YIELD-THE-BEST LTD v. ZHUO SAIYUN

DCCJ 5170/2022

[2024] HKDC 235

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5170 OF 2022

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DECISION

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Introduction

1.  The plaintiff took out a summons on 13 June 2023 (“the summons”) for a mandatory injunction, ie removal of all wire fences and/or blockades from the Occupied Area (as delineated on the plan attached to the summons) and a prohibitory injunction that the defendant be restrained from placing any objects, erecting any structures or doing any acts in the Occupied Area which would obstruct or hinder access to the Warehouse situated on DD 51 Lot 2848RP through the Occupied Area.

2.  At the hearing on 16 June 2023, Deputy District Judge Louise Chan granted an interim-interim injunction and gave directions for substantive argument of the summons.

Discharge

3.  Mr Tony Chow, counsel for the defendant, argued that the plaintiff is guilty of material non-disclosure which warrants the discharge of the interim-interim injunction and dismissal of the summons.

4.  Mr Chow pointed out that in the supporting affirmation of Lui Yue Yun Gary (“Lui”), he said that access to the Warehouse through the Lot 2855RP entrance (ie Entrance A) is the only entrance wide enough to accommodate large vehicles. Such access is particularly important for the plaintiff’s tenant, who rented the Warehouse for the purposes of storing heavy equipment which requires transportation by large vehicles.

5.  However, when the defendant produced the survey report prepared by Leung Chi Yan, George dated 6 July 2023 which showed that in fact Entrance B (5.39 metres width) is even wider than Entrance A (4.05 metres width), Lui in his 2^nd affirmation at paragraph 9 said that “if the Lot 2855 RP Entrance/Entrance A becomes unusable due to the Defendant’s obstruction (“Scenario”), the Warehouse would only be accessible by vehicles through the Lot 2848 RP Entrance/Entrance B”. He went on in paragraph 10 that Entrance B does not adjoin any open space that could be used for loading and unloading purposes. If Entrance B becomes the only entrance, the loading and unloading process will have to take place within the Warehouse.

6.  Mr Chow in relying on HKCOLO.NET Limited v Hong Kong Telecommunications (HKT) Limited [2023] HKCFI 138 at paragraphs 108-113, submitted that the plaintiff had failed to discharge its duty to make full and frank disclosure by making material non-disclosures which warrant the discharge of the interim-interim injunction.

7.  In reply, Mr Eugene Kwan, counsel for the plaintiff, submitted that in an inter partes application which has been served in accordance with the rules, the duty of full and frank disclosure is not applicable, citing Alpha & Leader Associated Ltd v Victory Mega Trading Ltd [2023] HKCFI 2322 at paragraphs 149-161.

8.  For my part, I do not see any conflict between the 2 authorities.

9.  DHCJ Winnie Tsui in Alpha & Leader (supra) has analysed the rationale behind the legal principle that the duty of full and frank disclosure does not apply to an inter partes application which has been served in accordance with the rules.

10.  HKCOLO.NET Limited (supra) was decided in the circumstances where although the respondent was served with the summons and was represented by counsel at the hearing, it did not have fair and reasonable opportunity to present any evidence in opposition before the hearing.

11.  In the present case, the defendant was not only represented by counsel at the hearing on 16 June 2023, she was able to file an affirmation in opposition before the hearing. HKCOLO.NET Limited (supra) is therefore not applicable.

12.  In the circumstances, I am not with Mr Chow that the plaintiff is under a duty of full and frank disclosure.

13.  As the plaintiff’s application is proceeded on an inter partes basis, it is open to the defendant to challenge the grounds relied on by the plaintiff. The complaint of material non-disclosure and the plaintiff misleading the court, with respect, is a non-starter.

14.  The issue remains, therefore, is whether the interim-interim injunction should continue until trial.

Legal principles on grant of interlocutory injunction

15.  The essential principles concerning the grant of an interlocutory injunction have been set out in the leading English authority of American Cyanamid Co v Ethicon Ltd [1975] AC 396. The House of Lords held that the requirements were first “that there is a serious question to be tried” and second “that the balance of convenience lies in favour of granting an injunction”: see Hong Kong Civil Procedure 2024 at 29/1/8

16.  Deputy High Court Judge Keith Yeung SC (as he then was) in Interactive Media Network (China) Holdings Ltd v Just Media Group Limited and others [2018] HKCFI 1114 has helpfully highlighted the guiding principles:

“27. In Music Advance Ltd v Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD 1041, Ma J (as he then was) observed at 1046 that:

(d) 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. …

(e) 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.”

28. The following guiding principles explained by Lord Diplock at page 408 of American Cyanamid are also relevant:

“ … So unless the material available to the court at the hearing of the application for an interlocutory injunction fails to disclose that the plaintiff has any real prospect of succeeding in his claim for a permanent injunction at the trial, the court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought.

As to that, the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant’s continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff’s claim appeared to be at that stage. If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, he would be adequately compensated under the plaintiff’s undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction.

It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises. It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them. These will vary from case to case.

Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo. If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial is to postpone the date at which he is able to embark upon a course of action which he has not previously found it necessary to undertake; whereas to interrupt him in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial.””

Serious question to be tried

17.  It is the plaintiff’s claim that the plaintiff has been in adverse possession of the Occupied Area since late 1989 or early 1990. Iron fences were erected enclosing the plaintiff’s land and the Occupied Area.

18.  I have no doubt that this is a serious question to be tried and Mr Chow has not argued otherwise.

Adequacy of damages as a remedy

19.  In conformity with the leading authorities, the first and foremost consideration is the adequacy of damages as a remedy.

20.  As to that, I should first consider whether, if the plaintiff succeeds at the trial, he would be adequately compensated by damages for any loss caused by the refusal to grant an interlocutory injunction.

21.  It is the plaintiff’s case that the plaintiff’s land together with the Occupied Area are currently rented out one Horizon Construction Overseas (Hong Kong) Limited (“the tenant”) at a monthly rent of $154,000. Due to the actions of the defendant which served to block access to the Warehouse through Entrance A in early June 2023, the tenant threatened to terminate the tenancy and take legal action against the plaintiff for losses arising therefrom.

22.  In the event that an interlocutory injunction is not granted and the plaintiff succeeds at the trial (ie obtaining a possessory title to the Occupied Area), the plaintiff would stand to have a cause of action against the defendant including but not limited to the loss of rental income at the rate of $154,000 per month for the remainder of the tenancy with the tenant. Such claim could indeed be compensated by money.

23.  However, there is no evidence that the defendant would be financially capable of compensating the plaintiff’s monetary loss which may arise in such event. More importantly, the defendant has not offered to give an undertaking as to damages to the plaintiff.

24.  That being the case, I should further consider whether, if the injunction were granted and the defendant succeeds at the trial, she would be adequately compensated under the plaintiff’s undertaking as to damages.

25.  It is the defendant’s case that on about 1 June 2023, she verbally agree to rent out the Occupied Area to a company at the monthly rent of $20,000. The agreement was however fallen through due to the interim-interim injunction.

26.  The potential claim of the defendant in the event of her succeeding at the trial would be damages for loss of rental income at the rate of presumably $20,000 per month.

27.  According to the plaintiff’s latest annual financial statements for the year ended 31 December 2021, the plaintiff had total assets of HK$32,641,624 and current assets of HK$23,522,217 as of 31 December 2021.

28.  I am satisfied that the plaintiff is financially capable of honouring the undertaking as to damages that it has offered to provide to the defendant by the Affirmation of Lui Yue Yun Gary filed on 13 June 2023.

29.  For the above reason, I see no reason to refuse to continue the interim-interim injunction until trial or further order of the Court and I therefore make an order in terms of the summons.

30.  Given my decision above, there is no need to consider the balance of convenience.

Costs

31.  I make a costs order nisi that the costs of the summons be costs in the cause of this action with certificate for counsel.

32.  In the absence of any application for variation by summons within 14 days from the date of this decision, the costs order nisi shall become absolute.