FAIRWING INVESTMENT LTD v. CHINA AND CANTON (PROPERTIES) CO LTD AND ANOTHER

HCA 2137/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2137 OF 2004

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J U D G M E N T

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I.  Introduction

1.  Fairwing is the co-owner of certain land.  It is developing that land along with other neighbouring lots.  It claims to have rights of passage over an access road situated on adjacent land belonging to the Defendants (collectively, CCC).  CCC disputes this. 

2.  CCC built a wall enclosing its land.  This meant that, save for an Emergency Vehicle Access (EVA) in its rear, Fairwing’s land became landlocked. 

3.  Fairwing claims that CCC has wrongly prevented vehicles engaged in construction work from using the access road.  On 15 September 2004 one of Fairwing’s digging machines which, being too large for the EVA, had been trapped on Fairwing’s land by the building of CCC’s wall, tried to break through that wall and drive out through the access road.  CCC caused a car to be parked at the point where the wall was broken to prevent access onto the road.  Tempers flared.

4.  Fairwing consequently applied ex parte for an injunction to restrain CCC from obstructing the access road.  Fairwing also obtained a mandatory injunction requiring CCC to remove an entrance gate and such parts of CCC’s wall as were built on the access road.  Pending the outcome of today’s hearing, Fairwing undertook not to enforce the mandatory injunction.

5.  The parties are before me today for the inter partes hearing of Fairwing’s interim application.  The issue before me is whether the injunctions should remain in effect pending trial.  I must also decide whether any continuation of the injunctions should be on conditions.

II.  Discussion

A.  Should the injunctions be continued?

6.  Mr Tang (appearing for CCC) argues that Fairwing has no arguable case for the existence of a right of way over the access road.  I disagree.  It seems to me that the affirmation evidence before the Court is capable of substantiating Fairwing’s claim to a proprietary interest over the land.

7.  Mr Tang suggests that the balance of convenience militates against the grant of an injunction.  He submits that it is unclear what if any damage Fairwing would or could suffer by delay to the development project.  In any event, Mr Tang points out that CCC owns 4 small houses in the land adjacent to Fairwing.  CCC accordingly (Mr Tang suggests) has the means of satisfying any damages which Fairwing might suffer through the refusal of an interim injunction.

8.  Fairwing’s development involved the building of small houses and the sale of flats within those small houses.  The property market in Hong Kong is notoriously volatile.  I am unable to say that delay in the selling of units would not result in substantial damages. 

9.  I should also consider the fact that construction is currently ongoing.  A period of 16 months’ construction work is mentioned in the evidence.  If progress is delayed, damages would likely have to be paid by Fairwing to contractors.  In light of the periods involved, months, rather than days, those damages may likewise be substantial.

10.  Great inconvenience may also be caused.  Workers may have to be laid off, pending resolution of the litigation.  If Fairwing prevails, contracts may have to be re-negotiated.  Workers will then have to be re-hired.

11.  In all the circumstances, Mr Tang’s suggestion that Fairwing should be able to countenance delay, does not seem to me practical.  I think that there is a case for saying that Fairwing is likely to suffer significant disruption which may not be capable of quantification or compensation by damages.

12.  Mr Tang lists a number of matters which he says Fairwing ought to have brought to the attention of the ex parte judge.  These matters are:-

(1)     The background of the Yuen family behind CCC.

(2)     The commencement of construction work on Fairwing’s land in around May 2004.

(3)     The fact that, at least before 23 July 2004, CCC had allowed openings to be left in the wall to accommodate Fairwing.

(4)     A dinner among representatives of Fairwing and CCC on 8 July 2004.

(5)     The existence of aerial photos and survey plans.

(6)     That Fairwing was a $10,000 company and was only acting as attorney of the neighbouring lots on which Fairwing’s development was to be built.

(7)     That a Mr Yip had commenced an action in the District Court against Fairwing, claiming rescission of the agreement transferring an interest in the land to Fairwing.

Mr Tang submits that the failure to mention these matters constituted material non-disclosure.

13.  Assume that the matters referred to by Mr Tang were not mentioned to the ex parte judge.  In my judgment, such omission could not justify a charge of material non-disclosure. 

14.  The event that prompted the ex parte application was the incident on 15 September 2004.  The application was made immediately after that incident.  Whatever may have happened before then, the flare up when the digging machine tore down a part of the wall in a bid to break out, meant that something had to be done urgently.

15.  Nor do I think that the Court can place much weight on Mr Yip’s allegations in the District Court.  They remain simply allegations.  They may or may not have the effect of rescinding the contract.  The ex parte judge, it seems to me, would have been bound to deal with the position as it was on the day of the application to him.  In other words, the ex parte judge would have had to treat Fairwing as the registered co-owner of the relevant land, regardless of what Mr Yip was claiming in the District Court.

16.  I note incidentally that Fairwing exhibited some aerial photos in the affirmation in support of its ex parte application.  The fact that it did not adduce other aerial photos could not have materially affected the outcome of the ex parte hearing.

17.  In contrast, it seems to me that CCC’s potential damages are more capable of quantification.

18.  In my judgment, the claim has a good prospect of success and damages being possibly an inadequate remedy for Fairwing, the balance of convenience would best be served by continuing the injunctions.

B.  Should the continuation be on conditions?

19.  The injunctions should be on conditions.  The Court has not decided on the merits of the parties’ contentions.  Pending trial, CCC as registered owner of the land where the access road is located, should only be inconvenienced to the extent reasonably necessary to allow construction by Fairwing to proceed.

20.  It also seems to me that there should be fortification of Fairwing’s undertakings, given that it is only a $10,000 company.

21.  I am minded therefore to make an Order on the following terms:-

(1)     CCC, whether acting through its servants or agents, must refrain from obstructing Fairwing’s reasonable access to its land.

(2)     In particular, CCC is to allow Fairwing to have unimpeded access through those parts of the wall marked “TS” (the TS wall) and “B” (the B wall) in the Lot Index Plan appended to this Judgment.

(3)     That will entail:-

(a)    tearing down the TS and B walls; and,

(b)   moving the present gate at the entrance of the access road, so as to enable Fairwing’s vehicles enough space to pass through the gap created by tearing down the B wall.

(4)     Fairwing will undertake to repair any damage caused by its vehicles when passing over CCC’s land to and from the gaps created in the TS and B walls.

(5)     Fairwing will fortify its undertakings to the Court, including the one just stipulated, by paying into Court the sum of $200,000 within 7 days.  The sum of $200,000 is calculated by reference to the following:-

(a)    Revenue foregone by CCC from loss of 2 car parking space due to Fairwing’s vehicles regularly passing through the area between the TS and B walls: $2,500 x 2 spaces x 16 months = $80,000.

(b)   Provisional cost of tearing down and re-building TS and B walls and moving and re-instating the gate: $70,000.

(c)   Provisional cost of repairing and maintaining the area between the TS and B walls and contingencies: $50,000.

(6)     Fairwing shall obtain CCC’s consent to any proposed repair or maintenance work to the area between the TS and B walls.  CCC shall not unreasonably withhold its consent.

(7)     There is to be a speedy trial of this action.

(8)     There will be liberty to apply.

22.  I have ordered the tearing down of the TS and B walls and the moving of the gate because Mr Tang says that such arrangement would lead to the least amount of disturbance to CCC from Fairwing’s construction activity.

23.  There was debate before me as to the hours when the gate was to be locked, whether between 8 am and 6 pm or between 7 am and 8 pm.  Given that the gate is to be moved and Fairwing is to have an independent access to its land through gaps in the TS and B walls, the closure of the gate should no longer be an issue.

24.  The parties are to try to agree directions for a speedy trial in the first instance.  Any agreed directions can be put to Court by way of a consent summons.  Failing agreement, the matter is to be restored for further directions. 

25.  In considering appropriate directions, the parties are invited to deal with the following questions:-

(1)     Whether there should be pleadings?

(2)     Whether the affirmation evidence filed by both sides should function as pleadings, as factual witness statements or as both, in order to save time and costs?

(3)     Whether there is a need for general discovery or whether discovery can be restricted to certain issues and (if so) what issues?

(4)     What is a a realistic timetable (that is, a timetable for which extensions will only be granted exceptionally) for the filing of any necessary documents?

(5)     Whether there is a need for expert evidence and (if so) on what specific issues?

(6)     What is an appropriate length of trial?

26.  I stress that my injunction orders today are merely interim in nature.  They are made without prejudice to the parties’ respective contentions as to their rights over the access road and as to the state of the access road prior to the commencement of litigation.