TSO YUK YIN v. KO WAI MING

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J U D G M E N T

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Power, J.A.:

1. This is an appeal from an order of Deputy Judge Daniell dismissing 2 summonses brought by the appellant, Mr. Ko Wai Ming (Mr. Ko) asking, inter alia, for an order restraining the respondent, Madam Tso Yuk Yin (Madam Tso) from continuing to conduct a business situated at the premises formerly occupied by a business run by a partnership between Mr. Ko and Madam Tso. They had, on 11th November 1987, entered into a partnership agreement with a view to conducting a restaurant to be known as the Good Taste Stall at 1-U Tung Choi Street, ground floor, Mongkok. It was agreed that the shareholding in the partnership should be in the ratio of 60% for Madam Tso and 40% for Mr. Ko. Madam Tso had, on 5th November 1987, entered into a lease in her name with one Chan Foo Chuen in which he agreed to lease the premises which came to be occupied by the restaurant for 7 months commencing on 1st December 1987 at a monthly rental of $24,000.00. Clause 9 of the lease permitted her to extend the tenancy for 2 years at the expiration of the first seven months.

2. It was the contention of Mr. Hung, who appears for Mr. Ko, that Madam Tso entered into this lease on behalf of the partnership or alternatively that she was a trustee of the lessee's interest for the partnership. Madam Tso says, in her affidavit, that she paid the legal costs and disbursements relating to the lease. Mr. Ko says that this was done for the partnership and that she was reimbursed for the expenditure incurred therein. Madam Tso is described in the lease as "Tso Yuk Yin trading as Good Taste Stall". She however says, in her affidavit, that this description was placed in the lease because the landlord said that it was safer from his side if she put the name of the business in the lease. This lease commenced on the 5th December 1987. By March of 1988 the parties fallen out. On the 10th of March Madam Tso says that he was prevented from entering the premises by the applicant and that the applicant then, without notice to her froze the partnership account which at that time had substantial funds in credit.

3. On the 11th of March Madam Tso, through her solicitors, served a notice of dissolution of partnership upon the appellant and notice revoking the licence of the partnership to occupy and use the premises. On the same day Mr. Ko, through his legal advisors, served on madam Tso his own notice of dissolution. Mr. Ho, in his affidavit, acknowledges the existence of a dispute between the parties. Suffice to say, for the purpose of the application, that he suggests that Madam Tso was dishonest and unfair in her dealings and is not truthful in her affidavits.

4. On 14th of March, three days after the dissolution of this partnership Madam Tso issued a writ seeking an injunction to restrain Mr. Ko from entering or remaining on the premises at No. 1-U Tung Choi Street and seeking damages for trespass. On the same day Madam Tso made an ex parte application supported by affidavit to Garcia, J. and was granted an interlocutory injunction. This order, the usual undertakings having been given, restrained Mr. Ko from entering upon or remaining on the premises and from otherwise interfering with Madam Tso possession of the premises until after the return date of the summons.

5. On the 19th of March Mr. Ko acknowledged service and on the 23rd of March he filed his own affirmation. As the return date of the summons was the 25th of March the affirmation of Mr. Ko was not filed two clear days before this date as required by the rules.

6. Mr. Joseph Tse, who then appeared for Mr. Ko, after taking instructions, consented to the interlocutory injunction being extended until further order. As it is of considerable importance we set out in full the order of Mr. Justice Nazareth:

    "UPON HEARING Counsel for the Plaintiff and Counsel for the Defendant.

    AND UPON READING the Affirmation of the Plaintiff filed herein on 14th March 1988 and the exhibits therein respectively referred to.

    AND BY CONSENT IT IS ORDERED that the Order dated 14th March 1988 be continued until the determination of the proceedings or further Order of the Court save that upon a nominated time and date within 14 days hereof, agreed between the Solicitors of the Plaintiff and the Defendant, that the Defendant be permitted to enter upon the premises if accompanied by a solicitor, for the purpose of permitting the Defendant to inspect the premsies to calculate and determine his claim in the winding upon of the former partnership."

7. It appears that Mr. Ko did not within 14 days enter the premises and make his calculation and that Madam Tso has not, although time has long since expired, filed any statement of claim.

8. On the 11th of April 1988 Mr. Ko filed the two summonses to which reference has already been made.

9. In the first summons he sought an order restraining Madam Tso from using the food licence, which is in his name, to conduct the business of the Good Taste Stall and an order restraining her, by herself or by her agents or servants, from conducting the said business. He asked further that the injunction be discharged and that there be an inquiry as to damages sustained by him by reason of the injunction.

10. In the second summons he sought firstly to have the action dismissed for want of prosecution, Madam Tso having failed to serve her statement of claim within time. This application, however, has not been pursued in the hearing before us. He sought, secondly, to have Madam Tso's endorsement struck out under 0.18 r.19 and/or under the inherent jurisdiction of the court on the ground that it discloses no reasonable cause of action against the defendant and is an abuse of the process of the court. Deputy Judge Daniell, having heard the two applications, dismissed them both. This hearing is an appeal against those orders of dismissal.

11. It is convenient to deal with the last mentioned application immediately. We see nothing in the submission that the endorsement disclosed no cause of action and was an abuse of process. It is a perfectly proper endorsement alleging trespass and seeking damages therefor and asking for an injunction to restrain the trespass.

12. We turn to consider the relief sought in the first summons. It is the allegation of Mr. Ko, and it is not denied by Madam Tso, that since the date of the consent order she has, by her servants or agents, been conducting a restaurant business in the subject premises and using the English version of the name formerly used by the partnership. It is submitted that the conduct of Madam Tso in so doing being an abuse of the injunction order this court has an inherent jurisdiction to discharge that order. The real hundle faced by Mr. Ko is that the relief sought is, in reality, the discharge of the consent order. indeed, although the summons states in terms that it seeks the discharge of the injunction, it is argued by Mr. Hung that what it sought is not an order discharging the consent order but an order holding that Deputy Judge Daniell was wrong in refusing to make the order sought.

13. Mr. Hung, while conceding that the effect of making that order would be to discharge the consent order, submits that the court must do so if it considers that to continue the injunction would be unjust and inequitable. Mr. Hung cited Harbottle (Mercantile) Ltd. v. National Westminster Bank Ltd. & others^(l) for the authority that the court always has inherent jurisdiction to dissolve an interim injunction. This case does not, however, deal with the setting aside of a consent interlocutory order upon the basis of non-disclosure made at a time when the facts were known to the respondent.

14. The thrust of Mr. Hung's argument, in the outcome, lay along two lines. He argued that the injunction should be discharged, firstly, because there was, prior to the making of the consent order, a non-disclosure of material facts and, secondly, because the actions of Madam Tso, since the making of the consent order, have been unjust and inequitable.

15. Before dealing with the first contention we think it proper to remark that we have considerable doubt whether it is properly based. The position is that Mr. Ko in his affidavits contests some of the matters raised by the applicant in her original affidavit in support of the ex parte application. There has, however, never been any determination as to whether or not she did, in fact, fail to make full and frank disclosure. The appropriate time for determination of these matters was when the parties appeared before Nazareth, J. The application having, however, been resolved by consent the issues, in this regard, were never tested. As the matter stands before this court there are, therefore, no findings of fact upon which Mr. Hung can rest his contention that there has not been full and frank disclosure.

16. However that may even if we were to proceed upon the basis that Madam Tso did not make full and frank disclosure it would avail Mr. Hung nothing.

17. There is no dispute that an ex parte injunction cannot stand where there has been a breach of duty on the part of the applicant to make full and frank disclosure. The King v. The General Commissioner for the Purposes of the Income Tax Act for the District of Kensington⁽²⁾. We are, however, satisfied that this rule has no application to a consent order. If any challenge is to be mounted upon this ground it must, when the challenging party is in full possession of the facts, be made on the return date of the summons. At that stage a respondent either challenges the ex parte order upon the basis it was made in the circumstances where the applicant failed to make full and frank disclosure or argues that the circumstances which are by then before the court are not such as warrant the making of an interlocutory order. A third course, and the one followed in this matter, is to consent to the continuance of the interlocutory order. If a party consents to the continuance of the interlocutory order in circumstances where he is fully aware of a suggested lack of frankness on the part of the applicant, as was the case here, we are satisfied that he cannot on that ground later be heard to question the making of the consent order. This is, in our view, so self-evident that it should go without saying. There is nothing, therefore, in this first contention.

18. The second contention is that Madam Tso by continuing to operate the business through her husband has been in breach of a fiduciary duty which warrants the quashing of the order granting the injunction. Mr. Hung was asked by the court to explain what this duty was and to whom it was that it was owed. His answer, at first, was that it was a duty to the partnership. When it was pointed out to him that the partnership had been dissolved by notices from each of the parties to it, he submitted that it was a duty to deal fairly with the property of the former partnership in the interests of both of the former partners. It was then pointed out to him that after the dissolution and the order granting the injunction the continued operation of the business was clearly in the best interests of the former partners as nothing could be better calculated to enhance the value of the business at the date of dissolution than evidence that the business was able to be continued as a profitable going concern. Mr. Hung did not accept this. He argued that the respondent was in the position of a trustee and that her duty after the injunctive relief was granted was to wind up the business as soon as possible. He suggested further, although there was no evidence of this, that this had been the understanding between the parties at the time of the consent order. This argument seems to us to fail wholly to appreciate the significance of the mutual dissolution and the consequent consent order. As at the date of the mutual dissolution entitled to the value of his share in if the business had simply ceased to operate at that date then the value of the business to be shared would have been represented by the value of the goodwill, (if it could be Sold), by such amount as could be realized by the Sale of the fixtures and fittings and by the amounts in the bank accounts of the business. The probability is that real value of the business lay in its goodwill which would, in all likelihood, have disappeared had the business not been continued after the date of dissolution. Such value could be best demonstrated and preserved by the continued operation of the restaurant. We are, therefore, unable to understand how it can be suggested that Madam Tso was in breach of any duty to the former partners by ensuring that the business continued to be conducted as a restaurant. No doubt at some time a valuation will have to be made for the purposes of the proper realization of the former partnership's assets. At that stage the value of the goodwill cannot but be enhanced by her actions.

19. We are satisfied that the appeal is wholly without merit and it is therefore dismissed.

20. Mr. McCoy who appeared for the respondent sought costs on a common fund basis.

21. We did not call upon the respondent as we were satisfied not only that the appeal was wholly without merit but also that it should never have been launched. This is, we are satisfied, one of the infrequent cases where the making of an order that costs be taxed on a common fund basis is warranted and we so order.

(1) (1978) 1 Q.B. 146

(2) (1917) 1 K.B. 486