MAN HING HONG LAND INVESTMENT CO LTD v. CENTRAL F&B MANAGEMENT CO LTD

DCCJ 3683/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3683 OF 2004

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REASONS FOR DECISION

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1.  There are a number of applications before me.  The more important ones are: (i) the Defendant’s application to discharge the mandatory injunction granted by me on 20 September 2004 (“the Injunction”); (ii) the Defendant’s application for leave to appeal against my decision on the Injunction; and (iii) the Plaintiff’s application to carry out the work under the Injunction by its own contractor.  In the hearing on 5 January 2005, I discharged the Injunction and granted a fresh injunction restraining the Defendant from causing any further water leakage from the Premises.  I now give my reasons.

2.  The background of this case has already been outlined in my earlier decision on the Injunction.  In short, the Plaintiff was the owner of the property known as Shop G04, Ground Floor, Man Yee Arcade, Man Yee Building, 68 Des Voeux Road Central and 31 Pottinger Street, Hong Kong (“the Premises”).  By a tenancy agreement dated 7 April 2003 (“the Agreement”), the Plaintiff leased the Premises to the Defendant for use as a restaurant for a term of 3 years commencing on 16 April 2003, with a monthly rental of $183,170 and management fee and air-conditioning charge of $56,078.20.  According to the Defendant’s case, the air-conditioning supplied by the Plaintiff in the Premises was insufficient and substandard, and so the Plaintiff was in breach of the Agreement.  Allegedly with the oral permission given by certain representatives of the Plaintiff, the Defendant installed its own set of air-conditioning system (“the System”) in the Premises.  The Plaintiff denies that its representatives have ever given such permission, and it claims that the installation of the System was in breach of Clause 3 of the Agreement, which required the Defendant not to carry out any alteration to the air-conditioning work without the permission of the Plaintiff.

3.  In the hearing on 20 September 2004, the Plaintiff applied to court for a mandatory injunction to compel the Defendant to remove the System before the trial.  By that time, I granted the application based on the following reasons:

(i)	the Defendant was in breach of the provisions of the Food Business Regulations, Cap. 132 in failing to obtain the approval from the Director of Food and Environmental Hygiene before carrying out alternation to the air-conditioning work in the Premises; and
(ii)	the court could not ignore the possible fire and safety hazard associated with such unauthorized work on the part of the Defendant.

4.  The Defendant now applies to discharge the Injunction.  Logically, I will deal with this application first, and depending on the result of such application, it may not be necessary for me to deal with the other summonses.

5.  O. 32 r. 8 of the Rules of the District Court, Cap. 336 enables the court, on sufficient cause being shown, to revoke or vary any interlocutory direction or order.  However, in order to give effect to finality of a court order, the court should only vary such order if there are good reasons, for example, there is significant change of circumstances after the making of the order which justifies any revocation or variation.  Mr. Chan, counsel for the Plaintiff, does not seek to argue otherwise.

Fire hazard associated with the System

6.  Since the granting of the Injunction on 20 September 2004, there has been some new development.  On 24 September 2004, the Food and Environmental Hygiene Department (“the FEH Department”) sent a letter to the Defendant stating that the Fire Services Department (“the FS Department”) had no objection to the Defendant’s plan for the installation of the System, provided that the FS Department’s requirements on mechanical ventilation system were fully complied with.  Further, the FS Department indicated that a fresh letter of compliance was not required for such alteration work.

7.  Such new development sheds a very different light on the application.  In the hearing on 20 September 2004, I was very concerned about the possible fire hazard associated with the unauthorized work, but now the letter from the FEH Department seems to suggest that the System is safe.  In order to have further clarification on the matter, I invited the parties to summon the relevant officer from the FS Department to give his assessment of the fire hazard associated with the System.  As a result, one Mr. Lee Ming Kwan, a Building Services Inspector of the Fire Services Installation Task Force of the FS Department (“Mr. Lee”), came to court to testify on 2 November 2004, and a site visit was also conducted on the same day.

8.  During the site visit, Mr. Lee was able to conduct a more detailed inspection of the System itself.  According to him, apart from defect relating to the installation of a sprinkler in the Premises, the System is basically safe.  Facing with such complaint, the Defendant gave an undertaking to court that it would engage the Plaintiff’s nominated contractor to rectify the defect within a certain period of time, which the Defendant subsequently complied with.  In view of such undertaking and the absence of fire risk, I do not find that there is any more justification to require the Defendant to remove the System before the trial of the action.  In particular, the Injunction is mandatory in nature.  Unless there is strong reason to change the status quo, for example the presence of fire risk associated with the unauthorized work, the court should not compel the Defendant to remove the System before a full trial.  I therefore discharge the Injunction granted on 20 September 2004, and by reason of such decision, it is not necessary for me to deal with the other summonses relating to leave to appeal and the Plaintiff’s request to carry out the work under the Injunction itself.

Water leakage caused by the System

9.  The Plaintiff also complains about the water leakage caused by the System.  As the leakage occurred shortly after its installation, there is reason to believe that such nuisance was caused by the System itself.  In the hearing on 20 September 2004, the Defendant acknowledged the leakage, but claimed that the problem had been rectified by adjusting the water supply to the heat diffuser of the System.  However, the leakage continued after the granting of the Injunction, and according to the consulting engineers engaged by the Plaintiff, the structure of the said Man Yee Building (“the Building”) would be damaged if such problem were to persist.

10.  During the site visit on 2 November 2004, I was also able to observe the damage caused by the water leakage in the basement car-park of the Building.  Apart from a statement from a contractor with unknown qualification, the Defendant has not engaged any expert to investigate the cause of the water leakage with a view to disprove the Plaintiff’s case.  In view of the evidence at this stage, I find that there is a serious question to be tried as to whether the Defendant has caused the nuisance.  As the leakage would cause irreparable damage to the structure of the Plaintiff’s Building, I grant a fresh injunction restraining the Defendant from causing any more water leakage from the Premises.

Reinstatement of the ramp for disabled persons

11.  According to the original layout of the Premises, there was a ramp near the main entrance of the Premises which served as a passageway or entrance for disabled persons (“the Ramp”).  At the commencement of the tenancy, the Defendant submitted a plan to the Plaintiff and the FEH Department, which is the licensing authority for the restaurant licence, indicating its intention to remove the Ramp.  There is a dispute as to whether the Defendant had actually done so before installing the System in July 2004, but it is common ground that that passageway or entrance had been blocked ever since the Defendant commenced business in 2003.  In other words, no one could use that passageway for access.  What we now know is that the Ramp was no longer there after the installation of the System, as part of it actually occupied that space.

12.  According to Clause 3.01 of the Agreement, the Defendant was required to comply with all statutory regulations in respect of the use of the Premises, and it is common ground that the removal of the Ramp was contrary to the Regulations under the Building Ordinance, Cap. 123 (“the Building Regulations”).  Hence, if the court were to discharge the Injunction, the Plaintiff is asking the court to grant a fresh mandatory injunction for the reinstatement of the Ramp, which would have the effect of having the System removed or relocated.

13.  In defending the claim for said breach of the Agreement, the Defendant tries to argue that the Plaintiff and the Government had waived the breach of the relevant Building Regulations by approving the layout plan of the restaurant some time in 2003.  However, I do not accept that such defence is arguable.  In respect of the possible waiver by the Government, the Building Department had expressly warned the Defendant to reinstate the Ramp when the latter applied for the restaurant licence in 2003, and so there could not have been any waiver by the Government.

14.  Neither can the Plaintiff establish any possible waiver on the part of the Plaintiff.  In approving the Plan, the Plaintiff had by various letters, in particular the one dated 14 April 2003, indicated that the approval was given provided that the work complied with all the statutory regulations.  Furthermore, Clauses 5.01(vi) and 12.04 of the Agreement expressly state that the approval of any plan by the Plaintiff shall not relieve the Defendant from the obligation of complying with any statutory regulations.  Hence, the Plaintiff cannot be said to have waived the breach.

15.  Despite the fact that the Defendant has no apparent defence to the Plaintiff’s claim for breach of the Agreement, I refuse to grant a fresh interlocutory injunction compelling the Defendant to reinstate the Ramp at this stage.  According to its latest affirmation, the Defendant is going to engage an architect, who is also an “authorized person” within the meaning of the Building Ordinance, to apply to the Building Department for the relocation of the ramp.  Although one Mr. Fung Chi Hang from the Building Department testified that it is very difficult for his Department to approve a revision of plan involving the removal of an entrance for disabled persons, it would be a different matter if the Defendant tries to relocate the ramp elsewhere.  In any event, Mr. Fung is not the officer ultimately responsible for approving such kind of application, and at this stage, I cannot ignore the possibility that the Defendant’s application will succeed.  If that happens, there is no necessity for the Defendant to reinstate the Ramp as per the original layout plan, and the Defendant may have a defence to the Plaintiff’s claim for injunction.

16.  In his able submission, Mr. Chan for the Plaintiff argues that the court should not sanction the breach of statutory regulation on the part of the Defendant.  As the Defendant took the risk of removing the Ramp against the statutory regulations, it had taken the law in its own hand.  In such case, it should not complain if the court only demands it to comply with the law.  This is in fact one of the arguments that I have adopted in granting the Injunction.  However, I am of the view that the circumstances now are very different from those in the earlier hearing.  Firstly, the injunctions that need to be considered on the two occasions are different.  Secondly, the Plaintiff has not taken any action in respect of the removal of the Ramp, or at least the blocking of the passageway or entrance for disabled persons, for about one and a half year.  Thirdly, there is no immediate danger associated with the removal of the Ramp.  Fourthly, if the Defendant can persuade the Building Department to approve the relocation, it would be a defence, at least, to a claim for the reinstatement of the Ramp.  Hence, I see no reason or urgency to grant such mandatory injunction at this stage, but I give the Plaintiff leave to reapply depending on the result of the Defendant’s application for the relocation of the ramp.

17.  Furthermore, the Defendant’s conduct is not that unreasonable.  The Defendant has all along indicated to the Plaintiff and the licensing authority that it would remove the Ramp.  Despite such clear indication, the Plaintiff approved the plan and the FEH Department granted the restaurant licence.  According to said Mr. Fung of the Building Department, the policy of his Department in 2003 was to tolerate such minor breach of the Building Regulations, and his Department would not rely on such ground to object the granting of the restaurant licence.  Tough not amounting to waiver, such conduct and policy might lead the Defendant to believe that the removal of the Ramp was not a serious matter.  Hence, based on all the aforesaid reasons, I refuse the Plaintiff’s request for a fresh injunction.

Costs

18.  I maintain that the Injunction was properly granted in the hearing on 20 September 2004.  The Defendant proceeded to install the System without obtaining the approval of the licensing authority, and the court could not ignore the possible fire hazard associated with the unauthorized work.  Had the Defendant obtained the approval or a confirmation from the licensing authority including the FS Department that the System was safe before the earlier hearing, the Injunction would not have been granted in the first place.  Costs have been wasted, and I therefore order the Defendant to pay for the costs of the various summonses, which were taken out after the granting of the Injunction, up to the hearing on 13 October 2004, in which the Defendant gave an undertaking to rectify the defect relating to the sprinkler in the Premises.  Apart from that, the costs of the summonses should be costs in the cause, which I understand is the usual costs order for applications involving interlocutory injunction.

Observations about the conduct of the case

19.  As the Defendant has not paid any rent, management fees or air-conditioning charges since about June 2004, the Plaintiff is very keen to see the removal of the System.  If such happens, the Defendant has no option but to rely on the air-conditioning supplied by the Plaintiff.  In the event that the default of payment of rent continues, the Plaintiff is able to cut off the air-conditioning supply to the Defendant under the terms of the Agreement, thereby exerting maximum pressure on the Defendant to pay the outstanding rent.

20.  Obviously, I share the frustration of the Plaintiff, but I doubt whether it has adopted the right strategy.  The Plaintiff has already brought a separate action in the Court of First Instance claiming for, inter alia,the arrears of rent and related charges, and it is always open to the Plaintiff to apply for interim payment in that action.  In the present case, the Plaintiff is asking the court to make various mandatory injunctions before a full trial.  For these applications, default in the payment of rent is certainly a non-issue.  One of the main disputes in the present case is whether the Plaintiff has given oral permission to the Defendant for the installation of the System, which is a relatively straightforward question that can be determined in a trial without much difficulty.  In the hearing on 20 September 2004, I have actually invited the Plaintiff to elect for a speedy trial instead of pursuing the application for mandatory injunction.  If such course were to be adopted, and taking into the existing diary of the District Court, the trial may have finished by the time I am writing these reasons.  Unfortunately, the Plaintiff did not agree.  More and more issues then popped up during the applications for various interlocutory injunctions, and adjournments had to be granted to enable parties to have adequate opportunity to deal with the new allegations.  Further, as the court was required to examine the issues in some detail, the interlocutory hearing nearly became a mini-trial in itself which was highly undesirable.  As a result, substantial costs have been incurred quite unnecessarily. 

21.  One more complication in the present case is that the counterclaim, which is brought by the Defendant relying on the non-provision of adequate air-conditioning as a ground for a claim for breach of the Agreement, exceeds the monetary jurisdiction of the District Court.  One of the options is for me to make a report to a judge in the Court of First Instance under s. 41 (3)(c) of the District Court Ordinance, and if the judge so agrees, he can make an order conferring jurisdiction on the District Court to hear the counterclaim as well.  This would shorten the proceedings.  However, the Plaintiff disagrees, and it prefers the action be transferred to the Court of First Instance apparently for the possible consolidation with the other action.  I therefore so order, but now we do not know when the proceedings will end.  In any event, I am grateful to counsel for the assistance that they have given to this court for this painful case.