightly granted. See Lau Wing Mo v. Lo Kong and Another 1991 No. 183 (Civil), an unreported decision of the Court of Appeal dated 9th June 1992. For the Plaintiff, however, Mr. Ismail argued that there is a different approach in cases of trespass to land. He said that, in the absence of exceptional circumstances or an arguable case by a defendant that there was a right to trespass, a land owner is prima facie entitled to an interlocutory injunction to restrain trespass on his land. For this proposition, he relied upon Patel and Others v. W.H. Smith (Eziot) Limited and Another [1987] 1 W.L.R. 835 and On Woollerton and Wilson Limited v. Richard Costain Limited [1970] 1 All E.R. 483. Those cases, however, were predicated upon the land owner having established his title. The question was whether or not the defendant could establish that he had a right to do what would otherwise be a trespass. In those cases, the land owner's title was not in issue. It was for the respective defendants to try and justify their trespass and show an arguable case to that effect. See the judgment of Balcombe L.J. in Patel at P.859.

10. Mr. Ismail further argued that the principle is even further refined in the case of a breach of a DMC. He relied upon the general rule that a court has no option but to grant an injunction to restrain a breach of a negative covenant. See The Incorporated Owners of Mai On Industrial Building and Another v. Hedit Limited 1987 No. A6529, an unreported decision of Godfrey J. (as he then was) dated 18th December 1987. An essential feature of this principle is that a party must be encouraged to keep its contract, not to break it. In The Incorporated Owners of Dragon View v. Nalpak Limited 1986 No. A3356, another unreported decision of Godfrey J. dated 18th January 1989, the judge, while not being prepared to grant the injunctive relief sought by the plaintiff, was at pains to spell out and declare that the defendant was in breach of the relevant provisions of a DMC and that the plaintiff was vindicated to the extent that it had established the principle that the provisions of a DMC must be observed.

11. In spite of the submission of Mr. Chan to the contrary, I am satisfied that there was reserved to the Plaintiff by the DMC and various assignments to other purchasers, a sufficiently defined space above the 3 car- parking spaces. I reject the submission that, until the cockloft had been constructed, the space was insufficiently defined to admit of trespass or unlawful entry or other interference. Trespass is the unlawful interference with the right to possession of land or the air space above it. See paragraph 1384, Vol. 45, Halsburys Laws of England, 4th Ed. Therefore, said Mr. Ismail, the offending pipe having unarguably been placed in the space reserved exclusively for the Plaintiff, a trespass has occurred and relief must be granted whether or not the Plaintiff has sustained any damage.

12. The 1st Defendant is sued as agent or representative of the owners of the building. The Plaintiff and the other owners are tenants in common, bound by unity of possession. For the Defendants, Mr. Chan contended that each owner has a right to possession of the whole building subject only to the agreement between owners that each will be given an exclusive right to "use hold and occupy" a defined part of the building. The word 'possession' is carefully avoided in the DMC and assignments, as is the case in respect of all multi-storey buildings. As tenants in common, one owner cannot commit a trespass against another. Mr. Chan referred to paragraph 1399, Vol. 45 Halsburys Laws of England, 4th Ed. which reads :-

"Co-owners. A joint tenant or a person entitled in common under a trust for sale of land can maintain trespass against his co-tenant if the co-tenant expels him from the land or destroys the subject of the co-tenancy without his consent, but not otherwise."

13. Mr. Ismail responded that the court should look at the reality of the situation. Notwithstanding the labels "possession" and "use and occupation", the Plaintiff and the other owners have effective possession in respect of the various defined parts of the building reserved to them. He relied upon two further judgments of Godfrey J. In Goodtex Land Company Limited v. Lung Kwong Emporium Company Limited 1993 No. MP2234 dated 3rd September 1993, the judge concluded that there was an implied reservation that each individual purchaser should obtain exclusive use of a particular floor but should be excluded from the use of the other floors. I can see how that decision points in the direction in which Mr. Ismail invites me to go. In Lai Wing Ho and Another v. Chan Siu Fong 1992 No. MP2835 dated 9th November 1992, the judge said :-

"No doubt in practice, the provisions of the deed of mutual covenant would be construed so as to preclude any co-owner claiming under it to complain of an agreement in respect of the taking of exclusive possession of part of the building by a person expressed to be granted that right. In theory, however, it is impossible for the co-owner's rights to possession of the whole to be limited in any way; for such limitation would be repugnant to the nature of his co-ownership."

14. The judge went on to say that a tenant in common cannot create any right to exclusive possession of part only of the premises, being a right capable of subsisting and binding his co-owners. The only way in which it might be done is by the grant of a licence which would in any event not be enforceable against the other co-owners. With respect to Mr. Ismail, this judgment seems to point in the opposite direction.

15. I do not think the concept of possession can be so conveniently adopted to suit an aggrieved co-owner, or at least not at an interlocutory stage. The matter requires far more detailed examinations. As far as the claim in trespass is concerned, I am satisfied that the Defendants have shown an arguable case that, whatever else they might have done, they have not committed an act of trespass.

16. Further, I take into account the fact that what has been done is in the interests of all owners of the building including the Plaintiff because the maintenance of effective fire fighting equipment is clearly of the highest priority. I have also inspected the premises. The encroachment by the pipe on the Plaintiff's space is little more than technical. I am not persuaded that it in any way inhibits the Plaintiff from constructing its cockloft. Nor do I see that it will have more than the most minimal impact upon the storage space then available to the Plaintiff. Similar considerations apply to the other acts of trespass complained of, namely the piercing of the floor slab and the placement of the pipe in the basement. In all the circumstances, I am quite satisfied that it would be wholly wrong to grant any injunctive relief at this stage. The issue in relation to trespass must go to trial.

17. Given the background to this dispute, I do not think that the allegation that the 1st Defendant is in breach of the DMC provides any more firm ground for the grant of injunctive relief. The essence of the complaint is that the 1st Defendant by the management committee has usurped the function of the management company, Essman. In arranging for the work to be carried out it was acting ultra vires and in a willfully negligent manner because it ignored requests by Essman, the manager, to provide specifications for the work. Even if it was arguably properly assuming and discharging the function of manager, it acted in a wholly unreasonable and arbitrary manner by encroaching upon the Plaintiff's space without any proper notice or consultation. The object, it is suggested, was to further its ends in the dispute with the Plaintiff over the running of the building. It acted, therefore, in a dishonest or at least willfully negligent manner, so that it is not entitled to the immunity which would otherwise be conferred upon it by the DMC.

18. Paragraph A, 1(ii) of section V of the DMC defines the manager. In my judgment, this definition is an unhappy one and destined to cause problems in the management of a multi-storey building. It is at least arguable that either the management committee or the management company may be the manager from time to time. However the provision is construed, the 1st Defendant's case is that Essman had effectively abandoned its management responsibility, so that it fell on the 1st Defendant through its management committee to do something about the state of the building, particularly the Fire Services installation. In replacing the main supply pipe, it acted responsibly by appointing a competent contractor (no complaint is made about the 2nd Defendant in this respect) and provided an efficient fire fighting capability, coupled with minimum expense and inconvenience, to the advantage of all owners including the Plaintiff.

19. I am satisfied that this is a matter which manifestly needs to be investigated at trial.

20. Accordingly, I dismiss the Plaintiff's summons. I make an order nisi that the Defendant should have the costs in any event.