The Incorporated Owners of South Seas Centre, Mody Road v. Great Treasure Development Ltd.

CACV000008/1994

1993, No.191
and 1994, No.8
(Civil)

IN THE COURT OF APPEAL

(ON APPEAL FROM HIGH COURT ACTION NO. A8191 OF 1993)

_________________

_________________

Coram: Hon Nazareth, Mortimer and Godfrey, JJ.A.

Date of hearing: 28 January 1994

Date of judgment: 9 February 1994

_________________

J U D G M E N T

_________________

Godfrey, J.A.: (delivering the judgment of the Court)

1. This is the plaintiffs' appeal from the refusal of H.H. Judge Yam (sitting as a deputy judge of the High Court), on 25th November 1993, to grant the plaintiffs an interlocutory injunction to prevent the defendant from maintaining, on an external wall of the building known as South Seas Centre, in Mody Road, Tsimshatsui East, Kowloon, a sign bearing (in English and Chinese) the legend "Toy Centre" (with additional words, in smaller letters, reading "1st Floor, South Seas Centre").

2. We heard argument on the appeal on 28th January 1994. At the conclusion of the argument, we announced that we had decided to allow the appeal and grant the plaintiffs the interlocutory injunction for which they had asked. We said we would put into writing our reasons for doing so and this we now do.

3. For the purposes of this appeal we can state the facts quite shortly.

4. The plaintiffs, as the incorporated owners of the South Seas Centre building, seek to enforce the provisions of the Deed of Mutual Covenant, dated 4th May 1982, regulating the use and the management of the building. This provides for a notional division of the property into 26,000 equal undivided shares, of which 1516 are allocated to the 1st floor of the building. The defendant, being entitled to these shares and to the exclusive right to use occupy and enjoy the 1st floor of the building, has subdivided that floor (which its predecessor used as a restaurant) into 109 shop units, the whole to form a permanent exhibition hall for the local toy industry.

5. The defendant wants to maintain, on the external wall of the building at 1st floor level, the signs to which we have referred. The new signs are in the same position as those which formally denoted the use of the 1st floor as a restaurant; and they are of similar size and construction. The plaintiffs say that the maintenance of these new signs, without their consent, involves the defendant in a breach of certain express negative stipulations contained in the Deed of Mutual Covenant. Nevertheless, subject to two conditions, the plaintiffs are in fact willing to consent to the defendant maintaining the new signs. The first condition is that some word other than "Centre" is used in the main sign; the plaintiffs' case being, in essence, that in the interest of good building management no sign should be maintained which might lead people to believe that the name of the whole building was now "Toy Centre" and no longer "South Seas Centre". The second condition is that proper provision should be made for the cost of maintaining the signs, so as to endure, given that the 1st floor is to be divided into 109 shop units, that the burden on the plaintiffs of performing their obligations under the Deed of Mutual Covenant is not increased. The defendant has created a sub-scheme for the regulation of the rights and obligations of the occupiers of the 109 shop units inter se but the plaintiffs are not party to the instrument by which the sub-scheme was created and are concerned that they might encounter problems in ensuring that the costs of any work which may have to be done in the future in connection with the maintenance of the signs will be met. The defendant says that there is no substance in the fears expressed by the plaintiffs, either as to the possibility of confusion as to the name of the building or as to the liability for the maintenance of the signs.

6. All these are matters to be weighed by the trial judge when he comes to consider whether or not the plaintiffs ought to be granted a permanent injunction. At this stage of the case, it is impossible to stigmatise the plaintiffs' refusal to consent to the maintenance of the signs unless its objections are met as obviously unreasonable. The plaintiffs, and the defendant, so far as these aspects of the case are concerned, both have a reasonable case fit for consideration by the trial judge.

7. But it is necessary, even at this interlocutory stage, for the court to form a provisional view as to whether, as the plaintiffs say, the maintenance of these signs does involve the defendant in a breach of the express negative stipulations contained in the Deed of Mutual Covenant, or whether it does not. If the plaintiffs are right in contending that the maintenance of the signs clearly does involve the defendant in a breach of those stipulations, then, say the plaintiffs, there is really no option in the court but to grant the interlocutory injunction for which they ask. If, per contra, it is fairly arguable that the maintenance of the signs does not involve the defendant in a breach of the stipulations, then, says the defendant, the court has to consider whether the balance of convenience lies in favour of granting or refusing the injunction; and, it adds, in fact the balance lies in favour of refusing the injunction.

8. We must, therefore, now consider the relevant provisions of the Deed of Mutual Covenant, which are contained in Clause 4, and read as follows:

"(g) Not to erect or build or suffer to be erected or built on or upon the roof, podium roof or the external walls or any part thereof of the said Building any structure whatsoever either of a permanent or temporary nature except with the prior written consent of the First Owner or Manager first had and obtained and in accordance with the specified conditions

..............

(1) Not to paint affix or exhibit on any part of the exterior walls, the common entrance hall, staircases, landings, lifts or passages of and in the said Building any trade profession or business notice or advertisement whatsoever save and except only in the space as the First Owner or the Manager shall designate for the purpose of affixing or exhibiting the trade or firm name of the tenant or occupier of such premises.

(m) No air-conditioning units or plants or any radio or television aerial or any other fixture shall be installed upon the roof or flat roof or through the windows or external walls of the said Building without the prior written consent of the Manager of the said Building to any such installations having been first obtained and the conditions of such consent having been complied with."

9. We have reached the provisional conclusion (a final conclusion must, of course, await the trial of the action) that the maintenance of the defendant's new signs on the external wall of the building, without the plaintiffs' consent, does involve the defendant in a breach of these negative stipulations. Mr John Swaine Q.C., for the defendant advanced an argument to the contrary. As to (g), he said that the signs were not a "structure". As to (1), the signs, he said, being in the same position as the former restaurant sign, had already been authorised. As to (m), the signs, he said, although "fixtures", are attached upon but not "through" the external wall. Our provisional view is that these arguments are ingenious but unreal. To construe these negative stipulations as entitling the defendant to put up any sign it likes on the external wall of the building without the need to obtain the plaintiffs' consent, so long as its signs are in the same size and in the same position as the earlier sign, and are fixed to the wall only by an attachment which does not go "through it", seems to us to reduce them to absurdity. In this, we differ from the judge, who took the view that the construction of the stipulations urged on him by the defendant was correct. Since the judge, in our judgment, misconstrued the express negative stipulations contained in the Deed of Mutual Covenant, we are entitled and bound to review his conclusion and to consider afresh the question whether the court should exercise its discretion in favour of granting or refusing the plaintiffs their interlocutory injunction.

10. As we have already noted, on the footing that the maintenance of these new signs on the external wall of the building involves the defendant in a breach of the express negative stipulations contained in the Deed of Mutual Covenant, the plaintiffs contend that the court really has no option but to grant to the plaintiffs the interlocutory injunction for which they have asked.

11. The plaintiffs rely, for this submission, on two authorities; first, Doherty v. Allman (1878)3 App.Cas.709; and secondly, Hampstead & Suburban Properties Ltd. v. Diomedous [1969]1 Ch 248.

12. In Doherty v. Allman (above) Lord Cairns L.C. said this (at p 720):

"If parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that a Court of Equity has to do is to say, by way of injunction, that which the parties have already said by way of covenant, that the thing shall not be done; and in such a case the injunction does nothing more than give the sanction of the process of the Court to that which already is the contract between the parties. It is not then a question of the balance of convenience or inconvenience, or of the amount of damage or of injury - it is the specific performance, by the Court, of that negative bargain which the parties have made, with their eyes open, between themselves."

13. In Hampstead & Suburban Properties Ltd. v. Diomedous (above)

Megarry J., in relation to Doherty v. Allman, said this (at p.259):

"I accept, of course, that Lord Cairns' words were uttered in a case where what was in issue was a perpetual injunction and not an interlocutory injunction. Indeed, the words seem to be obiter, for no negative covenant was present in that case. But these considerations do not preclude the words from having any weight or cogency in relation to an interlocutory injunction. Where there is a plain and uncontested breach of a clear covenant not to do a particular thing, and the covenantor promptly begins to do what he has promised not to do, then in the absence of special circumstances it seems to me that the sooner he is compelled to keep his promise the better. In such a case I do not think that the enforceability of the defendant's obligation falls into two stages, so that between the issue of the writ and the trial the defendant will be enjoined only if that is dictated by the balance of convenience and so on, and not until the trial will Lord Cairns' statement come into its own. Indeed, Lord Cairns' express reference to 'the balance of convenience or inconvenience' suggests that he had not forgotten interlocutory injunctions. I see no reason for allowing a covenantor who stands in clear breach of an express prohibition to have a holiday from the enforcement of his obligations until the trial. It may be that there is no direct authority on this point; certainly none has been cited. If so, it is high time that there was such authority; and now there is."

14. The dictum of Lord Cairns in Doherty v. Allman (above) has frequently been quoted and cited with approval; but never, so far as we are aware, so as to exclude altogether the general discretionary considerations which always fall to be considered when the question for the court to decide is whether or not to grant an interlocutory injunction in the circumstances of the particular case. We would reformulate the principle thus: Where a defendant is proposing to act in breach of an express negative stipulation binding upon him he will normally be enjoined from doing so, and, save in exceptional cases, damages will not be regarded as an adequate remedy; but the defendant may nonetheless be able to establish special circumstances of such a nature that the hardship that the making of the order would cause him would so far outweigh the inconvenience to the plaintiff through denying the plaintiff specific relief that the court considers that its intervention would be unjust. In addition, general discretionary considerations, such as unfairness, acquiescence or delay, may make the grant of an interlocutory injunction inappropriate. (In formulating the principle in this way, we acknowledge our indebtedness to the views expressed by the author in Spry, Equitable Remedies, 4th Edn. (1990), at p.574.)

15. In the present case, on our provisional view as to the true construction of the express negative stipulations contained in the Deed of Mutual Covenant, it does seem to us that the defendant ought to be enjoined, pending the trial of the action, from maintaining these signs on the external wall of the building in apparent breach of the stipulations. The grant of an injunction against the defendant will undoubtedly cause the defendant some hardship and inconvenience; but not such, we think, as to render the court's intervention unjust. It must always be borne in mind that the fundamental purpose of, and justification for, the grant of interlocutory relief is to preserve the status quo until the rights of the parties are established one way or the other at the trial of the action. We do not think the interests of justice would be served by allowing the defendant to maintain these signs on the external wall of the building when (on our provisional view as to the true construction of the stipulations binding upon the defendant) the defendant proposes to maintain these signs on the external wall of the building without the consent of the plaintiffs. (The signs have been erected, but we have been invited by the parties on the basis of an agreement made between them to that effect to treat as the status quo the state of affairs which obtained before the signs were erected.)

16. We do not discern in the evidence before the court anything which suggests the presence in this case of some general discretionary consideration which would militate against the grant of an interlocutory injunction. There has been some suggestion that at the trial of the action the defendant may advance a case based on promissory estoppel, or acquiescence. But these matters have not been pursued before us, and we do not consider them further.

17. We have, of course, borne in mind in considering this case the frequently cited speech of Lord Diplock in American Cyanamid Co. v. Ethicon Ltd. [1975] AC 396. That case shows that the applicant for an interlocutory injunction has to show that there is a serious question to be tried. So much is conceded here. The respondent, if he is fend off an interlocutory injunction, then has to show that he has an arguable defence: see Attorney General v. Barker [1990]3 All ER 257, per Lord Donaldson M.R. at p.260E-F. We are content to accept, notwithstanding our provisional view as to the true construction of the express negative stipulations contained in the Deed of Mutual Covenant, that the defendant has done so here. But, in applying American Cyanamid, it is clear that the court must not do so slavishly or mechanically, but must pay proper regard to all the circumstances of the case to see whether it is just or unjust, as well as convenient or inconvenient, to grant the injunction sought: see, for example, Fellowes & Sons v. Fisher [1976] QB 122. Where there are serious issues to be tried, the balance of convenience is a most important consideration; but it is not the only consideration, and there will always be cases in which the interests of justice, and the interests of convenience, do not coincide. In a case where a defendant is proposing to act in breach of an express negative stipulation, the balance of convenience would have to come down very much more heavily on his side to justify the court in withholding interlocutory relief from the plaintiff than it does in the instant case.

18. It was for these reasons that we allowed the plaintiffs' appeal and indicated that we would grant the interlocutory injunction for which they had asked.

Representation:

Mr. Dennis Yu (M/s Deacons) for Appellant/Plaintiff

Mr John Swaine Q.C. and Mr Andrew K.N. Cheung (M/s Kao Lee & Yip) for Respondent/Defendant