THE INCORPORATED OWNERS OF CAINEWAY MANSION v. CAINE'S KITCHEN LIMITED AND OTHERS

IN THE COURT OF APPEAL

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JUDGMENT

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Silke, J.A.:

1. On the 6th October 1983 the 1st defendant, Caine's Kitchen Limited - "the tenant" - executed a tenancy agreement for a six year period at a starting rent of $7,500 per month for premises described as Shop Space 1, Caineway Mansion, 130, Caine Road:

2. Their purpose was to use it as a restaurant.

3. It was necessary to re-design and re-decorate the Shop Space. The tenant employed the 2nd defendant, Current Decoration Company Ltd. - "the decorator" - of which the 3rd defendant, LAU Ching Tao - "Mr. Lau" - was the director manager.

4. A contract, in the form of priced items setting out the work to be done, was signed between the tenant and the decorator on the 23rd September.

5. Work commenced on the 3rd October and continued uninterrupted until the 20th of that month. The completion date in the contract was the 24th October and the price $191, 984.

6. On the 20th October Mr. Poon, the caretaker of Caineway Mansions, heard knocking sounds coming from the area of a wall separating a light well in. the Shop Space from a meter room in Caineway Mansions.

7. He investigated, for he was aware that some time previously the Committee of the plaintiffs had caused to be placed in the window space in that wall, and facing into the light well, a metal plate inscribed with the Chinese characters reading "No breaking of this wall is allowed: by order Caineway Mansions".

8. In his evidence Mr. Poon had spoken of an earlier incident when he had found the defendants using the Caineway Mansions electricity in order to inspect the Shop Space. They had, he said, inserted wires into a socket in the meter room. As a result of this the decorator and Mr. Lau had sought and had received permission to use Caineway Mansions electricity with a separate meter being installed so that the use could be paid for. This, suggests the caretaker, is the reason why the plate was put up.

9. There is a dispute as between the parties on the first using of the electricity.

10. Mr. Poon informed the Chairman of the Committee of Caineway Mansions, Mr. Lai Shing Kwong, and in consequence a report was made to the police. They came and work stopped.

11. On the 21st October a further report to the police was made consequent, it is said, upon further work being done on the wall. The police, considering the matter a civil one and thus out of their jurisdiction, took no action other than informing P.W.D.

12. An ex parte injunction, though the urgency of the application is somewhat difficult to see, was obtained the same day against all three named defendants. This prohibited: first: "knocking down or in any way damaging the wall" and: second: the "continuing to connect any pipes and/or wires to the cooling tower" - a tower situated above the light well and which was for the use of the air-conditioning, system in the proposed restaurant. The injunction contained the usual undertaking as to damages.

13. The inter partes summons was set down for the 31st October and came on for hearing on that date. There was filed by the defendants on the same date a somewhat curious and unnecessary document entitled a "Cross Notice of Motion". In one of its paragraphs it asked for the discharge of the injunction and the dismissal of the inter partes summons.

14. In the event the summons was adjourned to allow the defendants to file affidavits and the plaintiffs to file in reply.

15. On the 12th December the matter came on for hearing before Jones, J. who made the following order:

"IT IS ORDERED THAT on the Defendant's undertaking to replace a new window and to make good all decorations and the brick wall separating the light well behind the shop space No. 1 at Mo. 130 Caine Road, Caineway Mansion at the meter room on round floor of Caineway Mansion, No. 128-132 Caine Road, Hong Kong, the ex-parte injunction be discharged and costs for the ex-parte hearing and the hearing today be reserved.

 

        AND IT IS ORDERED that there be leave to Plaintiff to file a reply in 7 days. Case fixed for hearing on 25th and 26th January, 1984 at 10:00 a.m."

16. No Statement of Claim has ever been filed by the plaintiffs. The writ in its endorsement disclosed no cause of action. Nevertheless, on the 1st November, the defendants saw fit to file a Defence and Counter Claim. The counter claim in turn disclosed no cause of action for the claim for damages was based solely upon the issue of an Order by the Court.

17. The confusion already existing became worse confounded on the 25th January 1984 when the action came on before Clough, J. for hearing and the plaintiffs discontinued.

18. It is apparent that the learned judge's attention was not drawn to the deficiencies in the defendants' pleadings for he gave directions as to the trial of the counter claim. Had the defendants, upon the discontinuance, simply abandoned their counter claim and relied upon their rights under the undertaking as to damages all would have been well procedurally. This was not done.

19. There was an Appeal to another Division of this Court on the costs order made on the 25th January and that Division - again it would appear without their attention having been drawn to the lack of a cause of action in the counter claim, and no doubt influenced by the directions for trial given by the Judge - reversed the costs order and directed that the costs be reserved.

20. In this confused and confusing form the matter came on for trial before Liu, J. on the 17th October 1984.

21. After leave had been given to the plaintiffs to amend their defence to counter claim and after an informal application had been made to strike out the defendants' counter claim the following order was made on the 19th October:

22. After a hearing lasting some eight days the Judge found on the first question that the plaintiffs had been entitled to apply for and maintain the injunction in respect of the wall but were not so entitled as to the injunction in respect of the cooling system.

23. On the second question he assessed damages for the tenant at $15,455 and for the decorator and Mr. Lau, jointly it would appear, at $3,315.

24. The defendants now appeal both the issues as to the "wall" finding and as to the assessment of the quantum of damages.

25. The plaintiffs cross appeal as to the "cooling tower" finding and as to the damages.

26. Both parties seek to appeal the costs order.

27. At the outset of this appeal we were concerned about the oddities of the procedures adopted throughout the litigation and, because of them, as to the jurisdiction of the trial judge to frame the issues he did and to make his order of the 19th October. The question arose as to whether the proceedings before him were or were not a nullity.

28. It is clear that where in these circumstances a plaintiff discontinues his action then all that is left is a reference as to the damages which a defendant may have suffered.

29. Newcomen v. Coulsen^(l). In his judgment, at page 277, Mallins, V.C. said:

"Now if this had been the hearing of the action, and the action had been heard by me, I think I should have done that which I have done in other cases; I should have decided whether there was any case for damages at all and if there had been I should have assessed the damages at the hearing;......"

30. We think that this was the course the trial judge here, attempting to make the best of a very bad job, took. He was placing the parties back in the position they should have been. after the discontinuance and effectively striking out the counter claim. He was in our view deciding that, first of all, there should be tried the issue of whether it was just and equitable to enforce the undertaking as to damages for the period 21st October to the 12th December - that is whether there was any case for damages at all - and second, if there were such a case, the issue of. the quantum of those damages, if any.

31. And it is in the light of this that we view the appeal.

32. It is clear that the tenant's original intention was to open a door in the party wall and by so doing to provide an exit from their restaurant through the meter room and into the main corridor - one of the common areas of Caineway Mansions near the lifts. The evidence as to this is supported by the plan submitted to the Building Ordinance Office which showed such a door. Neither the tenant nor the decorator ever saw fit to seek the plaintiffs' permission for this work or for the use of the common parts of the building, which parts were vested, by the Deed of Mutual Covenant, in the plaintiffs.

33. After work had gone on up to the 15th October and with the completion date of the 24th October looming near both Miss Leung, a director of the tenant, and Mr. Lau stated in evidence that they had had second thoughts. They did not wish to delay the coming into operation of the restaurant and, no approval having yet been received from B.O.O. for the submitted plans, decided that, if approved, the door plan would be put into operation and, if not, they would simply repair the existing window in the wall. However, on that day, the caretaker, Mr. Poon, was, he said, told by the person doing actual work on the wall that he was carrying out the door plan. This conversation was not deposed to on affidavit. No member of the plaintiffs' committee saw fit to look and see what was actually going on.

34. The defendants still had not approached the plaintiffs for permission for any form of work on the wall.

35. In these circumstances the injunction was sought ex parte and granted on the 21st October. The evidence supporting, the application was not of the strongest. There were two affirmations before the Court; one from Mr. Lai Shing Kwong, the Chairman of the plaintiffs, and one from Mr. Poon. The latter simply verified the contents of Mr. Lai's affirmation. Plaintiffs seeking a remedy such as the one sought here are under a duty to ensure that the fullest disclosure is made to the Court. An inspection, and direct evidence of it, was of paramount importance.

36. Mr. Lai averred that the defendants, through Mr. Lau, had told Mr. Poon that they proposed to knock down part of the wall so that the necessary restaurant licence could be granted..

37. In his paragraph 9 Mr. Lai went on to state that as a result of the defendants "threatening" to knock down the wall the metal plate, to which we have already referred, was put up.

38. We would digress slightly here to say that the evidence as to why the metal plate was erected and as to why it carried the words it did was very vague. Mr. Poon said the plate was put up after an unauthorised use of electricity at a much earlier date. He said he did not come by the knowledge of the knocking down of the wall until the 20th October. The defendants disputed the unauthorised use of electricity and said they knew nothing of the plate despite the work they were starting to do on the wall near the window. The effect of this is to give paragraph 9 of Mr. Lai's affirmation little validity.

39. He had made but passing reference to "the erection of a cooling tower for the air-conditioning of the shop on top of the light well". The evidence again is clear that there was a pre-existing cooling tower on top of that light well. The light well was part of the shop premises. The cooling tower had been erected prior to 1979 when a supermarket occupied the area. It would appear that the defendants intended to build a new tower. The plaintiffs' writ prayed for a mandatory injunction to demolish a new tower. This issue was never pursued and no further reference is made to it in these protracted proceedings.

40. We would have thought it preferable had the Judge dealing with the ex parte application refused, or adjourned it, even on short notice, to the inter partes hearing. Had that been done it is unlikely that anything more would have been heard of this matter for Mr. Chair. has, very fairly said on behalf of the plaintiffs that if permission. had been asked for the doing of remedial work to the window it would have been granted.

41. Be that as it may, when the inter partes summons came on for hearing on the 31st October the defendants had in the "Cross Notice of Motion" nailed their flag to a window repair. It would have been open to the defendants to have sought, simply on the evidence as it then stood, the dissolving of the in junction. It is unfortunate that they had not seen fit to file any affidavit evidence. We intend, by saying this, no criticism of Mr. Persaud who was brought into the dispute on this behalf very close to that date But, had they filed evidence, it seems almost inevitable that the injunction would not have been continued. Their failure led to the summons being adjourned and not coming on for hearing until the 12th December when the "wall" portion was not continued on the undertaking given which we have already recited and the "cooling tower" portion died a natural death.

42. We have little doubt that, whatever the plaintiffs may have thought, the work being carried out on the wall over the 20th and 21st October was merely some minor alteration to the window and had hot gone on as far as an attempt to knock down the wall in order to make a door. Photographs of the area where, in someway, introduced into evidence before Liu, J. and of them the Judge said:

"The photographs are therefore unhelpful, and despite my first impression I can hardly derive any assistance from the size of the opening."

43. As there was no evidence as to when these photographs were taken, or by whom, we would respectfully echo his sentiments. Mr. Persaud has, through some detective work on the trial transcript and by the drawing of extended inferences, sought to persuade us that, as of the 20th October, the photograph marked "D3" was the before and the ones marked "D1" and "D2" the after condition of the wall and window. That may well be so, but we are not at all certain it is necessarily so and, like Liu, J., derive little assistance from them.

44. On the 25th January 1984, neither party yet showing any common sense, the action came on for trial. The plaintiffs having discontinued there was, as we have said, left simply the reference as to damages on the undertaking recited in the Order of the 21st October. However, directions were given as to the trial of the counter claim arid the trial adjourned.

45. Mr. Chain has said to us that he had discontinued the plaintiffs' action while reserving his rights to argue that the injunction had been properly obtained. We have no hesitation in accepting that that was Mr. Chain's view but the effect of discontinuance cannot be altered by a reservation of this kind.

46. The matter then came on for hearing before Liu, J. as I have earlier described.

47. With respect, we think his finding:

"there was justification for seeking and maintaining an injunction against the defendants in respect to the wall in the known circumstances which reflected a fixed intention on the part of the defendants to modify the same position into a door......."

to be wrong. Whatever the defendants' earlier intention had been, and we have no doubt that this was for a door, that which was desultorily taking place over the 20th and 21st October was not the positioning of a door.

48. But this is not in our view of any great importance for the Judge went on to find:

"but the plaintiff was clearly unjustified in obtaining and maintaining the in junction as regards the 1st defendant's cooling tower."

A finding which, with respect, we are in entire agreement. There never was any real justification advanced for this portion of the injunction whatever may have been the 1979 position or the results of the May 1984 inspection. On the latter occasion the tenant had long since ceased to occupy or have anything to do with the Shop Space.

49. There can be no doubt that the denial of an air-conditioning system to a restaurant would greatly inhibit the commencement of its business.

50. We would therefore find that it was both just and equitable for the defendants to enforce the plaintiffs' undertaking as to damages.

51. That being so what, if any, actual loss, a loss which could reasonably have been foreseen, flowed as the natural and probable consequence of (1) the tenant being deprived of the use of the premises as a restaurant during the injunction period; (2) of the decorator having been delayed in the execution of his works; (3) of Mr. Lau personally?

52. We can deal very shortly with Mr. Lau. There has been no attempt to show a loss of any kind to him. We are unclear as to the basis for the joint order on damages in favour of the decorator and Mr. Lau but that is neither here nor there for there was a complete failure of proof of any loss by Mr. Lau. Why he was joined as a defendant in the first place we do not know. We accept he was "the person in charge" but that was as the managing director of the decorator. He. was not, so to speak, the worker wielding the demolition sledge hammer.

53. On behalf of the tenant Mr. Persaud has sought to argue, as he did at trial, that the quantum of the tenant's loss should be based upon a provision in the decoration contract as between the tenant and the decorator.

54. This provision states:

"If the work goes on beyond the date of completion a compensation equal to 5% of the total amount of work done for and days delaye shall be given to Caine's Kitchen Limited to cover its loss until all the work is completed."

55. Leaving aside the difficulties of construction in respect of the wording of this provision and also whether or not it is a penalty or a genuine pre estimate of loss, this would, in respect of the. period of delay argued for by the tenant, give a sum in excess of $500,000.

56. The plaintiffs were never a party to the contract. No evidence of any kind was adduced to show actual loss. Nor prospective loss or that the provision was a genuine pre-estimate. The Judge stigmatized the provision as a penalty. Mr. Persaud has asked us, if this 5% is not to be accepted as the measure of the tenant's loss, to order an inquiry as to damages at this late stage. For reasons which will become apparent his request is declined.

57. Whether or not the trial judge was correct in describing this 5% provision as a penalty, in our view, matters not. What does matter is the question of the legal usage of the premises, actual or intended, as a restaurant. By "legal" we mean licensed.

58. Miss Leung in her evidence is quite clear that once the decoration. work had been completed the tenant wanted to operate the Shop Space as a branch of the pre-existing Mei Kei Restaurant run. by the tenant at 118, Caine Road. After the 22nd December, whether it was entitled a "Fraternity Association" or not is not of moment, the premises was clearly run as restaurant. Mr. Lau in his evidence said that he had had a hot meal there. Mr. Poon said meals were served there. Miss Leung accepts that no licence had been issued in respect of the premises. She was aware that a restaurant needed a licence but suggested that because the other premises in Caine Road had a licence it was unnecessary to apply for one for Shop Space 1.

59. Under the enabling provisions of the Public Health and Urban Services Ordinance, Cap. 132, there exist Food Business By-Laws. Part IV of those By-Laws (Vol. 8 N.14) is entitled "Licencing of Certain Food Businesses". A c restaurant is a "food business" and, under the provisions of By-Law 32(1), no such  business can be carried on without a licence. By-Law 34 sets out the prerequisites for the granting of a licence one of which is an approved plan, which plan, under By-Law 33, must accompany any application for a licence.

60. In respect of Miss Leung's evidence it is worthy of comment that a plan had been sent to the Building Authority and the defendants themselves produced in evidence a letter dated the 21st October 1983 addressed to Mr. Lau as of the decorator making reference to it. That letter stated that "the new door, the kitchen and the toilets" appeared to be unauthorised works and requested that plans for these alteration works be submitted for consideration. Mr. Lau was informed that the works could not be commenced until approval and consent had been given. There was no evidence that such "approval and consent" had been received at any time.

61. The object of the By-Laws is to supervise and control the premises upon. which a food business is being carried on. So: the activities intended to be carried on by the tenant needed a licence. None existed during the injunction period - nor, indeed, when the restaurant opened for business.

62. The line of authority which stems from Tam Choi v. Ho Wai Hing and The Kowloon Motor Bus Company^(1a) (unreported) makes it clear that losses emanating from an illegal business are not recoverable at law.

63. Here, apart from the lack of evidence of actual loss or of possible loss, the Shop Space could not have been legally run as a restaurant injunction or no injunction.

64. Liu, J., being in a generous mood, allowed the tenant that which he described as "out of pocket expenses" - the rent, rates and management charges paid by them during the whole of the injunction period. Had there been evidence that the premises were to have been used for some purpose other than as a restaurant these might well have been recoverable. With respect to the Judge in the circumstances here they were not. The tenant would have, injunction or no injunction, had to fulfil its commitments under the tenancy agreement.

65. In the event the tenant has not shown itself to have suffered any recoverable loss.

66. There was no evidence that the decorator had suffered loss through any extra days labour involved and paid for due to their being delayed in their completion of the works: nor have they shown. any loss on any other contract: nor have they shown any delay occasioned to other contract work which gave rise to any penalty being imposed upon them. The compensation clause in their contract with the tenant would, the delay as between those parties being occasioned by an order of Court, be unenforceable. There has been no attempt to enforce it.

67. The Judge awarded them the sum he did based on the wages to be paid to the workmen who completed the works and over a 6½ day period - making allowance for the number of days which would have had to be worked anyway after the injunction issued anal up to the due completion date.

68. The workers used were permanent employees of the decorator and would be paid their wages whatever work they were doing. It has never been suggested that the decorator lost any business because of the extra time needed for completion. of the works and the use of its workers on the Shop Space after the 12th December.

69. They have proved no actual loss. Their only possible claim for damages would lie on the basis of inconvenience. There is no evidence to suggest a loss on this head.

70. Therefore while the defendants succeed in their appeal on the "wall" issue they fail on the issue of damages. The plaintiffs fail on the "wall" issue but succeed on that which matters most, the damages issue. The appeal and cross appeal are allowed to that extent.

71. As a matter of record we strike out the counter claim.

Costs

72. Liu, J. made no order as to costs and that included no order as to those costs reserved for his consideration.

73. In the light of the foregoing conclusions we do not think that that order can now stand.

74. It is necessary before hearing Counsel on the matter to set out the multitude of costs orders already made.

75. So: we have to consider, starting at the beginning:

76. We shall hear Counsel.

77. Having heard submissions from Counsel and taking an overall view of this litigation from its inception we make the following order as to costs:

(1)    38 Law Times (New Series) 275

(1a)    Civil Appeal 19 of 1974 F.C.