RAINGATE LTD v. CHCP INVESTMENT CO LTD

HCA 734 / 2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 734 OF 2007

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BETWEEN

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DECISION

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I.       Introduction

1.  On 31 July 2008, Deputy High Court Judge Gill handed down his judgment (“the earlier judgment”), granting, inter alia, an interlocutory injunction against the Plaintiff, requiring it to remove the signage and the frame thereof attached to certain area of the external wall of the building known as De Victoria. 

2.  The Order was sealed on 11 September 2008, and at paragraph 2 therein the Plaintiff is given until 19 September 2008 to comply with this injunction.  At the same time, on 9 September, the Plaintiff lodged an appeal against the Order. 

3.  This is the hearing of the Plaintiff’s application to (1) stay the execution of the paragraph 2 of the Order pending appeal[1], or  (b) extend the time provided in the Order to comply with the injunction until the final determination of the appeal or alternatively for such other period as the Court shall deem fit[2].

4.  The Defendant opposes these applications.

5.  In this decision, unless otherwise stated, I shall adopt the abbreviations used in the earlier judgment. This decision should also be read together with the earlier judgment.

II.      Brief background

6.  The Defendant is the registered owner of the 1^st to 3^rd floors of De Victoria.  A large bookshop has been operating there since 1984.   It is the Defendant’s case that it has a right to erect signs on the exterior walls of the 1^st, 2^nd and 3^rd floors.

7.  Since its operation, the bookshop had put up a large and square sign (“the Defendant’s Sign”) on a particular part of the exterior wall of the 3^rd floor, that surround the triangular corner at the western end of the building (“the Disputed Area”).

8.  The Plaintiff has since 2002 been the registered owner of the ground floor, and the 4^th to 19^th floors of the building.   It has also acquired the building’s outer walls.

9.  Since 2007, the Plaintiff has a new management after its sale to a new purchaser.  The new management decided to turn the uppers floors into serviced apartments.  Relevant refurbishments works have been carried out, including the retiling and re-surfacing of the external walls of the building.

10.  Shortly after April 2007 (the commencement of this action by the Plaintiff), the Defendant demolished all the signages (including the Defendant’s Sign”) and air-conditioning equipment installed on the external walls of the 1^st to 3^rd floors, upon the objection from the Plaintiff on the basis that, inter alia, these were erected without the proper approval of the Building Authority.

11.  In June 2007, the Defendant obtained proper approval from the Building Authority to erect the signs (including the Defendant’s Sign) again.

12.  On the other hand, the Plaintiff adopts a position that, on proper construction of the relevant title documents, the Defendant has no right to have any access or use of the Disputed Area, thus it has no right to erect the Defendant’s Sign thereon.  The Plaintiff also seeks a declaration to that effect in its present claim.

13.  In the meantime, as part of its refurbishment works, the Plaintiff has since the Defendant’s earlier removal of the Defendant’s Sign at the Disputed Area erected its own sign (“the Plaintiff’s Sign”) there in relation to the serviced apartments it is proposing to run there.

14.  This thus has prevented the Defendant from putting the Defendant’s Sign back at the Disputed Area.

15.  The Defendant then applied for an interlocutory injunction to require the Plaintiff to remove the Plaintiff’s Sign, so as to enable it to put back the Defendant’s Sign at the Disputed Area.

16.  Deputy High Court Judge Gill heard the Defendant’s interlocutory injunction application, and on 31 July 2008 granted in favour of it.

III.    The present stay application

Applicable principles

17.  Both parties agree that the principles governing an application for stay pending appeal are those set out by Ma J (as he then was) in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 at 87D-90A, paras 6-10.  For the present purpose they can be summarized as follows:

(1)  The burden is on the appellant to justify a stay of execution by showing that there are good reasons for stay.

(2)  The existence of a strong ground of appeal or strong likelihood of success on appeal is by itself a good reason for stay.  But in the majority of cases, it is undesirable and unnecessary to go deeply into the merits and strength of an appeal.

(3)  If an appellant only has an arguable appeal, he will have to provide additional reasons as to why a stay is justified.

(4)  A commonly recognized good reason is that an appeal will be rendered nugatory if no stay is granted.  To determine that question, the court may have regard to the nature of the order being appealed against.

(5)  An appeal being rendered nugatory does not mean in all cases that without a stay, the appellant will face financial ruin or the loss of all his property.  Demonstrating that the failure to grant a stay will have a serious deleterious effect on the appellant is sometimes sufficient.

(6)  However, in considering whether to exercise to grant a stay, the Court must also not forget the position of the successful party, and it is always relevant to consider the prejudice would be caused to the successful party in the event a stay is granted.  Thus, a fortori the court must consider any contention that the appeal would be rendered nugatory to the successful party (in the event the appeal is dismissed) should a stay of execution be imposed.

(7)  Ultimately, the court embarks on a balancing exercise and uses its common sense, with the starting point that the successful party is not to be deprived of the fruits of his success.

The earlier judgment

18.  In granting the interlocutory injunction, Deputy High Court Judge Gill concluded that:

(1)  He had the jurisdiction to hear and grant such an injunction notwithstanding that the Defendant had not counterclaimed for any relief.  In coming to that conclusion, the learned Judge relied on and applied the authorities of Collison v Warren [1901] 1 Ch 812 at 814 per Buckley J, applying Carter v Fey [1894] 2 Ch 54 at 545 (Collison was affirmed on appeal); section 21L of the High Court Ordinance (Cap 4) and O 29 r 1(1).  See: paras 37-51 of the earlier judgment.

(2)  Applying the test concerning the grant of a mandatory interlocutory injunction, the Defendant had a high likelihood of success at trial to establish that it had the right erect signage on the Dispute Area.  In His Lordship’s view, it was difficult to hold that the words “Together with ALL That the right to erect signs on the exterior walls of the First, Second and Third Floors subject…” in the relevant title documents can be otherwise interpreted than to include the Disputed Area.  See: paras 53-59 of the earlier judgment.

(3)  The Defendant could not be adequately compensated by damages if injunction was not granted, because there was evidence that the Disputed Area of the external wall was exposed to heavy pedestrian traffic, and the message by a sign prominent to that traffic might subliminally or otherwise attract custom of the bookshop.  The loss of that without the sign would be impossible to quantify.  On the other hand, the damage that would be suffered by the Plaintiff if the injunction was later found to be wrongly granted would amount only to the cost and inconvenience associated with the removal of the Plaintiff’s Sign and its appendages and their subsequent reinstatement, if it was to win at the trial.  This could be adequately compensated by damages.  See: paras 59-61 of the earlier judgment.

The grounds in support of a stay

19.  Mr Kenny Lin, Counsel for the Plaintiff submits that there should be a stay of execution pending appeal for the following reasons:

(1)  The Plaintiff’s appeal against the Order stands a strong likelihood of success, as clearly:

(a)  the learned Judge has wrongly applied the law in ruling that he had the jurisdiction to grant the interlocutory injunction where the Defendant has maintained no underlying counterclaim (since it has only filed a Defence with no counterclaim);

(b) the learned judge had clearly wrongly concluded that damages would not be a sufficient remedy for the Defendant if the injunction was not granted, while damages would be a sufficient remedy for the Plaintiff if the injunction was wrongly granted, as these conclusions are contradictory since the nature of damage to be caused to the Defendant or Plaintiff respectively would have been exactly the same.

(2)  Alternatively, the Plaintiff has at least an arguable appeal, and there are additional good reasons for granting a stay:

(a)  given that the Order is a mandatory injunction and final in nature, in the absence of a stay, the Plaintiff’s appeal will clearly be rendered nugatory in the event of a successful appeal.

(b) the Plaintiff would also suffer serious deleterious effect, since if the learned Judge was right in saying that it would be impossible to quantify damages if the Defendant was denied the right to erect signs on the Disputed Area pending trial, there is no reason why this does not apply to the Plaintiff so that the Plaintiff would also suffer un-quantifiable damages if it was similarly denied the right.

(c)  If the Order is to be put into effect without a stay, the present status quo would be disturbed, as the Defendant would almost certainly put up the Defendant’s Sign at the Disputed Area.

IV     Discussion

Merits of Appeal

20.  The learned Judge was exercising a discretion in granting the interlocutory injunction.  It is trite that the Court of Appeal would not lightly interfere the exercise unless it can be shown that the learned Judge is clearly wrong, for example, in applying the wrong legal principles, or in arriving at a conclusion that no reasonable judge would have so come to.

21.  In relation to the ground of appeal that the learned judge had misapplied the law on the jurisdiction point, Mr Lin seeks to support his argument by (a) distinguishing the authorities relied on by the learned Judge from the circumstances of the present case, and (b) by submitting that Collison v Warren has not been further applied or considered in England or Hong Kong.

22.  On the other hand, Mr C Y Li, counsel for the Defendant, further relies on Gee, Commercial Injunctions (5^th ed), paras 1.007, 1.008; Snell’s Equity (31^st ed), paras 16-05 and 16-19; Channel Group v Balfour Beaty Ltd [1993] AC 334 at 360H-362D; Spry, Equitable Remedies (7^th ed), pp. 505-508 to support the learned Judge’s conclusion.

23.  In my view, without going into details and looking at the authorities cited in the round, and noting that the learned Judge’s interpretation of the effect of s. 21 of the High Court Ordinance and O. 29 r1(1) of the Rules of High Court, I cannot for the present purpose say the learned Judge has clearly applied the law wrongly on this issue, as submitted by Mr Lin. 

24.  There may be merits in Mr Lin’s submissions on the law as he sees it, but I do not agree that he has demonstrated that the Plaintiff has a high likelihood of success in the pending appeal on this ground.  All I can say is that there is at best an arguable appeal.

25.  In relation to the ground of appeal concerning the learned judge’s alleged inconsistent conclusions on the adequacy of damages as a sufficient remedy, what I can gather from the evidence filed for the hearing of the interlocutory injunction is that:

(1)  The Defendant has deposed at paragraph 64 of the Affirmation of Mr Li Chi Kin dated 20 May 2008 the adverse commercial effect on the bookshop’s business if the Defendant’s Sign were prevented from being put back on the Disputed Area, and that the loss of business was difficult to quantify.  The Plaintiff has not filed any evidence to challenge this.

(2)  On other hand, the Plaintiff has not put in any evidence to suggest the effect, if any, of the removal of the Plaintiff’s Sign would have on its business, if injunction was to be granted.  There is simply no evidence to suggest that the Plaintiff’s service apartment business would suffer any loss during the interim period if the injunction was granted.   In fact, there is also little evidence to suggest when exactly the service apartment business would start to operate.

26.  Given the state of the evidence as set out above, I cannot say at this stage the learned Judge’s conclusions on the adequacy of damages as a sufficient remedy are clearly wrong, or that no reasonable judge would have come to the same conclusions as he had. 

27.  I therefore equally reject the Plaintiff’s submissions that there is a highly likelihood of success on this ground of appeal.

28.  Again, at best I would only say the appeal has an arguable ground.

Any additional good reasons to grant a stay

Appeal rendered nugatory

29.  Although the Order is in the nature of a mandatory injunction, the effect of it if complied is not reversible.  If the Plaintiff is successful in its appeal to set aside the injunction, the Defendant no doubt would have to reinstate the Plaintiff’s Sign and the appendages that have been removed in compliance with the injunction.    Mr Li, counsel for the Defendant agrees with that observation.  The Defendant has also provided an undertaking as to damages in obtaining the injunction, which would include the costs of the reinstatement.  There is no suggestion, as concluded by the learned Judge, that the Defendant is not good for the undertaking.

30.  In the circumstances, I am not satisfied that the appeal would be rendered nugatory if a stay of execution is not granted.  I therefore refuse to grant a stay of execution based on this ground.  In this respect, it must be reminded that the starting consideration is that a successful party should not be lightly deprived of the fruits of its success notwithstanding a pending appeal.

The Plaintiff would suffer deleterious effect if no stay

31.  As set out above, the Plaintiff’s submissions that it would suffer serious deleterious effect if no stay is granted are premised on its contention that damages should equally be not a sufficient remedy to compensate its loss.

32.  For the same reasons I have set out above at paragraphs 25 and 26, I reject the Plaintiff’s submissions.  There is simply no evidence to show that the Plaintiff would suffer any deleterious effect if it has to remove the Plaintiff’s Sign now but only to have it reinstated later if it succeeds in its appeal.  I do not think this is something that the Court (without the support of proper evidence) can infer, in particular given that the nature of a retail bookshop business may well be different from a serviced apartment business.

33.  I also would not grant a stay of execution based on this ground.

Preservation of status quo

34.  Having ruled against the submissions that the appeal would be rendered nugatory and that the Plaintiff would suffer deleterious effect if a stay is not granted, with respect to Mr Lin, I do not see how the question of preserving the status quo be relevant to the question of whether a stay of execution should still be granted pending appeal.  This is a factor that may be relevant to the determination of whether an interlocutory injunction should be granted.  This however has already been decided by Deputy High Court Judge Gill, and unless I am satisfied that there is high chance of success in the appeal (which I am not), I do not consider it a relevant question that I should take into consideration in my present exercise of discretion. 

35.  In any event, even if this was a relevant factor that I should take into consideration for the present purpose, I do not accept that this alone constitutes a sufficient ground to tip the exercise of the discretion to grant a stay.  As I have said above, the starting consideration is that a successful party should not be lightly deprived of the fruits of its success notwithstanding a pending appeal.

V.      Conclusion

36.  For the above reasons, the Plaintiff has failed to satisfy me that there are good grounds to justify my exercise of discretion to stay the execution of paragraph 2 of the Order.  I therefore dismiss the Plaintiff’s application for stay of execution.

37.  Given that the Plaintiff is required to comply with paragraph 2 of the Order by 19 September 2008 (i.e,. 2 days from now), Mr Lin for the Plaintiff then asks for a 14-days extension of time to allow the Plaintiff to comply with paragraph 2 of the Order, or to make a further application for stay at the Court of Appeal.  This application is however not supported by any evidence to say why 14 days are required.

38.  Mr Li, for the Defendant, opposes the time extension.   He says the Plaintiff has simply failed to provide any evidential basis to support the time required.  He also submits that the Defendant will suffer uncompensatible damage for any further delay, given Deputy High Court Judge Gill’s conclusion on the non-adequacy of damages.

39.  Although noting Mr Li’s above criticisms on the way the Plaintiff has advanced its application for extension of time, in my view, looking at the circumstances as a whole, and taking into account of the reality that the Plaintiff must need some time to comply with the Order in removing the Plaintiff’s Sign and its appendages from the Disputed Area, and on balancing it with the least prejudice that my be caused to the Defendant, I think it is just and fair to exercise my discretion to grant a 7 days extension from 19 September 2008, to allow the Plaintiff to comply with paragraph 2 of the Order.  I therefore so order.

40.  I further order that costs of both of the Plaintiff’s Summonses be to the Defendant, to be taxed if not agreed.