Case Document

100%Judiciary

HCA 99/2018

[2018] HKCFI 1241

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 99 OF 2018

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BETWEEN
	FANTASTIC STATE LIMITED	Plaintiff
and
	TIEN’S ORGANIC FARM	1^st Defendant
	(鳳園美子親子有機農莊)
	WONG CHI PAN (黃志斌)	2^nd Defendant
	TONG HIU WAN (唐曉雲)	3^rd Defendant

________________

Before:

Deputy High Court Judge Richard Khaw SC in Chambers

Date of Hearing:	19 July 2018
Date of Decision:	2 November 2018

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D E C I S I O N

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I. APPLICATION

1.This is the Plaintiff’s application for leave to appeal from the decision dated 6 June 2018 (“the Decision”) in this action whereby it was ordered that the ex parte injunction order granted on 27 March 2018 (“the Injunction Order”) be continued. The relevant factual background leading to the grant of the Injunction Order has been set out in the Decision and I shall not repeat the same. It is not in dispute that it is incumbent upon the Plaintiff to show that the intended appeal has reasonable prospects of success.

2.The Plaintiff has identified 6 main grounds of appeal in support of the present application:-

(1)   The Defendants have failed to show that there is a serious issue to be tried (whether on Special Condition 30(a) or right of way by prescription), in respect of a right of way by vehicle over the Plaintiff’s land for access from Fung Yuen Road to Lot 813 (“Ground 1”).

(2)   The Defendants’ failure to disclose that the occupants of Lot 813 did not have vehicular access prior to 2015 and their failure to draw the court’s attention at the ex parte hearing to the change in the scope and extent of the user ought to have been held to be deliberate. Accordingly, the Injunction Order should have been discharged on this basis (“Ground 2”).

(3)   The Defendants’ failure to disclose the problems over their reliance on Special Condition 30(a) was a material non-disclosure and the Court should have so found (“Ground 3”).

(4)   There were no circumstances to justify the Defendants’ use of the ex parte procedure to obtain the Injunction Order, especially when the application was tainted by material non-disclosure (“Ground 4”).

(5)   The conclusion that the balance of convenience lies in favour of continuing the Injunction Order involved an error in law and a failure to consider relevant matters (“Ground 5”).

(6)   The Court failed to consider the Plaintiff’s fortification in respect of its loss arising from the Injunction Order and erred in refusing such application (“Ground 6”).

II. DISCUSSION

Grounds 1 and 3

3.Grounds 1 and 3 relate to the interpretation of Special Condition 30(a) and can be considered together.

4.As stated in paragraph 13(2) of the Decision, in view of its argument that the Defendants have failed to demonstrate any serious issue to be tried in relation to the alleged right of way concerning vehicular access, the Plaintiff is required to demonstrate that the Defendants’ claim is not sustainable and is therefore liable to be struck out. For the purpose of this application for leave to appeal, the Plaintiff does not seem to dispute that it is required to overcome this high threshold.

5.I have taken the view that the Defendants have at least an arguable case that Special Condition 30(a) provides for a right of way to access Lot 813 either on foot or by vehicle and it is not a plain and obvious case that such a case is liable to be struck out. I refer to paragraph 19 of the Decision.

6.The Plaintiff emphasises that Special Condition 30(a) is merely a personal covenant made by the Plaintiff to the Government. As contended by the Plaintiff, since the Defendants are not parties to the New Grant, they are not privy thereto and can derive no right or interest therefrom. By way of a Supplemental List of Authorities, the Plaintiff sought to further advance this point by referring to Incorporated Owners of Mirador Mansion v Tecowin Development Ltd [1999] 4 HKC 113.

7.In Mirador Mansion, the building was constructed in 1959 and was originally owned by the developer. The DMC was executed in 1960 and it made no mention of the use of the roof. Subsequently, the developer assigned some shares in respect of certain units of the building to different purchasers (including the plaintiff). In 1962, the developer assigned 4/752 shares to H and in the assignment (“the 1962 Assignment”) it was provided that “[t]he Purchaser hereby further covenants with the Vendor that the Purchaser will not use the said roof otherwise than for erecting and placing thereon one or more signs whether neon-light or otherwise and will make good any damage caused to the said roof by the erection of such signs”. H then assigned its shares together with the exclusive possession of the roof to the defendant. The defendant caused certain works to be carried out on the roof, which led to disputes. In an action brought by the plaintiff (who sued as the owner of one flat and also in the capacity as incorporated owners of the building) to enforce the above covenant, one of the questions was whether the covenant was enforceable against the defendant.

8.According to s.41(3) of the Conveyancing and Property Ordinance (Cap 219) (“CPO”), “a covenant shall run with the land and in addition to being enforceable between the parties, shall be enforceable against the occupiers of the land and the covenantor and his successors in title and persons deriving title under or through him or them by the covenantee and his successors in title and persons deriving title under or through him or them”. It was held in Mirador Mansion that the covenant was only enforceable by the developer and his successors in title only, given that the defendant was not a party to the same. The court also ruled that “successors” in s.41 of CPO should not include persons (i.e. including the plaintiff and other owners of the building) who derived their titles to units in the building prior to the 1962 Assignment.

9.Relying on the above decision, the Plaintiff seeks to argue that the Defendants in the present case similarly do not have the right to enforce Special Condition 30(a) on the basis that they cannot be regarded as covenantees or their successors in title. However, each covenant has to be considered and interpreted in light of its wordings and the surrounding factual matrix. The fact that the Defendants were not parties to the New Grant is not conclusive. According to s.26 of CPO, a person “may take an immediate or other interest granted to him in land or the benefit of any condition, right of entry, covenant or agreement granted to him over or in respect of land, although he may not be named as a party to the instrument”.

10.As explained in paragraph 19(2) of the Decision, Special Condition 30(a) specifically refers to the Grantee’s duty (i.e. the Plaintiff’s duty) to provide footpaths and access roads and also to allow members of the public to use such footpaths and access roads “on foot or by vehicle”. In view of the contents of the provision, I maintain my view that the Defendants have at least an arguable case that Special Condition 30(a) provides for a right of way to access Lot 813 either on foot or by vehicle.

11.At the hearing of this application, it was submitted on behalf of the Plaintiff that the construction of the covenant would involve difficult questions of law which warrant the Court of Appeal’s consideration and clarification. Nonetheless, if this is the case, it will only further reinforce the Defendants’ argument that this raises at least a serious issue to be tried.

12.In the circumstances, I am of the view that Ground 1 of the intended appeal does not have any reasonable prospect of success.

13.Further, the Plaintiff’s argument that the Defendants’ failure to disclose the problems over their reliance on Special Condition 30(a) was a material non-disclosure (i.e. Ground 3) has already been considered in paragraph 19(5) of the Decision and I do not see any merits in this regard.

Ground 2

14.This ground relates to the consequences of the material non-disclosure found. Notwithstanding proof of material non-disclosure, the court has a discretion to continue the ex parte order or to make a new order on terms. I have provided the reasons as to why the Defendants’ non-disclosure should not render the Injunction Order liable to be discharged in paragraphs 32 to 36 of the Decision. The Plaintiff has failed to demonstrate why such an exercise of discretion involved any fundamental error in law or any plain mistake on the factual analysis. Hence, Ground 2 also has no merits.

Ground 4

15.The Plaintiff’s complaint about the Defendants’ use of the ex parte procedure has been considered in paragraph 28 of the Decision and I believe that this ground can hardly constitute a valid ground of appeal.

Grounds 5 and 6

16.In paragraphs 26 to 31 of the Decision, I have explained why I took the view that the balance of convenience should lie in favour of the grant and also the continuation of the Injunction Order. In particular, I found that:-

(1)   The Plaintiff’s argument that the Defendants’ loss could be sufficiently compensated by damages is untenable.

(2)   The Plaintiff’s case that the injunction would increase the risk of illegal activities is not substantiated by any cogent evidence.

(3)   The Plaintiff’s assertion that it would be required to spend more than HK$10 million to guard against the so-called “increased risks” caused by the Injunction Order is rather fanciful.

17.I am not satisfied that the Plaintiff has sufficiently demonstrated any obvious error in the above analysis on balance of convenience. In the same vein, the Plaintiff has failed to discharge the burden of showing the need for fortification, not to mention the appropriate quantum for the same. Accordingly, I find no substance in Grounds 5 and 6.

III. Conclusion

18.By reason of the above matters, the Plaintiff’s application for leave to appeal is dismissed. I order that costs of and occasioned by this application be paid by the Defendants forthwith, to be taxed if not agreed.