Chinapro Ltd. v. Century Fame Ltd.

CACV000129/1992

Civil Appeal No 129 of 1992

HEADNOTE

Interlocutory injunction - specific performance - serious issues to be tried as to whether an agreement had been concluded between the parties and if so whether it provided for the sale and purchase of land or, in whole or in part, for agency or brokerage and as to appropriate remedies at trial - balance of convenience, the worth of the cross-undertaking as to damages, the possibility of registering a lis pendens and the terms of the practice direction requiring originals of copies of documents exhibited to affidavits considered.

The judge at first instance had discharged his own ex parte injunction after an inter partes hearing on the grounds that damages would be a sufficient remedy for the plaintiffs if they succeeded at trial. The Court of Appeal found that the judge had erred in principle and exercised its own discretion to restore the injunction until the hearing of the inter partes summons or further order.

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Coram: Hon. Yang, CJ, Kempster, JA & Jones, J

Dates of Hearing: 21st & 24th August 1992

Date of Judgment: 26th August 1992

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J U D G M E N T

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Hon. Yang, CJ:

1. On the 1st August 1992 Mortimer, J. made an ex parte order in favour of the plaintiff restraining the defendant in effect from selling or disposing of the shops and flats in a building in breach of a contract of purchase and sale of those shops and flats (hereinafter referred to as "unit" or "units").

2. On the 3rd August the paintiff took out an inter parte summons for continuation of the ex parte order. This summons was returnable before the same judge on the 7th August, and now stands adjourned.

3. On the 7th the defendant asked for the ex parte order to be set aside on the ground of material non-disclosure. This issue was however not addressed at the hearing. The learned judge was concerned that the plaintiff was in reality seeking not simply to preserve the status quo but to achieve a position whereby in due course specific performance of the contract could be achieved.

4. Having heard counsel for the purpose of reviewing whether the ex parte order should be continued, the judge gave his decision on the 10th August, discharging the ex parte order, but granting an injunction for 14 days pending the plaintiff's appeal from his order. The judge also indicated that any application for extension of the injunction should be made to the Court of Appeal.

5. An early date for the hearing of the appeal having been ordered, the matter came before this Court on the 21st.

THE EVIDENCE

6. The evidence is as follows.

7. Early in 1992 the plaintiff heard that the defendant had acquired nine units out of 17 units in a building at 2-6, Tak Cheong lane, Yaumatei, Kowloon (hereinafter referred to as "the building"). After negotiations, the plaintiff and the defendant entered into an agreement on the 28th May 1992 ("the Agreement").

8. By Clause 1 of the Agreement, the defendant warranted to the plaintiff that the defendant had entered into Provisional Agreements and/or Formal Sale and Purchase Agreements with the registered owners of the units at the prices and on the terms as per annexed schedule marked "A". The schedule produced in the court below was an unmarked and undated copy, but it seems that the judge took this to be Schedule A.

9. Clause 2 stipulates that the defendant agrees to enter into a Conditional Sub-sale and Purchase Agreement with the plaintiff agreeing to subsell the units to the plaintiff subject to the terms and conditions of the principal agreements and at the same prices as stated in Schedule A. This Conditional Sub-sale and Purchase Agreement will become binding upon the plaintiff when (a) the plaintiff through the defendant is able to acquire all the remaining units not yet acquired by the defendant, and (b) all the titles of the units are in order. Vacant possession will be guaranteed by the defendant on the agreed delivery dates of vacant possession.

10. Under Clause 3, the defendant warrants that it will be able to acquire all the remaining units for the plaintiff at prices and on terms shown in Schedule A. In this connection the defendant will act as the plaintiff's agent but the plaintiff will sign direct with the registered owners of the remaining units all the necessary agreements, which will be subject to (a) the plaintiff being able to purchase all the units, and (b) all the titles of the units are in order. Vacant possession will be guaranteed by the defendant on the agreed delivery dates of vacant possession.

11. In short, the Agreement was that the defendant agreed to sell the nine units to the plaintiff and warranted that it would acquire the remaining units for the plaintiff. The defendant guaranteed that vacant possession of the units would be obtained by the dates set out in the schedule annexed to the Agreement. The latest date for vacant possession was to be 28th February 1993.

12. According to the affidavit of Mr. Daniel Kwan, a director of the plaintiff, a Mr. Wong Kei of the defendant told him the defendant was not prepared to acquire the building in question for the plaintiff (para. 12 of the affidavit). The affidavit also says (at para. 16)-

"On or about 28th July 1992, Mr. Wong Kei as well as Mrs. Laura Wong (believed to be a director of the Defendant) indicated to me that the Defendant would definitely not acquire the said Building for the Plaintiff and threatened that the Defendant would sell all the said Properties to another party and also would procure all the Remaining Properties in favour of the same party. I verily believe that the party in question would be Shing Ko or its agents."

13. On the 29th June the owner of a unit, at the 2nd floor of No. 4 of the building, the Shing Ko Development Co. Ltd. ("Shing Ko") wrote to the defendant stating that it had no intention whatever to sell their property "at this time". On the same day, and on the basis of Shing Ko's letter, the defendant's then solicitors wrote to the plaintiff's solicitors to terminate the agreement of the 28th May 1992. By a letter dated the 4th July 1992 the plaintiff's solicitors wrote to the defendant's solicitors refusing to accept the termination of the agreement, and, warning that if the defendant failed to perform its duty in the Agreement within the next 14 days, legal proceedings would be instituted against the defendant.

14. On the 31st July the plaintiff instituted proceedings against the defendant claiming inter alia specific performance of the Agreement and an injunction in effect restraining the defendant from selling or acquiring any of the units. Those proceedings are still pending.

MORTIMER, J.'S JUDGMENT

15. The judge concluded that the position between the parties was simply that the defendant was trying to avoid its obligations under the Agreement and the plaintiff was holding the defendant to its obligations in spite of an anticipatory breach.

16. In his judgment the learned judge found that the correspondence indicated that the defendant was seeking to avoid its obligations on the basis of Shing Ko's refusal to sell. The Agreement was however still executory, accordingly there could be no question of specific performance "now". As the plaintiff was entitled to and did hold the defendant to its obligation, the judge held that the time for awarding damages also had not arrived. Both parties remained bound by the Agreement. The only question was whether the plaintiff was entitled to an injunction to encourage the defendant to fulfil its obligation.

17. There would be no breach of the defendant's undertaking until 28th February 1993 (the last day on which vacant possession of the last units was to be delivered) unless there was an anticipatory breach which the plaintiff treated as putting an end to the Agreement and sued. The evidence indicated that the defendant might not be able to fulfil its obligations if Shing Ko continued to refuse to sell. There was also evidence that the defendant might be contemplating deliberately breaching its undertaking by subselling to a third party. On the evidence the judge found that the plaintiff was almost certain to succeed in any action against the defendant. He then went on to consider whether damages would be a sufficient remedy.

18. In his view damages would be a sufficient remedy. Firstly, it was a commercial venture the purpose of which was to make a profit and damages would not be difficult to assess. Secondly, whether the defendant - a shelf company with a nominal paid up capital - was "not worth powder and shot" was irrelevant especially since the plaintiff chose to treat with the defendant.

19. The learned judge did not think it proper or necessary that the injunction be continued pending the hearing of the action. He concluded:

"Of course, if the defendant were to flagrantly disregard its obligations and this were an indication of it seeking to avoid its responsibilities and seeking to avoid compliance with any judgment so that it would be worthless, then the court has powers to seek to ensure that situation does not arise."

GROUNDS OF APPEAL

20. The gravamen of the plaintiff's appeal is that the judge erred in holding that damages would be an adequate remedy because the plaintiff's object was to make a profit from a commercial venture. it is also conteded that the juge was wrong in holding that damages would not be difficult to assess, and in holding that the defendant's inability to pay damages was irrelevant. The discharge of the injunction would have the effect of encouraging the defendant to act in further breach of its obligation. Finally, the judge was wrong in holding that there was no admissible evidence that Shing Ko and the defendant were conspiring together to induce a breach of the Agreement.

THE RESPONDENT'S ARGUMENTS

21. In response, counsel for the defendant made three points.

22. Firstly, the Agreement is not a straightforward sale and purchase of land; it is more in the nature of a service contract.

Secondly, Mortimer, J.'s judgment should be read in the context of a consideration as to whether it was just that the plaintiff should confined to damages only: vide Evans Marshall & Co. Ltd. v Bertola [1973] 1 WLR 349, 379H.

23. Thirdly, the ground is advanced in the Respondent's Notice that -

"There is no arguable cause of action to support the granting of the interlocutory injunction in that (a) there is no binding contract between the parties or (b) the contract, if any, between the parties insofar as it provided for any possible sale and purchase of the various units was subject to a condition subsequent that all the flat owners of the 17 units in question would have each entered into a sale and purchase agreement by 8th July 1992 which condition subsequent was not fulfilled."

24. The significance of the date of 8th July 1992, according to the defendant's case, is this. Schedule A, or its updated version of the 6th June 1992, shows that the completion date for two of the units already acquired by the defendant was to be the 8th July. The completion dates for the other units came later and differed, the latest being 11th November. It has already been noted that the latest date for vacant possession was to be 28th February 1993. The argument is that it is imperative that the defendant should succeed in obtaining the agreements of sale and purchase from the owners of all units between 28th May and 8th July 1992 if he were to acquire for the plaintiff all the units as a total package. If agreement with each and every owner was not reached by that date, some or all the owners who had not as yet entered into an agreement of sale and purchase would be tempted to inflate their prices and the whole venture would collapse.

THE LAW

25. It should perhaps be pointed out at this point that the issue as to whether damages was an adequate remedy was never argued in the Court below, nor the question as to whether the defendant had the ability to pay any damages that might be awarded. The judge cited no authorities for the views he came to on those matters.

26. The three points argued on behalf of the defendant on appeal were also not raised in the Court below.

27. Before dealing with the defendant's case more fully, it is necessary here to state the general principles of the law. I begin with a passage taken from Spry on the Principles of Equitable Remedies, 4th ed., where the learned author says (at p. 60)-

"But land is property that has a fixed location and a special value, and ordinarily damages are not to be regarded as an adequate substitute for the right either to acquire or dispose of an interest in it. Even indeed if the purchaser intends to purchase the land in question merely in order to be able to sell it later at a profit, damages will not be regarded as an adequate remedy for him.": vide dictum of Barwick, C.J., in Pianita v National Finance & Trust (1964) 38 ALJR 232,233.

And(at P. 439) -

"Where, in the course of proceedings for the specific performance of a contract, it is sought to restrain by interlocutory injunction the carrying out of particular acts it is necessary to analyse carefully the implications of the positive acts that it is sought to have ultimately performed. Every positive obligation, that is, every obligation to perform an act, necessarily involves an obligation not to perform other inconsistent acts."

28. In Chitty on Contracts, 26th ed., Vol. 1, para. 912 (at p. 559) -

"Also where a binding contract is subject to a condition precedent, a term may be implied that a party will not do an act which, if done, would prevent fulfilment of the condition. These implications are not inevitable, and the nature of the contract may indicate otherwise. As a matter of construction, in the absence of clear express provisions to the contract it will be presumed that it was not the intention of the parties that either should be entitled to rely on his own breach of the contract to avoid the contract or obtain a benefit under it."

And in the same work, at para. 1864 (at p. 1204) -

"The law takes the view that the purchaser of a particular piece of land or of a particular house (however ordinary) cannot, on the vendor's breach, obtain a satisfactory substitute, so that specific performance is available to him. It seems that this is so even though the purchaser has bought for resale. Even a contractual licence to occupy land, though creating no interest in the land (can) be specifically enforced."

"A vendor of land, too, can get specific performance; for damages will not adequately compensate him if he cannot easily find another purchaser or if he is anxious to rid himself of burdens attached to the land. It seems to make no difference that the land is readily saleable to a third party; or that after contract but before completion a compulsory purchase order is made in respect of it. Yet in such cases damages (based on the difference between the contract price and the resale price, or the compensation payable on the compulsory acquisition) would seem normally to be an adequate remedy."

29. Still on general propositions of the law, I should, refer to the well-known passage in American Cyanamid Co. v Ethicon Ltd. [1975] AC 396 where Lord Diplock said (at p. 408 B - E) -

"... the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial in establishing this right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage. If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, he would be adequately compensated under the plaintiff's undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction."

30. If there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, then the question of balance of convenience arises. In this context, my lord Kempster has referred to Hadley y The London Bank of Scotland (1865) 3 De G, J & S. 66. There the dispute between the parties arose upon a question of maintaining or not maintaining an interlocutory injunction granted in a cause which had not yet been heard. The suit was one of an alleged contract on the part of the defendants to sell to the plaintiff by private contract some leased property in London, and the defendants, resisting the performance of the contract as alleged by the plaintiff, have had awarded against them the interlocutory injunction. Turner L.J. said (at pp 70-71) -

"In a case, therefore, where there is a clear undisputed contract the Court would in my opinion interfere. But in the present case it is open to serious doubt what the result of the suit will be, and that being so, the question whether the vendor should be allowed to transfer the estate to a third party becomes a question of comparative convenience or inconvenience."

31. In the light of these authorities, it is argued on behalf of the plaintiff that the judge has acted wrongly: the way in which the judge exercised his discretion would result in injustice in that the defendant would be free to act in flagrant breach of its obligations under the Agreement. This being a sale and purchase of land, specific performance instead of damages is the proper remedy. The plaintiff's venture is such that damages are difficult to assess and the defendant's financial ability or inability to pay is a legitimate consideration.

RESPONDENT'S FURTHER ARGUMENTS

32. Returning to the arguments made on behalf of the defendant, it is stressed that if the owner of even one unit refuses to sell, the Agreement ceases to be effective as on 8th July 1992 because of "self-destruction". The content of the Agreement is that the defendant will use his special skill to perform a service for the plaintiff by putting "the project" together as a total package, and this to be done within about a month and a half. This is therefore a service contract. The terms of the Agreement do not allow a sale of only some of the units.

It is further argued that even if there was a breach of warranty by the defendant, damages would suffice. Then it is argued that the terms of the contract are vague as it is not clear which of the two different Schedules is referred to: on the signing of the Agreement, there was no finalised schedule. Our attention was drawn to a letter dated the 6th June 1992 written by the defendant to the plaintiff enclosing the schedule dated the same date for the defendant's approval. The letter goes on to say:

Please confirm your acceptance before noon 8-6-1992 so that we could negotiate with the registered owner in order to conclude the purchase prices and to finalise the schedule "A" for Memorandum of Agreement dated 28-5-1992."

By a letter dated 9th June from the plaintiff's solicitors to the defendant, there was no denial that Schedule A was not finalised, nor was the Schedule approved. The units were to be acquired "in the terms as per schedule marked 'A'": Clauses 1 and 3 of the Agreement. The Court should accordingly find that the Agreement is too vague to be enforced specifically, and it is difficult or impossible to state in an order for specific performance precisely what the defendant is bound to do in obedience to the order: Chitty (supra) para. 1884, at p. 1219.

33. As Shing Ko refused to sell, it is impossible for the defendant to perform its obligations under the Agreement, and specific performance will not be ordered against a person who has agreed to sell land which he does not own and cannot compel the owner to convey to him because the court does not compel a person to do what is impossible: Chitty (supra) para. 1883, at p. 1219.

34. As the schedule forms a necessary part of the Agreement, and there is no finalised schedule, the Agreement is not binding.

35. Also, if an injunction against the defendant is ordered, it will in effect be granting specific performance. "through the backdoor": Warren & Mendy (1989) 1 WLR 853, 867.

36. Finally damages are not difficult to assess. And the defendant will have the ability to pay damages if it succeeds in selling the units to a third party.

CONCLUSIONS

37. Whilst it is clear that the price in a contract for the sale and purchase of land is an essential term, thereby making a contract void for ambiguity or incompleteness if no price is agreed upon, in the case before us the price was in fact agreed upon as shown in a schedule annexed to the Agreement. It could be argued that the subsequent schedules, dated 3rd and 6th of June respectively, simply indicated that there were variations agreed upon by the parties after the 28th May: these variations did not necessarily affect the Agreement in such a way as to make it not binding.

38. The defendant's submission that the Agreement ceased to be a binding contract on the 8th July 1992 seems to ignore the fact that the terms of the Agreement do not necessarily lead to the conclusion argued on the defendant's behalf.

39. On the evidence, it would appear that the defendant deliberately committed a breach of its obligations in the Agreement. The Agreement is one of sale and purchase of land and agency in the sale and purchase of land. In Giles & Co. v Morris (1972) 1 WLR 307, Megarry, J. said (at p. 317H - 318D):

"There is a further consideration. The obligation to enter into a service agreement is merely one part of a contract which deals with many other matters; and that obligation is the only part of that complex which is said not to be specifically enforceable. Now there is authority for saying that the mere presence in a contract of one provision which, by itself, would not be specifically enforceable (because, for example, it requires the performance of personal services) does not prevent the contract as a whole from being specifically enforced. This is so even if the obligation to perform personal services could be enforced only, for instance, by ordering sequestration: see Fortescue v Lostwithiel and Fowey Railway Co. [1894] 3 Ch. 621; Fry on Specific Performance 6th ed. (1921), p. 53. In such cases, the contract must be regarded as a whole, and the court may refuse to let the disadvantages and difficulties of specifically enforcing the obligation to perform personal services outweigh the suitability of the rest of the contract for specific performance, and the desirability of the contract as a whole being enforced. After all, pacta sunt servanda."

"One day, perhaps, the courts will look again at the so-called rule that contracts for personal services or involving the continuous performance of services will not be specifically enforced. Such a rule is plainly not absolute and without exception, nor do I think that it can be based on any narrow consideration such as difficulties of constant superintendence by the court. Mandatory injunctions are by no means unknown, and there is normally no question of the court having to send its officers to supervise the performance of the order of the court. Prohibitory injunctions are common, and again there is no direct supervision by the court. Performance of each type of injunction is normally secured by the realisation of the person enjoined that he is liable to be punished for contempt if evidence of his disobedience to the order is put before the court; and if the injunction is prohibitory, actual committal will usually, so long as it continues, make disobedience impossible. If instead the order is for specific performance of a contract for personal services, a similar machinery of enforcement could be employed, again without there being any question of supervision by any officer of the court."

40. The considerations mentioned above are in my view sufficient for this Court to hold that there are serious issues to be argued at the trial.

41. I next come to the issue of balance of convenience, and accept in full the arguments advanced on behalf of the plaintiff in reply to the defendant's submission. The grant of an injunction would substantially increase the chances of performance of the Agreement. If injunction is refused, the defendant would almost certainly not perform its obligations.

42. In the Notice of Appeal, the plaintiff as appellant prays that the order of Mortimer, J. dated the 10th August 1992 discharging the ex parte order of the 1st August be set aside and the said ex parte order be continued until the determination of the plaintiff's inter-partes summons taken out on the 3rd August 1992.

43. I would allow the appeal, set aside the order of Mortimer, J. discharging the ex parte order of the lst August and order that the order of the 1st August be continued until the determination of the plaintiff's interpartes summons or further order.

44. Strictly speaking, it would now be open to the plaintiff to pursue the inter-partes summons and the defendant to meet it in the usual way. However, it should be said that such a course would cause undue delay, expense and duplication. If the inter partes summons is to be heard, the Court's decision may be appealed against, and there could well be two judgments of this Court dealing with very similar points, in fact and in law. This course is clearly undesirable.

45. Finally, after hearing submissions on the question of fortification by the plaintiff of an undertaking in damages, I take the view the defendant will be sufficiently protected by an order, which I would make, that that the plaintiff furnish fortification in the sum of $5 million in cash or by a bank guarantee within 14 days in the form and for the duration to be determined by a Master.

Kempster, JA:

46. This is an appeal from an order made and a reserved judgment given by Mortimer J on 10 August last discharging an order which he had made ex parte on the first day of the month restraining the defendants from concluding, completing or procuring, other than with the plaintiffs, agreements in relation to a certain property. Subject to amendment and an undertaking the judge suspended the discharge of his order until 24 August. We further suspended the time until today.

47. On 31 July the plaintiffs, Chinapro Ltd, had issued a writ with Statement of Claim endorsed claiming against the defendants, Century Fame Ltd, inter alia, specific performance of an alleged agreement in writing, incorporating an annexed schedule, dated 28 May 1992 whereby, subject to conditions, the defendants had undertaken to sell or to acquire for sale to the plaintiffs, with vacant possession by 28 February 1993 and at the prices and on the terms set out in the schedule, the shops and flats comprised in 2-6 Tak Cheong Lane, Yaumati for $53,250,000; to include a service charge. Subject to special provisions in relation to the flats on the second floor of No 4 and on the first floor of No 6 the defendants warranted their ability to acquire these premises. Mr Daniel Kwan, a director of the plaintiffs, affirmed that the terms of the schedule had been subject to variation and that the parties had agreed that the total "acquiring sum" was $53 million. The estimated site value of the property, he further affirmed, was $62,100,000 or thereabouts; the plaintiffs having paid $200,000 to the defendants who, during June, had sought to rescind the agreement and to return that sum. He also exhibited a letter from the defendants' solicitors dated 29 June repudiating the alleged agreement of 28 May on the basis that Shing Ko Development Co Ltd ("Shing Ko"), the registered owners of the second floor at No 4, were not prepared to dispose of their flat. On the basis of a telephone conversation which took place on or about 28 July Mr Kwan went on to affirm a belief that the defendants were both intent on securing all the shops and flats in the property for Shing Ko and in no position to pay substantial damages. Nonetheless the plaintiffs were holding the defendants to the agreement the terms of which, it appears, were in part concluded orally. Only copies of the agreement and schedule were exhibited and the plaintiffs failed to produce to us the original schedule as required by paragraph 4(1) of the Practice Direction on Evidence - Affidavits.

48. It was after reading this affirmation and the Statement of Claim that Mortimer J made his ex parte order which was to run until the hearing of an inter partes summons on 7 August or further order.

49. On 3 August the plaintiffs duly issued such a summons for the continuance of the relief granted until trial or further order and all parties came before the judge on 7 August with the result already outlined. He treated the hearing as if it were an application by the defendants to discharge the ex parte order and adjourned the plaintiffs' summons. By then an affirmation had been made on behalf of the defendants by Mr Cheung Hung, one of their directors, accusing the plaintiffs of failure, at the ex parte stage, to make full and frank disclosure of the fact that their issued and paid-up capital amounted to no more than $10,000 and of the terms of the letter that Shing Ko had written to the defendants' solicitors on 29 June reiterating their determination not to sell "at this time". By the special provision relating to that flat to be found in clause 5 of the alleged agreement the defendants had until 28 February 1993 to secure vacant possession and were liable to pay to the plaintiffs $1 million liquidated damages in default. While the plaintiffs' share capital was relevant to the worth of thir cross-undertaking as to damages the judge make no reference to non-desclosure.

50. What Mortimer J did determine was that "whether damages are a sufficient remedy in any particular case ... must be considered objectively and not in relation to the particular defendants' worth ... ". This is a conclusion in flat contradiction to the approach reflected in the oft-cited speech of Lord Diplock in American Cyanamid v Ethicon [1979] AC 396 at p 408 where he said: -

"As to that, the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage."

51. The judge also erred in holding that there could be no decree of specific performance now. The right to sue for that relief, which in the first instance may be declaratory in form, is not to be equated with a cause of action at law. All that is required is for a plaintiff to show circumstances justifying the intervention of a court of equity. Hasham v Zenab [1960] AC 316. The judge erred in principle and, in consequence, we are entitled to exercise our discretion to continue or to discharge the ex parte injunction.

52. The object of an interlocutory injunction, usually negative in form, is to maintain the status quo, including the ability of defendants to fulfill their alleged contractual objections, until the trial of the action. With few exceptions a cross-undertaking in damages by a party able to satisfy them is required. In that context I now read on in Lord Diplock's speech:

"If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, he would be adequately compensated under the plaintiff's undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction."

Mr Cheung Hung's unchallenged evidence is immediately in point but before us an offer has been made by the plaintiffs to fortify any cross-undertaking as to damages by a bank guarantee in terms satisfactory to a master in the sum of $5 million. In the circumstances we must address the question whether or not there is a serious question to be tried or whether, as the judge found, the plaintiffs are virtually bound to succeed on liability; whatever be the appropriate remedies at trial.

53. Where there is a contract relating to land which clearly would entitle the plaintiffs to a decree of specific performance the court will grant an injunction restraining the vendor from selling elsewhere. Where the position is not clear the court will seek a balance of convenience; the position of plaintiff purchasers normally being protected by the registration of a lis pendens. Hadley v London Bank of Scotland (1865) 3 De G J & Sm 63 (a decision of the Court of Appeal in Chancery). In Hong Kong a lis pendens is registrable under ss 2 and 14 of the Land Registration Ordinance (Cap 128). I do not accept that damages for repudiation of the agreement or for breach of warranty could easily be assessed.

54. If, as the judge found, no apparent issue arises as to the defendants' eventual liability and if the document of 28 May was, on its proper construction, a contract for the sale and purchase of land, I would readily be disposed to grant the plaintiffs the interlocutory relief they seek since an award of damages against a "shelf-company" can hardly be regarded as an adequate remedy. The submission that, by breach of contract, the defendants may sufficiently enrich themselves to be able to pay damages does not commend itself to me. However, in accordance with the Respondents Notice Mr Mok, for the defendants, has satisfied me that, by reason of the dates of the sale and purchase agreements between the defendants and the owners of the various shops and flats appearing in successive versions of the schedule, questions arise as to the contractual effect of the document of 28 May and related discussions and that, in any event, the court of trial may be concerned with a contract of agency or brokerage rather than for sale and purchase of land. If that be right, a judgment for specific performance will not normally be pronounced. Brett v East India and London Shipping Co Ltd (1864) 2 Hem & M 404. Into the bargain any such decree would require the supervision of the court. On the other hand Giles v Morris [1972] 1 WLR 307 at pp 317 and 318 is a relevant authority suggesting that in certain circumstances a decree of specific performance may be granted against an agent. Serious questions as to liability and available remedies therefore fall to be determined at trial.

55. It remains to determine whether or not the status quo should be preserved pending trial in circumstances where the plaintiffs, possibly able to register their interest in the property in whole or in part, might secure at least a negative injunction at trial and the defendants, not precluded from other gainful activity, would thereby be encouraged to perform their alleged contractual obligations. Evans Marshall & Co Ltd v Bertola SA and another [1973] 1 WLR 349 at p 379 per Sachs LJ.

56. In my opinion the balance of convenience tilts in favour of the continuance of the ex parte injunction until the hearing of the inter parte summons or further order if the plaintiffs fortify their cross-undertaking as to damages either as offered or by paying $5 million into court on interest bearing account, within 14 days. I would allow the appeal accordingly; granting both parties general liberty to apply. I would also invite counsel to draft and submit to us a draft order for approval.

57. Before parting with this appeal I think it appropriate to express my regret that the defendants were not put to their election to seek an adjournment in order to file such further evidence as they wished to adduce when they came before the judge on 7 August. The possibility of a further hearing and of a further appeal in relation to interlocutory relief might thereby have been avoided. It will be a matter of concern to determine what orders for costs are appropriate should any such further hearings take place.

Jones, J.:

58. I agree that this appeal should be allowed.

59. Although Mortimer, J. in his judgment said that there was no admissible evidence before him that Shing Ko Development-Co. Ltd. and the defendant were conspiring together to induce a breach of contract, there is in fact evidence from Mr Daniel Kwan, the plaintiff's director that I both Mr Wong Kei, a director of the defendant and Mrs Laura Wong who is believed to be a director, indicated to him that the defendant would definitely not acquire the building for the plaintiff but would sell the properties to another party. This evidence is undoubtedly admissible under 0.41, r.5(2) of the Rules of the Supreme Court for the source of the information and grounds for his belief have been set out.

60. If the injunction is discharged, the defendant will in all probability arrange for the properties to be sold to another party thereby effectively depriving the plaintiff of his claim for a decree of specific performance. The court should be slow to encourage such a result.

61. Whereas Mr Yu_, counsel for the plaintiff, submitted that the contract is for the sale and purchase of land, the defendant was clearly acting as a broker. In these circumstances, as was asserted by Mr Mok, counsel for the defendant, the agreement of the 28th May may be a contract for services. Whilst an order for specific performance is not normally made for a service agreement, the present case has some similarities with C.H. Giles & Co. Ltd. v. Morris [1972] 1 WLR 307, a decision of Megarry J. that has been cited by the other members of this court.

62. I am quite satisfied that there are serious issues to be determined at the trial with regard to liability and damages.

63. In my judgment, the balance of convenience lies fairly and squarely with the plaintiff for the ex parte injunction to continue until the hearing of the inter partes summons or further order, particularly as the plaintiff has agreed to fortify its cross-undertaking as to damages.

64. I would like to add that I concur with the views already expressed that it will be unfortunate if the hearing of the inter partes summons is pursued which will involve further delay and expense.

Representation:

Benjamin Yu and Chan Chi-hung (M/s Wong & Chan) for Appellants

Y.C. Mok (M/s Y.T. Chan & Co) for Respondents