Tang Hoi Wo v. Wintop Management Ltd

HCA1567/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.1567 OF 2004

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BETWEEN

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HCA1568/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.1568 OF 2004

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BETWEEN

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Before : Deputy High Court Judge L. Chan in Chambers

Dates of Hearing : 29 March 2005

Date of Delivery of Judgment : 1 April 2005

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J U D G M E N T

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Background

1.The plaintiff is the tenant of two lots of land mainly RP of Lord number 100 and RP of Lot number 104 in DT 115 in Yuen Long (“the lots”).  The plaintiff has let the Lots from the owner Tang Kwong Yu Tong (“the Tong”) by a tenancy dated the 1 June 2004.  The tenancy was for a term of three years commencing on 1 January 2004 and ending the 31 December 2006 at the monthly rental of $20,500.  There was also an option to renew for the plaintiff at the same rent for two years commencing 1 January 2007.

2.The plaintiff issued the writs of summons endorsed with statements of claim on 6 July 2004 claiming recovery of the lots from the defendants on the ground of trespass.  The plaintiff has issued a summons in each action on 17 Jan 2005 seeking an injunction to restrain the defendant from entering the lots or alternatively an order that they should deliver up vacant possession of the lots to the plaintiff.  On 18 Jan. 2005, the plaintiff issued two more summonses in the actions seeking an injunction to restrain the defendants from operating car parking business in the lots or using the lots for purposes other than cultivation of paddy.  On 3 March 2005, the plaintiff issued a third summons in each action for summary judgment against the plaintiff. 

The pleadings and the affirmations

3.The statements of claim referred to the plaintiff’s tenancy dated 1 June 2004 as granted by the Tong and alleged that the plaintiff had trespassed into the two lots on or about 1 Jan 2004.  It thus seeks an order for possession of the lots and damages to be assessed. 

4.The defendants duly filed their defences on 27 July 2004.  The defences are short.  The defendants admitted that they had been in possession of the lots as from 1 January 2004 onwards.  They also pleaded that they had entered into a lawful tenancy agreement with the Tong in or about December 2003 in respect of the lots for the period from 1 January 2004 to 31 December 2005 at a total monthly rental of $20,500.

5.The plaintiff on 16 August 2004 requested for further and better particulars of the alleged tenancy.  The particulars requested included the date of the tenancy and whether the tenancy was made orally or in writing.  Instead of providing the particulars sought, the defendants’ solicitors by a letter of 9 September 2004 enclosed to the plaintiff’s solicitors draft amended defences and requested for consent to the amendments. 

6.The draft amended defences abandoned the previous plea of a tenancy directly from the Tong.  Instead, they plead that the plaintiff had been granted an oral tenancy by the Tong over the lots in or about mid-December 2003 and the written tenancy dated 1 June 2004 as the written evidence of the oral tenancy.  The drafts further plead that there was an oral sub-tenancy over the lots and made between the plaintiff and one Lee Hong Yin for the defendants.  The sub-tenancy as alleged was to last from 1 Jan 2004 to 31 December 2005 at the total monthly rental of $30,000 with $20,500 to be paid directly by the defendants to the Tong and the balance of $9,500 to be paid by the defendants to the plaintiff.  The balance of $9,500 per month was however payable only upon the conclusion of the written tenancy agreements between the Tong and the plaintiff and between the plaintiff and the defendants.  It also alleges that there was an option to renew for three years at the same monthly rental unless there was default of the defendant in paying the rental or any part thereof during the first term. 

7.The plaintiff did not consent to the proposed amendment and no application has been made by the defendants for leave to amend defences in terms of the draft amendments.  However, as referred to below, the line of defence in the draft amendments has been confirmed on affirmation. 

8.In support of the summonses for injunctions, the plaintiff filed two affirmations on 17 January 2005 with one made by he himself and the other made by one Tang Lik Yuen, the treasurer of the Tong.  In his affirmation, the plaintiff referred to his tenancy as pleaded in the statement of claim.  He said that the defendants had on about 1 January 2004, without the consent from him or from the Tong, wrongfully entered upon the lots and operated a car park thereon.  The defendants thus trespassed into the lots.  The plaintiff then referred to the inconsistencies between the two lines of defence.  He further said that the car park operations on the lots would attract enforcement action which might result in forfeiture of leases by the government for breach of the covenant of user.  The simple picture painted by him was that the defendants had on about 1 January 2004 suddenly took occupation of the lots and operated car parks thereon.  He did not refer to any background of the case which might have been relevant. 

9.The plaintiff also produced the company search records of the defendants showing that the defendants are just $2.00 companies and thus cannot be expected to pay the plaintiff any damages for the trespass.  He also produced a receipt issued by the Tong to him showing that he had already paid on 1 June 2004 the rental for 1 January 2004 to 31 December 2004 at $246,000.  He gave the usual undertaking in damages in support of the applications for injunctions.

10.Tang Lik Yuen said in his affirmation that since 21 January 2004, there had been deposited into a bank account of the Tong two sums each of $10,250 every month up to December 2004.  He further said that he had inquired with the fellow managers of the Tong but nobody knew where did that money come from.  After a meeting of the managers on about 27 Feb 2004, he and two fellow managers reported the matter to the police for investigation.  He said nothing about the result of the police investigation or whether the police had told him the source of the deposits.  He also did not mention anything about any dealing that he had with those in control of the defendants on the letting of the lots or the use of the same for operating car parks.  The only picture painted by him was a mysterious one in that there was somebody who had secretly made regular deposits into an account of the Tong. 

11.The defendants filed an affirmation by Mr Li Hong Yin on 18 Feb 2005 to oppose the applications for injunctions.  He said he and his partners in 2003 were interested in setting up a small car parking business using unoccupied land in Yuen Long.  They approached the Tong which owned the lots and met one Tang Kam Wan, a manager of the Tong, and a Mr Leung, the Tong’s secretary.  They were told by Tang and Leung that the lots were available for letting by way of public tender.  Later on, they were told that one Ng Kwok Fung nicknamed “Ah Chung” could assist them by introducing them to Tang Lik Yuen, another manager of the Tong.  They then met Tang Lik Yuen in a Chinese restaurant in Yuen Long and Tang confirmed to them that he would be able to lease the lots and would then sublet the same to them.  Tang also told them to proceed with preparation works to make the lots ready for use as car parks.  On about 24 November 2003, they met Tang Lik Yuen again and were introduced to the plaintiff.  They were told that the plaintiff was the landlord of the lots and he wanted a monthly rental of $30,000 for sub-letting the lots to them.  They thought this was too expansive.  They had altogether five meals with Tang Lik Yuen and/or the plaintiff over two months. 

12.There were further meetings between the parties and they were told to proceed with converting the two lots into a car park.  Tang Lik Yoon also assured them that the subletting would be on favourable terms.  They then hired contractors on 27 November 2003 to level the lots and incurred an expenditure of $23,000.  The parties met again on 30 November 2003 and Tang Lik Yuen maintained the demand of rental at $30,000 per month.  There was thus no agreement.

13.The defendants then submitted their own tender in the name of Mr Li for letting the lots directly to the Tong on 1 December 2003 offering a rental of $15,000 per month for the two lots.  This tender was somehow lost and there was a re-tender on 5 December 2003.  This time the defendants submitted a tender of $20,000 per month for the lots.  However, they were informed on 14 December 2003 that the two lots had been let by the Tong to the plaintiff.  They then approached the plaintiff and on 15 December 2003 entered into a verbal sub-letting agreement with the plaintiff at a monthly rental of $30,000 for two years with an option to renew for three more years at the same rental.

14.Mr Li further said that when the defendants asked the plaintiff for a written tenancy agreement, the plaintiff said that he was unable to produce the head tenancy agreement for the time being and he would enter into a written sub-tenancy with the defendants at a later stage.  Regarding the payment of rental, they had to pay $20,500 directly to the Tong.  For the balance of $9,500 per month, it would only be payable to the plaintiff when the plaintiff has produced to them the head tenancy agreement.  The also said that at this meeting, Tang Lik Yuen gave them the Tong's bank account for them to deposit money to the Tong directly.  Pursuant to this oral agreement, the defendants then paid the Tong two sums each at $10,250 every month.

15.Mr Li also exhibited certain correspondence exchanged between the defendants' solicitors and the Tong's solicitors in January 2004.  He also said that he and his partners met Tang Lik Yuen in September 2004 and Tang tried to extract from them a lump sum of $400,000 and a monthly rental of $40,000.  They rejected the demand.

16.Mr Li further said that the plaintiff was just a pawn of Tang Lik Yuen.  He also said that the defendants were earning a net profit of $60,000 per month from the carparks on the lots and he challenged the plaintiff for fortification of his undertaking in damages.

17.Finally, Mr Li also produced a report by a town planning expert who opined that the risk of enforcement for breach of covenant by the defendant's operation of a car park on the lots is extremely remote.  I would also add that the plaintiff has not been able to point to any covenant of user in the government lease that has been breached by the operation of carparks on the lots.

18.In the correspondence produced by Mr Li, there was a letter dated 19 January 2004 from the Tong’s solicitors alleging that the defendant in HCA 1568 had trespassed into the lots and demanded recovery of possession and an account of profits.  I note that the first deposit of money into the Tong’s bank account took place two days later.  The defendants’ solicitors replied to the Tong’s solicitors on 4 February 2004 saying that the defendants had been granted a tenancy by the Tong over the two lots for a term of 2 years from 1 January 2004 to 31 December 2005 at a total monthly rent of $20,500 per month and an option to renew for 3 years at the same rental unless the defendants defaulted in paying rent or any part thereof during the first term. 

19.This allegation, which was repeated in the existing defences though without the option, is obviously incorrect.  But Mr Li did not attempt to explain why or how such an error could have been made in the reply letter and was repeated in the defences and why it was not corrected until 9 September 2004 after the plaintiff had asked for further and better particulars of the defences.  But there is also no evidence that the Tong had done anything further after receiving this reply.  I have not overlooked the fact that the Tong had after 27 Feb 2004 reported to the police the mysterious receipt of $20,500 per month in the Tong’s bank account from an unknown source. 

20.The plaintiff then filed his 2^nd affirmation on 3 March 2005.  He said that in early December 2003, he was interested in leasing the lots from the Tong and to operate carparks thereon.  He was told by Tang Lik Yuen that Ng Kwok Fung was also interested in operating carparks on the lots.  He thus considered that if he could let the lots from the Tong, he might sub-let RP of lot 100 to Ng Kwok Fung for profit.  He thus offered a total rental of $20,500 per month to the Tong for letting the lots.  He attended the Tong’s meeting which considered the tenders and noted that the tender of Ng Kwok Fung and his 3 friends with rental at $20,000 per month was beaten by his tender with rental at $20,500 per month.  He further said that after the Tong had announced the acceptance of his tender, Ng Kwok Fung said that “邊個租都好，我都會照霸既 (translation: regardless whoever is to rent (the lots), I will keep my dominion (over it)).”  This utterance was denied by Ng Kwok Fung in an affirmation filed on 24 March 2005. 

21.He then produced the minutes of the Tong recording the unanimous decision of those present on that day.  The decision said that the lots would be let to the plaintiff at a monthly rental of $20,500 with a deposit of $41,000.  It further said that the plaintiff had to pay one-year rental at $246,000 in advance at the signing of the tenancy agreement.  The term was for 5 years with liberty for termination for the last 2 years.  This explained why the plaintiff had paid one-year rental in advance to the Tong.  This advance payment was also evidenced by the third schedule of the tenancy agreement dated 1 June 2004 whereby the Tong acknowledged receipt of the rental for 1 January 2004 to 31 December 2004 at $246,000 in advance upon execution of the tenancy.  The tenancy was prepared by the Tong’s solicitors. 

22.The plaintiff also denied any sub-letting of the lots to the defendants or having met Mr Li or his partners on 15 December 2003.  He said if he were to sub-let the lots to the defendants, he would have asked for the first year rental to be paid in advance so that he could use the same to pay the Tong.  Though the tenancy agreement was only made on 1 June 2004, the Tong had in the tenancy assigned to him the right to sue the defendants from 1 January 2004 and for him to collect for himself the damages from the defendants since that date. 

23.Finally, the plaintiff confirmed that the market value of the lots was $30,000 per lot (or $60,000 for both lots). 

24.Tang Lik Yuen also filed a 2^nd affirmation.  He admitted that he had been introduced to Ng Kwok Fung in mid-November 2003 and Ng asked him for assistance in letting RP of lot 100 in DD 115 from the Tong as Ng intended to operate a carpark thereon.  In early December, he revealed this to the plaintiff and others and the plaintiff told him that R P of lot 104 in DD 115 would also be let out by the Tong.  The plaintiff further said to him that he also intended to operate carparks on the lots and if he could lease the lots from the Tong, he would consider subletting RP of lot 100 to Ng for profit.  He then recounted the Tong’s meeting on 14 December 2003 in which the plaintiff’s tender was accepted and also the alleged utterance by Ng Kwok Fung that he would maintain dominion over the lots.  He denied of having met Mr Li or his partners on 15 December 2003 or that he had provided the Tong bank account number to the defendants.  He also denied of having demanded $400,000 and monthly rental at $40,000 from the defendants in September 2004.

Analysis

25.Mr. Shipp for the defendants submitted that the plaintiff’s case left a lot of questions to be asked.  He said that the plaintiff was chopping and changing his case as the actions progressed.  He also commented that the plaintiff did not file cogent evidence unless forced by the defendants.  The statement given to the police was not produced.  Furthermore, someone must have given the defendants the bank account number of the Tong.  On the whole, Mr. Shipp said that the problems of the plaintiff’s case strengthened the defendants’ case.  He also maintained that the defendants have only one line of defence; namely, the line that has been confirmed by Mr Li in his affirmation and not the one in the defences filed. 

26.I think the plaintiff’s case would have a better appearance if some of the matters contained in the 2^nd affirmations of the plaintiff and Mr Tang Lik Yuen should have been put in their first affirmations.  The plaintiff’s case would have appeared to be more straightforward if the plaintiff should have disclosed earlier on that the defendants were his competitors in bidding for the tenancy of the lots from the Tong.  However, the revelation of these matters in their 2^nd affirmations does not make the plaintiff’s case dubious.  The plaintiff’s case of letting the lots from the Tong and the terms thereof are corroborated by documents.  Regarding the dealings between the plaintiff and Tang Lik Yuen on the one hand and Mr Li and his partners on the other hand, there is no dispute that there was no sub-letting arrangement up to 14 December 2003.  The defendants alleged that the subletting was agreed on 15 December 2003, but both the plaintiff and Tang Lik Yuen denied of having met them on that day.  On the mysterious deposits to the Tong, I think the plaintiff and Tang Lik Yuen should have grounds to suspect that they came from the defendants or those behind them.  Nevertheless, the failure to spell out this obvious suspicion also does not make the plaintiff’s case dubious.  I also do not think that the plaintiff has been chopping and changing his case.  He only presented his case in a fashion that is too simple to the extent that it is less than desirable. 

27.I think the defendants’ case has more problems.  The plaintiff has provided clear evidence that his tenancy from the Tong required an advance payment of one-year rental and that the same had been received by the Tong before the execution of the tenancy on 1 June 2004.  I agree that it would have been surprising that the plaintiff would have failed to demand the same from the defendants if he should have agreed to sub-let the lots to them.  Mr. Li has detailed his meetings and negotiations with the plaintiff and Tang Lik Yuen for the sub-letting, but he did not say a word about any demand or request having been made by the plaintiff or Tang for an advance payment of rental.  This is indeed surprising. 

28.There is also the further surprise that there was never any mention in the correspondence, the pleadings or the affirmations about the need for any deposit for the sub-tenancy though the plaintiff had to pay and had indeed paid a deposit of $41,000 to the Tong.  The requirement of a deposit in a tenancy is so common in Hong Kong that one would find it strange when it is not being asked for. 

29.I also note the failure of the defendants to explain its change in the line of defence.  The first line of defence of a direct tenancy from the Tong at monthly rental of $20,500 was made in a solicitors’ letter in early February 2004 and repeated in the defence.  The new line was made in September 2004.  The new line differed from the old one not just on the identity of the landlord, the amount of rental and mode of payment were also different.  The $30,000 per month payable under the new line was to be split between the Tong and the plaintiff and the plaintiff was only to get his share after he could produce the head-tenancy.  It is an arrangement that is less than straightforward.  The Court simply has not been told why or how the initial line of defence could have been made and maintained for so long. 

30.The arrangement embodied in the new line of defence is not a straightforward one and it is also surprising to find that there is not even a written note about it even though it can be argued that the time for the making of a formal tenancy has not arrived. 

Order 14 Summons

31.On the whole, I find the defendants’ defence as contained in the draft defences a shadowy one and I am only prepared to grant leave to defend subject to conditions.  The plaintiff has said in his affirmations that the lots had a monthly value of $60,000.  If the plaintiff should succeed in the action for trespass, he would be entitled to damages assessed on the basis of the defendants’ profits (see paras. 34-39 to 34-48 of McGregor on Damages 17^th Ed.).  Mr Li has said that the defendants are making a profit of $60,000 per month out of the car parks on the lots (presumably after making provision for $30,000 rental per month).  If that is an accurate figure, the total amount that the plaintiff may recover from the defendants can be as much as $90,000 per month, if he can succeed in the end. 

32.In the light of these, I order that leave be given to the defendants to defend both actions on condition that the defendants shall pay into court in an interest bearing account a sum of $3775,000 on or before 14 April 2005, a sum of $378,000 on or before 28 April 2005 and further sums of $60,000 per month on or before the first day of each month commencing May 2005.  In the event that the defendants shall have vacated from the lots by the end of December 2005, the defendants shall not be required to make any further monthly payment of $60,000 commencing January 2006. 

33.I now deal with the summons for injunctions.  There has been substantial delay in the issue of the summonses.  If the period from 1 January 2004 to 1 June 2004 (when the tenancy was executed) is ignored, there is still a delay of over 7 months.  There has been no explanation whatsoever on why there was such substantial delay.  This is a very simple case.  It should not take long for it to be prepared for trial. 

Summonses for injunctions

34.The plaintiff has also adduced no evidence or explanation on whether damages would be an adequate remedy.  The plaintiff has also failed to provide further information on his personal net worth or fortification to the undertaking in damages despite the challenge made by the defendants.  The plaintiff is also unable to pinpoint at any covenant in the government lease or any statutory provision that has been infringed by the defendants’ carparks. 

35.For the above reasons, I will not grant any injunction to the plaintiff.  Furthermore, if I should grant any injunction, that would be inconsistent with the basis for the conditional leave to defend that I have granted in relation to the future.  Any injunction as sought would annihilate the reason or logic for imposing the condition of payment for the future.  I therefore dismiss the 4 summonses for injunctions. 

Costs

36.On the question of costs, I order on the Order 14 summonses that costs of these summonses be in the cause if the defendants should make payment into court as ordered but failing which these costs shall be to the plaintiff.  On the summonses for injunctions, I order that the plaintiff do pay the costs of them to the defendants forthwith. 

Mr Hylas Chung instructed by Gary Lau & Partners for the Plaintiff.

Mr Colin Shipp instructed by Cheung, Chan & Chung for the Defendants in both cases.