Building contract: interim injunction allowing employer to recover possession in response to alleged breach of contract

In Yau Fook Hong Co Ltd v Man Cheong Construction Co ([1981] HKLR 60, HC) Y (the employer) engaged the services of M (the contractor) under the terms of a building contract providing for the construction of a block of flats. Y purported to terminate the contract in response to M’s failure to make adequate progress (the contract conferred such a right of termination). M refused to give back possession of the site. Y sought, inter alia, an interim injunction requiring M to give back possession. M disputed Y’s right to serve a notice to terminate the contract, that the purported notice had been duly served and that Y was entitled to an interim injunction. The injunction was granted since there was a serious question to be tried and damages would be an adequate remedy for the contractor but not for the employers. The employers would be able to honour the undertaking to pay damages should they fail at trial.

Fuad J. thought that it might be difficult for the contractor to persuade the court to follow the line taken by Megarry J. in Hounslow Borough Council v Twickenham Garden Developments Ltd to the effect that there might be an implied covenant not to terminate a contractual licence early and that, if this were present, the court could grant an injunction to prevent premature revocation.

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