LOYAL RICH TRADING LTD v. GREEN ENERGY TRADING LTD

DCCJ 4338/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4338 OF 2016

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

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

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

DECISION

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

INTRODUCTION

The parties

1.  The plaintiff is the owner of the property known as and situated at Lot No 1363 in Demarcation District No 100 situate at North New Territories, Hong Kong (“the Property”).  The defendant is the tenant of the Property.

2.  The Property was initially leased to the defendant as tenant by the plaintiff as landlord for a period of 3 years commencing from 16 February 2013 and ending on 15 February 2016.  Parties entered to a written agreement dated 30 January 2013 in respect of the aforesaid lease (“the Agreement”).

3.  Upon expiry of the aforesaid 3-year period, the defendant has remained in possession of the Property as tenant despite no further written agreement has been executed by the parties.  It is a common ground that the Agreement is binding upon the parties at all material times and so the terms and conditions are applicable in these proceedings.

4.  The Property is subject to the Crown Lease dated 27 March 1905 (“the Government Lease”).

5.  The defendant currently retains the exclusive possession and control of the Property.  There is a dispute over the right to access the Property.

The Summons

6.  This is the substantive hearing for the plaintiff’s application under Order 29 rule 1 of the Rules of the District Court for an interlocutory injunction against the defendant.  The plaintiff’s Summons was issued on 31 August 2016 (“the Summons”) and the plaintiff sought  the following orders:-

(a)  an injunction that the defendant do provide reasonable access to the plaintiff for the purpose of carrying out all such appropriate and necessary works in compliance with the PD Notice (as particularized in the Statement of Claim);

(b)  an injunction that the defendant do provide reasonable access to the plaintiff for the purpose of carrying out all such appropriate and necessary works in compliance with the LD Notice (as particularized in the Statement of Claim);

(c)  alternatively, an injunction or order that the defendant do forthwith at its own costs carry out all such necessary and appropriate works so as to comply with the aforesaid PD and LD Notices, whereas the liability of such costs shall be determined at trial; and

(d)  costs of this application be reserved.

Evidence filed by the parties

7.  The plaintiff has filed two affirmations of Wong Kiu Kai, director of the plaintiff, respectively on 31 August 2016 and 24 November 2016.  The 1^st affirmation of Mr Wong sets out the background leading to the present application.  His 2^nd affirmation seeks to contradict some of the factual assertions made by Lam Ming Tat, Ivan.

8.  The defendant has filed two affirmations of Lam Ming Tat, Ivan, director of the defendant, respectively on 19 October 2016 and 20 October 2016 to raise grounds of objections.

Material facts not in dispute

9.  The following material facts are not in dispute:-

(a)  the identities of both parties;

(b)  the terms of the Agreement (however, parties have different interpretation and application of the terms);

(c)  the Property was covered by hard paving and without any grassing when it was leased to the defendant in 2013;

(d)  the Planning Department issued a notice dated 21 January 2015 (“the PD Notice”) pursuant to section 23 of the Town Planning Ordinance, Cap 131 (“the Ordinance”) requiring the plaintiff by 21 April 2015:-

(i) to remove leftovers and debris on the area as shown coloured pink stippled black on the plan attached thereto;

(ii) to remove the hard paving on the area as shown coloured pink stippled black on the plan attached thereto; and

(iii) to grass the areas as shown coloured pink stippled black on the plan attached thereto;

(e)  on 1 March 2016, a Summons (Case No STS  1524/2016) was issued against the plaintiff for failing to comply with the PD Notice.  Information was laid by the Planning Department that the plaintiff who had been served with a notice dated 21 January 2015 under section 23(3) of the Town Planning Ordinance, Cap 131 between 21 April 2015 and 19 January 2016 in Hong Kong failed to comply with the said notice in that the land had not been reinstated as required by the said notice.  The plaintiff was summonsed to appear before a Magistrate sitting at Shatin Magistrates’ Court on 27 April 2016 (“the PD Summons”);

(f)  the plaintiff pleaded guilty to the PD Summons and sentence is pending;

(g)  the Property is still covered by hard paving and is ungrassed;

(h)  the Lands Department issued a notice to the plaintiff dated 1 December 2015 requiring the plaintiff to demolish or remove before 31 December 2015 five items of unauthorized structures for breach of the Government Lease (“the LD Notice”);

(i)  there are containers at the Property;

(j)  at all material times, the defendant was and still in actual possession and control of the Property pursuant to the Agreement but has not yet allowed the plaintiff's access to the Property for the purpose of performing removal of the concrete surfaces or grassing or removal of debris or removal of  the “unauthorized structures”;

(k)  both the PD Notice and LD Notice are not yet complied with.

10.  It is helpful to set out the relevant provisions of the Agreement and the Government Lease.

AGREEMENT

11.  Clause 2(6)

The Agreement, inter alia, provides that the Tenant shall:-

“To permit the Landlord and the Landlord’s agents with or without workmen or others and with or without appliances at all reasonable times upon prior appointment by written notice in advance to enter upon the Property to view the condition thereof and to take inventories of the fixtures and fittings therein and to make good all defects and wants of repair there found for which the Tenant may be liable under this Tenancy Agreement”.

12.  Clause 2(14)

The Agreement, inter alia, provides that the Tenant shall:-

“...... remove, reinstate and repair at the cost of the Tenant any structures erections partitions and other alternations that (including the several empty containers) were left by the Landlord in the Property or that may be made by the Tenant at any time during the Term if required to do so by the Buildings Authority or other competent government authorities and to make good all damage caused by such removal. The Landlord shall not be responsible to the Tenant for any loss that may be suffered by the Tenant as a result of such removal.”

13.  Clause 2(15)

The Agreement, inter alia, provides that the Tenant shall:-

“Not to do or permit or suffer to be done any act, deed, matter or thing whatsoever which amounts to a breach of any of the terms and conditions contained in the Government Lease under which the Property is held from the Government.”

14.  Clause 2(16)

The Agreement, inter alia, provides that the Tenant shall:-

“...... obey and comply with and to indemnify the Landlord against the breach of all ordinances, regulations, by-laws, rules and requirements of any Government or other competent authority relating to the use and occupation of the Property or any other act, deed, matter or thing done, permitted, suffered or omitted therein or thereon by the Tenant or any employee, agent or license of the Tenant.”

15.  Clause 3(1)

The Landlord agrees with the Tenant as follows:-

“That the Tenant paying the Rent reserved and performing and observing the agreements and obligations herein contained shall have quiet possession and enjoyment of the Property during the Term without any interruption by the Landlord or any person lawfully claiming under or through or in trust for the Landlord”.

16.  Clause 9

The Agreement also “sets out the full agreement between the parties.  No warranties or representations express or implied are or have been made or given by the Landlord relating to the Property and if any warranty or representation express or implied has been made the same is withdrawn or deemed to have been withdrawn immediately before the parties entered this Agreement”.

17.  Schedule 6 of the Agreement states that the user is for “lawful business purpose”.

THE GOVERNMENT LEASE

18.  At page 2 of the Government Lease it is stipulated that:-

“AND FURTHER that the Lease or any other person or person shall not, or will, during the continuance of this demise, use, exercise or follow, in or upon the said premises or any part thereof, any noisy, noisemaker or offensive trade or business whatever, nor convert any ground hereby expressed to be demised as agricultural or gardens ground into use of building purposes other than for the proper occupation of the same ground as agricultural or garden ground without the pervious Licence of His said Majesty, His Heirs, Successors or Assigns, signified in writing by the Governor of the said Colony of Hongkong, or other person duly authorized in that behalf: AND FURTHER that the Lessee or any other person or persons shall not nor will at anytime during the said term erect or construct any building or structure of any description on the said demised premises or any part thereon whether demised as agricultural or garden ground or otherwise without first having obtained the approval thereto of the Surveyor to His said Majesty, His Heirs, Successors or Assigns, or other personally authorized by the Governor of the said Colony of Hong Kong, in that behalf.”

The plaintiff’s stance

19.  The plaintiff relies on Clause 2(6), 2(14), 2(15) and 2(16) of the Agreement.  The plaintiff submits that the defendant wrongfully and seriously breached the Agreement by failing to comply with the PD and LD Notices and also failed to allow the plaintiff gaining access to the Property to rectify the matters.  In light of the available evidence at this stage, that plaintiff submits that the interlocutory injunction should be granted since the defendant fails to show sufficient evidence and reasons to resist the plaintiff's application.

20.  The plaintiff has the urgent need to comply with the PD and LD Notices.  As regards the PD Notice, the plaintiff is now in the process of criminal proceedings and is remorseful in pleading guilty.  As part of its mitigation, the plaintiff has to comply with the PD Notice with the aid of the interlocutory injunction.  If the interim injunction is not granted, the plaintiff is put to the apparent risk of being prosecuted again and/or enforcement actions by the Government.  All Ordinances and regulations should be properly observed.

21.  It is submitted that damages are not an adequate remedy, and the balance of convenience strongly supports the granting of the injunctions sought.

22.  Even if the plaintiff is successful in the present application, there are other issues to be resolved at the trial, including the question of which party should ultimately be liable to bear the costs of all the rectification works and also of the associated loss and damages. 

The defendant’s stance

23.  The defendant opposes against the plaintiff’s application.  The defendant contends that the PD Notice and LD Notice were wrongly issued, thus, the plaintiff cannot invoke Clause 2(14) and Clause 2(16) of the Agreement.  The defendant contends that the fact that the plaintiff has pleaded guilty for non-compliance with the PD Notice does not by itself prove the validity of the PD Notice. The defendant contends that before any injunction is granted, the validity of the Notices should be determined.

24.  The grounds relied on by the defendant to dispute the validity of the PD Notice and LD Notice are mainly as follows:-

In respect of the PD Notice:-

(a)  there were no more leftovers and debris on the Property;

(b)  hard paving was in existence at least back in 2009;

(c)  under the Agreement, the defendant has no obligation to remove the hard paving and to grass the Property as demanded by the PD Notice;

(d)  there is no evidence to show that agricultural land cannot have a hard paving service and must be grassed;

(e)  the hard paving is not an unauthorized development within the meaning of Town Planning Ordinance. The Government Lease contains no stipulation that the Property should be grassed at all times. Not using the Property for agricultural or garden ground does not imply that it has to be grassed. Hence the PD Notice to require the Property to be grassed is without legal basis;

(f)  therefore there is no breach as alleged by the Planning Department.

In respect of the LD Notice:-

(a)  containers have been present at the Property as early as in 2009;

(b)  there were containers placed on the ground and which were either raised by some support or simply placed on the concrete surface, they can be removed easily without any dismantling work;

(c)  the defendant has placed additional containers on the ground and they are removable without the need for any dismantling work;

(d)  a container is not structure as it is moveable/removable (Mills & Rockleys, Ltd v Leicester City Council [1946]1 All ER 424 (at 427F), per Lord Goddard);

(e)  therefore, all the containers are not unauthorized structural items as alleged in the LD Notice;

(f)  the plaintiff has not adduced any evidence to dispute the defendant’s case that there were no unauthorized structures at the Property.

25.  The defendant contends that Clause 2(6) only allows the plaintiff “to view the condition thereof and to take inventories of the fixtures and fittings therein and to make good all defects and wants of repair there found ......”.  Hard paving is not an aspect of the Property that is “defective” or in “want of repair”, and the same goes for the structures.  What the plaintiff seeks goes far beyond the scope of this Clause 2(6).

26.  Granting the injunction would breach the implied covenant of “non-derogation from grant”.  Replacement of “hard paving” with grass would materially change the nature of the Property.  It would also breach Clause 3(1) (“quiet possession and enjoyment”).  The defendant would be unable to use the Property at all during this time. 

27.  The defendant also contends that there is no urgency in this case as the hard paving was a pre-existing condition prior to commencement of the tenancy.  Neither the PD Notice nor the LD Notice indicates the non-compliance would cause any danger or hazard to the Property and its occupants or visitors.  Despite the PD Notice was issued on 21 January 2015 and LD Notice was issued on 1 December 2015, the plaintiff renewed the tenancy without any demand for compliance with both Notices and there is a lengthy and substantial delay to take out the injunction summons.  The defendant claims that the plaintiff is not entitled to any interlocutory injunctive relief due to delay.

28.  The defendant further contends that on the facts of the present case, the plaintiff’s claim can be fully compensated by an award of damages.  The plaintiff has not demonstrated that damages are irreparable if no injunction is granted at present.  In contrast, the defendant would suffer “irretrievable damage” if the Property is grassed as per the PD Notice as the removal of hard paving and grassing is bound to cause a significant interference with the defendant’s proper use and enjoyment of the Property.

29.  Up to the time of the hearing, the plaintiff has not given any undertaking to damages in the event that the interlocutory injunction is found at the later stage that it should not have been granted at the outset.

LEGAL PRINCIPLES

30.  The law relating to interim injunction is well established and succinctly stated in the White Book 2017 from 29/1/9 to 29/1/37.

31.  It is trite that an applicant seeking an interlocutory injunction has to show a serious question to be tried on the merits, that damages are not an adequate remedy, and if there is doubt on the adequacy of damages, that the balance of convenience favours the granting of the injunction.

32.  The leading authority is Music Advance Ltd v The Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD 1041.  The guidance by Ma J (as he then was) has been helpfully summarized by DHCJ Lisa Wong SC in Wu Wei v Liu Yi Ping [2009] HKEC 139 in para.80as follows:-

“(1)  The difference between the grant of a mandatory interlocutory injunction and a negative interlocutory injunction is not one of principle.

(2)  The ultimate question is: what is the course to adopt which involves the least injustice in case the grant or refusal of interlocutory relief, as the case may be, turns out to be wrong.

(3)  The balance of convenience test is in reality a balance of the risk of doing an injustice ......

(4)  The more “assured” the court is on the merits of the applicant’s case, the less will be the risk of injustice.

(5)  However, if the circumstances are that justice requires the grant of the mandatory injunction at an interlocutory stage, then such an injunction should be granted irrespective of whether the court has a “high degree of assurance” as to the merits of the applicant’s case.

(6)  Nor does the court lose sight of the practical realities of the situation to which the injunction will apply.”

33.  Much depends on what interlocutory mandatory injunction is sought (see Wu Wei at paras 81-82), but for an interlocutorymandatory injunction the risk of injustice (i.e. the grant or refusal of such injunction turning out to be wrong) can be quite acute, which is why generally the court will have to feel a high degree of assurance on the strength of the applicant’s case.  But if he cannot demonstrate more than a serious question to be tried, he will have to show the balance of convenience tilts so much in his favour that justice requires the injunction to be granted.

34.  But the court should not premise its approach on whether the defence contentions on the merits are “arguable” or whether a trial is necessary for resolving the disputed issues.  In Emagist Entertainment Limited v Nether Games (Hong Kong) Limited[2013] 1 HKLRD 898; [2013] DHCJ Woo expressly disapproved of such approach:-

“45.  I am afraid I do not accept an analogy with rules relating to summary judgment in the sense that only the plaintiff’s case is so strong as entitling it to succeed in obtaining summary judgment against the defendant or that the defendant’s defence is such that no unconditional leave to defend is given that amandatory injunction should be ordered. It all boils down to whether it is just and convenient for an injunction to be granted, prohibitory or mandatory. The court must be prudent to always bear in mind that it should only take a course that appears to carry the lower risk of injustice if its decision, to grant or refuse the injunction sought, should turn out to be wrong.

46.  I am here concerned with the principle that the court only grants amandatory injunction at the interlocutory stage with great caution before the court has heard viva voce evidence adduced by the parties, and is reluctant to make an order against a party who has not had the protection of a full hearing at trial.  However, I consider it important that the court should not and should not be seen to countenance a party taking the law into its own hands and taking advantage of a situation created by its own fault or blameworthy conduct ......”

35.  The defendant contends that the plaintiff is seeking mandatory injunction orders against the defendant and in effect a summary judgment in respect of the injunctive relief sought under the writ. The order sought is, therefore, not an interlocutory injunction, but in effect a permanent injunctive order.  Thus, a higher standard of proof is required.

36.  I refer to Abbott GmbH & Co KG & Anor v Pharmareg Consulting Co Ltd & Anorin [2009] 3 HKLRD 524; [2009] HKCU 549 in which Sakhrani J, after citing inter alia Lansing Linde Ltd and Fortune Realty Co Ltd, accepted that the plaintiffs would need to show more than merely a serious question to be tried where the interlocutory injunction sought had a finality effect.  The learned judge said “[it] seems to me proper to have regard to the plaintiffs’ prospects of success at trial. In my view, the plaintiffs must show that it has at least good prospects of success at trial”.  Further, Anthony Chan J in Chinaplus Wines Limited v Berry Bros & Rudd Limited & Ors[2012] HKCU 2574 said “...... if the court agrees that the interlocutory injunction will have a finality effect, then a high burden has to be discharged by [the plaintiff]”, ie the higher threshold of good prospects of success.

37.  In my view, the general approach of the court in respect of an application for an interlocutory injunction that has a finality effect is to have some consideration or some assessment as to whether the plaintiff will likely succeed at trial.  It is for the court to control the extent of such consideration or assessment.  The combination of the mandatory effect and finality effect in the present context does call for a higher threshold on the merits, i.e. the plaintiff should show they have good prospects of success on the merits.  But it does not follow that if this threshold is not satisfied the court will necessarily withhold the granting of the injunctions sought.  Rather, this brings into focus the balance of convenience, and the plaintiff will need to show that the balance tilts so much in their favour that justice requires the granting of the injunctions sought.

ANALYSIS AND SUBMISSION

Merits of the case

38.  First of all, for the purpose of the present hearing I think it is important to consider the wordings of Clause 2(14), Clause 2(15) and Clause 2(16) of the Agreement.

39.  Clause 2(14) of the Agreement, inter alia, provides that the defendant shall remove, reinstate and repair at the cost of the Tenant any structures erections partitions and other alternations that (including the several empty containers) were left by the Landlord in the Property or that may be made by the Tenant at any time during the Term if required to do so by the Buildings Authority or other competent government authorities and to make good all damage caused by such removal.  The Landlord shall not be responsible to the Tenant for any loss that may be suffered by the Tenant as a result of such removal.

40.  Clause 2(15) of the Agreement, inter alia, provides that the defendant shall not do or permit or suffer to be done any act, deed, matter or thing whatsoever which amounts to a breach of any of the terms and conditions contained in the Government Lease under which the Property is held from the Government.

41.  Clause 2(16) of the Agreement, inter alia, provides that the defendant shall obey and comply with and to indemnify the Landlord against the breach of all ordinances, regulations, by-laws, rules and requirements of any Government or other competent authority relating to the use and occupation of the Property or any other act, deed, matter or thing done, permitted, suffered or omitted therein or thereon by the Tenant or any employee, agent or license of the Tenant.

42.  The respective rights and obligations of the parties are well defined in the Agreement.  I take the view that the wordings of these relevant clauses of the Agreement are clear and wide enough to cover the present scenario.  The terms of the Agreement clearly impose contractual obligations on the defendant in dealing with all kinds of enforcement notices issued by the government authorities.  The operation of Clause 2(14) is not dependent on the validity of the government notices so long as the notices are issued by the competent government authorities.  The Planning Department and the Lands Department must fall within the ambit of the Agreement.

43.  The defendant contends that the PD Notice and LD Notice were wrongly or improperly issued.  This contention is not entirely relevant as the position of the parties are clearly governed by the terms and conditions of the Agreement. The Agreement expressly states that the defendant’s liabilities and obligations shall be triggered as long as competent government authorities issued notices to rectify certain matters as provided.  Unless and until such notices are withdrawn or rescinded, the defendant’s liability and obligations shall become accrued.  I am of the view that it is not a defence for the defendant to allege that the PD Notice and LD Notice were wrongly issued.

44.  I accept the plaintiff’s submission that the defendant’s occupation and use of the Property is not absolute but subject to the terms and conditions of the Agreement which is a commercial transaction between the parties. The defendant’s contention about the implied term of uninterrupted use of the Property cannot be accepted, as this implied term directly runs counter to the express term of the Agreement.  In trite contract law, the term to be implied must not be inconsistent with the express terms of the contract.  I accept that the defendant's use of the Property is not absolutely free from any interruptions.

45.  I consider that the matter is well resolved by the express term of the Agreement.  Therefore, I consider that any arguments relating to the validity or legality of the PD Notice and LD Notice are not open to the defendant to resist the plaintiff's claim in this present interlocutory application.

46.  The defendant relies on Lau Oi Kiu v Man Chun Shing and Another [2015] 4 HKC 73, where the plaintiffs sought an order that, inter alia, the defendants “grass the entire Subject Lots,” the judge at paragraph 127 of the judgment refused to grant the injunction because:-

“More importantly, the terms of the draft order raise a number of technical issues which I am unable to consider properly without the assistance of expert evidence. Further, there is no evidence to show, assuming that steps are taken in accordance with the terms of the draft order, how likely the Subject Lots will indeed become fit again for agricultural purpose. It must be noted that both the Subject Lots and their surroundings have undergone significant changes since July 2009. I am not satisfied that there is sufficient evidence to support a workable plan which enjoys a real and substantial likelihood of rendering the Subject Lots fit again for agricultural purpose.”

47.  I consider that our case is different and distinguishable from Lau Oi Kiu because the plaintiff in that case is not the owner of the Subject Lots and her interest in them was limited. In our case, the PD Notice and LD Notice have set out clearly the extent and nature of the remedial works required thereunder and the plaintiff is the land owner and they shall carry out the remedial steps directly by themselves which are workable.  In Lau Oi Kiu, third parties’ interests were involved so to grant a mandatory injunction might affect third parties’ interests.  No third parties’ interests are involved in our case.

48.  Anyhow, I accept the plaintiff’s submission that complications and further delays would be caused if the defendant is compelled by this court to carry out all such remedial works in compliance with the PD Notice and LD Notice given the strong opposition from the defendant.  The plaintiff’s primary case here is that the defendant should be ordered to allow access to the plaintiff to implement all such rectifications works instead, whereas the ultimate liability for such works shall be decided separately at trial.  I agree that allowing access to the plaintiff to implement all such rectifications works is a better arrangement.

49.  Alternatively, even if assuming that the Agreement does not directly say what the plaintiff, the landlord, is entitled to do, in case the tenant, the defendant disregarded and ignored the PD Notice and LD Notice, the plaintiff should have an implied right to access to the Property for the limited purpose of observing the PD Notice and LD Notice.

50.  Otherwise, an absurd circumstance could have occurred without this implied right of limited access: unlawful activities and breach of laws and Government leases could be allowed to subsist on the Property if any tenant deliberately refuses to co-operate.  I take the view that as a matter of “business efficacy”, this implied right should be inserted into the Agreement to cater for these circumstances.

51.  In McAuley v Bristol City Council [1992] 1 QB 134, the English Court of Appeal implied a right of the landlord to enter the concerned property to carry out repair where there was a defect in the garden which exposed a tenant or visitor to a serious risk of injury.  The court ruled that, out of business efficacy, the landlord has the implied right of access to cure the defects.  By analogy, the plaintiff in the present should have likewise an implied right to comply with the PD Notice and LD Notice.

52.  I accept the plaintiff’s submission that the plaintiff will suffer irreparable prejudice if the PD Notice and LD Notice are still not complied with.  The plaintiff will run the real risk of being further prosecuted and/or being sued by the Government. It is also in the public interests that the PD Notice and LD Notice shall be followed as soon as possible.

53.  On the defendant’s side, the defendant has not produced clear evidence to explain its business operation in the Property.  There is no evidence to demonstrate what and how the defendant uses and enjoys the Property.  The defendant did not disclose any photographs inside the Property to support how the business activities inside would be affected by the plaintiff’s application. The defendant did not produce any evidence in this aspect other than the bare assertion that the defendant would suffer irreparable damage.

54.  Further, the defendant did not particularize any damages, should this court grant the interlocutory injunctions as asked for by the plaintiff.

55.  All in all, I agree with the plaintiff’s submission that the defendant has not clearly demonstrated what prejudice or damage the defendant may suffer if interlocutory injunctions are granted.

56.  The defendant’s counsel has fairly referred me to the case Regency Power Enterprises Limited v SCS Express International Limited [2010] 3 HKC 262.  In that case,the plaintiff in its capacity as Landlord and owner of a premise held under a Government Lease sought for an interlocutory injunction against its tenant.  The defendant operated a successful logistics business from there which was a commercial use.  The plaintiff sought to restrain the tenant from further conduct of its business at the premise.  It was contended that the defendant’s commercial use of the premise was in breach of the Government Lease stipulating industrial use only.  On the other hand, the defendant contended that the plaintiff had knowledge of the commercial use.  Deputy High Court Judge Carlson granted the injunction and ruled that:-

“Firstly, the court cannot just stand by and permit the continuing breach of the Government Lease, no matter the circumstances that it has been allowed to come about and I think there is fault on both sides although I suspect the plaintiff must bear the greater share of that fault. It knew of the restrictions in the Government Lease and yet it willingly entered into leases that it knew would be in breach of that negative covenant. It did not have to let the premises for these purposes to Leadway and subsequently to the Defendant. The unsigned lease that it put forward shows its willingness to let the premises for commercial rather than industrial use and the actual tenancy agreement also gives that liberty to the Defendant. For its part, the defendant also knew of the restriction - the Government Lease is a public document - and so it must be taken to know what it was potentially letting itself in for. In any event, the tenancy agreement that it put forward and which regulates the parties’ position contains clause 4 supra which requires it to comply with all the covenants in the Government Lease.

In any event, even if one addresses this on the usual basis of American Cyanamid, the plaintiff has shown an overwhelming contractual case after which the balance of convenience requires the grant of the injunction.  It simply would not be right to allow this state of affairs to continue.  Whilst I appreciate the fact that the defendant will now suffer considerable losses, some of which may be difficult to quantify, its remedy against the plaintiff must be in damages. The court will usually say such a thing in refusing an injunction, leaving the plaintiff with its remedy in damages, but in this case all the circumstances indicate that there is no alternative to the grant of the injunction leaving the Defendant, by counterclaim or separate action, to pursue its claims for damages on any basis that it is advised to advance.”

57.  The defendant tries to distinguish the present case and submits that plaintiff’s cause of action in this action is premised on the breach of Agreement but not breach of Government Lease.  With greatest respect, I cannot accept such contention.  There is no material difference between a breach of Government Lease or PD Notice or LD Notice.  The court simply cannot just stand by and permit the continuing breach of the PD or LD Notices, no matter the circumstances that it has been caused or allowed to come about.

58.  For the reasons set out above, I find that there are good prospects of the plaintiff’s case.  For the purpose of the Summons and the present hearing, I am not persuaded that the defendant’s above arguments diminish the good prospects of the plaintiff’s case on the merits.  In the circumstances, I conclude that the plaintiff has good prospects on the merits (which is appreciably over and above the threshold of a serious question to be tried).

Damages an adequate remedy ?

59.  I proceed to consider whether, if the plaintiff were to succeed at trial, they would be adequately compensated by an award of damages for the loss they would have sustained by the defendant’s refusal to let the plaintiff to access the Property for the purpose of carrying remedial works in compliance with the PD and LD Notices.  Normally the plaintiff should not be entitled to interlocutory injunctive relief if damages would be an adequate remedy and the defendant would be financially able to pay such damages.  If damages are not an adequate remedy, then I should go on to consider whether, if the defendant were to succeed at trial, they would be adequately compensated under the plaintiff’s undertaking as to damages for the loss they would have sustained by grant of the injunctions sought.  But if there is doubt as to the adequacy of the respective remedies, then the question of balance of convenience arises.

60.  The plaintiff’s case is that it would suffer various items of damages, e.g. costs in complying with the PD and LD Notice, fines and further prosecution by the government.  To this, the defendant contends that the plaintiff has not demonstrated that damages are irreparable if no injunction is granted at present and that the plaintiff’s claim can be fully compensated by an award of damages.

61.  Having considered the submissions by the parties and the evidence in this case, I accept that the plaintiff will suffer irreparable prejudice if the PD and LD Notices are not complied with or rectified.  The plaintiff will run the real risk of being further criminally prosecuted and/or being sued by the Government.  Clearly, criminal conviction is an irreparable harm to the plaintiff. In the LD Notice, the District Land Office had warned the plaintiff that they reserved the right to take further lease enforcement action against the plaintiff, including re-entry of the Property or any other enforcement action as may be deemed appropriate.  The plaintiff is facing serious consequences if the breach is not purged.  I consider that, if the plaintiff were to succeed at trial, they would not be adequately compensated by an award of damages for the loss they would have sustained by the defendant’s refusal to let the plaintiff access the Property for the purpose of carrying remedial works in compliance with the PD and LD Notices.

DELAY

62.  The defendant submits that it is trite law that when interlocutory injunction is sought, the applicant must show he has acted promptly and without delay for delay can mean there is no irreparable damage.

63.  The defendant argues that the length of delay does not justify the present application.  The hard paving was a pre-existing condition prior to commencement of the tenancy.  The plaintiff knew the defendant agreed to lease the Property on condition that it was covered with concrete surface hard paving.  The Planning Department issued an earlier notice in 2014.  It did not allege that hard paving was a relevant matter.  The plaintiff was summoned by the Planning Department on 1 March 2016 and appeared at Shatin Magistrates’ Court on 27 April 2016.  On 10 June 2016, the defendant disputed that the hard paving should be removed and to be grassed instead.  There was no demand letter from the plaintiff to the defendant for purpose to comply with the PD Notice dated 1 December 2015.  Despite PD Notice and LD Notice were issued in December 2015, the plaintiff renewed the Tenancy in February 2016 without any demand for compliance with both Notices.  The plaintiff issued the summons on 31 August 2016, about 6 months after the PD Summons dated 1 March 2016.  The defendant submits that there is a lengthy and substantial to take out the injunction summons.

64.  The plaintiff explained that the plaintiff was negotiating with the defendant about the situation and proposals to deal with the situation since March 2016.  The parties had by correspondences exchanged views and arguments about the issues until 8 July 2016.  It was at the stage when the plaintiff apprehended that there was no chance of settlement that led to the proceedings and present application.  Attempts had been made by the plaintiff to settle the issues with the defendant.

65.  I consider that the plaintiff’s explanation for the delay is not unreasonable.  Even if I am wrong on this, I do not think that because of the delay in bringing this application, it would be unreasonable or unjust to grant the order sought by the plaintiff.  I consider that the question of delay had to be balanced against the likelihood of the plaintiff ultimately succeeding in the action.

66.  It is not sufficient for a defendant to show that the applicant has delayed unreasonably.  It must be shown that because of the delay, it would be unreasonable to grant the remedy; that it has become practically unjust to do so.  What seems to me important is not so much the length of the delay per se, but whether the delay has in some ways made it unjust to grant the injunction claimed.

67.  Here, I have found that are good prospects of the plaintiff’s case on the merits.  There is no evidence that the defendant has been prejudiced or has altered their position because of the time lapse.

68.  Balancing the delay against the likelihood of the plaintiff ultimately succeeding in the action, and the irreparable damage mentioned, I am not persuaded that it would be unreasonable or unjust to grant the interlocutory injunctions sought by reason of any delay in bringing this application.  The defendant has to allow the plaintiff to access to the Property for making good all defects under the PD and LD Notices.  It should be just and convenient to grant the interlocutory injunction being sought.

BALANCE OF CONVENIENCE

69.  Given my view that the plaintiff will suffer irreparable damage, in all the circumstances I consider that the risk of injustice is greater if the interlocutory injunctive relief is not granted.  On the other hand, should the grant of the injunctions turn out to be wrong, I consider that what the defendant have lost by being letting the plaintiff to gain access to the Property and carry out the remedial works is a matter which should be compensable by damages.  On this basis, there is no need for me to consider the balance of convenience.  However, in case I am wrong, I will deal with it briefly.

70.  In my view, the defendant has not demonstrated how the hard paving and grassing or the removal of debris or the removal of the unauthorized structures will affect their business.  There is no evidence to show how the proposed remedial works would cause damage or real prejudice to the defendant. The defendant did not particularize any damages should this court grant the interlocutory injunctions.  There can be no suggestion that the obligations imposed by the interlocutory injunctions sought are unduly onerous or unexpected.  The defendant has not suggested that it would suffer any prejudice which cannot be compensated by damages.  I consider that any prejudice to the defendant is likely to be limited to temporary business disruptions and financial loss (e.g. loss of profit or wasted expenditure). The same can be compensated by damages and which can be dealt with by the undertaking as to damages thereof.

71.  It follows from the above analysis that the balance of convenience strongly supports the grant of interlocutory injunctive relief.  In all the circumstances, I consider it just to grant such relief in favour of the plaintiff since it will cause the least injustice in the event that the decision is ultimately held to be wrong.

UNDERTAKING AS TO DAMAGES

72.  The defendant contends that up till the hearing the plaintiff has not given any undertaking to damages in the event that the interlocutory injunction is found at the later stage that it should not have been granted at the outset. If the plaintiff had given her undertaking at the outset, the position and the line of arguments of the defendant would be different.

73.  The plaintiff submits that it goes without saying that the plaintiff would be prepared to give the usual undertaking as to damages if the court grants the interlocutory injunctions as sought.  The plaintiff submits that she is the landowner of the Property and the valuation of the Property was worth HK$9 million as in 2012 and the proposed undertaking is credible.

74.  As pointed out above, the defendant did not put forward evidence to show the extent or her estimated loss if injunction is granted.

75.  I find that the proposed undertaking from the plaintiff credible.  The defendant’s contentions pertaining to the issue of undertaking ought not affect the position in regard to what is the essential justice of the case.  There is a public interest in preventing further breaches of the law.  In any event, the plaintiff is willing to give the usual undertaking as to damages if the court grants the interlocutory injunctions as sought.

CONCLUSION

76.  I therefore grant the following orders in favour of the plaintiff:-

UPON the plaintiff giving anundertaking as to damages

AND UPON each of the directors of the plaintiff jointly and severally undertaking to the court and to the defendant to procure the plaintiff to comply with her undertaking and the terms of this order

IT IS ORDERED THAT:-

(a)  an injunction that the defendant do provide reasonable access to the plaintiff for the purpose of carrying out all such appropriate and necessary works in compliance with the Planning Department Notice dated 21 January 2015 in respect of the Property; and

(b)  an injunction that the defendant do provide reasonable access to the plaintiff for the purpose of carrying out all such appropriate and necessary works in compliance with the Lands Department Notice dated 1 December 2015 in respect of the Property.

COSTS

77.  As to costs, I make a costs order nisi that the costs of the Summons (including all costs reserved, if any) shall be costs in the cause with certificate for counsel to be taxed if not agreed.

78.  Finally, I thank counsel for their very able assistance.  This application has been very well argued on both sides.