WING MING GARMENT FACTORY LTD v. THE INCORPORATED OWNERS OF WING MING INDUSTRIAL CENTRE AND OTHERS

CACV 27/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 27 OF 2008

(ON APPEAL FROM HCA NO. 8805 OF 1993)

----------------------

----------------------

--------------------------------------

REASONS FOR DECISION

-------------------------------------

1.  This was an application by the plaintiff for a stay of execution of the mandatory injunction granted by Reyes J on the 20 December 2007 until the determination of the plaintiff’s appeal by the Court of Final Appeal.  The application was refused, with costs to the defendants.  These are my reasons.

Background

2.  The background facts can be found in the judgment of this court.  Suffice it to say that the plaintiff was the developer of the building and remains the owner of several of its units.  All the other owners are represented by the Incorporated Owners, the first defendant.

3.  The building was developed pursuant to the provisions of Crown Lease and the Conditions of Sale which required, inter alia, parking, loading and unloading spaces to be provided in accordance with an approved layout car parking plan (“the approved plan”).  Designated on the approved plan were, inter alia, car parking spaces 2, 3 and 4.  Lying between these designated car parking spaces and the driveway were spaces marked “VOID”.

4.  In 1991, the plaintiff who was then the sole owner of the building decided to sell part of it and for that purpose a DMC came into being which reserved to the plaintiff the right to construct a loft over car parking space numbers 2, 3 and 4.  In August 1993, the plaintiff caused to be constructed a mezzanine floor to form a loft area, an internal wall to be demolished and the building of a new wall enclosing an area comprising the original car parks 2, 3 and 4.  The enclosed space is being and has been used by the plaintiff for purposes other than the parking of cars and what had been areas marked “VOID” in front of the original car parking spaces have been redesignated by the plaintiff as new car parking spaces 2, 3 and 4.  Changes to the approved plan required the “prior written consent of the Director of Public Works”.

5.  The judge found that not only had the plaintiff not obtained the approval of the other owners to vary the DMC so as to enable the “VOID” areas to be redesignated as the new car parking spaces, the building of the wall and the consequent changes to the layout of the car parks had been done without the permission of the Director of Public Works or his successor.  He ordered the plaintiff to demolish the wall and to restore the original car parking spaces 2, 3 and 4 in accordance with the approved plan (“the mandatory injunction”).

6.  This court by its judgment dated 27 June 2008 affirmed the mandatory injunction granted by the judge.

7.  The plaintiff and the third party issued a notice of motion on 24 July 2008 for leave to appeal to the Court of Final Appeal.  The leave application is scheduled to be heard on 17 December 2008.  Although the judge had granted a stay of the mandatory injunction pending the determination of the appeal to this court, that stay lapsed when this court handed down its judgment.

8.  There being no sign of compliance with the mandatory injunction, on 1 August 2008, the solicitors for the first defendant (“HWG”) wrote to the solicitors for the plaintiff (“HW”) regarding the mandatory injunction.  Two weeks later, HW intimated that an application would be made for a further stay of execution without indicating when that might be done.  This invited a response from HWG imposing a deadline of 19 August.  HW requested HWG to withhold any action until 29 August.  On that day, HW requested a further seven days of indulgence.  All told, it took the plaintiff over a month (after it had been goaded into action by HWG’s letter) to issue the summons for a stay.

The stay application

9.  Mr Mok SC who appeared for the plaintiff submitted that compliance with the mandatory injunction at this stage would put his client to expense and, if it were successful in obtaining leave to take the matter to the Court of Final Appeal and, ultimately, were successful in that appeal, none of the expenditure would be recoverable.  Mr Mok submitted that absent a cross undertaking as to damages, this being a final and not an interlocutory injunction, there is no power to award damages in respect of expenditure incurred in complying with the mandatory injunction should it transpire that it should not have been granted, but no authority was cited in support of that proposition.

10.  Yuen Man Pui (“Mr Yuen”) a director of the plaintiff filed two affirmations (being his third and fourth affirmations) in support of the stay application.  His third affirmation was filed on the same day as the summons.  It dealt with the timeframe, opining that the approval process for the building works involved would take about 4-6 months before the commencement of any demolition and restoration work required by the injunction.  Mr Yuen also stated his ‘belief’ that the ‘entire appeal process’ would be completed in 7-8 months.

11.  At the hearing, Mr Mok explained that the work required by the mandatory injunction would take about 8 months altogether (inclusive of the approval process) to complete and expected that it would take a similar period to reinstate what had been demolished if the plaintiff were to succeed in the Court of Final Appeal.  There was nothing in the third affirmation that addressed the issue of expense, notwithstanding the fact that it formed the mainstay of Mr Mok’s submissions.

12.  The third affirmation contained cryptic references to a fourth affirmation (see paragraph 16 in 18 of the third affirmation) and even a reference to an exhibit dated 29 January 2008 to the ‘fourth’ affirmation without actually exhibiting a draft fourth affirmation.  Suffice it to say that the fourth affirmation did not see the light of day until more than six weeks later, on 20 October 2008, the day prior to the hearing, when it was affirmed, filed and served.

13.  In the fourth affirmation, Mr Yuen set out his estimate of the relevant financial loss based upon his own experience in the “contracting construction industry” for over 25 years.  He estimated that the fees for preparing submissions up to completion of the works required to comply with the mandatory injunction and (on the hypothesis that the plaintiff would ultimately succeed in the Court of Final Appeal,) the reinstatement works to be in the aggregate $300,000, that the total construction costs for the two stages would be a further $1.5 million and the loss of rental the relevant ground floor areas to be $1.92 million calculated on the basis of a period of 16 months at a monthly rent of $120,000.  The estimated loss in monetary terms is thus put at $3.72 million.

14.  Mr Mak who appeared for the first defendant opposed the stay.  Quite rightly, he criticised the late filing of the fourth affirmation.  It gave the first and second defendants no opportunity to deal with the estimates advanced.  Further, he queried Mr Yuen’s qualifications to opine on the level of fees and construction costs.  I have to say that Mr Yuen’s ‘experience’ is opaque as he did not bother to explain his experience and what he described as the “contracting construction industry”.

15.  Given the references to the fourth affirmation in the third affirmation without exhibiting a draft when clearly it must have existed at that date and the total absence of any explanation for the late filing of the fourth affirmation, it is difficult to resist the inference that the late filing was done advisedly, to forestall the possibility of evidence being led on those matters by the defendants.  Such conduct requires the strongest reprobation.  Parties resorting to such tactics can expect no sympathy from the court.

16.  That aside, there is simply no explanation as to why the stay application had not been made promptly: one would have expected it to have been made no later than the leave application itself.  Regrettably, one is left with the impression that non-action is the name of the game of the plaintiff when it comes to the question of discharging its obligations.  In this connection, it is relevant to note that part of the backdrop to the long-running dispute is the plaintiff’s refusal to pay management fees for over 16 years, between 1 October 1991 and 30 November 2007, notwithstanding that it was the owner of several of the units in the building, giving rise to a successful counterclaim by the first defendant.

17.  The evidence put forward in support of the stay application is wholly unsatisfactory.  The estimate as to the length of the appeal process is unhelpful because it is unclear from what date the period is to be reckoned.  If it is from the date leave to appeal is granted, that, in turn, will depend on whether a leave application has to be made to the Court of Final Appeal.

18.  As regards the estimates of expenditure, I can place little reliance on them since Mr Yuen’s credentials, qualifying him to opine on such matters, are unclear.  More importantly, the defendants have not been given the opportunity to deal with Mr Yuen’s fourth affirmation.  So far as the estimated loss of rental is concerned, it would appear from Mr Yuen’s evidence that the plaintiff is unable to finding a willing tenant because the relevant areas are “litigation ridden”.  That, rather than compliance with the mandatory injunction, appears to be the cause of the loss.  So until such time as the matter is finally settled, it is doubtful that compliance with the mandatory injunction can be said to the causative of any loss.

19.  In the course of the hearing, upon the court’s the intimation that it was not minded to grant the stay sought but that it was open to the plaintiff (if it saw fit) to renew the stay application or to issue a fresh application to be heard at the same time as the leave application, Mr Mok changed tack: instead of seeking the stay sought in his summons, he sought a stay pending the hearing of the leave application by this court on 17 December 2008.

20.  I remained of the view that it would not be appropriate to grant a stay.  First and foremost, the fundamentals have not changed: as explained earlier, the evidence remains wholly unsatisfactory and the fault lies entirely with plaintiff and the third party.  One is left with the impression that less than fair play is involved here.  For that reason alone, I would be loathe to exercise my discretion in favour of the plaintiff.  Second, there is an unexplained delay in the making of the stay application.  Third, the discernible pattern of conduct on the part of the plaintiff to date when it comes to discharging its obligations is one of delay and nonperformance.  Such conduct should neither be tolerated nor condoned.  Fourth, whilst some expenditure will have to be incurred in the coming few weeks in terms of seeking approval from the Building Authority for the demolition and reinstatement works required by the mandatory injunction, there is no reliable evidence to show that it will be substantial.

21.  At the hearing, I stated in no uncertain terms, and I re-iterate it here, that if the plaintiff is minded to renew its stay application or to make a fresh application, it should ensure that the defendants are given ample time to deal with any fresh evidence the plaintiff sees fit to file in support.