WINDSOR SAUNA CO LTD v. POWERFUL DRAGON LTD

HCA 2345/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2345 OF 2003

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J U D G M E N T

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1. This is an application for an interlocutory injunction. As such, I am bound to comply with the procedure thereof as has been set out in the landmark case of American Cyanamid. Thus first I am obliged to determine whether there is a serious question to be tried and, if I find that there is, then I have to consider the respective rights and obligations of the parties in a balancing exercise to decide whether or not to grant the interlocutory injunction asked for, pending a trial of the action.

2. The history of events is as follows: by lease of September 1999 the plaintiff leased premises situated on the 3rd floor of Fortress Tower, King's Road, from the then landlord. Access to the 3rd floor was by means of two lifts running from the ground floor of Fortress Tower, servicing, however, only floors 2 and 3. The ownership and tenancy of the 2nd floor has no bearing on these proceedings. Somewhat unusually, the lifts do not run from a common area on the ground floor; rather they run from premises designated as shops 18 and 19 of the ground floor of Fortress Tower, which are privately-owned premises. Formal access by the plaintiff to the lifts on the ground floor was achieved in the lease of September 1999 by the landlord thereof being required to procure the consent of the owners of shops 18 and 19 on the ground floor to allow right of way to the plaintiff and, of course, its officers, staff and customers. This by all accounts was undertaken and during the currency of the lease, which was a two-year lease, there was unimpeded, uninterrupted right of way enjoyed by the plaintiff to its premises for itself, its officers, its staff and its customers.

3. I should say at this point that shops 18 and 19 were owned by a company which was independent legally of the landlord of the 3rd floor, but there was nevertheless a similarity of shareholding, directors, registered office and so on as between the two companies.

4. During the currency of that lease, the plaintiff, in effect, had the free use of the area comprising shops 18 and 19. Variously, this is said to have been 1,000 square feet but in fact it seems that the usable area is a little more than half that. The plaintiff says that it spent a considerable amount in decorating that area to a certain level of attractiveness. There is some dispute as to whether the plaintiff actually paid for this or acquired it. No point is taken about this. Suffice to say, from photographs exhibited, the decoration comprised murals on the wall, chandeliers from the ceiling, marbled floors and glass doors. Indeed, it seems the plaintiff used the premises not just for a right of way but as a reception area because there is a reception desk also installed; presumably, that desk was manned. And there was seating for customers.

5. In the chronology of events, what happened thereafter was that a letter of June 2001 was sent by solicitors for and on behalf of the landlord to the plaintiff, complaining that shops 18 and 19 had been fitted out and was being utilised by the plaintiff in ways contrary to the terms of the lease. Complaint to that effect having been made, the plaintiff was called upon to take action to purge that breach, remove the furniture and fittings and use the area only for the purpose of access and egress to the lifts. It seems that nothing was done about that. Certainly the fitting and fixtures were not removed, and by all accounts there was no alteration in the use of the area by the plaintiff.

6. The next event that took place was that the lease of September 1999 expired and a new lease was entered into between the same landlord and the plaintiff. I shall call it "the second lease". That was dated November 2001. The matter of access was set out in clause 3 of the third schedule of the second lease and, that being now a matter that is pertinent to these proceedings, I shall repeat it verbatim as follows:

"The landlord shall procure a consent of the owners of Shop No. 18 and 19 on ground floor of the building to grant a right of way to the tenant of 2nd floor and 3rd floor for common use, provided that the tenant of the 3rd floor should bear 50 per cent of the charges of rates, Government rents, management fee, water, electricity, gas, central air conditioning and others utility of the Shop Nos. 18 and 19 on ground floor of the building."

Whilst there could be a certain improvement in the linguistic quality of that clause, it is quite clear that what is intended by it is that it was upon the landlord's shoulders to ensure that there was free access to the lifts through the shops in question unimpeded as before.

7. The next event after the completion of the second lease was that the landlord of the 3rd floor premises sold the premises, subject of course to the existing lease to the plaintiff, to the defendant. At or about the same time - it matters not as to detail - the shops 18 and 19 were also sold by the then owner to another company. This other company, now the owner of shops 18 and 19, is a separate legal entity from the defendant but, as before, there are similarities of shareholding, officers, registered office and so on.

8. In the chronology of events, the next event of pertinence is that, by a memo written in Chinese of 18 March 2003 the defendant wrote the plaintiff and again, because of its pertinence, I shall read out what seems to be an unchallenged translation of what was written:

"Dear Sir,

According to the terms of the lease executed by you in respect of the 3rd floor, the landlord only needs to obtain the consent from the owner of Shops 18 and 19 on the ground floor to provide a right of way to the tenants of the 3rd floor within the ground floor shop premises of Shops 18 and 19 but not the entire area. To give effect to the terms of the contract, we, the landlords, will give you, the tenants, a passageway with a width of 2 metres. Ordinary fire escape passageways have a width of 2.5 metres.

We hereby give you notice that you must, within one week from now, remove all the miscellaneous items left in the shop premises of Shops 18 and 19, including the promotional materials on the walls. All items found in the premises after 25 March 2003 will be regarded as refuse. Notice is thus given."

And then it's signed and dated.

9. The plaintiff took no material steps to do anything about complying with the demand in that memo and matters proceeded unchanged until June of this year when the plaintiffs discovered that work was being undertaken in the premises comprising shops 18 and 19, that fixtures and fittings of theirs were being summarily removed, in particular the glass doors that formed the entrance into shops 18 and 19, thence to the lifts, and that effectively what was apparently going on was the construction of a partition subdividing the area in question such that about one-half of the area was available for access to and egress from the lifts, the remainder being essentially partitioned off for apparent use independently of the officers, staff, customers and so on of the plaintiff.

10. The plaintiff immediately sought legal advice. A letter before action was written by the plaintiff to the defendant calling upon the defendant to call off the work and reinstate the premises. When there was no immediate response, the plaintiff filed a writ and an application ex parte for an injunction seeking a cessation of the work and a mandate that the premises be restored to their former condition.

11. The matter came before Stone J on 25 June; presumably he was the duty judge. On that date, as I understand the situation, he formed the view that the matter should not proceed ex parte because a letter before action had been written. He adjourned the matter to be heard before himself two days thereafter but on the basis that there be service of the application and the supporting affidavit.

12. In the event, as I read from the papers, the defendant was served prior to the hearing of 27 June but too late to be able to seek advice and representation. In the event, the matter was restored back before Stone J without representation or the presence of anybody for and on behalf of the defendant. The judge granted that part of the injunction application which sought a cessation of work, otherwise adjourning the application to a nominated return date. In the meantime, the defendant became represented and, by agreement, the return date was adjourned; today's hearing before me is effectively the adjourned hearing date.

13. Both sides have filed evidence in support and in opposition to the application, and there are exhibited to the affidavits a series of photographs and diagrams which are of assistance to me in establishing the layout of shops 18 and 19 both before the work of June this year was begun and thereafter. These features emerge: first, that the plaintiff did have the area in question decorated to a high standard, and it is evident that there was in place a reception desk, murals, chandeliers and glass doors. Clearly the plaintiff was making use of the area to attract customers to the premises on the 3rd floor, no doubt new patrons in particular. It is also apparent in the construction work being carried out, that the glass doors apparently of the plaintiff and the other fixtures and fittings have been removed to enable part of the premises to be partitioned off for separate use by the owner thereof. Thirdly, it is quite apparent that there is no material impairment in the form of access to and egress from the lifts in question.

14. In pursuing this application as it does, the plaintiff has submitted, through counsel, that there is a material breach of clause 3 of the third schedule of the second lease because the plaintiff having had the run of shops 18 and 19, along with the tenant occupying the 2nd floor and, presumably, the owner, has now been unilaterally and wrongfully deprived of 50 per cent of the area in question. It is immediately apparent to me that the grievance is that the plaintiff having had the use of the premises in question not just for access and egress but to promote the sauna premises on the 3rd floor, is now materially restricted. But I do not see that restriction as effectively being a breach of the clause requiring the defendant to give access to and egress from the lifts.

15. The plaintiff may well have had the use of the premises for a period of time in excess of what it had been entitled to under the lease, but that is no ground for it having the right to insist upon the ongoing use of the premises, there being no provision in the lease for the use thereof. Had the plaintiff wanted to use the premises on the ground floor in the manner that it now insists it should be entitled to, it should have leased the premises or entered into some form of licence for such purpose. As it is, the defendant was solely obliged to provide access to the lifts, not more, not less than that. That access remains unimpaired, notwithstanding the activity undertaken within the premises comprising shops 18 and 19.

16. In my view, the plaintiff has not established that there is a serious question to be tried. The result of that is that it has not established grounds to warrant an injunctive order. The order of 27 June 2003 is accordingly discharged and the application for an interlocutory injunction is dismissed.

(Submissions on costs)

17. Costs are to the defendant to be taxed and paid forthwith.