Wing Siu Co. Ltd. v. Goldquest International Ltd.
Read the full judgment text of HCA 3183/2001 on BabelCite. This High Court CFI judgment was delivered on 11 November 2002.
2. The defendant has appealed my decision by a notice of appeal dated 3 May 2002 ('the Appeal'). The hearing before the Court of Appeal is to take place on 17 January 2003.
Cited by 20 cases · Cites 3 cases
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HCA003183B/2001 HCA3183/2001 and IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NOS.3183 AND 4145 OF 2001 ---------------------
---------------------- (Actions consolidated by Order dated 26 April 2002) Coram: Hon Ma J in Chambers Date of Hearing: 25 September 2002 Date of Judgment: 11 November 2002 ----------------------- J U D G M E N T ----------------------- The application before the court 1)I have already dealt with these consolidated proceedings on two previous occasions in : first, an appeal from Master Hout .C. Wong in relation to an application by the Defendant to strike HCAApril 3183/2001 (Decision made on 15 April 2002, Reasons for Decision handed down on 23 2002pending ); and secondly, in an application by the Defendant for a stay of the proceedings the hearing of the appeal from my 2002, 15 April 2002 Decision (Decision made on 16 August Reasons for Decision handed down on 29 August 2002). 2)The background to these proceedings (which were consolidated by Order of Master Mary Yuen on 26 April 2002) is described in the Reasons for Decision in both my previous Decisions. In order to put the present application in context, I set out paragraphs 1 to 7 of the Reasons for Decision handed down on 29 August 2002 in relation to the stay application :
3)I shall use the same abbreviations as I have done in the previous Reasons for Decision. 4)The present application before the court is the hearing of the Plaintiff's amended Summons for summary judgment and interim payment. There is also an application by the Plaintiff for the lifting of a stay, although there is no summons for this. The parties' respective positions 5)The Plaintiff's claim is simply put. On 22 January 2001, the Defendant sought to terminate the Lease by returning the keys to the Premises. The covering letter of that date made reference to a letter dated 16 November 2000 which had been sent by the Defendant's Director of Legal Affairs to the Plaintiff. I shall be referring to these letters in greater detail presently. 6)The Plaintiff treated the return of the keys as a repudiation of the Lease and by a letter dated 6 February 2001 from its solicitors, accepted it. The Plaintiff, therefore, claims damages for repudiation. 7)Damages are claimed in the present application under the following heads :
8)The Plaintiff accordingly seeks judgment in these amounts; alternatively, that interim payment be made in such sums. In addition, the Plaintiff applies to lift the stay of execution on Master Kwang's Order for summary judgment made on 17 May 2001. 9)The Defendant disputes both liability and quantum :
10)I have, of course, not forgotten the fact that the Defendant has appealed my Decision dated 15 April 2002 refusing to strike out the Plaintiff's claim in the Second Action. This appeal is due to be heard by the Court of Appeal on 17 January 2003. If the Defendant were to succeed in this appeal, the consequence would be that the second action would be struck out. In this event, if I were to grant judgment or order interim payment in the present application, any such orders would have to be set aside. Mr William Wong (who appeared for the Defendant) made it clear that his principal position was of course that the Plaintiff's claim should be struck out but accepted that I had already decided this against him in my Decision made on 15 April 2002. 11)Mr Wong's submissions, in the present case, were therefore made subject to the appeal due to be heard by the Court of Appeal in January next year. Liability 12)Ms Roxanne Ismail appeared for the Plaintiff in the summons before me. It was her submission that quite simply, the Defendant had repudiated the Lease and the Plaintiff had accepted this repudiation. 13)It is clear that by the act of returning the keys to the Premises, the Defendant sought, unilaterally, to terminate the Lease and vacate the Premises. It said as much in its letter to the Plaintiff dated 22 January 2001 enclosing the keys. There can be no doubt that, but for the collateral contract defence to which I shall come presently, the Defendant repudiated the Lease. This repudiation was accepted by the Plaintiff's solicitors by their letter dated 6 February 2001. The contractual concepts of repudiation and acceptance of repudiation apply equally to leases as they do to any other contracts : see National Carriers Ltd v. Panalpina (Northern) Ltd [1981] AC 675, at 703 per Lord Simon of Glaisdale. 14)What then of the Defendant's collateral contract defence? 15)In the affirmation of its Director of Finance, Mr Richard Zinkiewicz, it is said that in about early September 1999, he visited the Premises together with a Mr Samson Law and his assistant, Ms Asther Lau (both of whom he says were acting on behalf of the Plaintiff (which I shall assume for present purposes)). Upon Mr Zinkiewicz expressing some concern over the adequacy of the floor space of the Premises, Mr Law and Ms Lau "reassured me unequivocally on the Plaintiff's behalf that should there be a larger floor area in the same building become available in future, the Plaintiff would offer that to the Defendant and a new lease would then be entered into. They also told me that for the first year, the Plaintiff was willing to offer around HK$50,000 per month, though for the rest of the term the contractual rent would be higher". 16)This, Mr Wong argued, was a collateral contract for the entering into of a new lease should larger premises become available. It was as a result of this collateral contract that the Defendant agreed to lease the Premises from the Plaintiff. The Lease was dated 11 October 1999. 17)Mr Zinkiewicz then further deposes to the fact that in about August 2000, there appeared the possibility that some larger premises in the Building (the 38th floor) were available. Negotiations then ensued between the Defendant's representative (one Mr Nelson Lam of Chesterton Petty Ltd ("Chesterton Petty")) and the then tenant of the 38/F premises, Dah Sing Bank. These negotiations were conducted on the basis that Dah Sing Bank would sublet these premises to the Defendant. The Defendant's impression was that agreement with Dah Sing Bank was close, but later that month, the negotiations were suddenly called off. It was said that the tenant had changed its mind and wanted to reserve the 38/F premises for itself. Mr Zinkiewicz alleges that the reason why the negotiations were called off was that the Plaintiff had disapproved of the possibility of the Defendant becoming the subtenant of the 38/F premises. It is alleged by him that this was because the Plaintiff did not like the Defendant's clientele (the Defendant sold gold and jewellery). 18)The Defendant's reaction was the said letter dated 16 November 2000 to the Plaintiff from its Director of Legal Affairs, in which extreme disappointment was expressed at the Defendant not being able to secure the tenancy of the 38/F premises. Reference was made to a "bad taste left in their mouth". The upshot was that by the letter, the Defendant sought the Plaintiff's consent to "assign ... [the Premises] or locate a takeover tenant". No response having been received from the Plaintiff, the Defendant then sought to terminate the Lease by the said letter dated 22 January 2001. 19)In my view, these allegations by the Defendant do not amount to an arguable defence that should go to trial :
20)Finally, I come to Ms Ismail's reliance on clause 5(8) of the Lease : the entire agreement clause. The clause states as follows :
21)The Lease was made subsequent to the alleged collateral contract. Quite apart from its terms being completely inconsistent with the existence of the alleged collateral contract, in my view, Ms Ismail is right when she says that clause 5(8) operates to prevent the Defendant from relying on this defence. Although the clause does not in terms exclude the applicability of any previous agreements or promises, I am of the view that it is sufficiently wide to cover any reliance on the alleged collateral contract. In Inntrepreneur Pub Company (GL) v. East Crown Ltd [2000] 2 Lloyd's Rep. 611, Lightman J had to deal with a clause that was more or less only stated that the written agreement in that case constituted the "entire Agreement" between the parties : see 613(1). Like clause 5(8) of the Lease, there was no express exclusion of previous agreements or promises. The learned judge held, however, that the words in that case were sufficient to exclude the application of any alleged collateral contract : see 614(1)-615(1). With respect, the reasoning of Lightman J in Inntrepreneur is compelling and I follow it. The nature of a collateral contract (or collateral warranty as it is sometimes called) is that it involves an assurance or warranty : see Chitty at paragraph 12-101. The words "representation or warranty" contained in clause 5(8) are apt in my view to cover collateral contracts. 22)For the above reasons, the defence advanced by the Defendant in the present case is bad in law, even if the assertions are believable (which in my view they are not, applying the well-known Ng Shou Chun test). 23)Accordingly, there will be judgment for the Plaintiff on liability. But should there also be summary judgment for any particular amount or interim payment ordered? Damages and interim payment 24)The test for giving summary judgment in relation to damages is the same as for liability : only if there is compelling evidence in support and no arguable defence shown, would it be appropriate to grant summary judgment in any particular sum or sums. It is of course possible to grant summary judgment for a part of a claim : Order 14, rule 3(1). While this is often appropriate where liquidated claims or an ascertainable portion of a number of claims are involved, it is also possible to make such an order in relation to identifiable or indisputable parts of unliquidated claims (i.e. there is no doubt that some damages are payable but there is an argument fit for trial as to the balance) : see Associated Bulk Carriers Ltd v. Koch Shipping Inc. [1978] 2 All ER 254. 25)Running in parallel with the court's power to give judgment in relation to a part of a claim is the court's power to order interim payment. It is appropriate to make an order for interim payment where the court is satisfied that the Plaintiff will obtain judgment for a substantial sum : see Hong Kong Civil Procedure 2002, Volume 1, at paragraph 29/11/1. There will often be an overlap between applications for summary judgment and applications for interim payment and, like the present case, they are often made together. The conceptual differences between the two are discussed in Hong Kong Civil Procedure, Volume 1, at paragraph 29/11/3. The practical differences may be few but where the court entertains some doubt for whatever reason as to the appropriateness of granting summary judgment, even though it is of the view that the Plaintiff will eventually obtain judgment for a substantial sum at trial, an order for interim payment would be appropriate. 26)I have earlier identified the Plaintiff's monetary claims. I now deal with them in turn. The claims can essentially be placed in two groups :
27)The first group of claims focuses on the question whether the Premises could or should have been let following the termination of the Lease on 6 February 2001. It is not in dispute that they were not let and indeed remained so up to and including 25 September 2002. It would also appear that this is the position today. The Defendant's case is that the Plaintiff has not mitigated its loss. The law is clear. In claiming damages following the termination of a contract, the innocent party must act reasonably to minimize its losses : see Chitty at paragraphs 27-087 and 27-088. The burden of proof is, however, on the party in breach. 28)The Plaintiff has served affidavit evidence in support of its contention that it has acted at all times reasonably in its attempts to let the Premises following the termination of the Lease. There is evidence before me of the efforts made by the Plaintiff. A number of estate agents were engaged (about 10) and when the asking rents were not accepted, the Plaintiff offered lower rents. Reference was also made to the fact that demand for office space in the Building dropped since the termination of the Lease. 29)It is unnecessary for me to deal with every minute aspect of the Plaintiff's case here. In my judgment, they are all matters which should properly be resolved at the assessment of damages. At this stage, I am of the view that the Defendant has demonstrated an arguable case on the question of damages under this group of claims (but only to a limited extent, however) :
30)In the end, I have come to the conclusion that the damages suffered by the Plaintiff as regards rent, must be determined at an assessment. As there exists therefore the argument that the Plaintiff may not have acted reasonably in not letting the Premises during the relevant period, it follows also that the other claims for service charges and office rents, must also be left for the assessment exercise. In other words, if it transpires that the Plaintiff ought reasonably have let out the Premises for the period in question (or any part of it), the liability for service charges and office rates should then have fallen on the hypothetical tenant and not the Defendant. 31)That said, given the Defendant's case that the market rental for the Premises as at February 2001 was $100,000 a month, it is right that judgment should be given to reflect the difference between that and the Plaintiff's claim. Of course, for the six days from 1 February 2001 to 6 February 2001, the Plaintiff is entitled to a pro rata proportion of the rent under the Lease. Accordingly, the Plaintiff is entitled to partial judgment in the sums of :
32)As for legal costs, the Plaintiff relies on clause 3(29) of the Lease which enables it to claim solicitors' costs on indemnity basis for any proceedings in relation to breaches of the Lease. It is of course well-established that as far as costs are concerned, the court will normally give effect to the contractual bargain between the parties : see Chekiang First Bank v. Fong Siu Kin [1997] 2 HKC 302, at 309 (Court of Appeal). 33)Mr Wong does not dispute the applicability of these principles. His contention, rather, is that the sums claimed as representing the Plaintiff's costs in the consolidated actions have not yet been taxed and even includes a sum ($221,689) as yet unbilled. 34)I have been shown bills in relation to the solicitors' costs incurred by the Plaintiff in the consolidated actions. They amount to $1,690,405.50. In my view, although taxation has not taken place, it is extremely likely that the Plaintiff will obtain an order for a substantial amount to be paid to it by way of costs, particularly if taxed on an indemnity basis. As I have remarked above, the Defendant does not really submit that the Plaintiff will not be entitled to a taxation on this basis. 35)I am in agreement with Ms Ismail that an order for interim payment should be made. As taxation has not yet taken place, I am of the view that it would not be right for summary judgment to be ordered, even on a partial basis. However, an order for interim payment would be appropriate and I would so order. Ms Ismail advanced the basis for any order for interim payment as being Order 62, rule 9A and I am content to do so on that basis. Whether or not there is any difference between an order made under this rule and an order under Order 29, rule 12, it is unnecessary for me to decide. It seems to me in either case that the court will be able to make any necessary adjustments once a final order as to damages has been made or taxation has taken place : see Order 29, rule 17 and Order 62, rule 9A(2). 36)As to the amount of such interim payment, I would adopt a rough approach. It is often said that on a party-and-party basis of taxation, the court will usually award two-thirds of a party's actual costs. This percentage would increase if taxation is on an indemnity basis. Taking a conservative line, I would order that interim payment in the sum of $1,000,000 be made by the Defendant to the Plaintiff. Lifting of stay of execution on Master Kwang's Order dated 17 May 2001 37)There is no reason why the stay of execution ordered by Master Kwang should remain in place any longer. Master Kwang made the order on the basis of the then existing Counterclaim made by the Defendant in the First Action. In the original Counterclaim, there were allegations of breach of the Lease on the part of the Plaintiff. The Counterclaim was amended on 17 January 2002 to delete the whole of the original Counterclaim, substituting in its place a claim for $107,178, being the difference between the judgment sum ordered by Master Kwang ($354,252) and the rental deposit of $461,430 paid by the Defendant when it entered into the Lease. 38)In the Amended Counterclaim, the Defendant accepts that it is liable under the judgment ordered by Master Kwang. For its part, the Plaintiff accepts that the rental deposit must be taken into account to the Defendant's credit. 39)However, I leave open for the parties' agreement or further determination by the court all questions regarding interest arising from Master Kwang's order and the Amended Counterclaim. Order 40)Accordingly, for the reasons given above, I would order as follows :
41)If necessary, I shall hear the parties on the exact terms of the order. This would include any questions as to interest arising from the above. 42)As to costs, I make an order nisi that the costs of and occasioned by this application be to the Plaintiff in any event, such costs to be taxed if not agreed.
Representation: Ms Roxanne Ismail, instructed by Messrs Herbert Smith, for the Plaintiff Mr William Wong, instructed by Messrs Darin Leung & Partners,for the Defendant |
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