Shiny Dragon Investments Ltd v. Yue Tung Ching Kee Co Ltd

HCA640/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 640 OF 2007

BETWEEN

Coram: Deputy High Court Judge Carlson in Chambers

Date of Hearing: 3 April 2007

Date of Judgment: 3 April 2007

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J U D G M E N T

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1.This is the inter partes hearing of an application by the plaintiff for an interim injunction requiring the defendant, which is the owner of premises at the second floor basement of a building at 601 Nathan Road, Kowloon (“the premises”) to reinstate the operation of the air-conditioning and the lift to the premises which are used as a large-scale sauna bath establishment.  The application raises a fundamental issue of whether the plaintiff has the locus to bring these proceedings.

2.The background to this can be shortly stated.  The defendant, as owner and landlord, let the premises under a lease in writing dated July 2000 to a company called Power World Limited which subsequently was replaced by another called Dragon Ford Holdings Limited (“Dragon Ford”).  The original lease was modified by a number of supplemental agreements.

3.The final position is as described in a letter from the defendants to Power World Limited dated 24 June 2003, in which the defendant was prepared to grant a renewal of the lease for a further period of three years from 1 June 2003 to 31 May 2006 (page 226 of the defendant’s bundle).  The term of the renewal was that all outstanding rent was to be paid up to date.  In the event, Dragon Ford have incurred arrears of rent and service charges which now approach $4 million.  This being the case, the plaintiff sued for possession of the premises and for a judgment in respect of those arrears and mesue profits.  They obtained judgment under Order 14 from Master Wong on 12 January 2007.

4.It is against this background that the plaintiff directed the management company of the premises to turn off the air conditioning and the lift service.  It is also said that the ventilation system has been turned off, although it is not clear whether this was done by the management company or whether there had been some electrical fault that resulted in a failure of the ventilation system.  In any event, this part of the summons is not proceeded with today.

5.The defendant’s case, therefore, is perfectly straightforward.  It says that having obtained a judgment for very substantial arrears of rent and possession, it was entitled to do what it did.  The plaintiff says that by virtue of an oral agreement between Dragon Ford, itself and the plaintiff it was agreed that it would become the tenant of the premises.  Therefore, it has at least an agreement for a lease which takes effect in equity and which therefore provides it with its locus to sue and to make the application that is now before me.  This being so, it should also have been given notice of the possession action against Dragon Ford and it has now taken out a summons which will be heard on 7 May to set aside the judgment against Dragon Ford and for leave that it be joined in that action.

6.Mr Li, who appears for the defendant, says that there is no basis in fact for the plaintiff to say that it has any rights, equitable or otherwise, to occupy the premises.  All the contemporaneous documentation shows that Dragon Ford is the tenant against whom possession has been obtained.  Any oral agreement that is now put forward is completely unsupported and is, in fact, completely contradicted by the documents.  Mr Li submits that what appears to be happening is that the plaintiff and Dragon Ford have common directors and that this application represents a disingenuous attempt to get around the consequences of the possession order against Dragon Ford.

7.What is worse is that three members at the premises have been arrested and charged with managing a vice establishment from there - their trial in the District Court has yet to be heard - and also that a Mr Ching, who has very close associations with the plaintiff, has been charged with money laundering from these premises to the tune of $70 million.  As a result, a High Court order has been made freezing the plaintiff’s bank accounts, and indeed I have evidence that Dragon Ford’s accounts, with whom Mr Ching is also closely associated, has had its accounts frozen and a receivership order has been made in respect of the plaintiff’s assets.  In all of these circumstances, Mr Li submits that this is an action that is bound to fail.

8.In my judgment, on the present material I can see no credible basis for the plaintiff’s case.  Whilst it may have put forward a self-serving agenda to say that it now operates the sauna from these premises on the basis that it has some sort of right to be there, its case goes no further than that.  All of the objective evidence contradicts that version of events. All the credible evidence shows that the tenant is Dragon Ford, against whom a valid possession order is now in place.

9.This being my view, I can find no basis to grant the injunction which the plaintiff is asking for.   Nevertheless, I am not going to dismiss the application outright today because the defendant has only yesterday put in a substantial affirmation which the plaintiff must now have an opportunity to reply to, with the result that I will adjourn this application to a date to be fixed, and give the plaintiff leave to file evidence in reply to that of Mr Tong on behalf of the defendant.  I will give them 14 days to do that.

10.Whilst I am not going to prevent the plaintiff from re-listing this application before the outcome of its joinder application on 7 May, I would have thought that a successful outcome on that summons for the plaintiff, whilst not essential to its success on this matter, would greatly assist it.  I will leave it to those advising the plaintiff to decide the timing of the re-listing of this application.

11.The order today will be that the application is adjourned to a date to be fixed and I would have thought three hours should be set aside for the hearing.  Leave to the plaintiff to file an affirmation in reply to that of Mr Tong within 14 days.  There will be no further evidence filed without the leave of the court.  I will now hear counsel as to the costs of today.

(Submissions on Costs)

Costs

12.I think although Mr Li has had very much the better of things today, that is really because one has an incomplete evidential picture and I would have thought, therefore, that the costs of today ought to reserved to abide the outcome of the hearing of the application for this injunction.

13.If for instance - and I say this for the assistance of anyone who is going to hear the adjourned application if it isn’t myself - the matter is not brought back for a final resolution, then I would have thought inevitably the defendants ought to have their costs of today in any event.  But that would only be the situation if the plaintiff decided, having reviewed its position, that this is not an application that it ought to pursue.

14.I make these comments for the assistance of any other judge who has to deal with this matter, as I say, if I am not the judge, although my comments can’t in any sense bind another judge.  They represent my feelings and I think that is all I can usefully say. 

Michael Chai, instructed by Messrs C.D. Kan & Co., for the Plaintiff

Tony C.Y. Li, instructed by Messrs Gallant Y.T. Ho & Co., for the Defendant