Harkishindas Naroomal Harilela v. Chik Tao Ching and Another

HCA001527/1970

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 1527 OF 1970

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Coram: Pickering J.

Date of Judgment: 11th November, 1970.

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DECISION

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1. The plaintiff, the lessor, claims possession of certain premises on the ground that the 1st defendant, the lessee, is in breach of a covenant not to assign, sub-let or in anywise part with the possession of the demised premises or any part or parts thereof without the prior written consent of the landlord. There is an ancillary claim for mesne profits. The allegation is that the 1st defendant assigned, under-let or parted with possession of the premises to the 2nd defendant on or about the 8th day of April, 1970.

2. The present proceedings are for summary judgment under Order 14 and the plaintiff's affidavit in support of his summons exhibits a copy of what is called a deed of partnership dated 8th April, 1970 and entered into between the 2nd defendant of the first part, the 1st defendant of the second part, and one Chik Tao Yuen of the third part. The deed recites that the 1st defendant and Chik Tao Yuen have been carrying on a bar and restaurant business in the premises and that Chik Tao Yuen is the holder of a restaurant licence and liquor licence in respect of the premises. Under the deed the 2nd defendant supplied the use of the demised premises for the business of the partnership (a nightclub) for the "duration of his tenancy" - a phrase which presumably means the unexpired duration of the tenancy. Clause 2 of the deed provides for the payment by the 2nd defendant to the 1st defendant and Chik Tao Yuen of $120,000 by way of compensation for the fittings, air-conditioning system and decorations put into the premises by the two in connection with the business previously carried on by them in the premises. Clause 3 provides that the partners shall carry on business at the premises or at such other place or places as they may from time to time agree upon and states that the partnership shall continue until terminated by the 2nd defendant giving to the other partners not less than three months' notice in writing of termination. There is no similar provision for notice of termination by either the 1st defendant or Mr. Chik Tao Yuen. This third clause further provides that for the time being all profits and losses of the partnership shall accrue to and be borne by the 2nd defendant, and there is provision that if either of the other two partners at any time put any capital into the partnership, such partner shall be entitled to a share of profits.

3. Under Clause 4 the 2nd defendant is to be solely responsible for the control and management of the business and it is expressly provided that neither the 1st defendant nor Chik Tao Yuen shall be entitled to make any decisions or give any orders in connection with the running of the partnership business or the employment of employees without the prior consent of the 2nd defendant.

4. The fifth clause provides for the keeping of books of account and the preparation of an annual balance-sheet showing the amount owing to each partner in respect of capital and profits. The sixth clause gives the 2nd defendant carte blanche to pay himself whatever monthly salary he deems justifiable.

5. The Deed of Partnership clearly contains many features unusual in a partnership. That is all I propose to say about the document at this stage.

6. In the Statement of Defence, filed prior to the filing of the Order 14 summons, it is denied that the 1st defendant has assigned, underlet or parted with possession of the premises to the 2nd defendant and the deed of partnership is relied upon as constituting a mere licence. The affidavits respectively filed by the two defendants affirm the facts set out in the Statement of Defence and make the bare assertion that the 1st defendant has never given up possession of the premises to the 2nd defendant.

7. Upon the hearing of the summons there was much argument as to whether the deed of partnership operated as a sub-demise of the premises or a mere licence and many authorities were quoted. For present purposes it is unnecessary for me to discuss the authorities.

8. Mr. Ives for the plaintiff argued that the defendants in their affidavits had not condescended to particulars and that a mere denial of giving up possession did not amount to showing cause, so that the plaintiff was entitled to summary judgment. It is entirely true that the defendants have not given any very specific particulars as, for example, by reference to possession of the keys of the premises or to the fact that one or other or both of them frequent the premises or at least visit them from time to time. They have, however, condescended to particulars to the extent of reference to the deed of partnership. Their reply to the plaintiff is, in effect, "we have not transferred possession of the premises as between us, but what we have done is to enter into a partnership agreement and it is upon the interpretation of that agreement in conjunction with the behaviour of the parties to the agreement that the issue of a sub-demise or licence must be determined." Not without hesitation I have come to the conclusion that the defendants have condescended to just sufficient particulars to justify their being granted leave to defend. The deed of partnership has been tossed into the arena and at present the court does not know whether or to what extent it has been implemented and does not know the actual facts surrounding the operation of the business at present carried on in the demised premises.

9. There will be leave to the defendants to defend conditionally upon payment by the 1st defendant to the plaintiff's solicitors within seven days of the sum of $15,000 being rent or mesne profits in respect of the months September, October, November, 1970. Additionally, the 1st defendant must pay to the plaintiff's solicitors on the first day of December 1970 and upon the first day of each succeeding month until the date of judgment the sum of $5,000 as monthly rent or mesne profits. In default of compliance with these pecuniary conditions, the plaintiff is to be entitled to judgment as claimed.

10. The Statement of Defence having already been filed the Reply (if any) must be filed within 14 days of today and there will be an order for mutual discovery of documents upon oath or affirmation within 14 days of the close of pleadings. Order for early trial.

11. If the pecuniary conditions upon which leave to defend rests are complied with the costs of this application will be costs in the cause. Certificate for counsel.

Representation:

Written decision read in Chambers.

Ives for Plaintiff.

Bernacchi, Q.C. & P. Woo (Johnson, Stokes & Master) for Defendants.