WONG CHUNG MING DEVELOPMENT FUND CO LTD v. PROFIT SURPLUS LTD

HCA 335/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 335 OF 2008

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DECISION

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1.  The Plaintiff is the owner of No. 31-33 Hollywood Road and the building erected on it.  The Defendant is the owner of the adjacent land at No 35-37 of Hollywood Road, where the Defendant has just constructed a new commercial building on it.  

2.  On 14 August 2008, Deputy High Court Judge Gill handed down his judgment (“the earlier judgment”) and granted an interlocutory injunction against the Plaintiff.  The effect of the injunction is to restrain the Plaintiff from doing anything to prevent the Defendant from (a) connecting its sewage drainage system to the Plaintiff’s drainage system under the Plaintiff’s land, and (b) using the said system when connected.

3.  On 23 August, the Plaintiff lodged its appeal against the learned Judge’s Order.  By its Summons filed on 4 September (albeit dated 25 August), the Plaintiff applied for a stay of execution of the learned Judge’s Order. 

4.  This is the hearing of the Plaintiff’s application.

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

II.      Brief background

6.  The background leading to the dispute, and the nature of the dispute between the parties have been set out in details at paragraphs 1 to 50 of the earlier judgment.  I will not repeat them here.  Suffice for me to set out some of the salient background facts more relevant to this application.

7.  In March 2007, the Defendant connected the sewage drainage system of its newly constructed building to the existing system under the Plaintiff’s land through the Plaintiff’s manhole. 

8.  However, in about May 2007 the Plaintiff disconnected that connection.

9.  Despite various exchanges of correspondence between the parties, the Plaintiff has refused to give any consent to the Defendant to connect its drainage system to the Plaintiff’s.

10.  Between February and May 2008, the Defendant had apparently sought to continue to carry out various works at the Plaintiff’s manhole and drainage system to effect an upgrading of that sewage system and for the purpose of connecting the Defendant’s own system to it.  This was again met with repeated oppositions from the Plaintiff.

11.  In light of the dispute between the parties, the Plaintiff issued the present claim against the Defendant in March 2008, seeking an injunction against the Defendant restraining it from trespassing on the Plaintiff’s premises, its manhole by connecting or seeking to connect to the drainage system.  It also seeks damages from the Defendant’s alleged trespass.

12.  The Defendant defends the claim and counterclaims for (a) a declaration that it has the right to connect its drainage system to that of the Plaintiff, and (b) an injunction to restrain the Plaintiff effectively from doing any acts to prevent the Defendant from carrying out works to connect its drainage system with the Plaintiff’s at the Plaintiff’s manhole, and from using the said drainage system

13.  By June 2008, the construction of the commercial building on the Defendant’s land was practically completed, with the only outstanding matter before the issue of an occupation permit the connection of its sewage system.

14.  Thus, on 3 June 2008, the Defendant took out an interlocutory injunction application against the Plaintiff, seeking to restrain the Plaintiff from interfering or preventing the Defendant from carrying out the necessary works to connect the drainage system with that of the Plaintiff.

15.  At the interlocutory hearing, it is the Defendant’s case that it (being the owner of the land at No 35-37 Hollywood Road) has a prescriptive right to connect to the drainage system now in place at the Plaintiff’s land.  It seeks to support its case in reliance on, inter alia, various old approved building plans and letters from the Drainage Services Department to say that, since as early as the 1960’s, the sewage drainage system of the Defendant’s land has been connected to the drainage system located under the Plaintiff’s land.

16.  The Plaintiff however maintains the position there is no such prescriptive right, as no such alleged pre-existing drainage connection existed.  The Plaintiff relies on various expert reports on the interpretation of the building plans, and factual inspection evidence to say that no such drainage connection existed previously.  The Plaintiff also says that the building plans do not provide any conclusive evidence that the alleged drainage connection existed, as the plans do not amount to any evidence that the suggested drainage system was in fact implemented.

17.  The interlocutory application was heard before Deputy High Court Judge Gill.  As mentioned above, on 14 August 2008, the learned Judge granted the interim relief sought by the Defendant.

18.  Since the grant of the interim injunction and before today’s hearing, the Defendant has effectively completed the works to connect its drainage system with that of the Plaintiff’s, albeit no OP has yet been issued.

III.    The present stay application

The earlier judgment

19.  For the present purpose, the learned Judge’s relevant conclusions in granting the interlocutory injunction can be summarized as follows:

(1)  After applying the test concerning the grant of a mandatory interlocutory injunction, the learned Judge is satisfied that there is a high degree of assurance that the Defendant will at trial establish that it has the prescriptive right to connect the sewage system to the Plaintiff’s drainage system at the manhole by reason of an easement arising from a presumed grant under the doctrine of loss of modern grant, or an implied grant of an easement of necessity, or quasi-easement arising from the doctrine of Wheeldon v Burrows, or common intention.  The learned Judge came to that view based predominantly on (a) the certified existence of a sullage drain on site that ran from an existing manhole towards part of the service lane which was at part of No. 37 of Hollywood Road, and (b) the lack of other evidence to show that the plan was not implemented.  See: paras 56-65 of the earlier judgment.

(2)  The learned Judge also concludes that damages would not be an adequate remedy for the Defendant if the injunction is wrongly not granted.    On the other hand, if injunction is wrongly granted, damages would be a sufficient remedy for the Plaintiff as it will “not affect the plaintiff’s enjoyment of its property at all; there will be a disconnection and that will be that.  Minimal loss and damages will result”.   In the premises, the learned Judge further concludes that the balance of convenience lies in favour of granting the injunction.   See: paras 66-74 of earlier judgment.

Applicable principles

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

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

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

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

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

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

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

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

21.  Further, it is trite that the Court of Appeal would not lightly interfere the exercise unless it can be shown that the learned Judge is clearly wrong, for example, in applying the wrong legal principles, or in arriving at a conclusion that no reasonable judge would have so come to.

The grounds in support of a stay

22.  Mr Rimsky Yuen, SC, for the Plaintiff, submits that a stay of execution should be granted for the following reasons:

(1) The Plaintiff has a strong ground of appeal which is likely to succeed: 

(a) The learned Judge has clearly wrongly concluded that damages would not be a sufficient remedy for the Defendant.  Mr Yuen relies heavily on the decision of Patten J in Centrica Langage Ltd v Langage Energy Park Ltd [2007] EWHC 1003 (Ch) and submits that damages is plainly a sufficient remedy for the Defendant if an injunction is wrongly not granted.  

(b) In the premises, applying the trite principles in governing the grant of interim injunction, on that basis alone, no injunction should have been granted and there is no need to consider the question of balance of convenience. 

(c)  Mr Yuen also submits that the learned Judge has also erred in principle in his approach to the question of balance of convenience, since even if the question of balance of convenience comes into play, it must lie in favour of preserving the status quo: that is not to allow the Defendant to connect its drainage system to that of the Plaintiff’s. 

(2) Alternatively, if the Plaintiff has an arguable appeal, it would be rendered nugatory if a stay is not granted since:

(a)  the injunction granted is mandatory in nature and is a final relief sought by the Defendant;

(b) the damage to be suffered by the Plaintiff either (i) is not compensatible by damages, or  (ii) is one that the Defendant is unlikely to be in a position to compensate.

IV.    Discussion

Merits of the appeal

23.  In addressing the question of (a) whether damages would be a sufficient remedy for the Defendant if injunction is wrongly not granted, and (b) the balance of convenience, the learned Judge says as follows in the earlier judgment:

“The Balance of Convenience

66.  Against a strong argument mounted by Mr Yuen that damages would be an adequate remedy, I am satisfied in the circumstances that would not be so.

67.  The defendant would be faced with having a virtually completed building lying dormant for as long as it takes to complete the trial and then prospectively the appeal process to follow.  This would result in an extraordinarily high level of loss of income and/or recovery of capital and inevitably the building would with lack of use fall into disrepair.  The alternative would be virtually to abandon its counterclaim, and realign the sewage drains and seek approval to connect into the drain in Hollywood Road.  That would require alteration to the structure, complex reconstruction at basement level, and delays associated with getting approval for this realignment.

68.  David Chan said this would take nine months to achieve at a cost of $200,000.  This is strongly challenged by Wong Chi Kwong, of the firm of architects responsible for the construction of the defendant’s building.  He states from paragraph 9:

‘9. …

Now the new building has already been built and to re-route the drainage system would involve a substantial alteration to the new building with submission of new plans for the approval of the Building authority.

10.    If the foul drainage is to be discharged from a new manhole on the ground floor level and connected to the public foul sewer at Hollywood Road, the drainage pipe of the new system has to be re-designed and re-routed from the basement of the new building to the ground level with the construction of a suspended manhole, sump pits and a pump room at the basement.  This would render most of the basement unusable.

11.    Further such a proposal would involve construction work at government land at Hollywood Road and require approval from the government and the relevant District Board.  In view of the fact that that section of Hollywood Road is a very busy road with a heavy traffic flow and a very narrow pavement, one cannot assume that consent from the government and/or the relevant District Board for such a construction work would be readily given.  In any event, it would definitely take a long time for such an application to be processed.  In my opinion, such a proposal in the Report is wholly unrealistic and impracticable and, even if possible, would involve a very long delay and substantial costs including the loss of use of the basement which would greatly exceed the unrealistic estimation of no more than 9 months and $200,000.00 in the Report.’

69.  It is not for me to resolve this dispute in the affidavits.  Suffice to say that on any view the rerouting would be long and complex and expensive, and approval to it not assured. 

70.  So, where does the balance of convenience lie?

71.  The answer I believe is clear-cut.  It favours the granting of the interlocutory injunction.

72.  Where is the inconvenience to the plaintiff?  There will be short-term disruption but the end result will be a pipeline reconstructed at the defendant’s expense that will in fact be an upgrade rendered compulsory by the DSD.  The concern that the line will be overloaded is a speculation; and surely the DSD would not authorize the connection and reconstruction without paying heed to the prospective flow from the new building.

73.  If the plaintiff is successful after trial there will be a massive upheaval for the defendant.  But it will not affect the plaintiff’s enjoyment of its property at all; there will be a disconnection and that will be that.  Minimal loss and damages will result.

74.  That the Building Authority may not grant an occupation permit in the face of ongoing litigation is with respect to David Chan further speculation.  I should have thought that provided construction is in all respects in compliance with the requirements of the regulations administered by the Authority, the granting of the permit would follow.  If not, that will be for the defendant’s management to deal with.”

24.  As far as I can understand from the learned Judge’s reasoning, he comes to the conclusion that damages would not be a sufficient remedy for the Defendant because the alternative rereouting drainage work that needs to be carried out by the Defendant would be “long and complex and expensive, and approval to it not assured”.  He also relies on the same reason to come to the conclusion that the balance of the convenience should lie in favour of granting the interim relief.

25.  Mr Yuen for the Plaintiff submits that the learned Judge’s approach and conclusion are clearly wrong in principle:

(1)  If the rerouting issue features in the learned judge’s consideration as to whether damages is a sufficient remedy, this is clearly an irrelevant factor which the learned judge has wrongly taken into account.   This so because if the injunction is wrongly not granted at the interim stage, there would no question of re-routing, since the Defendant would be able to connect the drainage system at the Plaintiff’s land after establishing its right at trial.  There is no suggestion that the Defendant has to go for the rerouting if no interim relief is granted.

(2)  Thus, without the question of rerouting, the only damage that the Defendant would suffer in the interim period would be, as the learned Judge has set out at paragraph 67M-P of the earlier judgment, “the loss of income and/or recovery of capital and inevitably the building would with lack of use fall into disrepair” which is clearly compensatible by damages.  There is no suggestion that the Plaintiff is not good for its undertaking as to damages.

(3)  According to trite legal principles, once the Defendant’s loss is compensatible by damages, interim injunction should not be granted and there is no question of balance of convenience. See:  American Cyanamid v Ethicon Ltd [1975]AC 396, 408B-F.

(4)  Further, even if the question of balance of convenience had to be considered, for the same reasons set out in subparagraph (2) above, the question of rerouting should not constitute a relevant consideration, and again according to trite legal principles, the balance of convenience must lie in favour of preserving the status quo by not allowing the Defendant to connect the drainage system and to use it: American Cyanamid, supra, 408G.

(5)  For these reasons, the learned Judge has clearly erred in principle in his approach to the issues of (a) whether damages is a sufficient remedy for the Defendant, and (b) even if necessary, the balance of convenience.

26.  I accept Mr Yuen’s submissions. I am satisfied that notwithstanding that the learned Judge was exercising his discretion in granting relief, the Defendant has demonstrated to me that this ground of appeal stands a strong chance of success.

27.  Mr Edward Chan, SC, on the other hand contends as follows:

(1)  At the hearing before the learned Judge, it was part of the Defendant’s submissions that, given that the Defendant was claiming a proprietary right of easement and the right to use it, by definition damages would not be a sufficient remedy, and the rights would always be protected by an injunction.   Mr Chan then further submits that as the learned Judge has not rejected those submissions in his judgment, it must therefore form part of his reasons for coming to his above conclusion.

(2)  Alternatively, the Court of Appeal is entitled to consider these submissions again, which are clearly meritorious and the Plaintiff’s appeal cannot be said to be bound to win.

28.  However, in the earlier judgment, the learned Judge has neither set out Mr Chan’s above submissions nor included that as part of his reasons in coming to the conclusion that damages is not a sufficient remedy for the Defendant.  Without these, with respect to Mr Chan, I could not come to the view that the learned judge has accepted Mr Chan’s above submissions as part of his reasons in arriving at his conclusion.   

29.  Further, I do not think the contention that damages is normally not a sufficient remedy to protect an established proprietary right can be taken too far.  Each case must be decided on its own circumstances.   Having had regard to the Defendant’s own case that the use of the purported easement to connect the sewage system is to enable the OP to be issued, and given that the Court is now only considering the interim stage when there is still a dispute as to existence of the claimed proprietary right, for the purpose of a stay application, I am  not prepared to accept  that this contention is so likely to be accepted by the Court of Appeal such that, even if the learned Judge was wrong in his initial exercise of discretion as discussed above, the Plaintiff still does not stand a strong chance of success in setting aside the interim injunction. 

30.  For these reasons, I reject Mr Chan’s submissions that the Plaintiff has not shown a high likelihood of success in the appeal against the interim injunction.

31.  Mr Chan further submits that as the Defendant has already completed the connection of the drainage system, any stay of execution of the Order is academic and “otiose”.  The Defendant also says the Plaintiff is guilty of material delay in pursing the stay application, and the Court should not exercise its discretion to grant the stay.

32.  I do not agree the stay is academic, and accept Mr Yuen’s submissions that the stay of execution would still effectively operate to suspend the operation of paragraph 3 of the Order[1], and thus serve a useful purpose.  

33.  I also do not accept that there has been a material delay on the part of the Defendant in proceeding with the application for a stay:

(1)  The Order was sealed on 18 August 2008.  The Notice of Appeal was filed on 23 August 2008.

(2)  The Plaintiff put the Defendant on notice of its application for a stay by its letter dated 28 August 2008, enclosing therewith a copy of the Summons. 

(3)  I do not think a delay of 10 days since the Order can be regarded for the present purpose a material delay to justify my exercise of discretion against a grant of stay.  In any event, any prejudice arising from the delay is caused to the Plaintiff not the Defendant, a matter I have already taken into account above in considering whether the delay has rendered the stay application academic.

(4)  Further, from the copies of the correspondence exchanged between the parties concerning the fixing of the date of this hearing, it appears that the subsequent delay, if any, in having the application heard is due to the complication arising from the need to find another judge instead of Deputy High Court Judge Gill to hear it, in light of the learned Judge’s retirement.

(5)  In the circumstances, I do not think the Plaintiff can be criticized for this further part of the “delay”.

34.  In the premises, on the basis that the Plaintiff has demonstrated that it has a high likelihood of success in the appeal, and upon the Plaintiff’s undertaking that it would use its best endeavour to expedite the hearing of the appeal, I would grant the stay of execution of the Order pending appeal.

Other grounds in support of a stay

35.  Given my above conclusion, I would only deal with these briefly.

36.  If I were wrong above on the merits of the appeal, and that the Plaintiff only has an arguable appeal, I would also grant a stay of execution on the following ground[2]:

(1)  If no stay is granted, it is more likely than not that an OP for the Defendant’s new commercial building would be issued (as it is the Defendant’s own case that the only outstanding obstacle for the issue of the OP is the connection and use of the drainage system).

(2)  Once the OP is issued, the commercial building is likely to be put into use for sale or rental (it is noted that the Defendant has not put in any evidence as to its plan on whether to sell or only lease out units of the building).

(3)  If any of these happen before the appeal, third parties’ interest (ie., the new purchasers or the tenants) may become relevant at the appeal (as accepted by Mr Chan) in considering whether to set aside the interim injunction.  This is so because, even if the Court of Appeal has come to the view that the learned Judge was wrong in granting it in the first place, the setting aside of the interim injunction may seriously affect other third parties’ use of the property. 

(4)  There is thus at least a possibility (which cannot be ruled out for the present purpose) that the appeal would be rendered nugatory if no stay is granted, since the events that are likely to occur after the grant of the injunction would result in the Court of Appeal not setting aside the interim injunction.

37.  The Plaintiff further submits that the appeal is also likely to be rendered nugatory because the Defendant, as a developer BVI company with HK$1 capital may, once the building is sold, simply dispose of the proceeds of sale and disappear.  Thus, if no stay of execution is granted, and the Plaintiff succeeds in its appeal, the Defendant may not be there anymore to compensate the Plaintiff’s loss, and to reimburse or fork out the expenses that need to be incurred in disconnecting the drainage system. 

38.  On this ground, I reject the Plaintiff’s submissions.  I agree with Mr Chan’s submissions that:

(1)  The present evidence shows that the value of the Defendant’s building far exceeds its liability under the mortgage. 

(2)  In the premises, and coupled with (a) the learned Judge’s conclusion that the damage that is likely to be suffered by the Plaintiff for a wrongful grant of injunction is minimal, and (b) the lack of any evidence from the Plaintiff to show the likely quantum of damages it may suffer thereof, the Plaintiff has failed to establish that the Defendant is not good for its undertaking as to damages or that the Defendant is likely not to be available for meeting the undertaking.

V.      Conclusion

39.  For the reasons stated above, and subject to the Plaintiff’s undertaking that it would expedite the hearing of the appeal, I allow the Plaintiff’s application and order an interim stay of execution of Deputy High Court Judge Gill’s Order dated 14 August 2008, pending the determination of Plaintiff’s appeal therefrom by the Court of Appeal.

40.  I further make an order nisi that costs of this application be in the cause of the appeal, with certificate for two counsel.   Unless any of the parties applies to vary it, this order will be made absolute 14 days from today.

41.  It remains for me to thank leading counsel’s assistance.

[1] Which restrains the Plaintiff from doing anything to prevent or obstruct the Defendant from “otherwise using the Pipe to drain foul drainage from the Defendant’s Premises into the public manhole and drainage pipe…”

[2] Subject also to the Plaintiff’s undertaking to expedite the appeal.

HCA 335/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 335 OF 2008

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J U D G M E N T

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1.  This is a dispute between neighbours in Hollywood Road, one of Hong Kong Island’s oldest neighbourhoods.  The outcome of this an interlocutory application for a mandatory injunction will impact on the applicant defendant’s ability to advance the construction of a high rise building on its land to completion.

2.  The plaintiff owns the building at nos. 31 and 33; the defendant’s newly built building is at nos. 35 and 37.  At the heart of the dispute is whether or not there is a private sewage system running across the rears of the two properties whose outlet is into a public sewage drain in Cochrane Street, and if so, whether the defendant by owning its site has the right to feed into the system, thus to use it for discharge of sewage from the new building. 

3.  Notice having been given to the plaintiff of their intentions, contractors engaged by the defendant in furtherance of the construction did connect into a system at a manhole on the plaintiff’s property.  But when they came to complete the task they were driven off by representatives of the plaintiff who sealed off the connection.  The plaintiff filed this writ, praying for an injunction to restrain the defendant and its contractors from attempting to connect into its drainage system and for damages for trespass.

4.  This has serious repercussions for the defendant, for its management is relying on a right to enter the system for discharge of sewage from the new building.  With construction all but complete, it will not be able to achieve an occupation permit without such connection.

5.  The defendant has filed a defence denying the plaintiff’s claims and has counterclaimed for a declaration that it has the right to the use of the drain, and seeks an injunction to restrain the plaintiff from preventing it from connecting into the system, thence to discharge sewage into it. 

6.  The matter before me is for an interlocutory injunction applied for inter partes pending trial or further order.

7.  The issues for trial are twofold:

(a)    is there a private sewage drain at the location?  If so,

(b)   does the defendant have a prescriptive right to connect into and to use the drain?

8.  In the meantime I am bound to explore the circumstances as now pertain to determine whether the defendant should have the interim protection it asks for, pending trial or further order.

The History

9.  In fact, first the geography.  Hollywood Road runs roughly west to east.  The two properties are sited on its northern side, to the east of the intersection with Lyndhurst Terrace.  The fall of the land is naturally from south to north, and west to east.  Walking along Hollywood Road from west to east one would pass on one’s left first the defendant’s new building, at nos. 35 and 37, then the plaintiff’s, at 31 and 33, then a building called Hollywood House at 27 and 29.  Then comes the intersection with Cochrane Street, which runs down from Hollywood Road to Lyndhurst Terrace to the north.  There is a private service lane running across the rear, or northern ends of these properties, beginning at Cochrane Street and ending at the back of no. 37, thus giving direct access for the owners of the properties and their invitees via their “back doors” to Cochrane Street.

10.  In the 1880’s the sites of these three properties were under common ownership, being part of a single piece of land called Remaining Portion (RP) of Lot 109.  Then as from 1882 the land was subdivided and sold off as individual sites; so it was that there came to be six adjoining sites running west to east, being F, D, E, B, C and RP109.  In terms of street addresses, section D and F are at 35 and 37 (the defendant’s property), B and E are at 31 and 33 (the plaintiff’s property), and RP 109 and C are at 27 and 29 (Hollywood House).

11.  It is apparent from records that a feature of Hong Kong in those early years was that there was in place a drainage system for the disposal of sewage.  From 1888 this was a system separate and distinct from the disposal of storm-water.  It is also apparent from the annual report of the Sanitary Superintendent for the year 1893 that there were six houses built on Lot 109.  Logically they would have occupied the six subdivided sites.  The report reveals that in compliance with the Health Ordinance the owners, by plans submitted and approved, constructed drains to the satisfaction of the Authority.

12.  What is not revealed is the location of the drain or drains dug for the purpose.  But there are clues; there was a public sewage drain running down Cochrane Street.  And the fall is and would have then been in that direction.

13.  There was however also a public sewage system running down Hollywood Road.  So it is possible that some or all of the six houses drained into that drain.  But having regard to the lie of the land, this would have been less likely, for there probably would have been the need for pumps to get rid of the sewage uphill; there is no record of that form of disposal.

14.  Moving forward in time to 1960 there was a development.  The owner or owners of 35, Hollywood Road (section D of Lot 109) caused to have designed and built on site a tenement house of four floors and a basement.  Plans submitted for approval going to the drainage have been recovered for the purpose of this litigation; the approval is date-stamped 29 August 1960.  The plan records that along the private service lane from the back of no. 37 to Cochrane Street there was an existing sullage drain connecting by manhole to the public sewer running down Cochrane Street.  Within the boundaries of no.37 there is depicted a manhole, just as there is, in greater detail, one within the boundaries of no.35, where the tenement house was to be built.

15.  The draining of the various floors depicts the proposed passage of sewage from internal lavatories down to pipes connecting with the existing sullage drain at this manhole.

16.  An important feature of this record is that, so far, it is the earliest piece of documentary evidence that there was already in existence a sullage drain running along a passage at the rear of the six adjoining properties; thus an important further clue as to how from the early years sewage was disposed of and into the public system.

17.  For completeness and because these were raised at the hearing, I mention that there were further drainage plans retrieved from the 1960’s, when in turn buildings were proposed for 27 and 29 (which became Hollywood House) and 31 and 33 (the plaintiff’s existing building).  These plans all depict an “existing sewer” or an “existing private sewer” in the same position, that is along the line of the service lane to the public drain in Cochrane Street.  But in the plan for 27 and 29 it is depicted as beginning from a manhole at no.31, and in the plan for 31 and 33 from a manhole at 33.  In neither case is it shown to be servicing any building beyond; in particular, at 35.

18.  In both cases it is quite apparent that approval was forthcoming from the Building Authority to connect into this system wherever was its starting point.

19.  An important aspect of these plans is that they post date those approved for the building of the tenement house at no.35.

The Plaintiff Comes to Hollywood …

20.  The owner of the site at nos. 31 and 33 who constructed thereon the existing building was one Wong Chung Ming (Mr C M Wong), by all accounts a businessman of means who had a portfolio of real property.  In 1996 in an estate planning exercise he assigned this one by gift to the plaintiff, a company he had caused to be incorporated a year earlier.  His son Jimmy Wong was appointed and remains a director.  By virtue of that office and his earlier family connections, he deposed to having knowledge of events leading to this litigation both before as well as after the plaintiff’s acquisition.

… And Then, So Does the Defendant

21.  The defendant’s arrival was dated much later.  The tenement building that was constructed at no. 35 in the 60’s was under a previous owner pulled down in 1995.  Thereafter for some years the vacant plot was used as a temporary carpark.  Then the owner began to build a new building spanning 35 and 37, before selling it with only part of the piling under way.  The new owner took the work to a further level before selling it, still partly complete, to the defendant in 2006.  The defendant has continued with the construction.

22.  By June 2008 it was all but finished, the connection to the sewage system being the outstanding matter before the issue of an occupation permit.

The Dispute Erupts

23.  Evidence for the defendant was given by an authorized representative of a corporate director of the defendant called Albert Chang, and I come now to his account.

24.  He said that the defendant took over the construction of the partly built building on the premise that there would be a reconnection with the private drain that the plans reveal the old building was serviced by from the 60’s until its demolition in 1995.

25.  With construction leading towards completion, the defendant’s architects wrote to representatives of the plaintiff concerning this matter.

26.  The letter, dated 4 December 2006, stated in part:

“We noted from the Buildings Department Approved Plan of captioned Site [B.0.0. Ref. No. 4-5/2359/59] that the constructions of the service sewage drainage connected the captioned site to the government manhole in Cochrane Street passing the manholes along the service lane was approved in 1960.  We, therefore, have the rights to use the existing drainage connections along the service lane.

The conditions of the existing drainage connections are not to standard, with manhole overflows, sewer connections broken up and manhole cover not marching the government requirements.”

27.  The BOO reference is to the drainage plan that had been approved back in 1960 when the defendant’s predecessors had built the since demolished tenement building at no. 35.

28.  The letter went on to deal with practical features associated with the reconnection and that the defendant was prepared to upgrade the entire system at its own cost to the Authority’s satisfaction.  The connection, it was proposed, would be into an existing manhole in that part of the service lane passing through no.33; that is, in the plaintiff’s property.

29.  The matter was raised again by letter in January 2007 with some practical amendments to the proposed reconstruction and again in March 2007, with a proposed commencement date and timetable.

30.  There were no responses to these letters. 

31.  In March 2007, the drainage system from the defendant’s new building was connected to the existing system.  The contractors entered the plaintiff’s premises for the purpose.  The connection, on his account, proceeded uneventfully.

32.  Following that there were, in May 2007, and again in January 2008, meetings onsite between the defendant’s architect and an engineer from the Drainage Services Department (DSD). 

33.  He wrote on the point two letters as follows:

“Drainage Services Department

Hong Kong & Islands Division

42^nd floor, Revenue Tower, 5 Gloucester Road,

Wan Chai, Hong Kong.

Wong Pun and Partners Ltd

Unit 1412, 14/F Tower 1 Silvercord

30 Canton Road, Kowloon

Attn: Mr Tong Wong Chi Kwong

25 May 2007

Dear Sirs,

Proposed Commercial Building

at … 35-37 Hollywood Road, Central

Technical Audit of Drainage Connection Works

    I refer to our initial site inspection on 23 May 2007 and would like to advise you that you should replace all existing drainage connection that had been in use for a long period of time.  You should ensure all drainage connections, from your development to the public drainage system, works to the satisfaction of this Division.

	Yours faithfully,
	(K T WONG)
	for Chief Engineer/Hong Kong & Islands Drainage Services Department

Drainage Services Department

Hong Kong & Islands Division

42^nd floor, Revenue Tower, 5 Gloucester Road,

Wan Chai, Hong Kong.

Wong Pun and Partners Ltd

Unit 1412, 14/F Tower 1 Silvercord

30 Canton Road, Kowloon

Attn: Mr Tong Wong Chi Kwong

18 May 2007

 

Dear Sirs,

Proposed Commercial Building

at … 35-37 Hollywood Road, Central

Drainage System Condition at side lane between 27 to 37 Hollywood Road

    Further to my previous letter dated 23 May 2007 and our meeting today, this is to confirm that the existing drainage system at the side lane between 27 to 37 Hollywood Road has been used for many years and found deteriorating and nearing the end of its service life that require replacement as soon as possible.  In addition, you should ensure all drainage connections works to the satisfaction of this Division.

34.  Apart from the obvious requirement to repair and/or replace an existing private drainage system that had fallen into disrepair, it is apparent that from the DSD’s standpoint there was:

(a) in existence a private sewer running from 27 to 37 Hollywood Road, thence to the main public drain in Cochrane Street, and that it had been in use for a long time up to that date; and

(c)    approval for the defendant to connect into that drain.

35.  Mr Chang said that in furtherance of the required upgrade, a section of piping had been replaced and a meeting on site with the engineer of the DSD was scheduled for 25 February 2008.

36.  But this could not take place. 

37.  Five or six people representing the plaintiff came to the scene and proceeded to disconnect and dislocate the new pipes.  There was police intervention.

38.  There was a further attempt undertaken the next month to take the work further.  The new pipes were re-installed.  There was another appointment scheduled for 5 March.  But there was another confrontation.  Representatives of the plaintiff ordered the defendant’s people off-site and subsequently put up hoardings to prevent access to the manhole.

39.  Then on 17 May the defendant carried out a sewage water flow test only to find that the defendant’s pipe connecting into the system was blocked or had been disconnected.  Suspecting this was the work of or at the direction of the plaintiff, Mr Chang caused a letter to be written of 22 May giving seven days notice to remove the blockage or make the reconnection.  But there was no positive response.

40.  The defendant was, he said, left with no other choice but  to make this application and it did so on 3 June 2008.

41.  On behalf of the defendant he gave the usual undertaking in damages.

The Plaintiff’s Challenge

42.  Evidence in opposition to the application came from Jimmy Wong, whom I have already said is the son of the original developer the late Mr C M Wong, and a director of the plaintiff.

43.  As to events which preceded the filing of this application, particularly as to the confrontations Albert Chang deposed to, he differed as to detail, but does not otherwise challenge that version of what took place.

44.  As to the drain in question; accepting there was a drain, he denied that it ran beyond the manhole depicted in the plan approved for the purpose of building the plaintiff’s present building in 1965.  So, in order for the defendant to connect to that, the consent of the plaintiff was required.  None had been given.  And none would be forthcoming, first because the plaintiff was free to withhold that consent; secondly, because the significantly enhanced amount of sewage generated from the multi-storied building at 35 and 37 could materially overload the existing system.

45.  This opposition was supported by affirmations from Chui Sing Fun and Chung Wai Hin.  Mr Chui has been in the employ of the late Mr C M Wong and then latterly the plaintiff as project manager in charge of the landed properties since the 1960s.  He from time to time over the years was charged with the task of inspecting and servicing that part of the drain which ran from the plaintiff’s manhole east to Cochrane Street.  He deposed that there was not and never had been any indication of a connection to the west, servicing the building at no.35.

46.  Mr Chung is and has for some years been employed by the company the plaintiff engages to maintain the drainage system that services its building.  He deposed that there was no manhole westwards beyond that at the rear of no.33.

47.  Also in support of the proposition that the drain continued no further was the production of a plan that came from the records of the DSD.  That shows the existence of a drain into a manhole in Cochrane Street, with its starting point in the rear of the plaintiff’s property.

48.  The plaintiff also engaged a Chartered Surveyor called David Chan to examine the documents and other available evidence and to comment on:

(i)  the various drainage plans approved by the Building Authority, and then

(ii)    whether “it is a must” that the defendant connect to “the plaintiff’s” existing system; and

(iii)  how the Building Authority might deal with an application for an occupation permit given the unresolved litigation between the parties.

49.  He concluded:

(i)  that there was no evidence to confirm whether the sullage drain on the plan for the building at no.35 had ever been completed as shown;

(ii)    foul drainage from the new building at 35 and 37 coming from the floors at ground floor and above could be discharged by gravity to the system in Hollywood Road.  That coming from the basement could be brought up to the ground floor by sump and pump and be similarly discharged;

(iii)  that the Building Authority’s officers charged with the task of granting or withholding the occupation permit may “err on the safe side” and withhold their consent where there are issues being litigated.

The Defendant Responds

50.  This opposition brought a fresh round of affirmations.  It is not I think necessary for me to rehash the responses which will form part of the analysis I shall come to.  Suffice to say that the DSD conceded by letter of 11 July 2008 that the alignment and levels of drains shown on its plan are subject to site verification, and that the drain in question being on private property was noted as “drains maintained by others”.

Legal Principles

51.  It is clear-cut and established that for the defendant to achieve the injunction it seeks pending trial or further order, it must show:

(a) that there is a serious question to be tried;

(b)    that damages will not be an adequate remedy in the event that the defendant wins after trial;

(d)   that the balance of convenience favours the granting of the injunction.

52.  A further factor for consideration is that the injunction sought is, effectively, a departure from the status quo in that the defendant is seeking a mandatory or restorative injunction.  By and large, whilst every case has to be considered on its merits, a court will be more likely to preserve the status quo than to make such an order.

53.  Mustill LJ in Locabail International Finance Limited v Agroexport [1986] 1 WLR 657 said at p.663:

“I shall deal first with the question of the test which is to be applied.  In my judgment this is correctly stated in Halsbury’s Laws of England 4^th ed, vol. 24 (1979) p.534, para.948 in a passage headed ‘Mandatory injunctions on interlocutory applications’.  That passage reads:

‘A mandatory injunction can be granted on an interlocutory application as well as at the hearing, but in the absence of special circumstances, it will not normally be granted.  However, if the case is clear and one which the court thinks ought to be decided at once, or if the act done is a simple and summary one which can easily be remedied, or if the defendant attempts to steal a march on the plaintiff … a mandatory injunction will be granted on an interlocutory application.’”

54.  In Film Rover International Ltd v Canon Film Sales Ltd [1987] 1 WLR 670, Hoffman J said at p.681:

   “In Shepherd Homes Ltd. v. Sandham [1971] ch.340, Megarry J. spelled out some of the reasons why mandatory injunctions generally carry a higher risk of injustice if granted at the interlocutory stage : they usually go further than the preservation of the status quo by requiring a party to take some new positive step or undo what he has done in the past; an order requiring a party to take positive steps usually causes more waste of time and money if it turns out to have been wrongly granted than an order which merely causes delay by restraining him from doing something which it appears at the trial he was entitled to do; a mandatory order usually gives a party the whole of the relief which he claims in the writ and makes it unlikely that there will be a trial.  One could add other reasons, such as that mandatory injunctions (whether interlocutory or final) are often difficult to formulate with sufficient precision to be enforceable.  In addition to all these practical considerations, there is also what might be loosely called a ‘due process’ question.  An order requiring someone to do something is usually perceived as a more intrusive exercise of the coercive power of the state than an order requiring him temporarily to refrain from action.  The court is therefore more reluctant to make such an order against a party who has not had the protection of a full hearing at trial.”

And finally on the point, Chadwick J said in Nottingham Building Society v Eurodynamic Systems Plc [1993] FSR 468, at p.474:

“First, this being an interlocutory matter, the overriding consideration is which course is likely to involve the least risk of injustice if it turns out to be ‘wrong’ in the sense described by Hoffmann J. [in Films Rover]

Secondly, in considering whether to grant a mandatory injunction, the court must keep in mind that an order which requires a party to take some positive step at an interlocutory stage, may well carry a greater risk of injustice if it turns out to have been wrongly made than an order which merely prohibits action, thereby preserving the status quo.

Thirdly, it is legitimate, where a mandatory injunction is sought, to consider whether the court does feel a high degree of assurance that the plaintiff will be able to establish this right at a trial.  This is because the greater the degree of assurance the plaintiff will ultimately establish his right, the less will be the risk of injustice if the injunction is granted.

But, finally, even where the court is unable to feel any high degree of assurance that the plaintiff will establish his right, there may still be circumstances in which it is appropriate to grant a mandatory injunction at an interlocutory stage.  Those circumstances will exist where the risk of injustice if the injunction is refused sufficiently outweigh the risk of injustice if it is granted.”

55.  What can be gleaned from these authorities is that, generally speaking, for a mandatory interim injunction, the applicant will need to persuade the court that there is a high degree of assurance that the interlocutory injunction was rightly granted.  That said, where the withholding of the injunction may in given circumstances carry a greater risk of injustice than granting it even though the “high degree of assurance” cannot be achieved, it would not be a wrong exercise of the court’s discretion to make the order.

Analysis

56.  The obvious starting point is that there is no written grant of easement determining the rights of the parties.  In the absence of any additional documentary or other evidence coming to light, no doubt at trial the court will be asked to infer that there is or was a pipeline for discharge of sewage from all the six sites along this part of Hollywood Road.

57.  The defendant’s case is that it will on the evidence so far adduced be able to make out the existence of an easement arising from a presumed grant under the doctrine of loss of modern grant or an implied grant of an easement of necessity or quasi-easement arising from the doctrine of Wheeldon v Burrows, or common intention.

58.  Mr Yuen SC leading Mr Maurellet submitted that the defendant has failed to achieve the necessary high degree of assurance of success after trial.

59.  The more recent plans go to show that the private sewage system did not service the properties westwards beyond the plaintiff’s, which supports the personal observations of Messrs Chui and Chung.  The report of David Chan stated that it was possible on the evidence that the sullage drain referred to in the plan of the tenement house built at no.35 did not get to be completed.  And on his account there is an acceptable method of disposal of sewage by means of a direct connection with the public drain on Hollywood Road, ruling out the need for an easement of necessity.

60.  My view is that the defendant has made out not just that there is a serious question to be tried but that there is a high degree of assurance it will succeed after trial. 

61.  I base my contention on the certified existence of a sullage drain on site that ran from an existing manhole towards the western end of that part of the service lane in section F, being part of no.37.  If that was to be otherwise, then the block plan which formed the basis of the drainage plan drawn for the purpose of the construction of the tenement house at no.35 would have been a fiction, and there would have been no system into which the drain from the house could have been connected.

62.  There is what I should think will amount to a strong inference that that which was approved on the plan was put into effect, for there is no sign of any amendment at all much less the drastic amendment of realigning the discharge of sewage uphill into Hollywood Road.

63.  The evidence of Messrs Chung and Chui will have to be considered and dealt with at trial, but the fact that the plans drawn for the building of the plaintiff’s building and of Hollywood House which followed on later did not include a drawing of the drain to its far end to my mind carries little weight, for no construction was to be carried out at that end.

64.  The SDD plan shows a drainage line that runs no further than from the plaintiff’s property.  But there is a caveat on accuracy.  And the letter from SDD to the plaintiff of 18 January 2008 is unequivocal as to the existence of a private drain running the full distance.

65.  In the circumstance then, the first hurdle for the defendant of there being a serious question to be tried, with a good chance of success, has been achieved.

The Balance of Convenience

66.  Against a strong argument mounted by Mr Yuen that damages would be an adequate remedy, I am satisfied in the circumstances that would not be so.

67.  The defendant would be faced with having a virtually completed building lying dormant for as long as it takes to complete the trial and then prospectively the appeal process to follow.  This would result in an extraordinarily high level of loss of income and/or recovery of capital and inevitably the building would with lack of use fall into disrepair.  The alternative would be virtually to abandon its counterclaim, and realign the sewage drains and seek approval to connect into the drain in Hollywood Road.  That would require alteration to the structure, complex reconstruction at basement level, and delays associated with getting approval for this realignment.

68.  David Chan said this would take nine months to achieve at a cost of $200,000.  This is strongly challenged by Wong Chi Kwong, of the firm of architects responsible for the construction of the defendant’s building.  He states from paragraph 9:

“9. …

Now the new building has already been built and to re-route the drainage system would involve a substantial alteration to the new building with submission of new plans for the approval of the Building authority.

10.    If the foul drainage is to be discharged from a new manhole on the ground floor level and connected to the public foul sewer at Hollywood Road, the drainage pipe of the new system has to be re-designed and re-routed from the basement of the new building to the ground level with the construction of a suspended manhole, sump pits and a pump room at the basement.  This would render most of the basement unusable.

11.    Further such a proposal would involve construction work at government land at Hollywood Road and require approval from the government and the relevant District Board.  In view of the fact that that section of Hollywood Road is a very busy road with a heavy traffic flow and a very narrow pavement, one cannot assume that consent from the government and/or the relevant District Board for such a construction work would be readily given.  In any event, it would definitely take a long time for such an application to be processed.  In my opinion, such a proposal in the Report is wholly unrealistic and impracticable and, even if possible, would involve a very long delay and substantial costs including the loss of use of the basement which would greatly exceed the unrealistic estimation of no more than 9 months and $200,000.00 in the Report.”

69.  It is not for me to resolve this dispute in the affidavits.  Suffice to say that on any view the rerouting would be long and complex and expensive, and approval to it not assured. 

70.  So, where does the balance of convenience lie?

71.  The answer I believe is clear-cut.  It favours the granting of the interlocutory injunction.

72.  Where is the inconvenience to the plaintiff?  There will be short-term disruption but the end result will be a pipeline reconstructed at the defendant’s expense that will in fact be an upgrade rendered compulsory by the DSD.  The concern that the line will be overloaded is a speculation; and surely the DSD would not authorize the connection and reconstruction without paying heed to the prospective flow from the new building.

73.  If the plaintiff is successful after trial there will be a massive upheaval for the defendant.  But it will not affect the plaintiff’s enjoyment of its property at all; there will be a disconnection and that will be that.  Minimal loss and damages will result.

74.  That the Building Authority may not grant an occupation permit in the face of ongoing litigation is with respect to David Chan further speculation.  I should have thought that provided construction is in all respects in compliance with the requirements of the regulations administered by the Authority, the granting of the permit would follow.  If not, that will be for the defendant’s management to deal with.

Delay

75.  For completeness I mention the argument mounted for the plaintiff that the defendant was dilatory; that long before the proceedings were issued and longer still before this application the defendant became aware that the plaintiff would not agree to sharing the private sewer with it.

76.  I do not intend to rehearse the history again; suffice to say that the crucial date was 17 May, when the defendant carried out a sewage water flow test, then to discover that the defendant’s pipe had been blocked or disconnected.  Within five days of that a letter before action was sent followed by this application on 3 June.

77.  There was as I find no untoward tardiness by the defendant in the timing, thus no delay.

The Result

78.  There shall be an order in terms of paragraphs 1(1), (2) and (3) of the defendant’s summons pending trial or further order.  The works in question are to be carried out to the satisfaction of the DSD.

79.  Costs, nisi, of the defendant, of and pertaining to this application, shall be in the cause.