Raingate Ltd v. Yetonce Ltd and Another

DCCJ3540/2015

CIVIL ACTION NO 3540 OF 2015

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DECISION

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1.This is the plaintiff’s application for summary judgment against both the 1^st and 2^nd defendants.

BACKGROUND

The parties

2.The plaintiff is the registered owner of the outer walls of “V Causeway Bay”, a building located in Causeway Bay, Hong Kong.

3.The 1^st defendant is the registered owner of the premises known as and situate at “Shop No 1 on the ground floor and the use of the space above the shop on the 1/F to 3/F” of the building (referred to as “Shop No 1”).

4.The 2^nd defendant was, at the material time, the tenant of Shop No 1.

The claim

5.The claim concerns the use of the outer walls above Shop No 1 (the “Outer Walls”) of the building.

6.There is no dispute that during the time of the 2^nd defendant’s tenancy of Shop No 1 it used the Outer Walls for the support and/or affixation of air conditioning equipment.[1]  The 2^nd defendant says that the 1^st defendant, its landlord, permitted it to use the Outer Walls in this manner.  The 1^st defendant denies this.  In any event, the plaintiff contends that neither defendant had any right to use or permit others to use the Outer Walls such that this constituted a trespass to and/or unlawful use of the Outer Walls.[2]

7.Since the commencement of this action the 2^nd defendant’s tenancy of Shop No 1 has expired and the air conditioning equipment has been removed such that the various injunctive relief, originally sought under paragraph 1 of its summons, has been abandoned by the plaintiff.

8.The plaintiff, however, seeks an order in terms of paragraph 2 of its summons:-

“2. Interlocutory judgment be entered for the Plaintiff against the 1^st and 2^nd Defendants in relation to the claims set out in paragraph 14 of the Statement of Claim, for damages and mesne profits to be assessed.”

The principles

9.There is no dispute as to the principles involved in a summary judgment application. In the recent decision of On Loong Investment Company Ltd v IO of Wah Luen Industrial Centre, HCA 341/2014 (unrep, 8.1.2016), Au Yeung J recited these principles as follows (at para 20):-

“The following principles are well-known:-

(1) The burden is on the defendant to show a bona fide defence or some other reason for a trial. This is normally done by affidavit, and it is incumbent upon the defendant to “condescend upon particulars” in such affidavit.

(2) The mere assertion in an affidavit of a given situation by the defendant does not, ipso facto, ground leave to defend.

(3) Order 14 is only for clear cases, and ought not be applied in cases where there are serious material factual disputes, or a difficult point of law not fit for summary determination, unless it is obvious that the defence put forward is “frivolous and practically moonshine”.

(4) The court should not embark on a mini trial on affidavits.  Where there are factual disputes, the issue is not whether the defendant’s assertions are to be believed; it is whether those assertions are believable.”

See also Hong Kong Civil Procedure 2016, Vol 1 at Note 14/4/9

THE PARTIES’ CASES

The plaintiff’s stance

10.The plaintiff argues that the defendants neither raise any defence nor triable issues in respect of this claim.  Although there may be a question of permission to use the Outer Walls (which has been asserted by the 2^nd defendant but which the 1^st defendant denies), the plaintiff says that this is a  matter between the defendants and that it should not be dragged into that dispute.  From its perspective, nothing has been raised by the defendants that can credibly challenge its own claim.

11.It is necessary, in light of the principles, to look at each contention raised by the respective defendants.

The 2^nd defendant’s stance

12.The 2^nd defendant raises two issues which it says are triable.

First issue

13.As mentioned above, the 2^nd defendant admits that it placed the air conditioning equipment on the Outer Walls.  This was in or around October 2012 after it entered into a tenancy agreement with the 1^st defendant.  Its defence is that it was the 1^st defendant, through its estate agent (a Mr Telly Lam), that expressly permitted the 2^nd defendant to place the air conditioning equipment there. In other words, that the 1^st defendant “caused or permitted” the same. It contends that, as a result, it is not liable to the plaintiff.

14.At the same time, however, the 2^nd defendant does not say that the plaintiff was involved in granting this permission (either directly or by attribution) and raises no credible defence in this regard.

15.It seems to me that if the 2^nd defendant is arguing that only the 1^st defendant “caused or permitted” the Outer Walls to be used, it is a matter that must be taken up with the 1^st defendant, and does not constitute a defence to the plaintiff’s claim against it.

16.I agree with Mr Ho, counsel for the plaintiff, that there is no triable issue on this point.

Second issue

17.The 2^nd defendant further relies on an acquiescence/estoppel defence against the plaintiff. This is raised at paragraphs 14A and 14B of its amended defence:-

“14A. Further or alternatively, without prejudice to the pleaded defence hereof:-

(a) At all material times, the alleged (metal) support or affixation (on the Outer Walls above Shop No. 1) had already existed, installed and had been used by the previous tenant, one Wang Po Dispensary Co. Ltd （宏保中西藥房）, of the same Shop well before the commencement of the 2^nd Defendant’s tenancy of the Shop in or about October 2012.

(b) The alleged (metal) support or affixation was very conspicuous and easy to be seen.

(c) Upon the commencement of the said tenancy, with the permission and direction of the 1^st defendant, the 2^nd defendant had started to use the existing (metal) support and affixation (on the Outer Walls above Shop No. 1), and it had set up and placed the Air-Conditioning Equipment thereon, which at all material times was also very conspicuous and easy to be noticed.

(d) The Plaintiff had actual (or ought to have) knowledge of the matters pleaded in the above.

(e) Despite the Plaintiff’s such knowledge, at all material times it had made no objection to (but had impliedly allowed) the previous tenant’s conspicuous use of the alleged (metal) support or affixation (as stated in the above).

(f) Likewise, at all material times, the Plaintiff had also made no objection and had impliedly allowed the 2^nd Defendant’s subsequent use and placing the Air Conditioning Equipment thereon since in or about “October 2012”.

(g) The Plaintiff only made the alleged complaint or demand for “the 1^st time” in the alleged letters dated “14^th July 2015” and “23 July 2015”.

(h) In the premises, the Plaintiff is now estopped from asserting its right (if any) by reason of its own action over years, and/or the implied representation that the 2^nd Defendant would be allowed to use the alleged (metal) support or affixation (on the Outer Walls above Shop No. 1) for placing the Air-Conditioning Equipment thereon during its tenancy period.

14B. Further or in the 2^nd alternative, by reason of the matters pleaded in Paragraph 14A above, the Plaintiff at the material times had also acquiesced (and/or had granted an implied licence to) the 2^nd Defendant’s use of the alleged (metal) support or affixation (on the Outer Walls above Shop No. 1) for placing the Air-Conditioning Equipment thereon during its tenancy period.”

18.Mr Ho relies on the following principles, which have not been disputed.[3]

(a) Estoppel

19.The relevant principles in this regard are summarised in Sealegend Holdings Ltd v China Taiping Insurance (HK) Co Ltd, HCAJ 95/2012 (unrep, 24.10.2014) at paras 62-64 (per Au-Yeung J):-

“(1) Waiver by estoppel” is a doctrine substantially similar to “promissory estoppel”, referring to situations in which it is alleged that one party to a legal relationship has made a clear and unequivocal promise that he will not insist upon his strict legal rights against the other, and detrimental reliance by the promisee renders it inequitable for the promisor to go back upon his promise;

(2) The promisor must have by words or conduct conveyed a clear and unequivocal promise to the promisee that the promisor will not enforce or exercise some of those rights, duties or powers.  The promise must also reasonably rely on that promise and is induced to alter his/her position such that it would be inequitable for the promisor to renege on his/her promise;

(3) Where conduct is relied upon as conveying the promise, the promisee must establish that the conduct relied upon is not capable of more than one explanation, since such conduct is indeed equivocal;

(4) By their very nature, silence and inaction are equivocal.”

(b) Acquiescence

20.Insofar as the defence of “acquiescence” is concerned, the relevant principles are summarised in Tong Tim Nui v Hong Kong Housing Authority [1999] 4 HKC 466 at 494I-495I (Rogers JA).  In gist, the essential elements are that (p 495A-D):-

“(1) The 2^nd defendant must have made a mistake as to its own legal rights;

(2) The 2^nd defendant must have expended some money or must have done some act on the faith of its mistaken belief;

(3) The plaintiff must know of the existence of its own right which is inconsistent with the right claimed by the 2^nd defendant;

(4) The plaintiff knew of the 2^nd defendant’s mistaken belief of its own rights;

(5) The plaintiff must have encouraged the 2^nd defendant in its expenditure of money or in the other acts which it has done, either directly or by abstaining from asserting its legal right.”

21.Together with its pleaded case on the Second Issue (above) Mr Ma, counsel for the 2^nd defendant, submits that the air conditioning equipment was installed at a conspicuous part of the building such that it was visible from the street below.  And that the plaintiff, being the owner of the Outer Walls since 2002, must have known that the metal support and/or air conditioning equipment was placed there (at least much before July 2015) but it chose to do nothing.  

22.At the very least, he says, the nature and extent of the plaintiff’s “knowledge” must be an issue for trial.  He relies on the case of Winland Finance Ltd v Profit Fine Ltd And Another, HCA 1045/2005 (unrep, 10.1.2006) to argue that summary judgment cannot be granted.

23.Mr Ho dismisses this analysis on the basis that the estoppel/acquiescence argument fails at the threshold stage on the basis that all the elements have not been established, more particularly detrimental reliance.  He argues that there is no causal link between the inaction of the plaintiff and any detrimental reliance on the 2^nd defendant’s part, which has not been pleaded.

Analysis

24.I consider the case of Winland in more depth.  In my view, there are some similarities to the present case.  The background is as follows (per Deputy High Court Judge Muttrie):-

“1. The plaintiff (“Winland”) is the mortgagee of premises on the 2^nd floor of a building in Kwai Chung. The 1^st defendant (“KCNH”) and the 2^nd defendant (“Unicon”) are respectively the tenant and the landlord of premises on the ground and first floor of the building where KCNH operates an “elderly home”, i.e. an home for the elderly, or an old people’s home. Winland’s claim is for an injunction to restrain the defendants from operating the home and for damages and other relief. Winland now applies for summary judgment.

2. The parties’ relations within the building are regulated by a Deed of Mutual Covenant (“DMC”) dated 20 March 1975. Winland claims that KCNH operates the old people’s home in breach of the terms of the DMC and that, as evidenced in the First Schedule of the tenancy agreement between Unicon and KCNH, Unicon agreed with and allowed KCNH to do so, and that by reason thereof Winland has suffered loss and damage.

3. KCNH’s defence is that there was no breach of the terms of the DMC. If there was any breach, Winland or its mortgagor through the Incorporated Owners (“IO”) of the building waived its rights to enforce the DMC. Further, Winland is estopped from relying on the relevant term of the DMC, by reason that it knew that KCNH had been running the old people’s home since May 2002, and took no action until it issued the Statement of Claim, and by reason of a representation by the Chairman of the IO that it would permit KCNH to operate the old people’s home, as a result of which representation KCNH spend over $2.5 million to start the elderly home.

4. Unicon’s defence is that Winland is not a mortgagee in possession and therefore has no locus to sue under the DMC. Further, KCNH is in fact a nursing home, and its operation is not contrary to the DMC. In addition, Winland is estopped from enforcing its right, if any, under the DMC by reason of representations made by the Chairman of the IO, on which Unicon acted to its detriment; and finally, that Unicon itself never authorised any breach of the DMC.”(Emphases added)

25.Winland’s argument was that (1) it did not know, until shortly before the Statement of Claim was issued, that the old people’s home was operating below its property, as it had not been told by the Incorporated Owners about this; and (2) whatever the Chairman of the Incorporated Owners may have represented to the tenant, in granting permission for the old people’s home to operate, could not be attributed to it.

26.On the question of representation, the learned judge agreed that he “cannot see that any representation made by the IO could be regarded as binding on Winland so as to estop Winland from enforcing its right under the DMC.”[4]  This lends support to my decision on the First Issue (above) that any permission that may have been given to the 2^nd defendant by the 1^st defendant does not raise, without more, any triable issue as against the plaintiff’s claim.

27.On the Second Issue, however, the learned judge was alive to the fact that Winland, despite there being no evidence that it was anything but silent or inactive,might have been expected to have known about the activity much earlier than it purports to have known about it:-

“43. The fact here is that Winland was in the position of an owner before the old people’s home started its operations. Winland was in a position to know when it started them, even if it did not receive any communication on the matter from the IO.  One might expect a reasonably prudent finance company, and mortgagee in possession, to check from time to time on the state of its property, which is after all its investment, or all it has left of its investment, by which it might recoup debts owed by the mortgagor.  There is certainly no evidence to say specifically that Winland did not know, until some time in 2004, that the old people’s home was in operation, or why it did not know that.

28.It is argued by Mr Ma that the plaintiff, as owner, must have known all along that the metal support and/or air conditioning equipment was placed on the Outer Walls but that it made no objection and impliedly allowed such use to continue. He relies on the following dicta of the learned judge:-

“51. However, the fact remains that Winland effectively let the defendants carry on and set up the old people’s home and took no action until late 2004; and there is no explanation as to why it did this.  Although its director says, “we were never told”, there is no evidence to say “we never knew”; and I have indicated above my view that a reasonably prudent mortgagee in possession might be expected to check the property from time to time.”

29.In my view, the nature and extent of the plaintiff’s own state of knowledge must be relevant to determination of the Second Issue. Although there is evidence from the plaintiff that “it had no actual knowledge of the trespass until July 2015”[5] and that “it was simply unaware of the existence of the acts of trespass at all material times until July 2015”[6] it begs the question why this was so.  No explanation is given why it only noticed the alleged trespass in July 2015 and not earlier given the apparent conspicuous visibility of the air conditioning equipment (see paragraph 21 above). Indeed the evidence does not provide a complete but only a partial picture, which does not go far enough to deal with this point.  I adopt the rationale of the learned judge:

“54. It must be remembered, however, that these are proceedings under Order 14. For judgment to be granted, it would be necessary to show that Winland’s inactivity could not under any circumstances amount to an unequivocal representation that it would not enforce its legal rights. It seems to me that this cannot be established without knowing what Winland’s own state of knowledge was.”

Detrimental reliance

30.As stated above the plaintiff argues, on estoppel, that detrimental reliance has not been pleaded such that there is no causal link between the plaintiff’s inaction and the reliance of the 2^nd defendant.

31.Given my observations above, this argument invariably is subsumed within the estoppel/ acquiescence defence. Whilst I do not doubt the validity of the principles set out in Sealegend, the question of the plaintiff’s knowledge is in issue such that the same has not been properly answered in the evidence which led the learned judge in Winland to conclude as he did at para 54 of the Judgment (see para 29 above).

32.Necessarily, being one ground of that defence, whether the plaintiff can succeed on the detrimental reliance depends on how the estoppel/acquiescence issue as a whole plays out.  In short, it cannot be resolved at this summary stage for the reasons I have given above.

33.As a result, I hold that the 2^nd defendant has a real or bona fide defence as to whether the plaintiff acquiesced, or is otherwise estopped, from enforcing its legal rights against the 2^nd defendant.  Leave to defend is granted on this ground.

The 1^st defendant’s stance

34.The 1^st defendant accepts that it did not have any right to use or permit others to use the Outer Walls but essentially puts the 2^nd defendant’s case to proof.  It denies that it “caused or permitted” the 2^nd defendant to use the air conditioning equipment on the Outer Walls.  Notably, it does not plead any defence in relation to acquiescence or estoppel.

35.As against the plaintiff Miss Lee, counsel for the 1^st defendant, argues that the 1^st defendant’s liability for the trespass by the 2^nd defendant depends on whether the plaintiff can prove that the 1^st defendant had caused or permitted the same: Field Common Ltd v Elmbridge BC [2008] EWHC 2079 (Ch).  

36.Mr Ho says that the 1^st defendant has failed to condescend upon the particulars with evidence and it is for the 1^st defendant to discharge its burden to raise a triable issue.

Analysis

37.I agree with Mr Ho that the 1^st defendant’s purported defences do not sufficiently challenge the plaintiff’s case.

38.The 1^st defendant’s main argument is that “(no) consent has been given by the 1^st defendant to the 2^nd defendant to use the Outer Walls, whether expressly or impliedly.”[7]

39.It is clear that the 2^nd defendant has alleged that Mr Telly Lam gave the permission whilst acting on behalf of the 1^st defendant. In response, however, Miss Lee simply submits that he has failed to file any evidence in support of the bare assertion.  Nothing is said further on this point. Crucially, the 1^st defendant’s evidence does not dispute Mr Telly Lam’s apparent role.

40.The 1^st defendant also does not address the 2^nd defendant’s allegation that “the alleged metal support or affixation had already been installed and existed and had been used by the previous tenant of the same Shop …… for its own air conditioning equipment well before the commencement of the 2^nd defendant’s tenancy.”[8]  Again, it is not clear why the 1^st defendant does not condescend to this allegation given that again there is no apparent dispute (by the 1^st defendant’s evidence) that this state of affairs existed.

41.Miss Lee suggests that if the court sides with the 2^nd defendant’s allegations in relation to, inter alia, Mr Telly Lam and the previous tenant, then it is “embarking on a mini trial of affidavits to draw a conclusion that D1 is not credible.”[9] This is not the case. Had there been evidence to directly contradict the 2^nd defendant’s pleaded case and/or evidence and the court then reached a conclusion in this application by deciding between contradictory versions, this might be considered incorrect in light of the principles. However, this situation has not arisen. The 1^st defendant’s allegations have not been pleaded nor do they appear in its affirmation evidence – they are simply submissions. There is a gap in the 1^st defendant’s explanation.

42.In addition to the evidence put forward and a party’s pleaded case, a court is also entitled to consider the inherent probability of a defence raised.

43.It is not disputed that the relationship between the 1^st defendant and 2^nd defendant was governed by the tenancy agreement dated 12 October 2012.  Clause 16 thereof required permission to be sought by the landlord (the 1^st defendant) before any air conditioning equipment could be installed. Indeed, this is how the 2^nd defendant says permission was granted to it.  The 1^st defendant simply denies that it granted any permission.

44.It is unrealistic to argue, in my view, that the air conditioning equipment having been installed in October 2012 would have been allowed to remain for a period of three years, in violation of the tenancy agreement, without the 1^st defendant having permitted it to be there. No credible explanation is offered by the 1^st defendant as to why it could not have done anything to address earlier the apparent trespass.  

45.Without dealing with the issues raised in this application, particularly those facts that are raised in the 2^nd defendant’s evidence, which is incumbent upon it to do, there leaves a gap in the 1^st defendant’s explanation as stated above.

46.The test, as cited by the plaintiff, states that is “it is incumbent upon the defendant to condescend upon particulars.”  Failure to do so must be viewed with circumspection – I have made my observations above.  In my view it has failed to raise any bona fide defence to the plaintiff’s claim nor provided any other reason for trial.

47.Interlocutory judgment, as sought, is entered against the 1^st defendant.

CONCLUSION

48.In respect of the claim against the 1^st defendant, I make an order in terms of paragraph 2 of the plaintiff’s summons.

49.In respect of the claim against the 2^nd defendant, I grant unconditional leave to defend.

COSTS

50.The 1^st defendant is to pay the costs of the action, including of this application, to be taxed if not agreed, with certificate for counsel.

51.As to the application against the 2^nd defendant, the general rule is that costs shall be in the cause and I so order, with certificate for counsel.

52.All costs orders are nisi and shall be made absolute in the absence of any application to vary within 14 days of this decision.

53.Finally, I thank all counsel for their assistance to the court.

Mr Martin Ho,instructed by Vivien Chan & Co, for the plaintiff

Miss Phyllis Lee, instructed by Lui & Law, for the 1^st defendant

Mr Billy NP Ma, instructed by William Sin & Co, for the 2^nd defendant