DELUXE CONCEPT DEVELOPMENT LTD v. ICONIC CHIEF LTD

LDBM 240/2013

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 240 OF 2013

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D E C I S I O N

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1.  There are 2 summonses before me, one from each party.  By these interlocutory applications they ask for injunctive relief.  In gist, the applicant asks for an interim order restraining the respondent from removing a floor slab; and the respondent asks that the applicant be retrained from interfering with the removal of the same floor slab or alternatively the applicant be ordered to remove it.

2.  The applicant is the registered owner of a property situated at the Mezzanine Floor, 15 Tsing Fung Street, Hong Kong (“the M/F”), which it has purchased in January 2008.  The respondent is the registered owner of the unit on Ground Floor which is immediately below the M/F (“the G/F”).  The respondent purchased the G/F in March 2013 subject to a tenancy agreement (“the G/F Tenancy Agreement”) and the tenant (“the G/F Tenant”) was operating a food outlet.

3.  The respective rights and interests of owners of the building (“the Building”) are defined in a Deed of Covenant dated 8 September 1966 which was registered in the Land Registry (“the Deed of Covenant”).  The G/F and M/F were designated as shop and office respectively in the Deed of Covenant.

The Applicant’s Application and Summonses

4.  By a notice of application dated 23 August 2013 (“the Notice of Application/Application”) the applicant asks for an order that the respondent shall be restrained from carrying out works to remove the floor slab (“the Demolition Works”) now segregating the M/F and the G/F at the front portion facing Tsing Fung Street (“the Floor Slab”).  It is said that such Demolition Works had caused nuisance to the applicant.  It is the case of the applicant that this was in contravention of Clause 10(b) of the Deed of Covenant (“Clause 10(b)”) which provides that :

“each of the parties hereto shall not use or cause or suffer or permit to be used the part or unit of which he is entitled to the exclusive use … shall not do or cause of suffer of permit to be done anything therein or thereupon which may create unnecessary noise or which may be or become a nuisance annoyance or inconvenience to the occupiers of the other parts of the building or of the premises in the neighbourhood”.

5.  It is not disputed that there is an opening from the M/F onto the front staircase for the domestic units of the Building (“the Door Opening”); and that the occupiers on the M/F had used the Door Opening for entering and exiting M/F.  On 14 March 2013, the applicant received a building order from the Building Authority ordering it to seal the Door Opening, but such building order has been withdrawn in June 2013.  At the same time, the applicant received also a building notice (“the Building Notice”) notifying the applicant as owner of the M/F that unauthorized building works relating to the Floor Slab had been identified.  By the Building Notice, the applicant was put on notice that such unauthorized building works were in contravention of s.14(1) of the Building Ordinance.  Further it said that if the situation was not rectified before 12 May 2013, the Building Authority would cause the Building Notice to be registered in the Land Registry against M/F.  The applicant has never argued with the Building Authority on the Building Notice.

6.  The applicant says that according to the building plan of the Building (“the Building Plan”), there was a void area in the front portion of the M/F and G/F (“the Void”), and that the exit from M/F to Tsing Fung Street was by a staircase to and through the G/F (“the Staircase”).  Inconsistent with the Building Plan, however, the Void was not reflected in the floor plan annexed to the Assignment of the M/F (“the Floor Plan”) which shows a larger area of the M/F because of the Floor Slab and thereby extending the M/F to the full length of the G/F(“the Extended Part”).  Further the railings at the end of the M/F fronting the Void and the Staircase shown in the Building Plan were not shown therein and did not exist at the time the applicant purchased the M/F.

7.  It is the applicant’s case that at a time unknown to the applicant and prior to the applicant’s purchase of the M/F, the respondent’s predecessors in title or persons with their agreement and consent had caused the Floor Slab to be built and the Staircase to be removed (“the Unauthorized Building Works”).  As a result of the Unauthorized Building Works, at a time also unknown to the applicant, the applicant’s predecessors in title made the Door Opening for the obvious purpose of serving as an entrance and exit for users in the M/F.

8.  It is common ground that there had been discussions between the parties over the Building Notice regarding parties’ compliance with it.  The applicant says that despite of the on-going discussion, the respondent without giving any prior notice commenced the Demolition Works from the G/F and caused a hole to be drilled on the Floor Slab on 16 August 2013.  It is said that the Demolition Works carried out without any safety precautions would cause danger to the safety of users and occupiers on the M/F.  

9.  It is further said that there is a sitting tenant on M/F (“the M/F Tenant”) carrying out hair salon business but such business was seriously affected by the Demolition Works.  Further the applicant’s right and privilege to the use occupation and enjoyment of the M/F were disrupted.

10.  The applicant therefore issued the Notice of Application and asked for an injunction restraining the respondent from continuing with the Demolition Works without its consent.  The applicant further took out an ex parte summons on the same day asking for an interim order on same terms as pleaded in the Application.  Upon notice the respondent attended court on 26 August 2013 and the parties came to certain terms as to how the applicant’s interlocutory application should be dealt with and meanwhile the Demolition Works were put on a halt pending determination of the applicant’s interlocutory application.  Pursuant to the said agreement, an inter parte summons was taken out by the applicant on 29 August 2013 and returnable on 10 October 2013.

11.  The parties returned before me for argument on 10 October 2013.  Mr Tsui for the applicant makes an application for leave to amend the Notice of Application and the present summons at the conclusion of the hearing by adding the following clause:

“….for an injunction restraining the respondent to carry out any construction works on the Floor Slab without consent of the applicant which shall not be unreasonably withheld or until expiration of existing tenancy on 5^th May 2014’ whichever is earlier.”

12.  Further, Mr Tsui asks that in case the court is minded to make an order in terms of the application of the respondent, that is, that the Floor Slab is to be demolished, the court should order as a condition that the Staircase is to be reinstated.

13.  In support of this late and sudden application for leave to amend, Mr Tsui says that the first proposed amendment is to deal with the problem for the applicant’s claiming for an injunction against the respondent for an unlimited period of time.  For the second proposed amendment, Mr Tsui submits that if the Floor Slab is to be demolished, the applicant should be given back the Staircase which was removed without authorization of the Building Department.  Mr Houghton opposed to these late applications.

14.  I pause here to deal with these applications briefly.  I am of the view that the applications made orally so late at the juncture of Mr Tsui’s reply to Mr Haughton’s submission should not be entertained and must be dismissed.  There was never any claim for reinstatement of the Staircase in the Application and I do not see the basis for that to become a condition of an order to be made in relation to the Floor Slab.  I am of the view that the Staircase could be dealt with separately and not at this interlocutory hearing when the summonses are all but about the Floor Slab only.

The Respondent’s Counterclaim and Interlocutory Application

15.  The Respondent also received the Building Notice demanding the respondent to rectify the situation, i.e. to have the Floor Slab removed before 12 May 2013.  It is said that due to the uncooperative manner of the applicant, the Floor Slab has not been removed notwithstanding that the deadline has expired.  As a result, the Building Authority has caused the Building Notice to be registered against the G/F in the Land Registry.  By way of Counterclaim the respondent averred that the applicant or its predecessors in title had been in breach of Clause 8 of the Deed of Covenant (“Clause 8”) by building the Floor Slab:

“Each of the parties thereto shall not make any structural alteration to the said building or to the part or unit of which he is entitled to the exclusive use, occupation and enjoyment and shall not make any alteration to the installation or fixture so as to affect or likely to affect the supply of water, electricity or gas and shall not cut or damage any of the main walls or beams or floors of the said building.”

16.  Further it is said that as a result of the applicant’s breach of the Deed of Covenant, it has suffered loss and damage, namely that the Building Notice is still registered against the G/F; the G/F Tenant has terminated the G/F Tenancy Agreement and had vacated the G/F since May 2013.  As relief, it asks for an order for:

(1)	An injunction be granted restraining the applicant from preventing the respondent from commencing, proceedings with and completing, and/or interfering with the reinstatement work in respect of the Floor Slab;
(2)	Alternatively, the applicant do, within 28 days from the date of the order to be made herein, remove the Floor Slab and comply with Building Notice and Clause 8.

17.  By a Summons dated 18 September 2013, the respondent asks for same orders as interlocutory relief.

Discussion

18.  There is not much dispute on the relevant facts.  It is not disputed that the Floor Plan is not consistent with the Building Plan regarding the M/F.  The Building Plan shows that the M/F covers only about two-thirds of the length of the G/F, thus leaving the Void at the front portion.  At the end of the M/F, immediately fronting the Void, there should be railings fencing it off and the Staircase should be there for users to commute between the two floors and for M/F users to exit to or enter from Tsing Fung Street.

19.  More importantly there is no dispute that the construction of the Floor Slab involved unauthorized building works and had become the subject of the Building Notice; that the Building Notice has set out time for remedial work to be carried out; that such time has already expired; and that for reason of non-compliance, the Building Notice has been registered against at least the G/F.

20.  There is not much argument on the legal principles applicable to the present applications either.  It is not disputed that the guidelines set out in American Cyanamid Co v. Ethicon [1975]1 A.C. 396 are to be observed.  Mr Houghton for the respondent further submits that in the present case a grant of the interlocutory injunction would in practice have summarily decided the litigation in favour of the applicant as it would have the effect of giving the applicant all the final relief it seeks.  In such cases, the applicant should be required “to face a higher evidential burden in proving the merits of its case.”  I agree and am of the view that the respondent’s application is subject to same test.

The American Cyanamid Guidelines

21.  As mentioned, the House of Lords has in American Cyanamid Co v. Ethicon, supra, established as guidelines a series of questions which have to be considered in deciding whether or not an interim injunction should be granted[1]. Those relevant to the present applications include the following:

(i)	Whether there are serious questions to be tried or is there any real prospect of success;
(ii)	Whether damages would be adequate in compensating the applicant; and
(iii)	Where does the Balance of Convenience lie.

Serious Questions to be Tried /Any Real Prospect of Success

22.  As mentioned, there is little dispute on the facts leading to these interlocutory applications.  It is not disputed that the construction of the Floor Slab was not authorized and had occurred before the parties came into the picture.  The applicant does not argue that the Unauthorized Building Works are not in contravention of Clause 8.  It seems that the applicant is not saying that the respondent should not have carried out the Demolition Works at all, but they have to seek the consent of the applicant beforehand.  In paragraph 22 of his written submission, Mr Tsui submitted that the questions to be tried shall be as follows:

(i)	whether the respondent has caused nuisance to the applicant by carrying out the Demolition Works;
(ii)	whether it was the applicant or the respondent (including their predecessor in title ) who built the Floor Slab;
(iii)	whether the applicant has breached Clause 8 in making alterations which affected the wall, beam/floor of the Building;
(iv)	whether the applicant had been interfering with the Demolition Works; and
(v)	whether the Floor Slab imposes immediate danger which warrants immediate removal.

23.  I am of the view that the above items with the exception of that in sub-paragraph (ii) are in fact side issues.  I think the main issue to be tried at the end is whether there was contravention of Clause 10 (b) and if so who was in breach.  As mentioned, the applicant has never disputed that the Floor Slab was unauthorized.  I could not see that the applicant would be likely to succeed at trial in this regard.

24.  As to the question on who built the Floor Slab, it is not relevant so far as the Application is concerned because the respondent is not insisting that it has no duty to remove the same subject to the Building Notice.  It is the submission of Mr Houghton that the question on who was the wrongdoer in respect of constructing the Slab is not material in the circumstances of the case.  The Respondent has never argued that they had no duty to comply with the Building Notice.  To the contrary as one of the recipients of the Building Notice they have been earnest in complying with it and had virtually commenced the Demolition Works.

25.  As to those issues which I have found them peripheral, I do not think it likely for the applicant to succeed either.  For completeness, I shall also deal with them below.

(i) whether the respondent has caused nuisance to the applicant by carrying out the Demolition Works

26.  In the Notice of Application, the applicant makes no assertion that it has proprietary rights or interest over the Floor Slab itself or the Extended Part of the M/F.  Mr Tsui says it would be a matter for another court but I was not informed whether any claim has been filed or on what basis such claim is to be made.  So far as the nuisance complaint is concerned, in the Notice of Application, it is said that Clause 10(b) is relied upon.  Mr Tsui elaborates that although the applicant has made no assertion on the proprietary rights or interest in the Extended Part of M/F in the present proceedings, the noise and the dust caused by the Demolition Works must have caused nuisance to the applicant and/or the M/F Tenant as it would have had affected any other neighbouring owners in the Building.

27.  From the evidence before me bearing in mind that I am not doing a mini-trial on the strength of affidavits, I do not see how the Demolition Works could amount to nuisance, annoyance or inconvenience caused by the respondent as stipulated in Clause 10(b).  There were no such particulars set out in the affirmations.  Further I agree with Mr Houghton’s submission.  In effect he says if the nuisance complaint is made on the basis of the Demolition Works itself, the complaint could not be made out under Clause 10(b).  Clause 10(b) should not be construed in such a way that would be contradicted by the other parts of the Deed of Covenant and should be construed in the context of the Deed of Covenant as a whole.  Further a reasonable person reading Clause 10(b) in the context of the entire Deed of Covenant can safely be assumed to understand a “nuisance” as not preventing an owner from undertaking work with a view to complying with an Order of Building Authority and/or the Deed of Covenant.  In essence, it is submitted that the Demolition Works by themselves could not have constituted a nuisance within the meaning of Clause 10(b).  It is also submitted that Clause 12 of the Deed of Covenant confers power on the respondent in the carrying out the Demolition Works. 

28.  After hearing Mr Tsui and reading the affirmation made on behalf of the applicant, I find that the real concern of the applicant was not with the noise, the dust or any “nuisance” brought about by the Demotion Works per se, but with the consequential loss of possession and use of the Extended Part of M/F which would lead to an early termination of the M/F Tenancy Agreement and thus would bring about loss and damage to the applicant.

29.  As mentioned, Mr Tsui on behalf of the applicant applied for leave to amend the relief sought in the Notice of Application and the summons close to the conclusion of the interlocutory hearing.  From such application, it is clear that what the applicant has wanted to ask for is time.  The proposed relief it has attempted to ask for at the end is to defer the Demolition Works to May 2014 when the M/F Tenancy Agreement would have expired.  I must say that the application to make amendment to the Notice of Application and not only to the summons shows that there is no serious question to be tried at the end and this has further weakened the applicant’s case as it would not be unlikely that the trial would take place before May 2014.

(iii) whether the applicant has breached Clause 8 in making alterations which affected the wall, beam/floor of the Building

30.  It seems Mr Tsui has misread the respondent’s case and Clause 8.  It is obvious that the respondent relies on the first limb of Clause 8 and not the second limb.

(iv) whether the applicant had been interfering with the Demolition Works

31.  This is relevant to the respondent’s application and shall be dealt with later in the respondent’s application.

(v) whether the Floor Slab imposes immediate danger which warrants immediate removal

32.  The applicant says that the Floor Slab imposes no immediate danger and the respondent should not be allowed to continue or to carry out the Demolition Works.  It is my view that the Floor Slab has not caused or imposed immediate danger is not relevant at trial because it is not the case of the applicant that it should not be removed but what is the appropriate time or condition for it to be removed.  Even if it is relevant and I accept that there is no immediate danger,it could not assist the applicant if it is in contravention of Clause 8.

Adequacy of Damages

33.  The applicant says that if the respondent is allowed to continue with the Demolition Works and the Floor Slab is to be removed, damages will not be regarded as adequate remedy.  The crux of the applicant’s case is the M/F Tenancy Agreement and it is said that for this reason the Demolition Works should not be carried out before its expiry in next May.

34.  It is my view that the applicant’s loss in this regards, if any, is in monetary terms, which in my view could be adequately compensated by damages.

Balance of Convenience

35.  The applicant says that if there is doubt as to the adequacy of damages to the parties, the court will find out where the balance of convenience lies.  I have already found that damages should be adequate compensation to the applicant and I do not have to consider balance of convenience.

36.  In case I am wrong, however, I do not find that balance is in favour of the applicant.

37.  The strongest case of the applicant’s case in this regard is the loss of rental income or compensation to be made to the M/F Tenant.  Mr Houghton says that this could not be a good reason in this regard.  He refers me to the M/F Tenancy Agreement saying that in fact the M/F Tenant had excised an option to renew just in May 2013 which was a time when the Building Notice had already been issued for two months.  It is also submitted that Clauses 11(a) and (b) provides for early termination in situation as in the present case:

11 (a) : Notwithstanding anything hereinbefore contained to the contrary ………… or the said building or any part thereof whether wholly by demolition and rebuilding or otherwise or partially by renovation refurbishment or subdividing the said premises by new partition or otherwise  ……..then in any of such events the Landlord shall have the right upon giving six (6) months’ prior notice in writing to the Tenant to terminate this Agreement and the Landlord shall pay to the Tenant a sum equal to 50% of the rent payable herein from the date of termination of this Agreement to the end of the term herein as compensation. Upon expiration of such notice this Agreement shall determine and the Tenant shall deliver up vacant possession of the said premises to the Landlord thereupon in manner herein mentioned.  The Tenant shall not be entitled to claim any damages or compensation in respect of such early determination save and except the rights and remedies of either party against the other arising from any antecedent claim and breaches.

11 (b): If the aforesaid events under Sub-Clause (a) shall happen during the renewed term as defined in Clause 13(a), the prior notice in writing given by the landlord to the Tenant shall be three (3) months and no compensation shall be payable to the tenant in respect thereof.

38.  It is said on behalf of the respondent that until date of hearing, the applicant has served no notice on the M/F Tenant to determine the Tenancy Agreement pursuant to Clauses 11 (b) therein.  Had he served a written 3 months notice after the renewal in May, the applicant should be exonerated from liability to compensate the M/F Tenant by September 2013.   

39.  Mr Houghton further submitted that quite to the contrary, the respondent has been suffering from loss of rental income.  It is said that it has already suffered grave financial loss in terms of rental income for HK$80,000 to $90,000 per month since the registration of the Building Notice against the G/F as no license would be granted for restaurant business to be operated thereat.  The G/F Tenant terminated the lease with the respondent in May 2013.  Such loss is to continue until the registration of the Building Notice could be vacated.  Further it is said that the failure to comply with the Building Notice may result in fines or other penalty imposed by a court.  Again, I am not doing any mini-trial there, but I am of the view that the concern of the respondent on the registration of the Building Notice is not unjustified.  I agree with Mr Houghton that in the circumstances the applicant has failed to prove that balance lies in its favour.

Status Quo

40.  Mr Tsui has asked me to consider the factor of status quo.  I do not think it could be of assistance to the applicant.  In American Cyanamid, supra, three considerations have been expressly mentioned for cases where there is doubt as to adequacy of respective remedies in damages available to either party[2]:

(i)	Status quo
(ii)	Relative strength of the case; and
(iii)	Special factors.

41.  As mentioned above, I have already made a finding that loss if any could be adequately compensated in damages, thus I do not think I need to consider status quo.  But again if I am wrong on this, status quo would not operate in the applicant’s favour as it is indisputable that the Floor Slab is unauthorized.  The Building Notice is good evidence.

Conclusion

42.  To conclude, the applicant does not dispute that the Floor Slab involved an unauthorized building work and is the subject of the Building Notice.  No appeal was made against its issuance.  On the complaint of nuisance, I agree with Mr Houghton that Clause 10(b) does not include situations where works were carried out to rectify breach of the Deed of Covenant or statutory provisions.  In any event, the applicant did not tell how it or the M/F Tenant had been affected by the Demolition Works in the sense of noise and dust except that that the Extend Part of the M/F would no longer exist if the Demolition Works were to continue.  The purpose of the applicant’s application seems to be to allow the M/F Tenancy Agreement to continue so that the applicant would not have to face the consequence of having to pay compensation to the M/F Tenant.  I am of the view that such kind of loss could be adequately compensated in damages in the end.  I am also of the view that the applicant has failed to persuade me that the balance of convenience should be determined in its favour.

43.  The complaint of insufficient safety measure is a non-point.  The Demolition Works have been and would be supervised by an Authorized Person.  Prima facie they would be carried out in compliance with the standard required in the profession.

44.  For the summons taken out by the applicant, I am not satisfied that there is a serious question to be tried nor that damages would not be adequate compensation for reasons set out in the above; further I do not find that discretion should be exercised in its favour in weighing the balance of convenience.  The applicant’s summons should be dismissed.

The Respondent’s Summons

45.  On the respondent’s Summons, Mr Tsui for the applicant says that the application of the respondent is just the other side of the coin and he has not much to argue in opposition but to adopt those arguments put forward in support of the applicant’s summons.

46.  In fact the respondent’s summons is beyond the agreement reached by the parties on 26 August 2013.  It was taken out on 18 September 2013 and it seems to be the respondent’s stance that it should also be dealt with together at the present hearing.  No directions had been asked for by the respondent for the hearing of the respondent summons.  I must say that it is dealt with together with the applicant’s summons only because the applicant took no issue on it.

47.  For the prohibitive injunction order asked for by the respondent, which in gist is to restrain the applicant from preventing the respondent from continuing with the Demolition works and/or interfering with the reinstatement work in respect of the Floor Slab; I would say it adds very little to the applicant’s summons although technically, if granted, the applicant would be made subject to a penal notice for contempt of court.  I find that not necessary.  So far as the alternative mandatory injunctive relief is concerned, it is trite that the grant of a mandatory injunction is always discretionary and that a standard of proof required is “a strong prima facie case”.  As at this stage, no prima facie case is shown as to who had built the Floor Slab, I do not think it proper to grant an injunction mandating the applicant to remove the Floor Slab. The summons of the respondent is dismissed.

48.  After considering all relevant factors, I dismiss both summonses before me.

Costs

49.  I order that the applicant do pay costs of the respondent on its summonses (both ex parte and inter parte); and that the respondent do pay costs of its own summons to the applicant.  Such costs are to be taxed if not agreed.  This is an order nisi to become absolute within 14 days if no application is taken out to vary the same.

[1] Snell’s Equity 32^nd edn., at pp545-

[2] Snell’s Equity 32^nd edn., at pp546-547