THE INCORPORATED OWNERS OF FOO HOO CENTRE v. HONG KONG ALLIANCE IN SUPPORT OF PATRIOTIC DEMOCRATIC MOVEMENTS OF CHINA

HCMP 1037/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO1037 OF 2014

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DECISION
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1.  This is an appeal by the defendant against Master M Wong’s decision to dismiss its application for an order that, inter alia, these proceedings, which were commenced by originating summons, be continued as if the cause and matter had been begun by writ.

2.  The plaintiff is the incorporated owners of Foo Hoo Centre at 3 & 3A Austin Avenue, Kowloon (“the Building”) and the defendant is the registered owner of 3 out of 72 equal undivided shares of and in the land and the Building holding the exclusive right to use, occupy and enjoy the 5^th floor of the Building (“the Property”).  The defendant had acquired the Property by an assignment dated 17 December 2013.

3.  The defendant is a company limited by guarantee whose objects are, among others, to “promote any patriotic democratic movement and the cause of democratic reforms of China”, “support and assist students and autonomous student organisations in Beijing or elsewhere in China in their activities in promoting any patriotic democratic movement and the cause of democratic reforms of China” and “organise campaign and activities to promote demonstrate support and carry out any of [its] objects”.

4.  The underlying dispute concerns the use of the Property by the defendant as the “June 4^th Museum” or “June 4^th Memorial Hall”.  According to the affirmation of the Hon. Lee Cheuk Yan, chairman of the standing committee of the defendant, this involves using the Property “as a showroom or exhibition centre for displaying items kept by the Defendant over the years relating to the June 4^th Massacre.  The intention was to use the premises as a permanent showroom with displays to commemorate the 4^th June incident, and to educate the younger generation (especially local students and young visitors from Mainland China) who may not have much knowledge about what happened in the 4^th June Massacre but are interested to know about it”.

5.  The plaintiff considers the use of the Property for such purposes to be impermissible.  On 28 April 2014, the plaintiff issued proceedings by way of originating summons against the defendant for, essentially: (i) declarations that on the proper construction of the Deed of Mutual Covenant and Management Agreement dated 11 December 1990 relating to the Building (“DMC”) and the occupation permit dated 11 December 1990 issued by the Building Authority in relation to the Building (“Occupation Permit”), no part of the 4^th to 17^th floors of the Building may be used as a memorial hall or exhibition hall; (ii) declarations that the defendant is in breach of the DMC (including but not limited to clause 5.13 thereof) by using the Property as a memorial hall and/or exhibition hall, and that such use is in breach of the Occupation Permit; (iii) damages for breach of the DMC; and (iv) an injunction to restrain the defendant from using the Property as a memorial hall and/or exhibition hall.

6.  The dispute that the court has to determine at this stage is a procedural one concerning the mode of further conduct of these proceedings. 

7.  RHC Order 5 deals with the mode of commencing proceedings and rules 1 and 4 provide as follows:

“1. Subject to the provisions of any written law and of these rules, civil proceedings in the Court of First Instance may be begun by writ or originating summons.

4. (1) Except in the case of proceedings which under any written law are required or authorized to be begun by a specific form of originating process, proceedings may be begun either by writ or by originating summons as the plaintiff considers appropriate.

(2) Proceedings-

(a) in which the sole or principal question at issue is, or is likely to be, one of the construction of any written law or of any instrument made under any written law or of any deed, will, contract or other document, or some other question of law, or

(b) in which there is unlikely to be any substantial dispute of fact,

are appropriate to be begun by originating summons unless the plaintiff intends in those proceedings to apply for judgment under Order 14 or Order 86 or for any other reason considers the proceedings more appropriate to be begun by writ.”

8.  RHC Order 28 rule 8(1) provides:

“Where, in the case of a cause or matter begun by originating summons, it appears to the Court at any stage of the proceedings that the proceedings should for any reason be continued as if the cause or matter had been begun by writ, it may order the proceedings to continue as if the cause or matter had been so begun and may, in particular, order that any affidavits shall stand as pleadings, with or without liberty to any of the parties to add thereto or to apply for particulars thereof.”

9.  Order 28 rule 8 confers a flexible case management power on the court.  It is a discretionary power (note the word “may”) that can be exercised where the Court takes the view that the proceedings should “for any reason” be continued as if begun by writ.  Rule 8 does not specify or limit the possible reasons, but the usual ground relied upon by defendants is that there are substantial disputes of fact. 

10.  The rationale is that, in general, where there are substantial factual disputes, there should be pleadings so that the precise issues between the parties can be properly identified (although Order 28 rule 4(5) also empowers the court to order points of claim etc to be delivered and stand as pleadings without converting the proceedings into a writ action).  Lack of pleadings in complicated cases can often cause difficulties both at trial and on appeal; see e.g. Young’s Engineering Co Ltd v The Hong Kong and Shanghai Banking Corporation Ltd & Ors (unrep., HCMP 2676/2002, 18June 2004).  Cross-examination of the witnesses and discovery of documents may also be necessary for resolving disputes of fact, which are not automatically provided for in the originating summons procedure, although it is, again, possible for the court, where appropriate, to give specific directions for cross-examination of deponents of affidavits (see RHC Order 28 rule 4(4) and Order 38 rule 2(3)) and for discovery of documents (see Order 24 rule 3) without ordering the whole proceedings to continue as if begun by writ.

11.  These rules, like all the other rules in the RHC, must be exercised with a view to the furtherance of the underlying objectives of the Rules as set out in Order 1A and, ultimately, in the interests of justice.

12.  In the present case, Mr Erik Shum who appeared for the defendant submitted that the proceedings should be continued as if begun by writ because there is a great number of factual disputes, factual and expert witnesses will need to be called, and the plaintiff’s allegations of breaches of DMC are “all over the place” and need to be defined by pleadings.  In opposition to the application, Mr Daniel Fung SC for the plaintiff submitted that the case turns on no dispute of fact and that what divide the parties are questions of law.

13.  In his decision given in writing on 16 February 2015, Master M Wong held that there was no genuine or substantial issue of fact that required the proceedings to be turned into a writ action and dismissed the defendant’s application.  The defendant has appealed that decision to a judge in chambers.

14.  That the defendant has been using the Property as the June 4^th Museum is not in dispute.  According to the defendant, the Property has a usable net area of about 800 sq ft.  The part used as a showroom for exhibition accessible to the public has an area of about 700 sq ft.  The remaining part is for the internal use of the defendant’s staff.  The floor plan and photographs have been exhibited showing the use of different parts of the Property, e.g. ticket sales, photo-taking, cinematographic display, exhibition, display of reading materials and souvenirs sales. 

15.  The museum was officially opened on 26 April 2014.  It is open to the public upon payment of an entrance fee of $10 from 10 am to 6 pm every weekday except Tuesday and from 10 am to 7 pm every weekend and public holiday.  The defendant engages 4 employees (2 on a full-time basis and 2 on a part-time basis) to work in the Property, as well as 2 to 3 voluntary staff members to assist.

16.  According to the defendant’s own observation, each visitor spends about 25 minutes on average in the Property to view the exhibits and purchase items and souvenirs.  The defendant has a policy to ensure that the maximum number of visitors allowed at any one time is 40 people (excluding staff).  Since the official opening in April 2014 there have been an average of 150 visitors per day during weekdays and an average of about 350 visitors per day during weekends and holidays.

17.  I turn to consider what the plaintiff’s case is, based on the affidavits filed and the issues raised. While the originating summons complains of a breach of the DMC generally, the plaintiff’s affidavits refer only to clause 5.13 of the DMC and Mr Fung confirmed that this is the only provision in the DMC that the plaintiff alleges to have been breached by the defendant.  That clause provides:

“No owner shall use or permit or suffer any part of the Building owned by him to be used except in accordance with the Crown Grant, any applicable Building Regulations, other Government Regulations, Ordinances and the Occupation Permit, any other permit, consent or requirement as may from time to time be applicable thereto, and the covenants terms and conditions herein contained.”

18.  This clause, on its face, potentially brings into question an enormous range of laws and regulations.  For the specific laws and regulations relied upon one has to turn to the affidavits.

19.  In the initial affirmation of Chau Kwok Chiu, the chairman of the plaintiff, filed together with the originating summons, it is alleged that the use by the defendant of the Property as a memorial hall or exhibition hall was in breach of the Occupation Permit and therefore in breach of clause 5.13 of the DMC.  The Occupation Permit, issued by the Building Authority, relevantly provides as follows:

“I hereby permit the occupation of the new building … for the following purposes:

…

4^th to 17^th Floors (inclusive): Office and ancillary accommodation on each floor for non-domestic use.

…”

20.  The defendant submitted that the issues in the case with reference to its defence include the following:

“(a) Whether from the perspective of the land law in relation to both town planning and building regulations the defendant’s current use of the Property falls within the permitted use under the OP of “offices and ancillary accommodation”.

(b) Whether the only reason for stating the permitted use of the Property on the OP concerns purely the compliance of building regulations prescribed in the Buildings Ordinance in relation to the physical design and construction of the Property.

(c) Whether there is any allegation and/or evidence that the current use of the Property is in breach of any building regulations, and if not, whether in the absence of such allegation and/or evidence, there is any legitimate complaint or enforcement action the Building Authority could make or take.

(d) Whether on a true and proper construction of clause 5.13 of the DMC, any set of the defendant would not give rise to a breach of the same unless such act affects the rights and interests of the plaintiff and/or the co-owners of the Building.

(e) Whether there is any complaint of any breach of the OP by the Building Authority under the Buildings Ordinance which may affect the interests and rights of the plaintiff and/or other co-owners, and if there is no such complaint, whether that means there is no breach of clause 5.13 of the DMC.”

21.  The primary issue here seems to me to be whether the defendant’s use of the Property as the June 4^th Museum is a use in accordance with the Occupation Permit, i.e. office and ancillary accommodation.  Given that the actual use of the Property is not in dispute, these issues seem to me to be questions of construction and law that do not depend on the resolution of any dispute of fact.

22.  I accept that the phrase “offices and ancillary accommodation” in the Occupation Permit is not a statutorily defined term.  While the term has to be construed in its proper legal and factual context, with respect I cannot see how the exercise will depend, as Mr Shum submitted, on the precise number of visitors to the Property each day, what complaints have been received by the management of the Building and what measures have been put in place by the defendant to control the number of visitors to the Property. 

23.  Mr Shum submitted that whether the defendant’s current use of the Property falls within the use allowed by the Occupation Permit has to be seen “from the perspective of the land law in relation to both town planning and building regulations”.  The defendant has put forward a draft expert report and indicated that it will seek leave to adduce expert evidence in that form.  As no such application is before me I shall say as little as possible about the admissibility of the evidence. In the end it has to be borne in mind that construction is a question for the court.  In appropriate cases experts can help in establishing and informing the court of such factual and regulatory background as is relevant to the question of construction, but this does not necessarily mean that there are disputes of fact requiring the proceedings to be ordered to continue as if begun by writ. Specifically, so far as expert evidence on the history of land use control is concerned, even assuming it is admissible, factual disputes can be expected to be limited.  There is no inflexible rule that where a question of interpretation depends on background knowledge or matrix of facts, it cannot be determined by originating summons.  In fact, even though few questions of construction do not involve looking at some contextual background, as recognised in Order 5 rule 4(2) the originating summons procedure is in general appropriate for questions of construction.  Mr Shum relied on Memorial Park Hong Kong Ltd v Secretary for Justice (HCMP 2609/2010; 24 June 2011) as a case raising a question of construction of a Government lease in which the court nevertheless ordered the proceedings to continue as if begun by writ, but as Sakhrani J said there at §7, each case depends on its own facts.  The issue in that case concerned the meaning of the phrase “human remains” in one of the clauses of the Conditions of Sale, and the plaintiff there wished to adduce expert evidence on the customary manner of disposal of the dead among the Chinese population in Hong Kong in the period from 1934 to 1941 and rely on certain “background knowledge” or “matrix of facts” which apparently were not clearly identified.  I do not think that case assists the defendant in this case.

24.  Items (b) and (c) referred to in paragraph 20 above seem to me to be arguments that the defendant wishes to raise on the construction of the Occupation Permit.  They do not raise substantial disputes of fact.  Items (d) and (e) represent an argument of the defendant on the construction of clause 5.13 of the DMC.  If that argument succeeds, there may be a need to examine the extent to which the other co-owners and occupants of the Building have been affected.  There is some divergence in the evidence but those disputes seem to me to fall within a narrow compass.  In any event Mr Fung made clear to the Master (see paragraph 33 of the Master’s decision), and confirmed again to this court, that the plaintiff is prepared to accept the defendant’s evidence on such matters.  He also confirmed that, based on what the defendant has said so far, the plaintiff will not seek to cross-examine the deponents of the defendant’s affirmations. 

25.  Mr Shum also relied on certain allegations in Mr Chau’s 2^nd affirmation that complain of nuisance and loss of privacy being caused indirectly by the manner in which the Property has been used by the defendant.  But as confirmed by Mr Fung, the case is not about nuisance but what the permitted user is.  There is no claim for nuisance, nor any claim for breach of clause 5.14 of the DMC which prohibits the use of the common areas in such a way as to cause a nuisance or annoyance to other owners and occupiers.

26.  Mr Shum was correct in pointing out that the plaintiff had raised further allegations in the 2^nd affirmation of Mr Chau filed in September 2014.  There it is alleged that the June 4^th Museum falls within the definition of a “place of public entertainment” within the meaning of the Place of Public Entertainment Ordinance (Cap 172) (“PPEO”) and that the defendant has operated it without a licence, contrary to section 4 of the PPEO, which provides:

“No person shall keep or use any place of public entertainment without a licence granted under this Ordinance.”

27.  Under the same Ordinance, “place of public entertainment” is defined to mean-

“(a) so much of any place, building, erection or structure, whether temporary or permanent, capable of accommodating the public; and

(b) any vessel,

in or on which a public entertainment is presented or carried on whether on one occasion or more”.

“Public entertainment” is defined to mean:

“means any entertainment within the meaning of this Ordinance to which the general public is admitted with or without payment”.

“Entertainment” is in turn defined to include “any event, activity or other thing specified in Schedule 1”.

Schedule 1 relevantly provides as follows:

“1. The events, activities and other things referred to in the definition of ‘entertainment’ in section 2 of this Ordinance are the following or any part of any of them-

(a) a concert, opera, ballet, stage performance or other musical, dramatic or theatrical entertainment;

(b) a cinematograph or laser projection display;

(c) a circus;

(d) lecture or story-telling;

(e) an exhibition of any 1 or more of the following, namely, pictures, photographs, books, manuscripts or other documents or other things;

(f) a sporting exhibition or contest;

(g) a bazaar;

(h) (Repealed L.N. 120 of 2002)

(i) an amusement ride within the meaning of the Amusement Rides (Safety) Ordinance (Cap 449) or any mechanical device (other than such an amusement ride) which is designed for amusement;

(j) a dance party.”

28.  In the 2^nd affirmation of Mr Chau, it is further suggested that use of the Property as the June 4^th Museum breaches the Code of Practice for Fire Safety in Buildings 2011 issued by the Buildings Department.  Clause B21.1 and Table B5 of that code provide that in the case of premises whose use classification is “places of public entertainment” (meaning the uses listed in the PPEO), where the premises are located at a storey 12m or more above ground floor level, for an occupant capacity of 31 to 200, there should be a minimum of 2 exits and a minimum total width of exit route of 2400mm.  Mr Chau states that each of the two staircases of the Building measures only 1.05m in width, totalling 2.1m.  As the defendant’s affirmation stated, the maximum number of visitors admitted into the Property at any one time is 40, in addition to 6 or 7 members of staff.

29.  As I see it, the 2^nd affirmation of Mr Chau gives two further particulars of breach of clause 5.13 of the DMC, namely, breach of section 4 of the PPEO and breach of clause B21.1 of the Code of Practice for Fire Safety.  It would have been preferable if these allegations had been included in the 1^st affirmation of Mr Chau filed at the outset.  But as things stand these are all the allegations that have been made.  I do not think in these circumstances, that fact that the defendant has to find the allegations in two affirmations instead of one is a sufficient reason to order the proceedings to continue as if begun by writ.

30.  It is not in dispute that the defendant does not have a licence issued under the PPEO.  As Mr Shum appeared to accept, only one principal issue arises from these two breaches, namely, whether the museum is a “place of public entertainment” within the meaning of the PPEO so that by operating it the defendant is in breach of section 4 of the PPEO as well as the Code of Practice for Fire Safety.  This again seems to me to be a question of law and construction.  The nature of the activities available in the June 4^th Museum and the use of the Property have been described in the defendant’s affirmation and the website of the museum and are not in dispute.  Whether or not, having regard to what goes on inside it, the museum falls within the meaning of “place of public entertainment”, is to be answered by construing the statutory definition and applying that definition to the undisputed use of the Property.  That seems to me to be a matter of law quite capable of being dealt with in an originating summons.

31.  Mr Shum submitted that the plaintiff has made a claim for damages and that without a proper investigation of the facts it would not be possible to assess damages properly.  The position, however, as Mr Fung submitted, is that it is up to the plaintiff to prove any recoverable loss.  If on the evidence as filed the plaintiff fails to discharge that burden, then the court will award no or only nominal damages.  The plaintiff’s primary concern is to stop what it regards as a breach of the DMC.  The question of damages is, in my view, very much a subsidiary issue if it arises at all.

32.  Mr Shum further submitted that the extent and seriousness of the breach is relevant to the question of remedies.  In my view, as Mr Fung submitted, this is again very much a subsidiary issue, if at all.  Where a breach of a negative covenant is established, the general approach of the court, as stated by Godfrey JA in The Incorporated Owners of South Seas Centre, Mody Road v Great Treasure Development Ltd [1994] 1 HKC 197, 202 after reviewing the authorities, particularly Dohertyv Allman (1878) 3 App Cas 709, is as follows:

“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”.

33.  For the foregoing reasons, I agree with the decision of the Master.  The appeal is therefore dismissed.  I make an order nisi that the defendant do pay the plaintiff forthwith the costs of the appeal to be taxed if not agreed.