RAINGATE LTD v. CHCP INVESTMENT CO LTD

HCA 734/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 734 OF 2007

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J U D G M E N T

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1.  This is an application for an interlocutory injunction brought by the defendant against the plaintiff under O.29 r.1 RHC.

2.  An unusual feature of it is that the temporary injunctive relief that is being sought pending a trial of the issues, has no underlying cause of action such as a counterclaim.  Thus on the face of it there seems to be nothing upon which one can invoke the series of questions to be asked as set out in American Cyanamid in exercise of the court’s discretion.

3.  There is therefore the interesting preliminary feature; do I have jurisdiction to make the order?

De Victoria

4.  This is the recently renamed building which is the subject of the dispute between the parties.  Its address is 9-15 Yee Wo Street, which runs roughly west to east across Causeway Bay.  It was built in 1968.  It is of 21 storeys.  The 1^st, 2^nd and 3^rd floors are for non-domestic use; the balance are domestic.

5.  A bird’s eye view of De Victoria reveals that it is triangular in shape, dictated by the configuration of the plot upon which it stands.  A feature of that is that the western end of the building along Yee Wo Street comes to a point as the two long sides of the triangle merge.  According to the plan, at the apex of that corner, within an area described in the documents of title as “the triangular corner”, there is an internal staircase.  The stairs lead up to the 3^rd floor.  But whatever its original function the staircase is not, curiously, now in use.  Perhaps it has been removed. 

6.  There is another set of internal stairs at the eastern end of the building also leading up to the 3^rd floor.  This stairway is functional, servicing the premises which occupy the bulk of the 1^st, 2^nd and 3^rd floors. 

The Defendant’s Acquisition

7.  The defendant, Commercial Press Limited and Commercial Press (Hong Kong) Limited are all associated companies of a group whose holding company is Sino United Publishing (Holdings) Limited.  They own and operate a chain of bookshops under the name of Commercial Press.

8.  In 1984 Commercial Press Limited came to purchase 44 of 246 undivided shares in the building, giving it sole rights to the 1^st to 3^rd floors of the building, for the purpose of operating a bookshop therein.  Incorporated within its boundaries for access to the bookshop is the staircase that I have referred to, at the eastern end of the building. 

9.  Excluded from the purchase was the defunct staircase at the western end of the building; the triangular corner.  What was included was an exclused right to erect signs on the exterior walls of the 1^st, 2^nd and 3^rd floors with this inbuilt condition:

“Subject to observation of all laws and regulations regarding the erection of signs and subject to the restriction that the signs or any brackets or supports annexed thereto shall not extend or be affixed to the external walls of the building other than those of the first, second and third floor.”

10.  In 1990 Commercial Press Limited assigned its interest to Commercial Press (Hong Kong) Limited.  In 2005 Commercial Press (Hong Kong) Limited did likewise to the defendant which remains the owner.  Throughout, the bookshop has remained in situ and in operation.  The present internal arrangement is that Commercial Press (Hong Kong) Limited rents the space from the defendant.  There is a sign at the ground floor entrance in English “The Commercial Press” and Chinese characters “商務印書館”.

11.  Since 1984 signs promoting the bookshop have been erected on the exterior walls, but in a manner which gave rise to complaints and this litigation.  One of those complaints is particularly pertinent to this application.

12.  Of about nine signs that were put up, one was on that part of the exterior walls of the 3^rd floor that surround the triangular corner at the western end of the building.  This sign was quite big and square comprising in large strokes, as if drawn by hand, the single Chinese character “書” which means “Book”.

The Plaintiff Acquires an Interest

13.  The plaintiff bought into the building in 2002 by purchase of 128 of the undivided 246 shares in it, which gave it exclusive rights in shop premises on the ground floor, and the 4^th to 19^th floors.  It also acquired the outer walls of the building, excluding one small area that does not feature in this litigation.

14.  In 2007 there was a further sale and purchase, in that the entire shareholding in the plaintiff was bought and sold, giving rise effectively to a new owner and management, whilst in the plaintiff’s name. 

15.  As I understand, the plaintiff has converted the upper floor units into serviced apartments, or that is a prospective conversion.

The Dispute Emerges

16.  The plaintiff under its new management came to learn that the defendant or its predecessor had erected air-conditioning units and related equipment on the canopy of the building over the ground floor which is designated a common area of the building.  Further, its signboards, supporting frames and lights promoting the Commercial Press had been built without authority of the Building Authority and were thus illegal structures.

17.  There was correspondence.  The defendant agreed to demolish the air-conditioning equipment and take down the offending signs, and not re-erect before approval had been obtained.

18.  So far so good.  That should have meant resolution of a possible dispute without resort to litigation.

19.  But the parties could not agree on a time frame.  The plaintiff filed this action in April 2007, seeking an injunction for the removal of the air-conditioning equipment and the illegal structures from the outer walls of the building, built contrary to the conditions imposed, and consequential damages. 

20.  For another reason it also sought removal of the sign that was on the external walls that surround the triangular corner at the western end of the building; this because, on the plaintiff’s case, on a proper construction of the documents of title, the defendant has no right of access to this part of the building for its signage. 

21.  This was vehemently challenged by the defendant and remains a point of contention.  Its case is that on an ordinary reading, it has the right to affix signage to the exterior of the 1^st to 3^rd floors, without exception.   I shall, as have the parties, call the external walls of this the triangular corner at the western end, the disputed area.

22.  Shortly after the commencement of the action the defendant accepted an obligation to remove all the signage and air-conditioning equipment, and did so.  Then in June 2007 the defendant sought and obtained approval from the Building Authority for the re-erection of the signs.  This included the replacement of the sign originally carrying the single character “Book” at the disputed area.

23.  The plaintiff responded to the positive steps taken by the defendant by amending its statement of claim, removing reference to the illegal structures therefrom.  But holding firm to the belief that the defendant had no right of access to the disputed area, it claimed, and still claims, for a declaration to that effect.

The Plaintiff Renovates

24.  The plaintiff’s new management, professing to be concerned at the dilapidated condition of the external walls of the building, chose in May 2007 to undertake a renovation programme; essentially this was to entail retiling and replacement of the windows.  No doubt the timing was influenced by there being a window of opportunity, the period after the removal of the defendant’s old signs and before their replacement.

25.  The defendant along with other occupants was informed.

26.  It was, on the evidence, the plaintiff’s intention to have the work carried out as soon as possible, for the benefit of all concerned; itself and the defendant included.  It had no wish to stymie the defendant’s right to re-erect the signboards, this time with the Building Authority’s approval, apart from within the disputed area.

27.  In the event the renovation work was completed but not before April 2008.  Various reasons were proffered as to why it took longer than expected, with bad weather a significant factor.

28.  There remained the underlying unresolved issue of the disputed area, and the defendant’s management saw the plaintiff’s decision to time the renovation work as deliberate conduct to hinder their own reconstruction.

29.  They proceeded to get underway the reinstallation, by drilling and other preliminary activity.  But this really was inappropriate in the circumstances; it was not feasible that both activities could proceed side by side.

30.  One can see from correspondence that the delay in completion of the renovation exacerbated the ill-feeling and distrust between the parties.

31.  Then it was that the plaintiff took upon itself to construct at the disputed area air-conditioning units and to erect a signboard of its own, advertising the serviced apartments it was running or proposing to run in the upper floors of the building.  Bearing in mind that the defendant had approval for and the firm intention to re-erect at that very spot a sign, a bit larger than before, carrying the Chinese character “Book”, this was, to coin its own words:  “the last straw that broke the camel’s back.”

32.  Treating this as the latest saga in a long-line of disruptive behaviour, the defendant’s management and advisors formed the view that there was no alternative but to file for an interlocutory injunction; thus this application.

The Interim Injunction Application

33.  This application, filed on 20 May, seeks an injunction restraining the plaintiff from denying the defendant’s access to the external walls of the 1^st to 3^rd floors, and from its carrying out the installation of the signage as approved, “until trial or further order”.

34.  Consequential orders are also sought.

The Real Issues

35.  What emerged during the hearing, whereat Mr Li represented the defendant and Mr Lin the plaintiff, was that notwithstanding the extensive ill-feeling and distrust and apparently highhanded approach taken by each side to the other’s rights, the following emerged:

(1)     The recladding of the exterior walls of the building undertaken by the plaintiff is complete.  Scaffolding erected for the purpose has been removed;

(2)     the plaintiff has no intention of impeding the defendant from re-erecting on the external walls of the 1^st to 3^rd floors the approved signage, save and except that it does not resile from its stance that the disputed area is out of bounds.  Thus the defendant may forthwith erect the signs intended for all but about seven metres of wall space; about 30 metres. 

36.  So, it all comes down to the rights of access to and use of the wall in the disputed area.

The Jurisdiction Point

37.  Mr Lin argued that an interlocutory injunction cannot be granted without an underlying cause of action to be tried.  The defendant has filed a defence but there is no counterclaim.  There is no free-standing right to interlocutory injunctive relief.  In support of this contention is the Australian Supreme Court case of Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63.  Gleeson CJ said this at page 21:

         “A dispute arose in the course of argument as to ‘whether interlocutory injunctive relief to prevent publication can be granted without any underlying cause of action to be tried’.  In the context of the present case, this is puzzling.  There could be no justification, in principle, for granting an interlocutory injunction here other than to preserve the subject matter of the dispute, and to maintain the status quo pending the determination of the rights of the parties.  If the respondent cannot show a sufficient colour of right of the kind sought to be vindicated by final relief, the foundation of the claim for interlocutory relief disappears.”

38.  O.29 r.1(3) expressly provides that:

“the plaintiff may not make such an application before the issue of the writ or originating summons by which the cause or matter is to be begun except where the case is one of urgency, and in that case the injunction applied for may be granted on terms providing for the issue of the writ or summons and such other terms, if any, as the Court thinks fit.”

39.  Mr Lin invites me to substitute for the plaintiff the defendant, applying O.15 r.2 RHC, who thus may not make the application it now has because it was not preceded by a writ or originating summons; in this case a counterclaim.

40.  The exception of course deals with the not uncommon scenario where the circumstances warrant immediate cessation of some ongoing unlawful activity, so that the first matter to come before the court is the interim injunction application supported by an undertaking to file the underlying writ.

41.  In this case argues Mr Lin, there is no urgency, and no sign of a counterclaim, two months after the application was made.

Analysis

42.  Against that argument there is the wide discretion available to the court to grant an injunction if it is just in the circumstances to do so.  Section 21L of the High Court Ordinance, Cap.4 says as much:

“(1)  The Court of First Instance may by order (whether interlocutory or final) grant an injunction … in all cases in which it appears to the Court of First Instance to be just or convenient to do so.”

43.  O.29 r.1(1) reads:

“(1)  An application for the grant of an injunction may be made by any party to a cause or matter before or after the trial of the cause or matter, whether or not a claim for the injunction was included in that party’s writ originating summons counterclaim or third party notice, as the case may be.”

44.  O.29 r.1(3) already reproduced above, does not expressly withhold from the court the power to grant an injunction applied for by a defendant who has a defence pleaded but no counterclaim.  There is, I think, a difference between a plaintiff who seeks an interlocutory injunction without complying with O.29 r.1(3), and a defendant who does so within the framework of litigation brought against him.

45.  This contention is supported by a case decided in the first year of last century but still propounded as good law:  Collison v Warren [1901] 1 Ch.812.

46.  In that case Collison was appointed by Warren, the trustee of his creditors, to continue to manage the hotel that he was the proprietor of.  Under the terms of that management he was permitted to reside in the hotel.  Then with reasons given (Collison was habitually drunk) he was summarily dismissed and ordered to leave.  Collison sued for relief, including that he be entitled to stay on.  Warren applied for an injunction to restrain Collison from remaining in the hotel and in any way engaging in management of the hotel.  It was put in evidence that Warren intended to file a counterclaim to this effect. 

47.  Buckley J said this at p.814:

“The first question is whether the defendant is right in moving in the action.  In my opinion he is.  In 1876 Jessel M.R. determined, in Sargrant v. Read [1876] 1 Ch. D. 600, that a defendant in a partnership action might, before judgment, apply for an injunction and a receiver, notwithstanding that the plaintiff had already served notice of motion for the like purpose; and the basis of that decision was that where an action is brought by the plaintiff relying on a cause of action, and the defendant wants relief arising from the same cause of action — not necessarily the same relief — he may by motion in the same action, before counterclaim delivered, obtain that relief.  In Carter v. Fey [1894] 2 Ch.541, a case in which the defendant ineffectually tried to move in the action, the principle I have stated was held by the Court of Appeal to be the true one.”

He went on to quote from judgments in Carter v Fey:

“Lopes L.J. said at p.545:  ‘The question is this — whether the defendant can move for an injunction against the plaintiff without filing a counter-claim or issuing a writ in a cross action.  In my opinion he can in some cases, but only in cases where the defendant’s claim to relief arises out of the plaintiff’s cause of action, or is incidental to it’.  And Davey L.J. said at p.540:  ‘In my opinion, it must be relating to or arising out of the relief sought in the action which is before the Court, and that any other injunction cannot properly be granted in the action.”

Then he went on to say:

“I ask myself, What in this case is the cause of action on which the plaintiff is suing?  It is the contract contained in this deed of arrangement.  He affirms that, as the result of that contract, he is entitled to be employed as manager of the hotel.  What is the defendant’s cause of action?  It is identically the same thing from the opposite point of view.  He negatives the plaintiff’s claim to be employed, and claims to prevent him from interfering with the management.  In that state of things I think he is entitled to move in the plaintiff’s action.”

He granted the injunction asked for; not, apparently, in reliance upon an undertaking that a counterclaim would be filed.

48.  Collison appealed.  Rigby LJ gave the lead judgment at p.818:

“In my opinion Buckley J was quite right in granting the injunction and the appeal ought to be dismissed.”

49.  In this case, now trimmed back to the current remaining issue of rights over the disputed area, the plaintiff seeks declarations that it has sole and exclusive rights over the disputed area, and that the defendant has no right to fix signboards thereon.

50.  The pleaded defence is that the defendant has every right to do so.

51.  The plaintiff having then anticipated success and arbitrarily taken control of the disputed area, it is, as I find, within the defendant’s entitlement to call for interim protection pending resolution of that issue at trial.  And, as I find, I have the jurisdiction to deal with that.

52.  I come now to whether the defendant should be entitled to the relief it seeks.

The American Cyanamid Principles

53.  Is there a serious question to be tried?

54.  The answer as I find is quite apparently ‘Yes’.  In that regard I pay heed that what is sought is, effectively, a mandatory injunction, for the defendant seeks the right to re-erect its sign at the disputed area and that means the deconstruction of what the plaintiff has put there.

55.  Thus to be weighed in the balance at this stage is as to whether or not the defendant at this stage has been able to demonstrate a high degree of success.

56.  This is established law in Hong Kong; see the judgment of Ma J (as he then was) in Music Advance Limited v The Incorporated Owners of Argyle Centre, 1 HCA 2574 of 2002.  Ma J said at para.12:

“12.       I would, however, only highlight one aspect.  Where, as in the present case, the plaintiffs seek an interlocutory mandatory injunction (that is, an order requiring the defendant to do something, in contrast to a prohibitory injunction which restrains the defendant from doing something), the following matters would be borne in mind as being the court’s approach :-

(1)     In the case of interlocutory mandatory injunctions, it is often said or assumed that a court will not grant one unless it feels a high degree of assurance that at the trial of the action, it will be shown that the injunction was rightly granted : see Shepherd Homes Ltd v. Sandham [1971] Ch 340 at 351.  This has been explained and sometimes understood as meaning that in the case of an interlocutory mandatory injunction, the applicant’s case on the merits has to be made out to a higher standard of proof than in the case of prohibitory injunction : see the Court of Appeal’s observations in TKI Limited v. New Happy Limited [1995] 1 HKC 551 at 554 B-D.

…”

57.  In Films Rover International Limited v Cannon Films Sales Limited [1987] WLR 670, Hoffman J said at p.681:

“In Shepherd Homes Ltd. v. Sandham, Megarry J, spelled out some of the reasons why mandatory injunctions generally carry a higher risk of injustice if granted at the interlocutory stage : they usually go further than the preservation of the status quo by requiring a party to take some new positive step or undo what he has done in the past; an order requiring a party to take positive steps usually causes more waste of time and money if it turns out to have been wrongly granted than an order which merely causes delay by restraining him from doing something which it appears at the trial he was entitled to do; a mandatory order usually gives a party the whole of the relief which he claims in the writ and makes it unlikely that there will be a trial.  One could add other reasons, such as that mandatory injunctions (whether interlocutory or final) are often difficult to formulate with sufficient precision to be enforceable.  In addition to all these practical considerations, there is also what might be loosely called a ‘due process’ question.  An order requiring someone to do something is usually perceived as a more intrusive exercise of the coercive power of the state than an order requiring him temporarily to refrain from action.  The court is therefore more reluctant to make such an order against a party who has not had the protection of a full hearing at trial.”

58.  I have read the relevant terms of the documents of title, and find it difficult to hold that the words:

“Together with All That the right to erect signs on the exterior walls of the First, Second and Third Floors subject …”

can be otherwise interpreted than to include the disputed area.

59.  Mr Lin valiantly pursued a semantics argument to show that the external walls of the disputed area are excluded.  He may well do likewise at trial.  For my part I believe the contrary viewpoint has every chance of success.  So, moving on:  Could the defendant be adequately compensated in damages if it is denied the right to advertise the Bookshop on the disputed area, but then succeeds after trial?

60.  I believe the answer is ‘No’.  It is of course only one minor part of a wall on which it is free to erect such signs.  But there is evidence that this the western end of the building is exposed to heavy pedestrian traffic, and the message passed by a sign prominent to that traffic may subliminally or otherwise attract custom.  That however would be impossible to quantify.

61.  Conversely, the plaintiff could be compensated if compelled to remove the sign and appendages only to win the right to reinstate.  The damages will amount to the cost and inconvenience associated with that.  The defendant has given an undertaking in damages.  There is nothing to suggest it is not good to meet a proper claim.

62.  Thus the balance of convenience does not come into play; put another way, the defendant should be entitled interim to the right to use the disputed area for the affixing of an approved sign.

The Result

63.  What emerges is that the defendant shall have its injunction.  But I am loath to dictate the terms because the parties have moved on from the time when the proceedings began and then from when the application in its present form was made.

64.  I accept from the Bar table Mr Lin’s assurance that the plaintiff’s challenge is limited to the parties’ respective rights at the disputed area, and from Mr Li that all the defendant wants to do is to erect the signs that his client has the approval of the Building Authority to carry out.

65.  It would not be right for there to be an injunction which goes further than is necessary.

66.  What now is required is that there be opportunity given to the plaintiff to remove from the disputed area the sign and any other construction which prevents the defendant from erecting the sign approved by the Building Authority or which will have the effect of obstructing it wholly with party from view.  There should be a time frame, of reasonable duration, to enable the plaintiff to do this.  Failure to do so in time will enable the defendant to effect such removal, at the plaintiff’s expense.  Thereafter the defendant must not be prevented from carrying out the erection of the signboard.

67.  That shall prevail until trial or further order.

68.  I trust the parties’ solicitors can agree a draft form of injunction to that effect.  If they cannot then they have liberty to apply to come back for determination of the terms; I trust that will not be necessary.

69.  I urge upon the solicitors to be expeditious, I shall be retiring soon and departing Hong Kong.

70.  Costs, nisi, of the defendant, shall be in the cause.