MUSIC ADVANCE LTD. AND ANOTHER v. THE INCORPORATED OWNERS OF ARGYLE CENTRE PHASE I

HCA2574/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2574 OF 2002

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REASONS FOR DECISION

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The plaintiffs' claim

1. The 1st and 2nd plaintiffs are the tenants of premises situate at, respectively, the 5th and 4th Floors of Argyle Centre, Phase I in Mongkok ("the Building"). The landlord of both premises is the same, CRE Property (Argyle Centre) Limited ("CRE"). The relevant tenancy agreement are dated 17 December 1999 (for the 5th Floor premises, until 30 November 2005, made between the 1st plaintiff and CRE's predecessor in title, CRC Department Store Limited) and 24 April 2002 (for the 4th Floor premises, until 19 December 2003).

2. Both plaintiffs carry on a karaoke business on the leased premises. The hours of business stretch to the early hours of the morning (the opening hours are approximately from 12 mid-day to 8 a.m. the following day).

3. Access to both premises is by the passenger lifts and one of the cargo lifts of the Building. This cargo lift is exclusively used for access to the plaintiffs' premises and is located, I am told, to the side (or back) of the main entrance of the Building.

4. On or about 31 December 2001, the defendant, who are the incorporated owners of the Building, passed a resolution to the effect that the times of operation of the passenger lifts in the Building had to be changed, together with the implementation of additional security measures. This followed an incident at about 6 a.m. on 23 December 2001 when one of the security guards employed by the managers of the Building, Chi Pan Company Limited ("Chi Pan"), was assaulted by a drunken man resulting in severe injuries (a broken nose and 13 stitches). I shall say more about this incident presently.

5. By a notice dated 31 December 2001 to the plaintiffs from Chi Pan, they were informed that following the incident I have referred to, the defendant had passed a resolution that all passenger lifts would not be in operation from 11 p.m. to 7 a.m. This also meant in practice that the main entrance of the Building would be closed by a metal roller gate and all persons wishing to enter the Building would have to register their identities.

6. The plaintiffs regarded these measures as seriously affecting their business. Attempts were made to negotiate with the defendant and Chi Pan. I have, for example, seen the minutes of meeting on 7 February 2002 between the defendant, Chi Pan and a representative of the plaintiffs, as well as correspondence exchanged between the solicitors for the plaintiffs, the defendant and CRE.

7. No resolution of the dispute being achieved, on 3 July 2002 the plaintiffs instituted the present proceedings against the defendant. Essentially, the plaintiffs' case is that the defendant is in breach of the Deed of Mutual Covenant for the Building dated 28 June 1982 ("the DMC"), in particular clause 8B(b) and the Third Schedule thereto : -

"(b) Notwithstanding the provisions of (A) above, the reservation by the Registered Owner of the Reserved Areas and the rights and privileges therewith shall not in any way :

(i) interfere with or prejudice any owner's right to hold use occupy and enjoy his Shop or Office; or

(ii) contravene the terms convenants and conditions of this Deed; or

(iii) unreasonably impede or obstruct any owner's or its tenants' licensees' occupiers' and customers' reasonable access to its Shop or Office."

"THE THIRD SCHEDULE ABOVE REFERRED TO

(A) Easements, rights and privileges, the benefit of which is held with each undivided part or share of and in the Land and the Building and with the exclusive right and privilege to hold, use, occupy and enjoy each part of the Building to which such shares are allocated PROVIDED that all such easements, rights and privileges shall be held and enjoyed subject to the provisions of this Deed and the House Rules made hereunder and the payment by the owner of his due share of management expenses : -

(a) Full right and liberty for the owner for the time being his servants, agents and licensees (in common with all other persons having the like right) and subject to Clause 7 to go, pass and repass over and along the entrances, staircases, landings, passages, arcades, lobbies and lifts on the land and building for all purposes connected with the proper use and enjoyment thereof."

The application before the court

8. By a summons also dated 3 July 2002, the plaintiffs applied for an interlocutory injunction restraining the defendant from "interfering with, ... [impeding] or ... [obstructing] or in any way [prejudicing] the 1st and 2nd Plaintiffs' right to hold use the entrances, passages, lobbies and the passenger lift(s) of the building for itself, its licensees and customers to gain access to the 4th and 5th Floors of the Building during the business hours of the 1st and 2nd Plaintiffs between 12:00 noon to 8:00 am."

9. Though framed in these terms, the remedy that the plaintiffs were really seeking was that the defendant should be ordered to resume the passenger lift service which had been in operation prior to 31 December 2001.

10. At the hearing on 20 August 2002, after submissions from Mr Kenneth Wong (for the plaintiffs) and Mr Thomas Au (for the defendant), I dismissed the summons with costs. I said that I would later hand down the Reasons for my Decision.

Applicable principles

11. The applicable principles for interlocutory injunctions are well-known and do not need repetition. Generally, one needs to look no further than American Cyanamid v. Ethicon Ltd [1975] AC 396 and the relevant text in Hong Kong Civil Procedure 2002 Volume 1 at paragraphs 29/1/8-29/1/50.

12. I would, however, only highlight one aspect. Where, as in the present case, the plaintiffs seek an interlocutory mandatory injunction (that is, an order requiring the defendant to do something, in contrast to a prohibitory injunction which restrains the defendant from doing something), the following matters should be borne in mind as being the court's approach : -

(1) In the case of interlocutory mandatory injunctions, it is often said or assumed that a court will not grant one unless it feels a high degree of assurance that at the trial of the action, it will be shown that the injunction was rightly granted : see Shepherd Homes Ltd v. Sandham [1971] Ch 340 at 351. This has been explained and sometimes understood as meaning that in the case of an interlocutory mandatory injunction, the applicant's case on the merits has to be made out to a higher standard of proof than in the case of prohibitory injunction : see the Court of Appeal's observations in TKI Limited v. New Happy Limited [1995] 1 HKC 551 at 554 B-D.

(2) Broad statements such as the above must, however, be properly put in context.

(3) The basic approach to interlocutory injunctions, whether mandatory or prohibitory, is the same. Section 21L of the High Court Ordinance, Chapter 4 makes no distinction between these two types of injunctions and simply states that interlocutory injunctions may be granted if it appears to be just or convenient to do so.

(4) At the interlocutory injunction stage, the principal concern of the court is that it might make a wrong decision in the sense that after trial, the party to whom an interlocutory injunction has been granted may lose or the party who has been refused one, may win. The court will therefore take whichever course appears to carry the lower risk of injustice if it should turn out that it is wrong. This "fundamental " principle is the source of the guidelines that have evolved for the determination of interlocutory injunctions (included are, of course, the American Cyanamid guidelines) and therefore, in the application of any guidelines, sight must not be lost of this principle. See here : Films Rover International Ltd v. Cannon Films Sales Ltd [1987] 1 WLR 670 at 680 D-G, in a passage from the judgment of Hoffman J which was approved by the House of Lords in R v. Secretary of State for Transport ex parte Factortame Limited (No.2) [1991] 1 AC 603 and recently reiterated in the English Court of Appeal decision of Zockoll Group Ltd v. Mercury Communications Ltd [1998] FSR 354 (which Mr Au was kind enough to place before me).

(5) Two common guidelines are of course the consideration of the merits of the plaintiffs' claim and the balance of convenience. Here, it is of course easy to see at once how they are linked to the fundamental principle : there must be a risk of injustice if the plaintiff cannot even establish a serious question to be tried or that one or the other party will be put to substantial inconvenience or prejudice if an interlocutory injunction were or were not granted.

(6) In the case of interlocutory mandatory injunctions, the risk of injustice (being wrong in the sense referred to above) can be quite acute. In Films Rover International Limited, it was put thus by Hoffman J at 681 B-E :

" In Shepherd Homes Ltd. v. Sandham, Megarry J. spelled out some of the reasons why mandatory injunctions generally carry a higher risk of injustice if granted at the interlocutory stage : they usually go further than the preservation of the status quo by requiring a party to take some new positive step or undo what he has done in the past; an order requiring a party to take positive steps usually causes more waste of time and money if it turns out to have been wrongly granted than an order which merely causes delay by restraining him from doing something which it appears at the trial he was entitled to do; a mandatory order usually gives a party the whole of the relief which he claims in the writ and makes it unlikely that there will be a trial. One could add other reasons, such as that mandatory injunctions (whether interlocutory or final) are often difficult to formulate with sufficient precision to be enforceable. In addition to all these practical considerations, there is also what might be loosely called a 'due process' question. An order requiring someone to do something is usually perceived as a more intrusive exercise of the coercive power of the state than an order requiring him temporarily to refrain from action. The court is therefore more reluctant to make such an order against a party who has not had the protection of a full hearing at trial."

(7) This passage in my view explains just why it is that generally a court will have to feel a high degree of assurance that at the trial of an action it will be shown that the interlocutory injunction was rightly granted before an interlocutory mandatory injunction will be given; all this being an exercise in assessing the strength of the plaintiffs' case : see sub-paragraph(1) above. However, I emphasize that this is only generally the court's approach. Where it is shown, as an exception to this general approach, that the case is one in which the withholding of on interlocutory mandatory injunction would in fact carry a greater risk of injustice than granting it even though the court does not feel the "high degree of assurance" as aforesaid, it would be right to grant an interlocutory mandatory injunction : see Films Rover International Limited at 681 A-B.

(8) This of course brings into focus the balance of convenience. Thus, if a plaintiff in seeking an interlocutory mandatory injunction cannot demonstrate more than a serious question to be tried, it will have to show that the balance of convenience tilts so much in its favour that justice requires such an injunction to be granted, even taking into account those aspects of an interlocutory mandatory injunction expressed by Hoffman J in Films Rover International Limited.

(9) At no stage, however, in the consideration of the matter does the court lose sight of the practical realities of the situation to which the injunction will apply : see NWL Limited v. Woods [1979] 1 WLR 1294 at 1306C per Lord Diplock.

13. How are these principles to be applied in the present case?

The merits of the plaintiffs' claim

14. As I have mentioned, the plaintiffs' claim is essentially based on the breach of those provisions of the DMC set out in paragraph 7 above. However, neither those provisions nor indeed any other provision in the DMC give an unrestricted right to the plaintiffs to insist on using the passenger lifts in the Building at any time of day : -

(1) The right set out in clause 8B(b) are not absolute and must as a matter of construction be subject to an element of reasonableness and also must coexist with other provisions in the DMC unless specifically excluded.

(2) The right set out in the Third Schedule is expressly made subject to the other provisions of the DMC.

15. The defendant, for its part, relies on clauses 10(a)(17), (21), (31) and (35) to justify its actions in terminating the provision of the passenger lift service for the plaintiffs overnight. Clause 10(a)(35) is particularly relevant in that it empowers the manager (Chi Pan) to do all things which are reasonably incidental to the proper management of the Building for the common benefit of the owners.

16. In my view, the plaintiffs have just about established a serious question to be tried, but have not satisfied the "high degree of assurance" test I have earlier referred to : -

(1) One can readily assume in the plaintiffs' favour that closing down one lift would restrict access to their premises. However, as I have observed earlier, the plaintiffs' right under the DMC is only to reasonable access. That said, correspondingly, any restrictions on a tenant's right of access must also be reasonable.

(2) It is difficult at an interlocutory stage when not all the facts that may emerge at trial are before the court, for any firm view to be reached on a fluid concept such as reasonableness. Many factors have to be balanced against each other.

(3) On the plaintiffs' side, there is to be recognised that, unlike other tenants in the Building, they operate a business that is at its busiest late at night and in the early hours of the morning. It is also a business that necessarily involves large numbers of customers. Ready access to and from the premises is therefore required. The defendant says that the carrying on of a karaoke business on the premises at these times is a breach of the DMC, but this is disputed by the plaintiffs. It is another matter for trial and I form no views on this aspect one way or the other.

(4) The defendant has mounted a powerful case against the plaintiffs. There is no real dispute before me that what led to the cessation of the passenger lift service as from 31 December 2001 stemmed from the meeting of the defendant where there had been discussions over the incident on 23 December 2001 when, as will be recalled, a security guard was seriously injured. Not only was violence involved in the incident (three men assaulted the security guard in question), there was damage to the Building. The description of the incident itself in the reports is an ugly one. The scene of broken pots of flowers and blood all over the place led everyone to be scared and uneasy, it is reported. At the 31 December 2001 meeting, a representative of Chi Pan reported that incidents of drunken behaviour were not infrequent. I have seen a daily patrol report giving details of 10 incidents from March 2001 to May 2002 (which includes the 23 December 2001 incident). All of them took place in the early hours and most specifically refer to the karaoke bars. These incidents involved fighting, drunken behaviour and criminal damage. Mr Wong submitted that not all of these incidents, in particular the 23 December 2001 incident, could necessarily be linked to the plaintiffs' business, but he accepted there was no evidence that any other occupant of the Building operated a business or carried on any activity in the early hours of the morning.

(5) In these circumstances, Mr Au submitted in his written submissions that the defendant was perfectly justified in restricting the operation of the passenger lifts. There was, he said, no serious question to be tried either. It was to be noted, he further observed, that it was not as though the plaintiffs or their customers had no access at all to the premises : they still had the exclusive use of the cargo lift (which was provided by CRE) and any complaints that the plaintiffs had as to the appearance of the lift should be taken up with CRE. The defendant's actions were necessitated by the activities that the plaintiffs carried on at their premises.

(6) These are powerful arguments. However, in the end I have come to the view that it is the element of reasonableness and the difficulties in reaching any firm conclusion on this aspect, that have led me to conclude in the plaintiffs' favour that there is a serious question to be tried, but no more.

The balance of convenience

17. Even if the present case did not involve an interlocutory mandatory injunction, on the evidence before me, the balance of convenience clearly falls in the defendant's favour. It follow, a fortiori, that the plaintiffs have not satisfied me that the balance of convenience tilts so much in their favour that justice requires an injunction to be granted.

18. I reach this conclusion for the following reasons : -

(1) The various incidents I have referred to are not denied by the plaintiffs. More likely than not, most if not all of them are directly linked to the plaintiffs' business. Mr Wong accepts there is a risk that such types of incidents will occur when alcohol is made available on the premises.

(2) It is clear that the steps taken by the defendant were intended to address the problems caused by the above incidents and to try to minimise if not avoid such problems recurring. The measures taken (closing the main entrance, restricting lift access and registering the identities of visitors) were obviously to increase the security and safety of the Building. There is no allegation that the defendant had somehow acted in bad faith or in a bizarre or illogical way.

(3) Against this, the plaintiffs assert that the restricted lift access to their premises will result and has resulted in loss of business, profits and goodwill and will also cause irreparable damage to their reputation. No particulars, however, were provided in support of these assertions. Further, if any of these are proved at trial, damages may well be an adequate remedy. There is simply no material for me to conclude otherwise.

(4) One point made by Mr Wong was that the defendant's measures have posed a safety risk in that one of the fire exits (namely at the main entrance to the Building) is blocked. The complaint is that there is a metal roller gate in operation at night. I am unable to conclude that such a risk exists based on this evidence alone. There is no evidence from a fire safety expert, for example, nor any evidence as to the layout of the Building such as to make good this point. As I said to Mr Wong, if a fire were to materialise and people congregated at the main entrance, at that time the roller gate would presumably be opened.

(5) In the end, the aspects of safety and security weigh heavily in my mind. Any steps taken to curb violent and illegal activity must in my view be sympathetically regarded.