WONG KI CHING v. LIU LIN CHAU AND ANOTHER

HCA5948/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.5948 OF 1997

----------------------

-----------------------

---------------------

J U D G M E N T

---------------------

1. The plaintiff claims for damages and an injunction against the defendants arising from an alleged breach of a Deed of Mutual Covenant.

2. The plaintiff and/or his family are and were at all material times the registered owner of shop numbers G.3, G.20, G.58 and G.59 in a wet market known as the Saddle Ridge Wet Market ("the Wet Market") which is situated at the Saddle Ridge Commercial Centre. The 1st defendant was at all times the registered owner of shop G.5 at the Wet Market. The 2nd defendant was at the material time a tenant or licensee of the 1st defendant in respect of the 1st defendant's shop G.5 but had at some time before this trial ceased to be so.

3. There is a Deed of Mutual Covenant dated 21 October 1993 ("the DMC") entered into by all the registered owner of the Wet Market including the 1st defendant. Its provisions are, by the terms contained therein, binding upon not only those who had entered into the DMC but also their successors in title.

4. Under the DMC all the owners at the time agreed to use their respective shops in the Wet market to sell only those commodities specified in the 2nd schedule of the DMC in relation to each of the shops in the Wet Market. Under the 2nd schedule shops G.3, G.20 and G.59 were only allowed to sell fresh pork, and G.58 only fresh beef and mutton. This restriction became binding upon the plaintiff when he became the owner of those shops.

5. In like manner, the 1st defendant, being the registered owner of shop G.5, the 2nd schedule to the DMC restricted shop G.5 to only selling fresh vegetable in that shop.

6. In this action brought by the plaintiff, the plaintiff's complaint against the defendants is that in early 1997 the 1st and/or 2nd defendant began to sell fresh pork at shop G.5. The fact that fresh pock was sold at shop G.5 is admitted by the defendants in their Defence. The defendants also admit the existence of the DMC as well as the restrictions contained in the 2nd schedule thereto and referred to above.

7. The defence put up by the defendants in their defence to the plaintiff's claim is that those restrictions contained in the 2nd schedule of the DMC had never been strictly adhered to or complied with by the other owners of shops in the Wet Market and thereby has either fallen into disuse or the change in user by the defendants in relation to shop G.5 has been acquiesced in by all other owners including the plaintiff therefore the plaintiff cannot be heard to complain now.

8. Moreover the defendants have pointed to the fact that the plaintiff has himself failed to comply with the restrictions contained in the 2nd schedule of the DMC by selling other items and commodities in the shops owned by the plaintiff which are outside of the commodities permitted under the 2nd schedule.

Acquiescence

9. The first question that I have to decide is whether the plaintiff has acquiesced in the defendants' breach of the 2nd schedule of the DMC such that the plaintiff has lost his right to enforce it?

10. On the 1st defendant's own admission, he gave permission to the 2nd defendant, his licensee of shop G.5 at the time, to sell fresh pork from shop G.5 in early 1997. G.5 was the only shop (apart from those permitted by the 2nd schedule) to change to sell fresh pork at the Wet Market in breach of the DMC.

11. Upon that breach being committed by the defendants in early 1997, firstly, a warning notice was issued by the plaintiff, as Chairman of the Owners' Committee, to the 1st defendant requesting him to cease the breach of the DMC; secondly, when that failed, the plaintiff's solicitors wrote to the 1st defendant registering their complaint on behalf of the plaintiff by letter dated 14 April 1997. When even that letter failed to put an end to that breach, the Writ in the present case was issued against the defendants in June 1997.

12. On these facts, it is quite clear that there cannot be any acquiescence by the plaintiff in the breach by the defendants.

Are the covenants in the DMC still enforceable

13. The evidence in relation to this issue show that the DMC came into existence towards the end of October 1993. By about the middle of 1995 several of the owners of shops in the Wet Market had changed their business at their shops in the Wet Market to selling a different commodity than what was permitted by the 2nd schedule of the DMC. These changes appear to have come about because of poor business in the Wet Market generally and so were made with a view to improving their business.

14. There is no evidence that any form of action were taken against these owners by anyone.

15. On 19 July 1996, the plaintiff was elected as Chairman of the Committee responsible for the Wet Market.

16. As a result of the changes by some of the shop owners referred to above, this led to a shop owners meeting of the Wet Market which was held on 23 August 1996 at which meeting a resolution was purportedly passed whereby shop owners of the Wet Market would be permitted to sell commodities other than what is permitted by the 2nd schedule of the DMC conditional upon there being no objection by other owners and that such change would not affect the business of other owners.

17. At that meeting of the shop owners on 23 August 1996, the 1st defendant voted against such a resolution.

18. Counsel for the defendant points out that that resolution, as a matter of procedure, was seriously flawed in that it had failed to comply with the proper procedure expressly laid down in the DMC whereby an amendment or alteration of the provisions of the DMC or the schedule thereto may be effected. The most serious flaw, which can readily be seen on the face of the minutes relating to the 23 August meeting shows that it did not fulfill the requirements provided in the DMC that it had to be attended by two-thirds of the shop owners. On the face of the minutes it only shows that the meeting was attended by 12 representatives of the 23 shops in the Wet Market.

19. The plaintiff attempted to give evidence to contradict what was stated in those minutes. Without going into that evidence in detail it suffice for me to say that I do not accept that evidence from the plaintiff for the simple reason that the plaintiff is now relying on his memory of what transpired over five years ago whereas the minutes purport to be a contemporaneous record of what happened at the meeting. Moreover, if there was a mistake on the face of those minutes, nothing appears to have been done soon after the meeting to put the minutes right.

20. Having said that, it is not necessary for me to come to a decision on the validity of the minutes or even of the resolution purported to have been passed. The issue which I have to decide on is whether the provisions of the DMC is still enforceable. Even if the meeting of 23 August 1996 and the resolution passed at that meeting were seriously flawed procedurally, the fact that there was this meeting at which the owners attempted to open up an avenue whereby they could change, subject to the conditions imposed, those restrictions laid down in the 2nd schedule of the DMC, by itself, shows that the majority of the owners consider themselves bound by the terms of the DMC, in particular the 2nd schedule thereof.

21. Moreover, after that resolution was "passed" at the 23 August meeting of shop owners, some of the owners including the plaintiff, no doubt believing that resolution to have been validly passed at that meeting, did take steps to seek the approval of other owners to effect changes so as to be allowed to sell other commodities than what was permitted by the 2nd schedule. Again this shows that the owners, or at least the majority of them, regarded the DMC as still effective and binding on them.

22. Despite these changes concerning the commodities sold at the Wet Market, it remained in character very much as a wet market by and large, selling such commodities as one would expect to find being sold in a wet market.

23. For all the above reasons, I have come to the conclusion that the terms of the DMC is still binding and effective upon all the shop owners of the Wet Market and has not been rendered ineffective by breaches or by any change of character in the Wet Market to such an extent as to make it unenforceable in law.

24. Accordingly, the defences raised by the defendants are not sustainable and the defendants were in breach of the terms, in particular the 2nd schedule of the DMC when they decided or permitted the sale of fresh pork in shop G.5 of the Wet Market in early 1997.

Remedies

25. Initially, the reliefs sought by the plaintiff as contained in the plaintiff's pleadings, and even when the case was opened by counsel for the plaintiff, was for an injunction and also for damages for breach. However, in his closing address, counsel for the plaintiff abandoned the claim for damages - probably due to the fact that the plaintiff was not able to adduce sufficient evidence at the hearing of actual loss suffered by him due to the breaches complained of.

26. Whatever the reason, the only relief this court is asked to consider in this case is an injunction. An injunction being an equitable relief, the court has a discretion whether or not to grant it. One of the matters which a court will take into account in deciding whether or not it should exercise that discretion is the conduct of the party who is asking for that relief.

27. In this case, the defendants have adduced evidence to show that the plaintiff himself had also been guilty of certain breaches of the 2nd schedule of the DMC in that the plaintiff had also strayed outside of the restricted commodities sold at some of the shops of the plaintiff in the Wet Market.

28. To this allegation the plaintiff does not deny that he has been selling other items and commodities from his shops outside of the items which his shops are permitted to sell under the 2nd schedule of the DMC.

29. Firstly he does not deny selling dried seafood product and toilet paper at shop G.3 from about the middle of 1997 when shop G.3 was only permitted to sell fresh pork by the 2nd schedule of the DMC. There is no evidence, documentary or otherwise, to show that the plaintiff had obtained any consent from other owners allowing him to sell dried seafood or toilet paper from shop G.3 in accordance with the resolution passed at the meeting held on 23 August 1996. This therefore appears to be a breach of the terms of the DMC. Even if the plaintiff believed (there is no evidence to that effect) that the sale of dried seafood and toilet paper would not affect the business of other shop owners in the Wet Market, it is nonetheless a breach of the terms of the DMC in the absence of any written consent by the other shop owners.

30. Another matter which I would also take into account is that there is evidence from the 1st defendant that since the time the 2nd defendant ceased to be his licensee at shop G.5, fresh pork was no longer sold at his shop in the Wet Market. This evidence has not been challenged.

31. A third matter which I will take into account is that on his own admission, the plaintiff accepts that he (or members of his family) deliberately acquired all the shops in the Wet Market which were permitted to sell fresh pork. After acquiring these shops, at some stage, he stopped the sale of fresh pork in shop G.3 and G.59 and only continued selling fresh pork at shop G.20 in order to cut down the expenses of having to operate several shops selling fresh pork. In so doing, he has succeeded in obtaining a monopoly in the Wet Market of selling fresh pork from only shop G.20. It was against this background that the defendants started to sell fresh pork from the defendants' shop, but on a relatively minor scale since the defendants' shop was still mainly selling fresh vegetables.

32. Taking into account the above matters, in particular the conduct of the plaintiff being himself also in breach of the DMC, I am not prepared to exercise my discretion in granting him the injunction he seeks.

Conclusion

33. I have found the defendants to have been in breach of the provisions of the DMC, however, since the plaintiff has not proved that he had suffered any damage resulting from that breach, I shall award nominal damages of $10.

34. The claim for an injunction is accordingly refused.

35. The parties have seen fit to go through the whole process of a legal dispute with two full days of trial in Court, both sides represented by solicitors and counsel and yet with neither side emerging a clear winner relief-wise. This would be reflected in the cost order which I propose to make.

Costs

The normal order would be for costs to follow the event. However, in a case as this where, although the plaintiff succeeded in proving a breach on the part of the defendants but is awarded only nominal damages and no other substantive relief, it is permissible to depart from the normal rule for costs. In all the circumstances of this case, I take the view that justice would best be served by a cost order nisi that each party to bear its own costs.