Mass Transit Railway Corporation v. WONG Ming Tak Mercedes and Another

1996,L.T. No. BM79

IN THE LANDS TRIBUNAL OF HONG KONG

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HEADNOTE

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Building Management - Deed of Mutual Covenant - Breach of Negative Covenant - Acquiescence - Permanent Injunction

The Applicant is the estate manager authorized by the deed of mutual covenant of a commercial building in Central. The First Respondent is the registered owner of a shop in the building. The Second Respondents are the tenant occupiers of the shop and, admittedly, operate a fast food business there. The respondents conceded that they are prohibited by the terms of the relevant deed of mutual covenant from operating fast food business anywhere in the building except with the prior written consent of the Applicant and that no consent has been obtained. The Applicant seeks a permanent injunction in appropriate terms to bar the operation of fast food business by the respondents at the subject premises or elsewhere in the building. The respondents contend that they are entitled to protection under the doctrine of acquiescence for (1) the Second Respondents had operated a similar business in other premises in the building before and (2) there are quite a number of fast food businesses operating in the building without consent against whom the Applicant has not taken action.

Held: (1) Applying Doherty v. Allman (1878) 3 App. Cas. 709 and distinguishing Incorporated Owners of South Seas Centre, Mody Road v. Great Treasure Development Limited [1994] 1HKC 197, the doctrine of acquiencence does not assist the respondents for breach of a negative covenant. (2) In any event, there was no sufficient evidence in support of acquiescence. (3) Injunction granted with costs.

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L.T. Case No. BM79 of 1996

IN THE LANDS TRIBUNAL OF HONG KONG

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J U D G M E N T

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The Applicant is the estate manager authorized by the deed of mutual covenant of the commercial building in Central known as World-Wide Plaza ("the building"). The First Respondent is the registered owner of Shop 175 ("the subject premises") on the First Floor of the building. The Second Respondents are the tenant occupiers of the subject premises and, admittedly, operate a fast food business there.

2. The Applicant seeks an injunction in appropriate terms to bar the operation of fast food business by the respondents at the subject premises or elsewhere in the building. Counsel for the Applicant emphasized that the injunction was sought as final remedy, not as an interlocutory relief. It is conceded by the respondents that they are prohibited by the terms of the relevant deed of mutual covenant from operating fast food business anywhere in the building except with the prior written consent of the Applicant and that in fact a fast food business is being operated at the subject premises by the Second Respondents without consent. However, the respondents contend that the they are entitled to protection under the doctrine of acquiescence for (1) the Second Respondents had operated a similar business in other premises in the building before and (2) there are quite a number of fast food businesses operating in the building without consent against whom the Applicant has not taken action.

3. In reply, the Applicant says that action in the High Court were taken previously against the Second Respondents for operating a similar business in other premises in the building which ended with the closure of that earlier business. The Second Respondents do not dispute this. Hence there is no question of acquiescence vis-a-vis the Second Respondents. As to other "fast food businesses", the Applicant argues that no action has been contemplated against any of them because they cannot be regarded as fast food businesses within the meaning of the relevant deed of mutual covenant. So, again, the doctrine of acquiescence does not apply.

4. The doctrine of acquiescence has been convassed in a large number of building management disputes before the courts here and in the U.K. Hence counsel for the respective parties have been able to cite copious authorities as the fruit of their diligent research. It is clear that the prohibitive provision in the relevant deed of mutual covenant in this case is what is generally regarded as negative covenant. Proper consideration should, I think, begin with the principle enunciated in Doherty v. Allman (1878) 3 App. Cas. 709 where Lord Cairns LC said at p. 720:

"If parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that a court of equity has to do is to say, by way of injunction, that which the parties have already said by way of covenant, that the thing shall not be done and, in such a case, the injunction does nothing more than give the sanction of the process of the court to that which is already the contract between the parties. It is not then a question of balance of the convenience or inconvenience, or of the amount of damage or of injury --- it is the specific performance, by the court, of the negative bargain which the parties have made, with their eyes open, between themselves."

5. In Incorporated Owners of South Seas Centre, Mody Road v. Great Treasure Development Limited [1994] 1HKC 197, our Court of Appeal, after referring to the above dictum, observed that,

"The dictum of Lord Cairns in Doherty v. Allman has frequently been quoted and cited with approval. But never, so far as we are aware, so as to exclude altogether the general discretionary consideration which always fall to be considered when the question for the court to decide is whether or not to grant an interlocutory injunction in the circumstances of the particular case. We would reformulate the principle thus: where a defendant is proposing to act in breach of an express negative stipulation binding upon him, he will normally be enjoined from doing so, and, save in exceptional cases, damages will not be regarded as an adequate remedy. However, the defandant may, nonetheless, be able to establish special circumstances of such a nature that the hardship that the making of the order would cause him would so far outweigh the inconvenience to the plaintiff throug denying the plaintiff specific relief tha the court considers that its intervention would be unjust. In addition, general discretionary considerations, such as unfairness, acquiescence or delay, may make the grant of an interlocutory injunction inappropriate." (per Godfrey JA at p.202)

6. I have no doubt in the light of what the learned Justice of Appeal has stated that the dictum of Lord Cairns is the proper principle to apply when considering enforcement of a negative covenant by way of a permanent injunction. Our Court of Appeal re-formulated the principle to guide us on applications for interlocutory injunction. Both dicta are, by any measure, unchallengeable authorities to me. I see no need to refer to other authorities. It follows that, on the basis of what have been agreed and conceded by the parties, the Second Respondent's fast food business at the subject premises being admittedly in breach of a negative covenant, the only appropriate course I should take is to grant a permanent injunction against the respondents.

7. The parties also seek a ruling by the Tribunal on what amounts to a fast food business within the meaning of the deed of mutual covenant. I should say that such ruling is unwarranted in this case in view of the conclusion I have drawn on the applicable principle of law. In fact I have difficulty in finding a meaningful definition of "fast food shop". I think it is a matter that cannot be resolved without reference to evidence relating to the customary understanding of the food and catering trade which neither party has presented, although it seems obvious that a shop selling fruit juice cannot be regarded as fast food shop. As the trial judge, I would observe that, having studied all the agreed evidence relied upon by the parties, I am not satisfied on the balance of probabilities that each and every of the other shops referred to by the respondents is being operated as a fast food business. In the circumstances, I think the doctrine of acquiescence can be invoked for there is genuine reasonable doubt as to whether other parties have indeed committed similar breaches.

8. In the premises, I make the following order in the following terms agreed by the parties:-

1. The First Respondent be and is hereby restrained by injunction whether by himself, his servants, agents or otherwise howsoever from causing or permitting a fast food business to be operated at the subject premises;

2. The Second Respondent be and is hereby restrained by injunction whether by himself, his servants, agents or otherwise howsoever from operating a fast food business to be operated anywhere in the building; and

3. Costs to the Applicant to be taxed if not agreed with certificate for counsel.

Dated this 18 February 1997