RORY MACDIARMID AND ANOTHER v. PARAYEAR INVESTMENT LTD AND OTHERS

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JUDGMENT

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Penlington, J.A.:

1. At the hearing' of this appeal we allowed the appeal, set aside the order for costs against the 2nd defendant made by Jones, J. and awarded the 2nd defendant its costs here and before Jones, J. We said we would hand down our reasons which we now do.

2. This is an appeal against an order made by Jones, J. on 15th August 1989 wherein he discharged an ex parte injunction which he had granted against the 2nd defendant. However he ordered that it should pay the plaintiffs' costs of the proceedings, on a common fund basis.

3. The background of this matter, so far as it is relevant to this appeal, is that the 2nd plaintiff entered into a two year tenancy agreement on the 15th October 1987 with the 2nd defendant in respect of a house in a residential property at Stanley called Stanley Green. The tenancy agreement contained the usual convenants for the tenant's right to quiet enjoyment of the premises. The house was in fact occupied by Mr. Macdiarmid, an Assistant Director of Barclays, who is the 1st plaintiff. It is, however, not in dispute that at the time of entering into this agreement, the 2nd defendant was holding the property in trust for an associate company, Hathras Industries Limited (Hathras). Both companies are members of the China Chem Group. The plaintiffs were not then aware of the position of Hathras as regards the ownership of the reversion.

4. In March 1988 Hathras sold the property to the 1st defendant. There is no dispute that notice of this assignment was sent to the 2nd plaintiff and they were requested that thenceforth rent should be paid to the 1st defendant's agent Messrs. Knight Frank Kan and Baillieu (Services) Limited ("Knight Frank"). Rent was accordingly then paid by the 2nd plaintiff to Knight Frank. Despite a reference to the lease having been assigned in the 1st plaintiff's draft affidavit which was before Jones, J. at the ex parte application, he was informed by counsel that no notice of any such assignment had been received. That clearly was wrong although I hasten to add it was no doubt a perfectly honest mistake.

5. In January 1989, Knight Frank wrote to all the tenants of Stanley Green informing them that renovation works were due to be commenced on 18th January and that there might be some inconvenience to them. This turned out to be a gross under-statement. On 1st March 1989 Linklaters & Paines ("Linklaters"), the plaintiff's solicitors, wrote to the 2nd defendant's complaining. However an out-dated address was used and in consequence the letter was brought back by their messenger. Linklaters claim that later, on learning that the 2nd defendant belonged to the China Chem Group, they sent the letter to the Group office and ultimately made contact with a Mr. Gary Wong. However, Mr. Wong says he cannot now remember the matter. Linklaters also wrote to Knight Frank, but the latter were agents of the 1st defendant and not of the 2nd defendant. However, as a consequence of their letters, they received a reply dated 18th January 1989 from Deacons, the 1st defendant's solicitors, which unequivocally referred to their client as the landlord of the premises.

6. Work on the premises was still going on in July 1989 and on the 21st of that month, Linklaters, on behalf of Mr. Macdiarmid obtained the ex parte injunction. In his draft. affidavit presented in support of the ex parte application made to Jones J., Mr. Macdiarmid deposed that since Barclays had entered into a tenancy with the 2nd defendant, the lease (meaning the reversion) had been assigned to the 1st defendant. The order granted restrained the defendants from carrying out the works in the manner they had, and contained a direction that an inter parte summons be issued with a return date of 1st August. On that date the injunction was discharged as the plaintiffs and the 1st and 3rd defendants had come to an agreement regarding the works being carried out and it was agreed that the 2nd defendant, having assigned all its interest in the reversion of the lease, had no control over those works. The 2nd defendant resisted the plaintiff's application for costs and successfully applied for the hearing to be adjourned to 15th August 1989. Before the hearing additional affidavit. evidence was put in by both sides.

7. In an affidavit sworn on the 31st July in support of the plaintiff's application for costs, it was stated by Mr. Robert Tissot, a legal assistant in Linklaters, that "this afternoon" he had asked the 1st plaintiff whether he was notified by the 2nd defendant or its agents of the assignment of the lease. According to Mr. Robert-Tissot's evidence the 1st plaintiff had then informed him and he verily believed that neither the lst plaintiff nor the 2nd plaintiff were informed that the lease had been assigned. That confirmation of the original erroneous statement made by counsel at the ex parte hearing, was accepted and acted upon by the judge. At page 4 of his judgment he stated his reasons in the following way :

8. It is difficult to see now the judge could have come to the conclusion he did had he not failed to have regard to the undisputed fact, disclosed by Mr. Wong's evidence, that the 2nd plaintiff had received notice in April 1988 of the assignment of the reversionary interest in the property by Hathras to the 1st defendant to whose agents the 2nd plaintiff had thereafter paid rent. This highly material information was never disclosed to its solicitors or counsel (and therefore concealed from the court) by the 2nd plaintiff which was the tenant of the property and therefore the only plaintiff entitled to the benefit of the covenant of quiet enjoyment under the tenancy agreement.

9. The plaintiffs' ordinary obligation to make proper enquiries before it commenced and pursued proceedings was compounded by the notice originally received of the assignment and subsequently from Deacons that the lst defendant was the landlord. We cannot see how the ancillary matters also relied upon by the judge, some of which are partly founded upon the mis-statement made to him, can displace the fundamental failure of the plaintiffs to make proper enquiries and of the 2nd plaintiff to make full disclosure of material matters in the face of which an ex parte order should not have been made in the first place. It is well settled that the penalty for such non-disclosure is the discharge of the ex parte injunction and the payment of costs. Counsel for the plaintiffs at the hearing of the appeal was very properly constrained to admit that had he been informed that notice of the assignment to the 1st plaintiff had been given he would have felt unable to support the application for ex parte relief.

10. The failure to mention receipt of notice of the assignment was a material non-disclosure, notwithstanding that it was not intentional (Peter Oswald Scales & Another v. William H.H. Wong and Another (1983) H.K.L.R. 110; 115 I-J). Moreover in the context of the discharge of the ex parte order on 1st August, the plaintiffs agreed that the 2nd defendant having assigned all its interest in the reversion of the lease, had no control over the works. Clearly the ex parte order would never have been granted had full disclosure been made at the time of the application.

11. There were other grounds urged upon us on behalf of the 2nd defendant, but it. is not necessary to consider them. We are satisfied that the decision cannot stand and that the 2nd defendant is entitled to its costs.

12. We would, however, also add that while not germane to our decision we were concerned that the ex parte order made on the 21st July was on the basis of an undertaking to have the draft affidavit sworn, the writ and the inter parte summons issued forthwith, these steps were not taken until the 25th. In Repson (P.S.) and Co. Ltd. v. Saggers 1984 1 W.L.R. 1025 Nourse, J. said that such an undertaking must be complied with expeditiously and failure to do so was a breach of a solicitor's duty to the court. This dicta has been recently affirmed in clear terms by Scott, J. in Manor Electronics Ltd. v. Dickson and Ors., The Times, Feb. 8, 1990 when he said:

We agree with those authorities and stress that the word "forthwith" means exactly that in relation to undertakings given in support of ex parte orders.