NGAN CHOR YING ANN and Another v. YEAR TREND DEVELOPMENT LTD. and Another

1994 No.A10337

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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The Background

1. There is a summons before me by which the plaintiffs claim judgment under Orders 14 and 14A. They say that they are entitled to a declaration that the defendants are not entitled to carry on business as real estate agents, by themselves or through others, in two shops, numbered 17 and 18, in a commercial building in Tsing Yi. The plaintiffs also ask for an injunction restraining the defendants from doing this.

2. The first plaintiff is the registered owner of two other shops, numbered 1 and 2, in the same commercial building, and the second plaintiff is the tenant. The first defendant is the registered owner of shops 17 and 18 and the second defendant is its tenant.

3. There is a deed of mutual covenant registered against the shops I have mentioned. The purpose of this deed is to achieve what is called a tenant mix. The deed does this by prohibiting the carrying on of certain trades or businesses in particular shops. The second plaintiff carries on a real estate agency business in shops 1 and 2, which is a permitted use for those shops. The second defendant is carrying on the same kind of business in shops 17 and 18, but this is a prohibited use in respect of those shops.

4. Before the second defendant entered into the lease in respect of shops 17 and 18, it was aware that the deed prohibited the use of these shops for the purpose of carrying on a real estate agency, but, because it believed, it says, for reasons that need not be discussed now, that compliance with the deed in this respect had been waived by the management of the building and other owners, it entered into the lease.

5. Before going into the merits of this matter, there is a preliminary point to be decided. Mr Chan Chi-Hung, who appears on behalf of the defendants, says that the plaintiffs have commenced their action in the wrong forum. He argues that the Lands Tribunal has exclusive jurisdiction in this matter.

The Matter of Jurisdiction

6. Section 45 (1) of the Building Management Ordinance (Cap. 344) says -

The tribunal [the Lands Tribunal] shall have jurisdiction to hear and determine any proceedings specified in the Tenth Schedule.

7. The Tenth Schedule is very comprehensive and certainly covers the proceedings before me. So, the Lands Tribunal has jurisdiction to hear and determine these proceedings. But does it have exclusive jurisdiction?

8. My understanding of the law in this area is that where an Ordinance creates a right or remedy; that is, the right or remedy has no existence independently of the Ordinance creating it, and, at the same time, the Ordinance lays down a particular method of pursuing it in a particular court or tribunal, the courts will, without more, tend to confine a person in pursuit of that right or remedy to that particular court or tribunal. But an Ordinance should not be interpreted so as to take away the jurisdiction of the superior courts unless it does so by express words or necessary implication.

9. Mr Chan prays in aid the judgment of Mayo J., in Winbase Industrial Ltd. And Others v. Mightyton Property Management Ltd. And Another 1994, No. A10232. That case was an action in which the plaintiffs were complaining about the management of a residential development governed by deeds of mutual covenant. At page 6 of his judgment, Mayo J. said -

Mr Chan [Mr Edward Chan Q.C.] . . . argued that the range of proceedings referred to in the 10th Schedule was so wide that it must be the case that the jurisdiction of the Lands Tribunal would be concurrent jurisdiction together with the jurisdiction of the High Court. I do not think that this is right. I agree with Mr. Tang that if the 10th Schedule is considered in the context of Part VIII generally it is quite clear that proceedings referred to in the 10 th Schedule are limited to matters coming within the ambit of the Building Management Ordinance Cap. 344. This is the only sensible way of interpreting the legislation.

The fact that the Ordinance, unlike the Labour Tribunal Ordinance Cap. 25 does not contain an express exclusive jurisdiction provision is not significant. In this connection I would adopt the reasoning of Trainer [Trainor] J. in Kong Hoa (Hong Kong) Ltd. V. Lau Hung Kwan [1976] HKLR 62. I have no doubt that it was the intention of the legislature to vest in the Lands Tribunal an exclusive jurisdiction to hear the cases specified in the 10th Schedule. This being the case the High Court does not have jurisdiction to hear the action which has been commenced by the Plaintiffs.

10. In Kong Hoa (Hong Kong) Ltd. v. Lau Hung Kwan [1976] HKLR 62, Trainor J. seemed to hold that, where a right or relief arises from an Ordinance and jurisdiction in respect of that right or relief is given to a particular tribunal, it should be taken that the tribunal selected by the legislature has exclusive jurisdiction in relation to that right or relief, and this is particularly so when there are indications in the statute, such as extending the jurisdiction of the tribunal and limiting the rights of appeal from the tribunal, pointing towards an intention not merely to create an alternative jurisdiction. If this interpretation is correct, I have no quarrel with the decision. If the decision goes beyond this, which on one reading it may, I must respectfully decline to follow it.

11. Mayo J. seems to recognise that what he considers to be within the exclusive jurisdiction of the Lands Tribunal is limited; he says it is limited to "matters coming within the ambit of the Building Management Ordinance Cap. 344." If, by this, Mayo J. is saying that the exclusive jurisdiction of the Lands Tribunal is limited to those rights and remedies that are created by that Ordinance, I have little difficulty with that conclusion. If, however, the decision is to be taken to say that the exclusive jurisdiction covers all those matters mentioned in the Tenth Schedule, without limitation, I must respectfully disagree.

12. Where a dispute concerns the interpretation and enforcement of a deed of mutual covenant, a matter in respect of which the High Court has a natural jurisdiction, my view is that the court should not lightly find that this jurisdiction has been ousted. If the legislature had intended this, I would expect to find its intention in express words or necessary implication.

13. Section 5 of the Small Claims Tribunal Ordinance (Cap 338) recites -

5 (1) The tribunal shall have jurisdiction to hear and determine the claims specified in the Schedule.

(2) Save as provided in this Ordinance, no claim within the jurisdiction of the tribunal shall be actionable in any other court in Hong Kong.

14. Section 7 of the Labour Tribunal Ordinance (Cap. 25) says -

7 (1) The Tribunal shall have jurisdiction to inquire into, hear and determine the claims specified in the Schedule.

(2) Save as provided in this Ordinance, no claim within the jurisdiction of the tribunal shall be actionable in any court in Hong Kong.

15. This is the language the legislature uses when it wishes to give exclusive jurisdiction to a particular tribunal. It has not spoken thus in this Ordinance. It has not given exclusive jurisdiction to the Lands Tribunal by express words. Has it done so by necessary implication?

16. I can find nothing in the Ordinance that leads me to the conclusion that the legislature must have intended that the Lands Tribunal should have exclusive jurisdiction over all matters mentioned in the Tenth Schedule. Indeed, there are, in my view, strong indications to the contrary.

17. As I have said, the Tenth Schedule is very widely drafted. It includes matters that concern rights and obligations that arise quite independently of the Ordinance; matters that frequently come before the High Court for determination. If the legislature intended that this commonly exercised jurisdiction of the High Court should be taken away, it would, in my judgment, have said so in clear words.

18. Section 45 (2) of the Building Management Ordinance (Cap. 344) says -

No person other than a person to whom this section applies shall be competent to commence any proceedings referred to in subsection (1).

19. The section is said to apply only to a list of people described in section 45(4), and in respect of some of them the section is said to apply only with leave of the tribunal.

20. Section 45 (3), in effect, divests the tribunal of jurisdiction to make any order which might, amongst others things, vary any contractual obligation or proprietary right enjoyed by any owner or occupier or [person] otherwise referred to in registered instrument including a deed of mutual covenant. I do not know what this means. I was unaware that any court or tribunal in Hong Kong could vary contractual obligations or proprietary rights, although, of course, the law may do so.

21. Whatever the meaning of these subsections, they tell against any argument that the tribunal has exclusive jurisdiction over the wide range of matters mentioned in the Tenth Schedule. If the tribunal does not have comprehensive jurisdiction over all persons and to make all lawful orders, the natural conclusion is that some other tribunal must have that comprehensive jurisdiction; that is, the High Court. I cannot believe that the legislature intended to take away the rights of some people to enforce a deed of mutual covenant, or to restrict the kind of rights that they may enforce.

22. And the fact that, for example, a tenant's representative is not competent to commence proceedings before the tribunal without leave of the tribunal implies that such a person may commence proceedings before some other tribunal of competent jurisdiction without leave, and that can be only the High Court. The assumption is that but for this section a tenant's representative would be competent to commence proceedings in respect of matters covered by the Tenth Schedule, and it cannot be so that it was intended by the legislature that a tenant's representative would, without leave, be quite unable to do so in any tribunal.

23. Mr Merry, who appears for the plaintiffs, argues that the fact that the list of persons mentioned in section 45 does not include a tenant means that, even if exclusive jurisdiction is otherwise vested in the tribunal, a tenant may take action in the High Court in respect of a matter mentioned in the Tenth Schedule. I do not see the matter in this way. The way the section reads, if it is to be interpreted as giving exclusive jurisdiction to the tribunal in respect of all matters mentioned in the Tenth Schedule, the fact that the section does not apply to a tenant means that the tenant cannot take action in any court or tribunal. This cannot be right; this result cannot have been intended by the legislature. I believe that the section should not be construed as giving exclusive jurisdiction to the Lands Tribunal in respect of all matters mentioned in the Tenth Schedule.

24. The Lands Tribunal is not otherwise a tribunal of exclusive jurisdiction. If for no other reason, this is clear from section 8A of the Lands Tribunal Ordinance (Cap. 17) which provides for the Tribunal to transfer to the High Court or the District Court proceedings are within the jurisdiction of those courts and which are either not within the jurisdiction of the Tribunal or the Tribunal considers should in the interests of justice be so transferred. Its jurisdiction includes making orders under statutes and in respect of common law claims.

25. Mr Chan has referred me to statements made in the Legislative Council during the resumed second reading debate on 5 May 1993 on the Multi-Storey Buildings (Owners Incorporation) (Amendment) Bill 1992, which contained the new section 45 and the Tenth Schedule.

26. Pepper v. Hart 1993 A.C. 593 permits references to Hansard "where (a) legislation was ambiguous or obscure or led to absurdity, (b) the material relied upon consisted on one of more statements by a Minister or other promoter of the Bill together if necessary with such other Parliamentary material as was necessary to understand such statements and their effect and (c) the statements relied upon were clear."

27. I am not sure how applicable this decision is to a legislature that has no majority party to ensure the passage of legislation. Where a majority party exists, one can be reasonably sure that what is said by a Minister or other promoter of a Bill represents the intention of the majority of the legislature. In Hong Kong, statements in the Legislative Council cannot be said to be clearly representative of the intention of the majority of the Council. In any event, I do not think that the Ordinance is ambiguous, obscure or leads to an absurdity, not on my construction of it anyway, and I do not believe that the statements in the Council clearly indicate that there was an intention to vest an exclusive jurisdiction in the Lands Tribunal.

28. I do not see any difficulty in there being jurisdiction in respect of matters mentioned in the Tenth Schedule vested both in the High Court and the Lands Tribunal. In any given case, there may be advantages in having a matter determined by one or other of the bodies having jurisdiction. In that sort of case, where, for example, it is clear that the particular expertise of the Lands Tribunal would help in the speedy determination of a dispute, the High Court could transfer the cause to that Tribunal. The matter before me is not of that nature. It is a straightforward, although important, matter for which the High Court is the natural forum. Mr Chan did invite me to consider declining to exercise jurisdiction if I found that I was able to deal with the matter. I do not see any reason why I should do this.

29. In the result, I find that the Ordinance does not vest exclusive jurisdiction in the Lands Tribunal in respect of the matter before me, and that I should proceed to decide the issue.

The Matter of the Merits

30. On the merits, the defendants oppose the relief sought by the plaintiffs on the basis that there others who are in breach of the tenant mix scheme provided for in the deed of mutual covenant. That does appear to be the position: More than a dozen other shops are being used for purposes other than those permitted. Does this debar the plaintiffs from obtaining the relief they seek?

31. The interest that the plaintiffs are seeking to protect is the exclusive right to use shops 1 and 2 for the purpose of carrying an real estate agency. They have no interest in ensuring that a shop designated for a particular use should be used for only that purpose if that does not affect their exclusive right. It would be quite unrealistic to expect the plaintiffs to police the whole of the scheme and take action to prevent breaches of the covenant in which they have no interest.

32. The only other shop, apart from shops 17 and 18, which is being used as a real estate agency in contravention of the covenant is shop 30. This shop's designated use is "stationary and toys shop". In this respect, the plaintiffs complained to the manager of the shopping centre when the real estate agency commenced business in late 1992. The manager wrote to the "landlord" of shop 30 protesting about this on 25 November 1992 and the manager's solicitors' wrote again on 7 May 1993. The manager commenced legal proceedings against the owner of shop 30 on 18 November 1993. After writing, the plaintiffs themselves commenced proceedings against the owner and tenant of shop 30 on the same day as they commenced these proceedings.

33. In these circumstances, I do not believe it can be said that the plaintiffs have in any way led the defendants to believe that they would not enforce the covenant, nor have the plaintiffs behaved in such a way that would make me believe it would be unfair, unjust or unconscionable to restrain the defendants from carrying on an activity prohibited by the covenant. If the defendants, when they entered into their lease, were of the belief that it would be safe to open up an estate agency in shops 17 and 18, that is their own doing, and not induced by the plaintiffs.

34. It is clear from the affirmation before me made on behalf of the defendants that they undertook a measure of research into the covenant and the permitted uses. They knew that only shops 1 and 2 were permitted to carry on the trade or business of real estate agency. If they thought that, on the face of it, it was possible that the covenant was not being enforced, and those with exclusive rights were not interested in enforcing them, they could have, very easily, made sure of what the position was by asking those who had an exclusive right to carry on the business of real estate agency. They would very quickly have been disabused of any thought they might have had that it was safe to go ahead. Even if the defendants had approached the other estate agency operating in contravention of the covenant, they would have been told that the plaintiffs had not waived their rights. They did not do so, and I believe they did not do so because they knew what the reaction would be.

35. In fact, of course, the defendants did not believe that the persons with the exclusive right to operate an estate agency had waived their rights. They agreed between themselves that if the second defendant "has to cease trading due to objection of the Developers, the Management Company or other tenant or landlord . . . [the second defendant ] has the right to cease trading and terminate this agreement." Clearly, the defendants were aware of the plaintiffs' rights and decided to take a chance. The commercial risk they freely undertook did not come off, and they cannot legitimately complain about that.

The Result

36. In the result, I do not believe that there is anything unfair or unconscionable in enforcing the covenant against the defendants. I do not believe that damages would be an adequate remedy in these circumstances. According, I grant an order in terms of paragraphs 1, 2(a), 3 and 4 of the summons dated 29 November 1994. Counsel agree that paragraph 2(b) is too wide. There seems to be no reason why the defendants should not pay the plaintiffs costs to be taxed if not agreed, and I make an order nisi accordingly.