THE INCORPORATED OWNERS OF MAI ON INDUSTRIAL BUILDING AND ANOTHER v. HEDIT LTD

HEADNOTE

The Defendant, the owner of part of an industrial building, wanted to erect a chimney on the exterior of the building to serve plant to be installed within its premises, despite covenants in the Deed of Mutual Covenant affecting the premises which prohibited this. The building was already defaced with other chimneys. The Defendant alleged acquiescence, and offered an undertaking to remove the chimney if it failed at the trial. It was conceded that the balance of convenience lay in favour of refusing the injunction; but argued that an injunction to restrain a threatened breach of a negative covenant ought to be granted as of course.

HELD : granting an interlocutory injunction, and notwithstanding the concession on the balance of convenience, that the Defendant's conduct, amounting as it did to a threatened breach of clear and express negative covenants, justified the claim for an interlocutory injunction (Hampstead and Suburban Properties Ltd. v. Diomedous [1969] 1 Ch, 248 applied). The application was not an application for final judgment, and the defence of acquiesence was one to be raised at the trial.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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JUDGMENT

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1. This application has been very well argued on both sides. It is a claim for an Injunction against Hedit Limited, which is the owner of part of Mai On industrial Building. It requires consideration of a Deed of Mutual Covenant of 10th March 1978, the material provisions of which are as follows:

By Clause 4 -

"The owner or owners for the time being of any undivided share in the said premises shall at all times hereafter be bound by and shall observe and perform the covenants provisions and restrictions set out in the Second Schedule hereto."

By the Second Schedule, paragraph 12 –

"Save and except the Vendor not to add to, substract from, repair, redecorate, improve or relegate the facade or exterior walls or alter the appearance of the exterior of the said building or any part thereof."

By the Second Schedule, paragraph 13 –

"Not to install any furnace, boiler or other plant or equipment without the consent in writing of the Manager or use any fuel that might in any circumstances produce smoke or any equipment which might produce excessive noise, vibration or heat without first obtaining permission in writing from all necessary Government Departments."

By Clause 6 -

"There shall be an Owners' Committee (hereinafter called 'the Committee') constituted and having the powers in the manner as described in the Third Schedule hereto."

By the Third Schedule, paragraph 1 -

"The Owners' Committee shall comprise not more than five persons appointed or elected to represent the owners of the said premises."

2. On the 5th July 1986, the lst Plaintiff was incorporated. The present proceedings are brought with the authority of the Management Committee of the lst Plaintiff. The Defendant is anxious to erect a chimney on the exterior of the building connected to plant which it wishes to install on its premises for business purposes.

3. Differences have arisen between the Defendant on the one hand, and other owners of premises within the building and the lst Plaintiff, on the other hand. An overwhelming majority of the owners is said to have objected to the construction or installation of a chimney by any unit in the building.

4. By a letter of 10th August 1987, the lst Plaintiff wrote to the Defendant in the following terms:

"The incorporated owner of this building has since November of last year conducted a series of meetings and discussions, and to be on the safe side has made enquiries from individual owners in the building. The overwhelming majority of the owners object to the erection or installation of chimney by any unit. The questionnaire of the enquiry has been sent to the Buildings and Lands Department for their reference. Thus, if your goodselves need to add any structures to the exterior wall or to install chimney, you must write to and notify the Incorporated Owners of this building beforehand. The building work can only be carried out if permission is given. Please give your profound support and assistance."

5. By a letter of 28th September 1987, the lst Plaintiff wrote again to the Defendant as follows:-

"According to the letter of 10th August 1987 from the Incorporated Owners of our building to yourself, prior notice in writing should be given to the Incorporated Owners of our building if any additional construction on the exterior wall or any installation of chimney is requited. Approval should be obtained before commencement of any construction."

(The letter continued with reference to a water pipe which I am not concerned. )

6. The Defendant does not appear formally to have applied under paragraph 13 of the Third Schedule, for any consent, at any rate not before the issue of the Writ in this action on 29th October 1987. Even now, as I understand it, the Defendant so far has dealt with the Management Committee rather with the Manager. I should, for the sake of completeness, say that paragraph 12 of the Second Schedule is absolute in form, and does not refer to consent at all.

7. The 1st Plaintiff issued the Writ on this action in order to prevent the Defendant from, among other things, erecting the proposed chimney. I am satisfied that at the date when the Writ was issued, and still today, the Defendant intends unless restrained by the Court from doing so to erect the chimney and, that accordingly the Plaintiff has a clear cause of action for a threatened breach of the negative covenants contained in paragraphs 12 and 13 of the Second Schedule. The Defendant's reasons for wishing to erect its chimney are perfectly understable. The only question for me is whether or not an interlocutory injunction ought to be granted against the Defendant at this stage.

8. The Defendant, faced with the fact that it wishes to do something which is or is said to be in clear breach of an express negative covenant, has put forward three arguments why it should not be restrained from acting as it wants to do.

9. The three points it takes may be briefly described as first, the "authority to sue" point, secondly, the "construction" point and thirdly, the "acquiescence" point.

10. As to authority to sue, the Defendant draws attention to the fact that the Management Committee, as the evidence shows, consists of some eleven persons, whereas the Owners' Committee provided for in the Deed of Mutual Covenant is to consist of a maximum of five persons only. The answer to this point is, I think, that the Owners' Committee is plainly something different from the Management Committee, the former being constituted for the purposes only of the Deed of Mutual Covenant and the second being constituted for the purposes of the Multi-storey Buildings (Owners Incorporation) Ordinance, and, in my judgment, there is nothing in the "authority to sue" point. Certainly the Defendant has not satisfied me that this action has been brought without the authority of the 1st Plaintiff, which is the only way in which it could persuade me on this ground alone not to grant an interlocutory injunction.

11. I turn to the "construction" point.

12. As it seems to me, there can be no argument but that the proposed chimney will add to the facade or exterior wall; so it will alter the appearance of the exterior of the building. This being so, it follows in my judgment that what is proposed by the Defendant here must be a breach of the provisions of paragraph 12 of the Second Schedule. The installation of the plant which the chimney is intended to serve must, in my judgment, be a breach of paragraph 13 of the Second Schedule. The Defendant has not obtained the consent in writing of the Manager to the installation of the necessary plant.

13. It was argued that the reference to consent in paragraph 13 must be read as a reference to a consent which is not unreasonably withheld. In my judgment, there is no warrant for that construction. If it were necessary to imply it to give efficacy to the covenant, it would be another matter; but it is not. Just as paragraph 12 contains an absolute covenant, so it seems to me, paragraph 13 contains a qualified one; but not so much qualified as the Defendant contends.

14. For these reasons, it seems to me there is nothing in the "construction" point either.

15. The last point is the acquiescence point. One has only to look at the photographs in evidence to see that from the aesthetic point of view the proposed chimney will make no significant detraction from the appearance of the building. It is already faced with various sorts of machinery, and it may be that, at the trial of this action, the Defendant will succeed in establishing to the satisfaction of the trial judge that in the exercise of his judicial discretion the enforcement of this covenant ought not to be allowed. This is not an application for summary judgment but for an interlocutory injundction, and, in my judgment, the considerations involved are totally different. I would have been prepared to give leave to defend to the Defendant on an application by the lst Plaintiff in this action for summary judgment against the Defendant. I would regard the case as unsuitable for summary judgment and one in which the Defendant would have been entitled to a trial. I would not have thought the chance of the Defendant's succeeding are particularly good, but I would, I think, have been prepared to allow it to have its day in Court. But that is not the point that I have to consider. I have to consider whether or not to grant an interlocutory injunction pending the trial, not whether to give judgment for or against the Defendant.

16. The evidence is that the injury done to the Defendant by a grant of this injunction will be considerable. It would gravely impede its prospect of carrying on a successful and profitable business on the premises. It may destroy that prospect altogether. In those circumstances, I would certainly not be prepared to grant an interlocutory injunction without first exacting from the 1st Plaintiff a cross-undertaking in damages in case the Defendant does succeed at the trial. After some debate, that cross-undertaking is now forthcoming, and I am satisfied that the 1st Plaintiff will be able to meet it.

17. I will hear the Defendant's Counsel upon this if he wishes to address me before I finally make any order.

18. I am urged to decide in the Plaintiffs' favour on the ground that since this is a threatened breach of an express negative covenant the Plaintiff is really entitled to its injunction as a matter of courses.

19. The Court has in general a discretion whether to grant or withhold an injunction. But, as a general rule, it has no option but to grant an injunction to restrain the breach of a negative covenant. In Doherty v. Allman (1878) 3 App. Cas 709, at p. 720, Lord Cairns, the Lord Chancellor, said :-

"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 that thing should 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 already is the contract between the parties. It is not then a question of the balance of convenience or inconvenience, or of the amount of damage or of injury - it is the specific performance, by the Court, of that negative bargain which the parties have made, with their eyes open between themselves."

20. It is clear that this expression of the opinion of Lord Cairns cannot be applied blindly to the facts of this or indeed any particular case without careful consideration, and it is doubtful if Lord Cairns' doctrine applies to interlocutory injunctions at all.

21. As I read the decision of Mr. Justice Megarry in Hampstead & Suburban Properties Ltd. v. Diomedous [1969] 1 Ch. 248 (in particular the observations of the judge at p. 259) he was of the opinion that the principle of Doherty v. Allman does apply to interlocutory injunctions. In Texaco Ltd. v. Mulberry Filling Station [1972] 1 WLR 814, Mr. Justice Ungoed-Thomas seems to have come to the opposite conclusion. I prefer the earlier decision.

22. For the purposes of this application, the 1st Plaintiff does not contend that damages under its cross-undertaking in damages would be an adequate remedy for the Defendant. Nor does the lst Plaintiff contend that the balance of convenience lies in favour of granting the injunction, most particularly in light of the willingness of the Defendant (repeated before me) to undertake to the Court that it would dismantle the chimney if it fails at the trial. But the 1st Plaintiff does contend that the Defendant has no case at all and that accordingly an injunction ought to be granted. If, says the lst Plaintiff, the Defendant is clearly not entitled to construct the chimney, the matter of the balance of convenience is neither here nor there.

23. I have not found the point altogether easy. But in the end I come down in favour of the lst Plaintiff. In my judgment, the principle that a threatened breach of a clear and express negative covenant ought to be restrained, pending the trial of the action, is one which I ought to apply. I do so with some reluctance having regard to the admitted fact that, on the balance of convenience, the Defendant will suffer more damage from the grant grant of the injunction than the 1st Plaintiff is likely to suffer if I refuse it. But parties must be encouraged to keep their contracts, not to break them.