Equity Nominees and Secretarial Ltd v. China Spring Hong Kong Ltd

DCCJ 758/2021

[2021] HKDC 687

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 758 OF 2021

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BETWEEN

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Before: His Honour Judge Ko in Chambers (Open to Public)

Date of Hearing: 4 June 2021

Date of Decision: 4 June 2021

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DECISION

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1.This is the adjourned hearing for the plaintiff’s summons for an injunction against the defendant.

2.When the summons first came before the court on 26 March 2021, the presiding judge gave directions for filing of evidence and adjourned the summons to today for argument upon the defendant’s undertaking not to enforce any right to re-enter the leased premises until 31 May 2021 (“the Undertaking”).

3.Today, the plaintiff’s counsel (Mr Stephen Siu) applies to withdraw the summons and asks for costs against the defendant on the ground that the plaintiff has achieved what it sought by virtue of the Undertaking.

4.The defendant’s counsel (Mr Victor Lui), on the other hand, argues that the summons should be dismissed with costs to the defendant.  Alternatively, he suggests me to stand over the issue of costs to trial.

Background

5.By a tenancy agreement dated 30 April 2019, the defendant as landlord let to the plaintiff as tenant a residential flat at South Horizons, Ap Lei Chau for a term of 2 years from 1 June 2019 to 31 May 2021.

6.It is the plaintiff’s pleaded case that the tenancy agreement was subject to oral and/or implied terms apart from the express terms stated therein, and that the defendant was in breach of the tenancy agreement in failing to give peaceful enjoyment of the premises to the plaintiff and in failing to maintain and keep in good order the floorings and ceilings in the master bathroom and guest bathroom of the premises.  On 19 February 2021, the defendant, through its solicitors, served on the plaintiff a Notice of Breach requesting the latter to allow the defendant or persons authorized by them to enter the premises to carry out repair, and threatening to exercise its right of re-entry to determine the tenancy and to forfeit the rental deposit.  As a result, the plaintiff suffered loss and damage estimated to be well above HK$1 million.

7.In its defence, the defendant denies there was any oral or implied term or that it had any duty to check and examine the floorings and ceilings in the master bathroom and guest bathroom of the premises.  In about December 2020, the defendant became aware of water seepage from the leased premises to the flat below.  There was then a Nuisance Notice dated 22 January 2021 from the Food and Environmental Hygiene Department requiring the defendant to repair the branch drainage pipe connected to the floor drain at the guest bathroom of the premises.  The defendant maintains that the Notice of Breach it sent to the plaintiff was lawful, reasonable and legitimate in light of the plaintiff’s repeated refusal to allow the defendant to send contractors to inspect and carry out necessary repair.  The plaintiff only allowed the defendant’s contractor to enter the premises for inspection on 2 March 2021 after the Notice of Breach. And the defendant denies that the plaintiff has suffered any loss and damage.

8.This action was commenced on 19 February 2021.  On 22 March 2021, the plaintiff took out the injunction summons seeking to restrain the defendant from early termination of the tenancy and re-entering of the premises until 31 May 2021.  As mentioned before, the court adjourned the summons for argument upon the defendant giving the Undertaking.

Discussion

9.Mr Lui argues that the summons should be dismissed on the following grounds:-

(a) There is no serious question to be tried, as the Notice of Breach was validly issued with sufficient basis and justification.

(b) There was no urgency or necessity for the application.

(c) Damages are adequate remedy to the plaintiff, which would preclude the grant of any injunctive relief.

(d) The plaintiff has failed to give any cross-undertaking as to damages in the event that the injunction sought is wrongly granted.

10.I do not think I should dwell on the merits of the parties’ case given the stance of the plaintiff.  This is all the more so as this action is ongoing and issues such as whether the tenancy agreement contained oral and/or implied terms is fact sensitive and cannot be resolved on affidavit/affirmation without cross-examination. 

11.The real dispute of the parties is on costs.

12.Mr Siu has referred me to Re Lucky Ford Industrial Limited [2013] 3 HKLRD 550; Re Porter Martine Joan, unreported, HCB  2757/2019, 11 December 2020; Perrine Chamonix Ltd v Star League Ltd, unreported, HCA 1139/2017, 13 September 2017 and Lionstar Manufacturing Limited v Zoo International Pte Limited, unreported, HCMP 1679/2018, 28 June 2019 for the proposition that the effective winner should be entitled to his costs.

13.In particular, the Perrine Chamonix case bears some resemblance to this case.  There, the plaintiff complained that the defendant’s property had been used as a vice establishment by the defendant’s tenant in breach of the applicable DMC.  When the defendant ignored its complaint, the plaintiff commenced proceedings and took out a summons for interlocutory injunction against the defendant aimed at stopping the operation of the brothel.  At the call-over hearing, the defendant gave an interim undertaking not to permit its premises to be used as a vice establishment and not to permit the continuation of the nuisance or annoyance.  Eventually, the defendant terminated the lease and repossessed the property.  The court granted leave to withdraw the summons and discontinue the action upon the defendant’s undertaking which basically continued the interim undertaking.

14.In ordering costs against the defendant, Deputy High Court Judge William Wong SC elaborated that:-

“25. … If, but for a plaintiff’s or an applicant’s application, he or she would not have obtained the relief he or she seeks in a writ of summons or a summons, then he or she is in effect the substantive winner of the case. The fact that a defendant consents to the claims by a plaintiff or an applicant which renders it unnecessary for the plaintiff or the applicant to continue the action or summons should not be a reason for denying the plaintiff or the applicant his or her costs…”

15.I do not agree with Mr Lui that the authorities mentioned above relate to different circumstances rendering them distinguishable.  They are testament of the application of the general principle that normally costs should follow the event.

16.In the present case, the plaintiff came to court for an injunction to restrain the defendant from early termination of the lease and early re-entering of the leased premises.  The defendant gave an undertaking effectively allowing the plaintiff to stay on until the expiry of the tenancy. In my view, it is clear that the plaintiff has achieved what it sought in the injunction summons. 

17.Three points arising from Mr Lui’s submissions bear mentioning.

18.First, he submits that the Undertaking was only temporary in nature and was given for the sole purpose of maintaining the status quo until argument. In my view, it is futile for the defendant to try to water down or avoid the undesirable effect (from the defendant’s point of view) of the Undertaking.  Mr Siu has observed that the defendant was fully aware, when it gave the Undertaking, that the injunction summons would have been spent by the time of the adjourned hearing.  I agree with him that for present purpose, I should not explore the defendant’s motivation in giving the Undertaking.  As Deputy High Court Judge Gill explained in The Bank of East Asia Ltd v Labour Buildings Ltd, unreported, HCMP 769/2002, 18 September 2007:-

“9. In the end, the defence has succeeded with its application. A consideration of the reasons by which the plaintiff chose to accede to the application and make discovery is not, I think, a matter that I should pay heed to. There are, I am sure, numerous reasons as to why one side or the other should, in effect, consent to or offer no opposition to an interlocutor application. I think it would be wrong for a court, in consideration how to exercise its discretion as to costs, to explore that party’s motivation.”

19.Secondly, Mr Lui has contended that ordering costs against the defendant would ignore the realities of the case and he addressed me on the merits of the injunction application.  As Harris J pointed out in Re Lucky Ford Industrial Ltd with reference to a winding up petition, this is the wrong approach bearing in mind the underlying objectives of the Rules of the District Court, Cap 336H:-

“14. In my view having regard to O.1A r.1 the correct approach to determining costs in cases which do not involve the court granting substantive relief is for the court first to consider the terms of settlement and assess whether the petitioner has obtained substantially what he sought in his petition. If he did it will not be necessary or appropriate for the court to consider evidence and arguments directed to the merits of the case and whether or not the petitioner would have been successful if the petition had gone to trial. The petitioner will be treated as having been successful and entitled to his costs.”

20.Thirdly, I agree with Mr Siu that it is disingenuous for the defendant to argue that it was neither urgent nor necessary for the plaintiff to take out the injunction summons.  The defendant is still contending today that the Notice of Breach was validly issued and that the injunction summons should be dismissed.

Conclusion

21.For the above reasons, I grant leave to the plaintiff to withdraw the summons.  Applying the above authorities, the plaintiff should be awarded the costs of and occasioned by the injunction summons in any event with certificate for counsel, save that the affidavits/affirmations filed by the parties should stand as witness statements so much so that their costs should be in the cause.

Mr Stephen Siu, instructed by William KW Leung & Co., for the plaintiff

Mr Victor Lui, instructed by Yung, Yu, Yuen & Co., for the defendant