Bontex International Ltd v. Kaiser Investment (Group) Ltd and Another

HCA 1560/2021

[2025] HKCFI 2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1560 OF 2021

_______________________

(by Original Action)

_______________________

(by Counterclaim)

_______________________

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DECISION

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1.There are two summonses calling for my determination. First, Bontex International Limited (“P”), the plaintiff in the main action, took out a summons dated 3 May 2024 (“the Striking Out Summons”) for an order that certain passages in the witness statement of Mr Hiew (“D2”), the 2^nd defendant in the main action, dated 14 March 2023 (“the D2’s WS”) be struck out.

2.Subsequently, Kaiser Investment (Group) Limited (“D1”), the 1^st defendant in the main action, and D2 (collectively “Ds”) took out a summons dated 23 July 2024 (“the Amendment Summons”) for their application to file and serve their Amended Defence and Counterclaim.

3.As pointed out by Mr Li, for P, the Amendment Summons was a direct response to the Striking Out Summons. By the proposed amendments, Ds could justify those parts of the D2’s WS sought to be expunged by P. Logically I should first dispose of the Amendment Summons.

Parties respective pleaded cases

4.To assess the relevance of the proposed amendments, it is imperative to have an understanding of the parties’ present respective cases. Both Ms Wong, for Ds, and Mr Li have given me helpful introductions to the pleaded cases of the parties. Below is my summary of their introductions.

5.P is the landlord of First, Second and Third Floors (“the Property”) of AKVO Hotel, No. 57 Jervois Street, Sheung Wan, Hong Kong (“the Hotel”). By a tenancy agreement dated 14 November 2018 (“the Tenancy Agreement”), P as the landlord rented the Property to D1 at the monthly rental of HK$220,000 for a term of three years commencing from 15 November 2018. To secure due observance and performance of the Tenancny Agreement, D2, director of D1, executed a guarantee on 2 December 2018 (“the Guarantee”).

6.D1 rented the Property for the purpose of its Chinese restaurant business.

7.P’s case is that since 15 July 2019 D1 had defaulted on rental payments and other charges and the total amount of arrears up to 14 February 2020 was HK$1,512,019.55. D1 further wrongfully terminated the Tenancy Agreement and vacating the Propety on 27 December 2019.

8.By the main action, P claims against D1 for, among other things, rental arrears, loss of rental income and consequential losses incluiding unpaid utilities and rates. P also sues D2 on the Guarantee.

9.Ds’ case is that D1 and D2 were induced by three men acting on behalf of P to enter into the Tenacny Agreement and the Guarantee respectively by certain false representations. The three men were Steward Wong, Matthew Chow and Paul Yip and they are the second, third and fourth defendants of the Counterclaim of D1.

10.The alleged false representations include:

(1)  The Property did not have any hidden problems (including structural problems);

(2)  The Property was suitable for the purpose of running a high-end Chinese restaurant; and

(3)  The Property would be managed by Hanison Project Management Limited (“Hanison”).

11.The falsity of these representations include:

(1)  The subject staircases which D1 was entitled to use under the Tenancy Agreement, i.e. the staircase connecting the 1/F and 2/F were unauthorised building structures and constituted hidden problems of the Hotel Building;

(2)  The Property was not suitable for the purpose of running a high-end Chinese restaurant due to continuous malfunctioning of the air-conditioners; and

(3)  The Property was not managed by Hanison but by Salient Property Management Limited, a company operated by the son of Stewart Wong.

12.There are other alleged breachesof the Tenacny Agreement by P such as the breach of the quiet enjoyment clause.

13.In the premises, Ds say that they legitimately rescinded the Tenacny Agreement. Alternatively, they accepted the repudiation of P and terminated the Tenancy Agreement on 11 December 2019 and surrendered the Property to P on 27 December 2019. They brought the Counterclaim for renovation costs and the operational costs of the Chinese restaurant as their loss and damage.

Ds’ proposed amendments

14.In the main, the proposed amendments concern an alleged loan agreement between D2 and Stewart Wong dated 14 November 2018 (“the Loan Agreement”). Those proposed amendments relating to the Loan Agreement are as follows.

15.Matthew Chow and Paul Yip presented to D2 the idea of a renovation sponsorship to take the lease with renovation fund. This idea was later developed into the Loan Agreement with the repayment to be negotiated subject to business performance. The Loan Agreement would kick start in tandem with the Tenancy Agreement. The loan transfer would be subject to the renovation of the interior done on site. The loan would be paid by various instalments.

16.Eventually, Stewart Wong as lender and D2 as borrower executed the Loan Agreement. By the Loan Agreement, Stewart Wong agreed to lend and D2 agreed to borrow an aggregate amount of HK$2,500,000.

17.Ds plead that the Loan Agreement is unenforceable by reason of its various contraventions of the Money Lenders Ordinance, Cap. 163 (“the MLO”).

18.Ds then pray for a declaratory relief in regard to the enforceability of the Loan Agreement and an order that the Loan Agreement be set aside. Effectively, Ds intend to add a new claim in their Counterclaim against Stewart Wong (“the Loan Agreement Claim”) by their proposed amendments.

19.The primary contention of Mr Li is that the Loan Agreement Claim falls foul with O.15 r.3(1) and 5(2), Rules of the High Court (“RHC”) and must not be allowed.

20.O.15 r.3(1) of the RHC provides,

“Where a defendant to an action who makes a counter-claim against the plaintiff alleges that any other person (whether or not a party to the action) is liable to him along with the plaintiff in respect of the subject-matter of the counterclaim, or claims against such other person any relief relating to or connected with the original subject-matter of the action, then, subject to rule 5(2), he may join that other person as a party against whom the counter-claim is made.”

21.It can be seen that O.15 r.3(1) is expressly subject to r.5(2), which provides,

“If it appears on the application of any party against whom a counterclaim is made that the subject-matter of the counterclaim ought for any reason to be disposed of by a separate action, the Court may order the counterclaim to be struck out or may order it to be tried separately or make such other order as may be expedient.”

22.Thus, to bring a counterclaim against an additional party, there are requirements for the defendant to meet. First, both the plaintiff and the additional party must be liable to the defendant in respect of the subject matter of the counterclaim. Alternatively, the claim of the defendant against the additional party is for relief relating to or connected with the original subject-matter of the action.

23.It is clear that the Loan Agreement Claim satisfies neither requirements under O.15 r.3(1) and r.5(2).

24.The Loan Agreement concerns D1 and Stewart Wong only and has nothing to do with P. No liability arising from the Loan Agreement can attach to P as a non-party thereto.

25.The subject-matter of the main action is the Tenancy Agreement. To my mind, the Loan Agreement is a distinct and separate agreement between different parties though Ds try to say that it relates to the Tenancy Agreement.

26.More importantly, the relief which Ds seeks in the Loan Agreement Claim concerns the enforceability of the Loan Agreement. It has nothing to do and no connection whatsoever with the Tenancy Agreement.

27.I am aware that O.15 r.3(1) concerns the joinder of an additional party against whom the defendant has a counterclaim. Stewart Wong is already a party in the Counterclaim and so the present application is not a joinder application.

28.Nonetheless, I believe O.15 r.3(1) remains to be pertinent and Ds are still required to show that their Counterclaim against Stewart Wong, who is not a party to the main action, falls within O.15 r.3(1). It cannot be right that once the defendant has satisfied O.15 r.3(1) and made a counterclaim against an additional party, the defendant is released from the requirements of O.15 r.3(1) and make any other claims against the additional party in the counterclaim. If the defendant is allowed to do so, this simply defeats the purpose of O.15 r.3(1) to control the nature of claims that the defendant may bring against an additional party in his counterclaim.

29.Ms Wong has not argued against the applicability of O.15 r.3(1). She has not addressed me on this rule indeed. She is unable to convince me that how the Loan Agreement Claim should be allowed to be made against Stewart Wong in the Counterclaim.

30.Ms Wong merely points out that the parties negotiating the Loan Agreement were exactly those individuals negotiating the Tenancy Agreement. In the main action, the key allegation is misrepresentations made in the course of the negotiation of the Tenancy Agreement and the Guarantee. Ms Wong stresses that the negotiation of the Loan Agreement is a relevant context in the negotiation of the Tenacny Agreement and the Guarantee.

31.Nevertheless, this does not bring the Loan Agreement Claim anywhere near the requirements of O.15 r.3(1).

32.I then come to the conclusion that the Loan Agreement Claim must not be allowed to be added by way of amendment. It fails to meet the requirements under O.15 r.3(1).

33.In any event, I agree with Mr Li’s submission that the justice of the case demands that the Loan Agreement Claim should be disallowed to be added to this action at this late stage.

34.To begin with, I cannot accept that the Loan Agreement has any bearing on the Tenancy Agreement and it concerns D1 and Stewart Wong only.

35.Also, at the Case Management Conference held on 11 July 2024, Ds confirmed that they intended no amendments to be made in their listing questionnaire. Ms Wong points out that the Loan Agreement was disclosed as early as in 16 August 2022 by way of Ds’ List of Document. All the more, any attempt to include the Loan Agreement Claim should have been made much earlier.

36.I do not accept the explanation of D2 in his 3^rd Affirmation that he did not find it necessary to make the Loan Agreement Claim until P seeks to strike out those parts pertaining to the Loan Agreement in the D2’s WS. This is just putting the cart before the horse.

37.Ms Wong submits that the trial of the present action would only take place in mid October 2025 and the Amendment Summons was taken out more than a year before the trial and was only necessitated by the the Striking Out Summons. I cannot accept that the delay is excusable and inevitable. Ds should have properly formulated all their claims before they decided what to include in their witness statements in the first place.

38.Morever, even if P had not taken out the Striking Out Summons, those evidence relating to the enforceability of the Loan Agreement, despite remaining to be contained in the witness statements, should be inadmissible for want of relevance.

39.If the Loan Agreement Claim is allowed, no doubt Stewart Wong is entitled to file his Amended Defence to Amended Defence and Counterclaim to deal with such a new claim. The trial of the present action would be severely delayed. Also, it would unduly prolong the trial. The Loan Agreement Claim only concerns one third of the parties in the present action. There is no reason why Ds should not make such a claim in a new action against Stewart Wong only.

40.I cannot accept D2’s assertion that no additional evidence is required. By the proposed amendments, Ds allege that the Loan Agreement violates sections 7, 22, 23, 24, 25 and 29 of the MLO. There is no averment that Stewart Wong was a money lender within the meaning of the MLO. I fail to understand how additional evidence is not required to substantiate the alleged contraventions of the MLO and why it is not necessary for Stewart Wong to adduce rebuttal evidence. At least Stewart Wong has to adduce evidence as to whether he carried on business as a money lender at the material time.

41.To conclude, even if the Loan Agreement Claim satisfies O.15 r.3(1), I would exercise my discretion against the inclusion of such a claim in the present action pursuant to O.15 r.5(2). I cannot allow any amendment to include the Loan Agreement Claim in the Counterclaim.

42.The remaining proposed amendments relate to the staircase(s) of the Property. Ms Wong confirms in her written submissions that Ds withdraw the proposed new definition of the “Staircases” and the “1/F and 2/F Staircase” in §8 of the Defence and Counterclaim. The original definition of “Staircase” in their current pleading will be used. Further, the reference to “including, inter alia, the 1/F and 2/F Staircase” and corresponding amendments at §§8(a), 12, 13, 17(b), 19, 22 are withdrawn.

43.What is left is the proposed deletion of the phrase “as well as the 3/F external balcony staircase” due to its non-existence factually and also the proposed addition of the clause “while the 1^st Defendant had the right to use, inter alia, the “external staircases” (i.e. the staircase connecting the G/F and 1/F) under the Tenancy Agreement.

44.The proposed deletion and the proposed addition are of little materiality. I do not find them to be necessary.

45.Lastly, Ds intend to correct a typographical error relating to the name of Hanison. It is misstated to be Hanison Construction Holdings Limited in §§6(c), 8(c), 16 and 17(d) of the Defence and Counterclaim.

46.Mr Li raises no objection to the proposed amendments to correct this typographical error. I see no reason why Ds should not be allowed to correct such obvious mistakes in their pleadings. Had Ds only intended to do this correction, P would have agreed to such amendments and in my view the Amendment Summons would not have been necessary.

47.I therefore refuse to accede to Ds’ application by the Amendment Summons save that I would allow Ds to correct the references to Hanison.

The Striking Out Summons

48.Given my conclusion on the Amendment Summons, those parts in the D2’s WS concerning the Loan Agreement Claim (§§17, 18, 19, 31 and 32) must be inadmissible for lack of relevance. They must be struck out.

49.I do not accept Ms Wong’s submission that these parts of the D2’s WS can still assist to establish Ds’ plea of false representations in the main action. I have gone through all those parts and do not find anything of relevance.

50.In these circumstances, I am convinced that I should accept P’s striking out application.

Conclusion and orders

51.For the reasons given, I accede to P’s application by the Striking Out Summons and order that those parts of the D2’s WS relating to the Loan Agreeement Claim be struck out.

52.On the other hand, I dismiss the Amendment Summons though I allow Ds leave to file and serve their Amended Defence and Counterclaim only to correct the references to Hanison, if so advised, within 28 days from the date of this Decision.

53.There is no reason why costs should not follow the event. I make a costs order nisi that costs of the Striking Out Summons and the Amendment Summons including all costs reserved be paid by Ds to P, to be taxed if not agreed.

54.Lastly, I thank Ms Wong and Mr Li for their succinct and helpful submissions.

Mr Kevin Li, instructed by Cheung, Yeung & Lee, for the plaintiff (by original action) and the 1^st to 4^th defendants (by counterclaim)

Ms Carol Wong, instructed by Chan, Wong & Lam, for the 1^st and 2^nd defendants (by original action) and the 1^st and 2^nd plaintiffs (by counterclaim)