THE INCORPORATED OWNERS OF WING MING INDUSTRIAL CENTRE v. MANTEX SUPPLIES CO LTD AND OTHERS

HCA1505/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1505 OF 2007

_________________

BETWEEN

	THE INCORPORATED OWNERS OF WING MING INDUSTRIAL CENTRE	Plaintiff
	and
	MANTEX SUPPLIES COMPANY LIMITED CHINA ASSET HOLDINGS LIMITED trading as	1st Defendant
	THE ORIGIN CHINESE MEDICAL CLINIC (a firm)	2nd Defendant
	BABIES TRENDYLAND LIMITED	3rd Defendant

_________________

Before : Hon Chu J in Chambers

Date of hearing : 29 October 2007

Date of decision : 29 October 2007

_________________

DECISION

_________________

 

1.  On 3 October 2007, I entered summary judgment for the plaintiff against the defendants. By the judgment, an injunction was granted against each of the defendants restraining them to use the ground floor and cockloft of Wing Ming Industrial Centre (“the Premises”) for purposes not permitted under the Deed of Mutual Covenant.  On 9 October 2007, the defendants filed a Notice of Appeal against the judgment. By summons filed on 10 October 2007, the defendants applied for a stay of execution of the judgment. The application is opposed by the plaintiff.

The relevant principles

2.  The starting point in considering the application is Order 59 Rule 13(3), which provides that a pending appeal does not operate as a stay. 

3.  The relevant principles governing the exercise of discretion on a stay application have been discussed and set out in Star Play Development Ltd v Bess Fashion Manufacturing Co Ltd (unreported) HCA No. 4726 of 2001, an authority relied on by both counsel. The court starts off from the basic premise that a successful party is not to be deprived of the fruits of its success. A stay will only be granted if there are good reasons to justify it.  A strong appeal will usually constitute a good reason for a stay.  By “strong appeal”, it means that something has grievously gone wrong with the process of law in the court below: per  Litton JA (as he then was) in World Trade Centre Group Limited& Anor v Resourceful River Limited& Anor (unreported) Civ. App. No. 70 of 1993, see also Wendon Engineering Service Company Limited v Lee Shing Yue Construction (unreported) HCCT No.90 of 1999 at paras.6-8.  Conversely, a mere arguable appeal is by itself insufficient.  The applicant will have to provide additional reasons to justify the stay.  What it means therefore is that the court has to form a preliminary view of the grounds and the merits of appeal.  If the appeal will be rendered nugatory without the stay, that would provide a good reason justifying the grant of a stay of execution.  Where it is suggested that without a stay, the applicant will suffer financial ruin or serious financial consequences, then good evidence is required.  Bare assertion would be insufficient.

The context

4.  With these principles in mind, I turn to deal with the application. At the outset, it is important to put the application in context by noting the following: First, the Premises are rented premises.  The 1st defendant is the tenant; the 2nd and 3rd defendants are merely permitted by the 1st defendant to have the use of the Premises (i.e. Portions A and B).  The tenancy is for two years, starting on 1 April 2007 and will expire on 31 March 2009 with an option on the landlord’s part to terminate by six months’ notice, an option which is exercisable any time nine months after the commencement of the tenancy agreement.  As Mr Mak rightly points out, this means the tenancy agreement may come to end on 30 June 2008 at the earliest.

5.  Second, the injunctions granted against the 1st to 3rd defendants are restrictive in nature.  They are to enforce a negative covenant in the Deed of Mutual Covenant (“DMC”).  By the injunctions, the defendants are prohibited from using the Premises for purposes not permitted by the negative restriction in the DMC.  This restriction has always been the 1st defendant’s obligation under his tenancy agreement.  Likewise, it is an obligation that all defendants are subject to by reason of the DMC. 

6.  Third, it is wrong to say that the injunctions are in effect similar to a mandatory injunction because the defendants are required to carry out positive acts of bringing about the removal of the unauthorized use and making alternative arrangement to accommodate the unauthorized use. No analogy can be drawn with a mandatory injunction.   

Merits of the intended appeal

7.  Dealing with the strengths of the intended appeal, the Notice of Appeal contains several grounds. It is the defendants’ case that they constitute very strong grounds of appeal with high prospect of success.  It would not be appropriate nor necessary for me to dwell into the merits of the appeal or the arguments underlying it. It suffices for me to indicate my preliminary view and to give an outline of the reasons. 

8.  On the materials before the court, I am not persuaded that this is a strong appeal in the sense as explained by the authorities.   

9.  In respect of the construction of the Occupation Permit or the uses permitted under it, this is essentially a point of law. The cases of Leung Wai Fong v Lau Chun Hong& Anor (unreported) HCMP No. 1568 of 1996 and Summit Investment Limited v Shia Ning Enterprise Limited [1999] 2 HKLRD 798, on which the defendants place great reliance, are both cases of Vendor and Purchaser summonses.  The discussions on the consequences of non-compliance with or inconsistency with the use permitted under an occupation permit were in the context of conveyancing transactions. The observations that an occupation permit does not by itself impose a restrictive covenant and that the Buildings Ordinance did not contain provision specifying the consequences of a use that is inconsistent with an occupation permit is, in my view, not determinative of the issue in this case. This is because the plaintiff’s claim is not for breach of the Occupation Permit simpliciter.  It is a claim for breach of negative restriction in the DMC. I do not read the authorities relied upon by the defendants as dictating how the Occupation Permit shall be construed or demonstrating that the contents in it are only descriptive. The point made by P Chan J (as he then was) that an occupation permit cannot be modified does not assist the defendants because an occupation permit, though may not be modified, can be amended.  The reference to section 25 of the Buildings Ordinance is similarly misplaced.

10.  As to the use of portion A constitutes a breach of the DMC, the arguments raised in the intended appeal had been argued at the Order 14 hearing and fully considered. In fact, the second Affirmation of Fung Sau Ying merely repeated what had already been said in her first Affirmation: see paragraph 9.  As such, I need only point out and reiterate the following:

(1)	The defendants have a duty to condescend upon particulars in opposing an Order 14 application.
(2)	The court is not bound to accept bare statements.
(3)	The court is also entitled to consider bare statements against other evidence before the court.
(4)	The fact that the court does not conduct a mini-trial on affidavits at Order 14 stage is not the same as saying that the court is bound to accept everything that are asserted in an affidavit.
(5)	The Judgment on the summary judgment application had set out the reasons for concluding that the use of portion A does not comply with the OP and the Land Grant, therefore amounting to breach of the DMC.

11.  I turn next to the discretion to grant or refuse injunctions, which, apart from costs, are the only remedy sought by the plaintiff in the claim. It is suggested that the evidence of Mr Patrick Lau, the defendants’ expert, is that the only practical consequence of the breach of government lease was payment of forbearance fee by the defendants alone.  It is said that the plaintiff does not dispute that -- a matter that I am in doubt. I do not read Mr Lau’s evidence as stating this.  Mr Lau only stated that a forbearance fee would be imposed if there were a change of user without prior approval.  He did not say this was the only consequence or the only practical consequence.  In any event, this is an irrelevant consideration because the Incorporated Owners is under a duty to enforce the DMC.

12.  The defendants also suggest in the Notice of Appeal that the claim was brought in bad faith in that they were being singled out for action when other owners’ or occupiers’ breach of the DMC relating to user is not pursued. The allegation of bad faith is however not borne out by the evidence before the court.  In terms of the argument that it is unfair or unjust to grant the injunctions, it is important to remember that the restriction on user in the DMC was made known to at least the 1st defendant right from the beginning.  The letter from the 1st defendant’s solicitors in response to the complaint from the plaintiff’s solicitors points strongly to the fact that, despite the knowledge, the 1st defendant had intended to use the Premises for purposes other than the permitted use.  Yet, they chose to apply for approval only after being sued by the plaintiff. The application for approval is also indicative of the recognition that the current uses are not permitted use.  

13.  As in the case of The Incorporated Owners of Hoi Luen Industrial Centre & Another v. Ohashi Chemical Industries (HK) Ltd [1995] 2 HKLR 450, at 454-455, the defendants realized that they were proceeding at their own risk and were not misled by the plaintiff’s alleged failure to act, it is not unfair to grant the injunctions.

14.  In short, I would only proceed on the basis that the intended appeal is arguable such that the defendants have to show there are other good reasons to justify the stay. In this regard, it appears the defendants’ main reason is that the appeal will be rendered nugatory.  It is said that the injunctions will cause the defendants’ businesses to be closed down and their staff to lose their jobs and that the health of the patients of the Chinese medical clinic operated by the 2nd defendant will be affected.

15.  As the plaintiff points out, these submissions are hard to reconcile with the defendant’s defences and primary case that there is no breach of the DMC in that there is no breach of the Occupation Permit or the Land Grant.  So far as portion A is concerned, the 1st and 2nd defendants’ stance is that the area is being used for manufacturing and production, packaging and storage of Chinese medicine as well as research, all of which constitute industrial use. In the case of portion B, the defence is that the area is used for production of samples, storage of finished and semi-finished products and design work, all of which fall within the permitted use.  The other activities on Portions A and B are only ancillary.  The injunctions only restrict uses that are not permitted under the DMC. If the defendants’ contentions as to the use they have put to portions A and B are correct, the injunction would not have brought about cessation or closure of the businesses of the 2nd and 3rd defendants or caused the staff to be dismissed.  As to the patients, the injunction would not prevent them from having supply of Chinese medicine from the 2nd defendant.  It is difficult to understand the point about their health being affected unless it is a reference to the fact that they cannot receive consultations at the Premises.

16.  On the point about the staff, Reyes J had in Top Talent Development Limited v. Top System Investment Limited (unreported) HCA No. 3120 of 2003 para.27, made the point that there was a choice of retaining the staff pending the final resolution of the matter. It is of course a commercial decision for the defendants to take.  The point remains that if the defendants’ defences are correct, viz. the uses they put to Portions A and B are industrial in nature, then there is no question of the defendants being forced to give up the Premises. It has therefore not been demonstrated that the intended appeal would be rendered nugatory in this sense. 

17.  In any case, the 1st defendant’s tenancy agreement will only last for two years.  Presently, there is another 18 months to go.  It is possible that the tenancy will not be renewed upon expiry, in which case one would expect the 2nd and 3rd defendants to seek alternate accommodation instead of to close down their businesses. In the same vein, the injunctions will at the most only mean the defendants are compelled to look for alternate accommodation. It is exaggerating to suggest that their businesses would have to cease altogether as a result of the injunctions, entailing all the consequences of severe financial loss, loss of jobs to the employees and or risks to patients’ health.  After all, only the 1st defendant is the tenant; the 2nd and 3rd defendants are only permitted by the 1st defendant to use the Premises.

18.  As to the argument that a stay will not cause prejudice to the plaintiff, this submission overlooks the fact that the plaintiff in the normal course should not be deprived of the fruit of the litigation. Further, as an Incorporated Owners, the plaintiff is charged with a statutory duty to enforce the DMC and to properly manage the building.  And as the plaintiff points out, the injunctions or the judgment may become futile given that the 1st defendant’s tenancy agreement will expire on 31 March 2009 and there is the possibility of an early termination by the landlord.

19.  Finally, Mr Lui had in his written submission made the point that in building management cases, the usual practice is to grant a stay of execution pending appeal. I am not aware of this practice.  No authority has been put forward in support of this submission.  The case of The Incorporated Owners of Hoi Luen Industrial Centre & Another v Ohashi Chemical Industries (HK) Ltd, op cit, does not in any way support this proposition.

Conclusion

20.  For the above reasons, the application for stay is refused. The summons is dismissed with costs to the plaintiff, to be taxed if not agreed. 

 

 

(C Chu) Judge of Court of First Instance High Court

 

Mr Paul W P Mak instructed by Messrs Hampton Winter & Glynn for the plaintiff.

Mr Simon K M Lui instructed by Messrs Keith Lam Lau & Chan for the 1^st to 3^rd defendants.

 HCA1505/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1505 OF 2007

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BETWEEN

	THE INCORPORATED OWNERS OF
	WING MING INDUSTRIAL CENTRE	Plaintiff
	and
	MANTEX SUPPLIES COMPANY LIMITED	1st Defendant
	CHINA ASSET HOLDINGS LIMITED trading as
	THE ORIGIN CHINESE MEDICAL CLINIC (a firm)	2nd Defendant
	BABIES TRENDYLAND LIMITED	3rd Defendant

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Before : Hon Chu J in Chambers

Date of Hearing : 11 September 2007

Date of Judgment : 3 October 2007

 

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J U D G M E N T

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1.  This is the plaintiff’s application for summary judgment be entered against the defendants for injunctive relief relating to the use of the ground floor and cockloft of Wing Ming Industrial Centre (“the Building”) situated at No.15 Cheung Yue Street, Kowloon, Hong Kong.

Background facts

2.  The plaintiff is the Incorporated Owners of the Building, which is a multi-storey building.

3.  Wing Ming Garment Factory Limited (“Wing Ming”) is the registered owner of the ground floor and cockloft of the Building. By a tenancy agreement dated 30 March 2007 (“D1’s tenancy agreement”), Wing Ming let the ground floor and cockloft (“the Premises”) to the 1^st defendant for a term of two years commencing from 1 April 2007 at a monthly rent of $120,000.

4.  By clause 2(k) of D1’s tenancy agreement, the 1^st defendant covenanted not to do anything in contravention of the negative or restrictive provisions of the Deed of Mutual Covenant and the Government Lease under which Wing Ming holds the Premises. Clause 2(m) further provides that the 1^st defendant shall not use or permit to be used the Premises or any part thereof for any purpose other than light industrial purpose only.  In addition, clause 3 of the Annex to the tenancy agreement, which is in Chinese, provides, inter alia, that the Premises can only be used for industrial purpose, if the 1^st defendant were to use the Premises for other commercial purpose, it must apply to the government at its own costs (依照現狀交吉及依地契用途，只可作工業性質用途。租客若經營其他商業用途，必須要向政府申請，一切費用由租客自付。). 

5.  The 2^nd defendant has been permitted by the 1^st defendant to occupy and use part of the ground floor, an area that the parties have referred to as Portion A.

6.  The 1^st defendant has also allowed the 3^rd defendant to occupy and use part of the ground floor and the entire cockloft, an area that the parties have referred to as Portion B. 

7.  Portions A and B had been coloured pink and green respectively on the plan attached to the Statement of Claim.

8.  The 2^nd defendant operates on Portion A what is called “The Original Chinese Medical Clinic” (本元中醫診所).  According to the Business Registration return filed by the 2^nd defendant, the nature of the business is Chinese medical clinic.

9.  Portion B is used by the 3^rd defendant for its business, which according to the description given in the Business Registration return filed by the 3^rd defendant, is trading of children wear.

10.  The nature and character of the use and occupation of Portions A and B by the 2^nd and 3^rd defendants respectively is a matter of dispute between the parties, an issue that I shall return to deal with in the latter part of this Judgment.

11.  It is common ground between the parties that the Building is subject to a Deed of Mutual Covenant dated 2 March 1991 (“the DMC”).  Clauses 12, 30(a) and 34 in Section IV of the DMC are relevant to this application. They provide:

Clause 12
“	No Owner shall use or permit or suffer any part of the Building owned by him to be used except in accordance with the Conditions of the Grant and the law of regulations applicable to Building or other Regulations or any Government or other permit, consent or requirement from time to time applicable thereto and in particular no Owner shall use or permit or suffer any part of the Building for any offensive noxious or unhealthy manufacturing purpose or heavy industry.”
Clause 30(a)
“	No Owner shall use any Unit for any purpose other than that as permitted by the Grant and the Occupation Permit of the Building (in particular, shall not use any unit for or in connection with any trade that is now or may hereafter be declared to be an offensive trade under the Public Health and Municipal Services Ordinance, or any enactment amending the same or substituted therefor) and shall not use any unit for such purpose as mentioned in Clause 34 of this Section.”
Clause 34
“	No Owner shall use or cause or suffer or permit to be used any Unit of the Building for godown purposes connected with the storage of any dangerous goods, kerosene, or other inflammable goods or materials or for any illegal, unlawful or immoral purpose or any purpose which contravene the Grant.”

12.  The Building stands on New Kowloon Inland Lot No.5491, which is held under Conditions of Sale No.10715 as varied or modified by two modification letters registered with Memorial Nos.1197335 and 2711336 (collectively referred to as “the Land Grant”).   Special Condition No. (3)(a) restricts the user of the Lot as follows:

“	The lot shall not be used for any purpose other than for industrial or godown purposes or both excluding any trade that is now or may hereafter be declared to be an offensive trade under the Public Health and Urban Services Ordinance, or any enactment amending the same or substituted therefore”.

An exception is provided for in Special Condition (3)(e) for the operation of a canteen or canteens, which is not relevant to the present proceedings.

13.  The occupation permit of the Building (“the OP”) was issued on 14 November 1978. The material part of it states:

“	I hereby permit the occupation of the new building … for the following purposes:-
	…
	Ground Floor:	1 transformer room, 1 switch room, 1 store, foyer, car parking area, 1 cockloft for store & 1 package room for non-domestic use.
	…  ”

14.  Previously, the ground floor of the Building was let out by Wing Ming and was used as an estate agency office.  The use was ceased after the plaintiff made an interlocutory injunction application in HCA No. 8805 of 1993 to restrain Wing Ming from permitting the ground floor to be used as an estate agency in breach of the DMC. Subsequently, Wing Ming gave an undertaking to include in future tenancy agreements for the ground floor provision prohibiting its use for purposes other than that allowed by the Land Grant.

15.  By letter dated 13 June 2007 to Wing Ming’s solicitors, Messrs Huen Wong & Co (“HW”), the plaintiff objected to the use of the Premises as a Chinese medical clinic and babies’ clothing showroom.

16.  On 15 June 2007, HW wrote to the defendants’ solicitors herein demanding the 1^st defendant to cease using the Premises for any purpose other than for light industrial purpose.

17.  On 25 June 2007, the 1^st defendant’s solicitors replied by drawing Wing Ming’s attention to clause 3 of the Annex to D1’s tenancy agreement. The letter further stated that the 1^st defendant had, at the signing of the tenancy agreement, informed Wing Ming that it intended to use the Premises for purposes other than light industrial purpose and that Wing Ming had agreed to it provided that the 1^st defendant should at its own costs apply to the government for permission to change the user. The letter went on to say that the 1^st defendant had instructed a surveyor company to study and make application to the government.  

18.  On 26 June 2007, Wing Ming commenced HCA No. 1348/2007 against the 1^st defendant claiming for possession and an order for indemnity on the ground that the use of the premises as a Chinese medical clinic and babies’ clothing showroom is in breach of the user clause in D1’s tenancy agreement and the DMC.              

19.  By three letters dated 5 July 2007 to the 1^st, 2^nd and 3^rd defendants respectively, the plaintiff through its solicitors herein demanded the defendants to cease using the Premises as a Chinese medical clinic and showroom for babies’ clothing.

20.  The 1^st and 2^nd defendants through their solicitors replied by letter dated 10 July 2007. The letter made several points. First, they are aware of the provision of Special Conditions (3). Second, they had instructed Trusty Surveyors (HK) Limited (“Trusty”) to study and apply to the government to change the permitted use of the Premises. Third, at the signing of D1’s tenancy agreement, Wing Ming had been informed that the Premises would be used for purposes other than light industrial purpose, and Wing Ming had agreed to this provided that the 1^st defendant would at its own costs apply to the government to change the permitted use. Fourth, as Wing Ming had already commenced legal proceedings against the 1^st defendant, it is unnecessary for the plaintiff to commence fresh proceedings. The plaintiff was asked to withhold further action pending the outcome of Wing Ming’s action and the 1^st defendant’s application to the government for change of permitted use.  

21.  On 12 July 2007, the plaintiff commenced this action against the 1^st to 3^rd defendants. 

22.  On 24 July 2007, the plaintiff issued the summons for summary judgment.

23.  In the meantime on 20 July 2007, Trusty on behalf of Wing Ming made a temporary waiver application to the Lands Department in respect of the user of the Premises. The result of this application is yet to known. 

Wing Ming’s request to withhold handing down of this judgment

24.  Before dealing with the present application for summary judgment, it is necessary to mention Wing Ming’s request to withhold the handing down of this Judgment. The request was made by HW’s letter dated 24 September 2007, at a time when the summons was heard and adjourned to 3 October 2007 for judgment.

25.  In the letter, Wing Ming requested, inter alia, that the judgment be withheld pending its application to be joined as a defendant in these proceedings.  At the court’s request, Wing Ming elaborated on its reasons for the request by letter from HW dated 24 September 2007. In essence, Wing Ming made three points. First, it had engaged solicitors (not HW) to hold a watching brief at the hearing of the plaintiff’s summary judgment. The plaintiff as well as the defendants had omitted to disclose to the court relevant matters that would afford “very strong arguable defence to the plaintiff’s claims against the 1^st to 3^rd defendants”. Second, the outcome of the present summary judgment application might be prejudicial to Wing Ming’s interest, including the claim between the plaintiff and Wing Ming in HCA 8805/1993, which is scheduled for hearing on 5 November 2007. Third, if the judgment on the plaintiff’s summary judgment application were to be handed down before Wing Ming’s joinder application and if the summary judgment application were allowed, Wing Ming might be forced to set aside or appeal against the judgment resulting in wastage of costs and time. On the other hand, there is no urgency in the plaintiff’s application for judgment.

26.  Wing Ming’s request is opposed by the plaintiff on the basis that Wing Ming is seeking to improperly influence the outcome of the summary judgment application when the application simply does not concern it. The defendants on the other hand do not oppose the request. Wing Ming’s summons to be joined as a defendant herein had been adjourned by Master de Souza and is fixed to be heard before me on 8 October 2007.

27.  I am not persuaded that Wing Ming has made out any ground for asking this court to withhold the judgment on the plaintiff’s application. First, the application is only directed against the 1^st to 3^rd defendants. Wing Ming is not a party to this action. All the parties to the application had completed their submissions on the application. Wing Ming is in no position to request the judgment to be withheld and/or to be heard on the summons. Second, if Wing Ming wishes to be heard on the summary judgment application, it is incumbent upon it to act promptly. Any perceived prejudice caused by the judgment being handed down as scheduled could have been avoided if the joinder application was made earlier. In fact, even at the hearing of the plaintiff’s summons, the court had not been informed that Wing Ming’s legal representative was in attendance. Third, Wing Ming has not indicated what relief it seeks by applying to be joined. It would appear that the joinder application was made for the sole purpose of enabling Wing Ming to be heard on the summary judgment application against the 1^st to 3^rd defendants. This is most unusual having regard to Wing Ming’s stance as indicated by HW’s letter to the defendants’ solicitors and the claim in HCA1348/2007.      

The claim

28.  I now turn to deal with the application before the court. The plaintiff’s claim is primarily based on breach of the restrictive covenant of the DMC which prohibits the Premises to be used for purposes other than those permitted by the Land Grant and the OP. Other than costs, the only relief sought is three injunctions to restrain the respective defendants from using the Premises for purpose not permitted or allowed under the Land Grant and the OP.  

The defence

29.  The defendants have yet to file a Defence. From the affidavit evidence and counsel’s submissions, the intended defence can be summarized as follows:

(1)	There is no breach of the OP in that the OP merely restricts the use of the Premises to non-domestic use.
(2)	The use of Portions A and B by the 2nd and 3rd defendants respectively is either industrial or as a godown. There is thus no breach of the Land Grant.
(3)	The discretion of the court should be exercised against the granting of injunctions. The defendants are in the process of applying to the relevant authorities to change the permitted use of the Premises. Further, even if the defendants are in breach of the OP and Land Grant, there is no loss to the plaintiff. Further, any loss or damage can be adequately compensated by an order for damages.

30.  I will deal with these defences in turn.

The OP

31.  Mr Lui’s arguments on the OP are that it permits the Premises to be used for non-domestic use. The reference to “1 transformer room, 1 switch room, 1 store, foyer, car parking area, 1 cockloft for store & 1 package room” is merely descriptive of the ground floor and cockloft and do not constitute the permitted use or restriction on the use of the Premises. It is also Mr Lui’s argument that the Building Authority who issued the OP is only concerned with the safety of the Building. Accordingly, it suffices for it to stipulate the use as domestic or non-domestic. He suggested that it would pose no problem even if, for example, the switch room were to be converted into industrial use.  

32.  I am unable to accept this submission and the construction that Mr Lui puts on the OP. It is trite that an occupation permit prescribes the approved or permitted user of the various parts of the building to which it relates. In the present case, the OP prescribes the use of the ground floor as “1 transformer room, 1 switch room, 1 store, foyer, car parking area, 1 cockloft for store & 1 package room for non-domestic use”.  It is not the case that any non-domestic use is permitted: see Wonderful Investments Ltd v. Young King Asia Ltd [1996] 4HKC 238, Max Smart Ltd v. First Super Investment Ltd [1999] 1HKLRD 519. Had this been the case, there would be no need for the OP to specify in details the user of each and every floor of the Building.

33.  Plainly, irrespective of whether the 2^nd and/or the 3^rd defendants’ present occupation is or is not for industrial or godown purpose, their use of Portions A and B is not permitted by the OP. It follows that there is a breach of clause 30(a) of Section IV of the DMC. There is no arguable defence to the claim.

The use of Portions A and B

34.  The defendants also dispute the 2^nd and 3^rd defendants’ uses of the Premises is other than for industrial or godown purposes and amount to breach of the Land Grant.  In Fung Sau Ying’s Affirmation, she described Portion A as being used for some manufacturing processes like the manufacturing of Chinese herbs, boiling of Chinese medicine and vacuum packaging of the medicine, and also for storage of the Chinese medicine. It is also said that some research is also carried out in the clinic. As for Portion B, the affirmation said that it is used as a workshop for manufacturing, developing and storing of the 3^rd defendant’s products, which include babies’ clothing, bedding and other accessories. Specifically, it said that the designing of the products and the production of samples are done on Portion B. Admittedly, the manufacturing of the products take place in factories located elsewhere, but the semi-finished and finished products will be kept in Portion B. There is an office and also a showroom, where retail activities also take place, at Portion B. 

35.  There are before the court a number of photographs showing the conditions and use of Portions A and B. They are not controversial. What is in issue is the inferences to be drawn from them as to the activities that are being carried out.

36.  In the case of Portion A, notwithstanding the eloquent submissions of Mr Lui, it is evident from the photographs that it is no more than an ordinary Chinese medical clinic where in addition to consultation service, Chinese or herbal medicine soup will be prepared or boiled for the patients or customers. It is an exaggeration to suggest that there is on the premises manufacturing of Chinese medicine amounting to or similar to an industrial undertaking.  The photographs show that herbal soup packs are packed and displayed for sale in the clinic. But that is far from manufacturing or production of Chinese or herbal medicine. The only facilities shown in the photographs are several small electrical soup boilers and a machine for cleansing Chinese herbs. They hardly support the defendants’ case of Portion A being used primarily for industrial purpose and that the retail and consultation services are merely ancillary.

37.  As submitted by Mr Mak, the layout plan supplied by the defendants is also quite telling. It does not, for instance, identify any part of Portion A as being used for manufacturing purpose. What stand out from the plan are the several consultation rooms.

38.  The Affirmation filed on behalf of the defendants also does not show what manufacturing processes are involved or conducted on the premises. There is also no evidence as to the scale of the undertaking. Against this is the fact that 2^nd defendant had described the business as a Chinese medical clinic in its Business Registration return, which is indicative of its perception of the activities on the premises. In my view, the defendants have not discharged their burden to show that the use of Portion A is not in breach of the Land Grant.      

39.   As for Portion B, the evidence is clear it is used for a variety of activities, ranging from office, retail showroom to workshop for production of samples and storage of products.  As in the case of Mexx Consolidated (Far East) Ltd v. Attorney General & Anor [1987] HKLR 1210,1215 & 1219 where there are both elements of user (i.e. commercial and industrial), it will be wrong to look at the activities in isolation. What is important is the cumulative effect of the activities and not their individual characteristics. In the present case, the cumulative effect of the activities on Portion as described in the affirmations and depicted in the photographs is that it is more in the nature of trading than industrial. However, this being an Order 14 application, it would not be appropriate for the court to resolve an issue like this on affidavit evidence. It is also arguable as a matter of law whether the primary use is industrial having regard to the sort of activities carried on at Portion B. Therefore, purely on the use of Portion B and subject to the foregoing analysis on breach of the OP, I will accept that there is a triable issue as to whether the 3^rd defendant’s use amounts to a breach of the Land Grant.      

Court’s discretion on the grant of injunctive relief

40.  I turn finally to the defence that the court should not grant the injunctions sought as they are discretionary remedies. The defendants had led expert evidence from Mr Patrick Lau, who is an Authorized Person and Chartered Building Surveyor employed by Trusty.  Mr Lau stated that despite the restriction as to user in the Land Grant, an owner (i.e. Wing Ming) could apply to the Lands Department for temporary waiver and to change the user. If the proposed user is not a permitted use under the relevant outline zoning plan, a separate application for approval of use has also to be made to the Town Planning Board. In Mr Lau’s experience, the whole process will take 5 to 7 months and each case will be decided on its own merits.

41.  In the present case, under the Draft Cheung Sha Wan Outline Zoning Plan No.S/K5/29 that governs the Building, the present uses of the Premises do not fall within either Column 1 or Column 2 permitted uses for industrial buildings. Mr Lau’s evidence is silent on whether any application had been made to the Town Planning Board.

42.  Mr Lau further stated that where there is any change of use of land without a short term waiver, the Lands Department will issue a warning letter and also impose on the occupier a “forbearance fee”. It is pointed out that the forbearance fee is the liability of the occupier and will not affect co-owners in the same building.

43.  The evidence of Mr Lau does not afford the defendants with a defence to the claim. On the contrary, it is clear that the defendants have not yet secured approval from the Lands Department to change the permitted use. Unless and until the necessary approval and the short term waiver is given, the defendants’ uses of the Premises are contrary to the Land Grant. It is of significance to note that it is Mr Lau’s evidence that the present uses do not constitute breach of the Land Grant.

44.  It should also be noted that in Fung Sau Ying’s Affirmation filed on behalf of the defendants, it was said that application for change of permitted use and short term waiver will usually be entertained and approved by the Lands Department and that the defendants were confident of Wing Ming’s pending application. Madam Fung is a shareholder in all the defendants and a director of the 1^st and 3^rd defendants. She is however not an expert witness and is therefore not in a qualified position to express these opinions. Her evidence is in fact contradicted by Mr Lau who said that such applications were dealt with on a case by case basis and depending on the merits of the case.

45.  As to the matter of forbearance fee, it is not Mr Lau’s evidence that the only consequence of an unauthorised change of user is the payment of a forbearance fee.  It is trite that the government is entitled to take enforcement action against the land, including the right of re-entry, where there is a breach of the Land Grant. It is therefore irrelevant that the other co-owners of the Building are not liable for the forbearance fee.

46.  In Fung Sau Ying’s Affirmation, it was said that a number of the occupiers of the Building are using their units for commercial purposes rather than industrial or godown purposes and the plaintiff had tolerated or condoned this. This is refuted by the plaintiff. In any event, this affords no defence to the defendants. Firstly, the plaintiff as an incorporated owners cannot grant an owner or occupier the right to act in contravention of the deed of mutual covenant. Secondly, no waiver or estoppel can be set up against the plaintiff for condoning other occupier’s breach because equity would not bind the plaintiff to allow something which it could not have allowed by express grant: see The Incorporated Owners of Hoi Luen Industrial Centre & Anor v. Ohashi Chemical Industries (Hong Kong) Ltd [1995] 2 HKC 11, at 12G-H and 13C-E.

47.  The defendants also argue that as any breach by them will cause no loss to the plaintiff and there is no urgency, the injunctions should not be granted. As Mr Mak points out, the plaintiff has a statutory and contractual duty to manage the Building and to enforce the DMC. Whether any loss will occasion to the Owners Incorporation is quite irrelevant. What is plain that the defendants’ breach may affect the other owners’ rights to peaceful enjoyment and use of the Building. Whether there is or is not urgency is also irrelevant to an application for summary judgment. In the same vein, the suggestion that damages will be an adequate remedy also missed the point.          

48.  The defendants also say that if the injunctions were granted, the 2^nd and 3^rd defendants would have to close down their businesses, entailing considerable hardship to them. As pointed out by the plaintiff, the defendants are well aware of the restriction on the user of the Premises. It is their own choice to use the Premises for purposes not authorised by D1’s tenancy agreement, the OP and the Land Grant. They had also chosen not to seek the relevant approval to change the user until after the present claim is brought against them. Any hardship that they may suffer cannot afford them with a defence to the claim nor move the court’s discretion in their favour.   

Conclusion

49.  For the above reasons, the plaintiff’s application is allowed. There is judgment for the plaintiff against each of the defendants as claimed together with costs of the action, including this application, to be taxed if not agreed.

 

 

(C Chu) Judge of Court of First Instance High Court

 

Mr Paul W P Mak instructed by Messrs Hampton Winter & Glynn for the plaintiff.

Mr Simon K M Lui instructed by Messrs Keith Lam Lau & Chan for the 1^st to 3^rd defendants.