Servicemen’s Guides Association Fenwick Pier, Wanchai, Hong Kong v. Christine N Ltd

DCCJ 203/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 203 OF 2008

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BETWEEN

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Coram: His Hon Judge Leung in chambers (open to public)

Date of hearing: 23 July 2009

Date of decision: 23 July 2009

Date of handing down reasons: 6 August 2009

REASONS FOR DECISION

1.The dispute concerns a shop on the Ground Floor of what is known as Fleet Arcade at Fenwick Pier, Wanchai, Hong Kong.  CNL, the Defendant, is the vendor occupying the shop premises.  SGA, the Plaintiff, is claiming possession of the shop premises.  CNL resists and counterclaims for specific performance of an alleged agreement between the parties in respect of CNL’s continued occupation of the shop premises.

2.There were 2 summonses.  By its summons dated 9 March 2009, CNL applied for specific discovery of documents by SGA.  By its summons dated 9 April 2009, SGA applied to strike out parts of the Defence of CNL.

3.Ms Nigam, director of CNL, appeared and argued the applications on behalf of her company.  At the end of the hearing, I granted substantially what SGA applied for and dismissed the CNL’s application in its entirety.  CNL also has to pay costs.  I now give my reasons for the decision.

The striking out application

4.The pleaded case of SGA is that it is the registered owner and entitled to possession of the shop.  Following SGA’s offer of tenancy but eventually failure to conclude a formal tenancy agreement between the parties in November 2007, CNL is said to have been in wrongful occupation of the shop premises since then.  SGA claims for possession of the shop premises and damages.

5.The parts in the Defence, which SGA objected to, appear as follows:

“1.   As to paragraph 1:

(a)        it is denied that the Plaintiff is the registered owner of the premises; and

(b)       it is denied that the Plaintiff is entitled to possession of the premises;

Consequently, the Plaintiff is put to proof as to its title to sue herein.

2.         …… The terms pursuant to which she occupied the same included those set out in a document entitled “Fleet Arcade Saleroom Agreement between Ship Support Office (SSO) Hong Kong and Fleet Arcade Salesroom Association (FARSA) member, Christine N Refined designs” dated 1 July 2004.

3.         …… No admissions are made as to the Plaintiff’s entitlement to offer the 1^st October 2007 ground floor tenancy agreement, or its standing to enter into the same.

4.         …… No admissions are made as to the Plaintiff’s entitlement to offer the November 2007 second floor tenancy agreement, or its standing to enter into the same.

……

9.        …… No admissions are made as to the Plaintiff’s entitlement to offer the 22^nd November 2007 ground floor tenancy agreement, or its standing to enter into the same.”

6.According to its summons, as amended with leave during the hearing, SGA contended that the above pleading failed to constitute reasonable defence and/or was frivolous and vexatious under O.18, r.19(1)(a) and (b) of the Rules of the District Court.

7.An order for striking out will be granted only if the court is satisfied that the parts of the pleading being objected to are clearly and obviously bad and unsustainable.

Paragraph 1 of the Defence and Counterclaim

8.SGA was formed in the 1950’s.  It is the direct tenant of the land where Fenwick Pier is from the Hong Kong Government as the landlord.  According to the written tenancy agreement dated 14 September 1992 (“the Head Lease”), the term of the tenancy was 5 years certain commencing on 1 May 1992 and thereafter quarterly until such time as the tenancy is determined.  There is no dispute that such tenancy is subsisting.

9.SGA chose to plead the alleged registered ownership of the premises.  In view of the capacity of SGA as tenant under the Head Lease and in the absence of evidence of actual registration of ownership of the premises in SGA’s name, I do not think that CNL’s denial of that in its pleading is at this stage wholly without basis.

10.Whether the alleged registered ownership is relevant in the present case, and I doubt that it is, I see no clear reason for striking out paragraph 1(a) of the Defence and Counterclaim.

11.Paragraph 1(b) of the Defence and Counterclaim required different consideration.  To begin with, as the tenant of the premises under the Head Lease, SGA is prima facie entitled to possession and therefore the right to sue for such.  Whether SGA is entitled to the order for possession in the circumstances of the present case is of course a matter for trial.

12.The major contention in this regard, which is also pleaded in the Amended Reply and Defence to Counterclaim, is that SGA’s rights, title or interest over the premises is irrelevant to the present action and CNL is estopped from disputing the title of SGA by whom CNL was let into possession.

13.There is no dispute that it was the Fleet Arcade Salesroom Association (“FASRA”) that let CNL into possession of the various shop premises in the Arcade first on the 2^nd Floor and then in 2006 the current shop premises on the Ground Floor.  SGA claimed that FASRA was its agent in doing that.

14.If it was CNL, through FASRA, which allowed CNL into possession of the shop premises, CNL would indeed be estopped from disputing CNL’s title.  This would be the case even though SGA had no title to the premises in question or right to let the same at all.  The same principles should apply if the relationship is not one of tenancy but licence.  See Morton v Woods (1869) LR 4 QB 293 at 304; Industrial Properties (Barton Hill) Ltd v Associated Electrical Industries Ltd [1977] 1 QB 580; Tang Man Kit & Anor v Hip Hing Timber Co Ltd, CACV 137/2002, 13 May 2005 at para.53; Yoshiya Property Management v Yau Po Hing, DCCJ 1175/2007, 12 September 2007; Lam Chi v Yip Ching [1982] HKC 623; Halsbury’s Laws of Hong Kong, Vol.11 at paras. 170.123-170.124; 170.126.

15.CNL denied that FASRA was SGA’s agent.  Ms Nigam of CNL referred to various documents.  The starting point was the Head Lease which provided:

16.Apparently, SGA was supposed to sublet the salesroom to the US Navy Salesroom Association, which would be operating the salesroom.  But what was the actual subletting arrangement?

17.The documents suggested that SGA has apparently entered into a lease agreement with the US Department of Navy regarding the use of Fleet Arcade (“the lease agreement”).  FASRA was an association of the vendors at the Arcade.  There was no subletting agreement between SGA and FASRA as the Head Lease might have contemplated.

18.The US Navy’s Ship Support Office in Hong Kong (“SSO”) apparently required each vendor at the Arcade (i.e., member of FASRA) to enter into a blanket agreement whereby SSO outlined the relationship and responsibilities between SSO and the vendors pertaining to the management of, among others, the Arcade (“the blanket agreement”).  The blanket agreement between SSO and CNL dated 1 January 2004 (which was somehow pleaded as 1 July 2004) is referred to in paragraph 2 of the Defence and Counterclaim.

19.The blanket agreement provided that, among others, SSO would continue to hold the lease agreement with SGA while SGA would provide SSO and FASRA with the use of various areas including the Arcade.  FASRA would pay SGA service charges to cover SGA’s cost of management, operation and maintenance of these areas.

20.The blanket agreement also provided that every month, the vendors would pay their respective service charges to FASRA and FASRA would pay the service charges to SGA.  In case of default on the part of any vendor, SSO would terminate FASRA’s use of such portion of the salesroom area and allowed SGA to let such area and to receive all rentals and service charges from such leasing in consultation with SSO.

21.In May 2004, the lease agreement was amended whereby, among other things, FASRA took over from SSO the responsibility of administering the FASRA Fund.

22.SGA’s budgets show that apart from SSO, the vendors and the restaurants there, SGA also had to pay service charges.  This is a strong indication that the services charges were contributions by all the occupiers of Fenwick Pier towards the management and maintenance by SGA.

23.In about late 2007, the vendors started to pay the service charges directly to SGA and SGA also started to arrange direct tenancy agreements with the vendors.

24.On the basis of these documents, CNL argued that it was FASRA, in exercise of its authority assigned by SSO, which let CNL into possession of the shop premises.  In doing that, FASRA was not the agent of SGA.  The only connection between FASRA and SGA was said to be the collection and payment of services charges from the vendors to SGA.

25.On the other hand, SGA has obtained written confirmation from the SSO that FASRA was created pursuant to the agreement between SGA and SSO to facilitate the collection of the service charges payable to SGA.  SSO and SGA would oversee the approval of new vendor and vetting of merchandise being sold by the vendors.

26.SGA has also obtained written confirmation from the Vice-Chairman and Treasurer of FASRA at the material time that FASRA had always been the middleman collecting service charges from the vendor for onward payment to SGA.  These were the officers of FASRA who signed the letter to CNL in September 2006 confirming the agreement for CNL to use the shop premises in question.  They explained that they signed the letter to CNL as representative of SGA.

27.Whether FASRA was SGA’s agent in letting the vendors into possession of the shop premises or the representative of the vendors in collecting and paying the service charges to SGA, or perhaps both, becomes a factual dispute.  But I do not find that raising such dispute assists CNL.

28.It is CNL’s pleaded case that Ms Nigam countersigned SGA’s written offers of tenancy in November 2007 and thus confirming CNL’s agreement to them.  This, according to CNL, constituted a specifically enforceable agreement.  SGA was said to be in breach of such agreement by subsequently sending the draft tenancy agreement containing terms allegedly at variance with such agreement.  On the basis of such agreement between SGA and CNL in November 2007, CNL denied SGA’s right to rescind the offer of tenancy or to demand CNL to vacate from the shop premises.  This also forms the basis of CNL’s counterclaim.

29.In line with such pleaded case, CNL effectively acknowledges that whatever tenancy or licence CNL used to have over the shop premises had expired and its continued occupation of the shop premises was based on the alleged agreement between SGA and CNL in November 2007.  Seeking to enforce such agreement whilst denying SGA’s title and interest in the shop premises would be self-contradictory.  Paragraph 1(b) was still liable to be struck out.

Paragraph 2 of the Defence and Counterclaim

30.During the hearing, Mr Shum for SGA did not press on with the application to strike out the part of paragraph 2 of the Defence stated above.  I also do not find this part of the Defence to be objectionable.

Paragraphs 3, 4 and 9 of the Defence and Counterclaim

31.The parts of these paragraphs of the Defence being objected to by SGA were identical.  CNL put SGA to proof of its capacity to let the shop premises.  This also formed the basis for CNL’s application for specific discovery of documentary proof of the consent of the District Lands Officer for SGA to let the shop premises to the vendors at the Arcade.

32.I refer to the discussion above of CNL’s claim for the right to occupy the shop premises on the basis of the allegedly specifically enforceable agreement between SGA and CNL in November 2007.  On the other hand, by these parts of paragraphs 3, 4 and 9 of the same pleading, CNL questioned SGA’s capacity to offer tenancy to and to enter into the agreement with SGA that it is seeking to enforce.

33.Ms Nigam seemed to suggest that CNL’s denial of SGA’s capacity to offer tenancy and its enforcement of the alleged agreement with SGA in November 2007 were alternative pleas.  However, the suggestion was not borne out or permitted by CNL’s pleading as it now stands.

34.The inconsistent pleas by these paragraphs were liable to be struck out.

Discovery

35.According to its summons, as amended with leave during the hearing, CNL sought specific discovery of the following documents:

“(1)       Such document or other evidence that the Plaintiff is permitted, contrary to clause 2(b) of the Head Lease and the First Schedule thereto, to be running the premises as salesrooms……

(2)          The written consent of the District Land Officer pursuant to Clause 2(g)(i) of the Head Lease that the SGA has permission to sublet the premises, other than in accordance with Clause 2(g)(ii) of the Head Lease; and

(3)  Documentations to show what rent or service charge the Plaintiff is getting for letting the first floor of the Fleet Arcade to Vero Chocolate, documentations to show what rent or service charge the Plaintiff was getting for letting the first floor of the Fleet Arcade to the previous vendors on the first floor who are currently in the Fleet Arcade.  Documentation to show that written consent has been obtained from the District Land Officer to the Plaintiff to grant tenancy agreement to Vero Chocolate?”

36.Ms Nigam seemed to suggest that CNL’s application was taken out under O.26 of the Rules.  O.26, which has to do with leave to serve interrogatories, is hardly relevant.

37.It is the burden of the party seeking discovery under O.24, r.7 to show the followings:

(1)  The document or the class of documents requested exists.

(2)  The party against whom the order is sought has or had the document in his possession, custody or power: see Hong Kong Civil Procedure 2009, Vol.1 at 24/2/7.

(3)  The document or class of documents relates to a matter in question in the action: see Hong Kong Civil Procedure 2009 (above) at 24/2/10.

38.The order sought must identify with precision the document or documents or categories of documents that are required to be disclosed: see Re Estate of Ng Chan Wah, HCAP 5/2003, 5 March 2003.

39.Any document which, it is reasonable to suppose, contains information which may enable the party applying either to advance his own case or to damage that of his adversary, if it is a document which may fairly lead him to a train of inquiry which may have either of these two consequences is also subject to discovery: see Compagnie Financiere, etc (1882) 11 QED 55 at 63.

40.But the party against whom the order for specific discovery is sought may show that the order should nevertheless be refused if it is not necessary either for disposing fairly of the cause or matter or saving costs: see O.24, r.8; Hong Kong Civil Procedure 2009 (above) at 24/8/1.

Requests (1) and (2)

41.Though I had my doubt, Mr Shum did not take issue as to whether reference to “such document or other evidence” in request (1), unlike requests (2) and (3), lacked precision in identifying the document or class of documents required.

42.It is never SGA’s pleaded case that it has the permission or consent from the District Land Officer.  It was CNL that brought this up by putting SGA to proof of its capacity to let the shop premises.  But in requesting for the document evidencing such permission or consent, CNL was not really suggesting that such document in fact existed and was in the possession, custody or power of SGA.

43.The documents required to be disclosed under requests (1) and (2) could not have been relevant unless SGA has been “running the premises as salesrooms” and “subletting the premises” as stated in the requests.  But if SGA has in fact been doing that, whether there has been permission or consent from the District Land Officer to do so could only be a matter between the Government and SGA under the Head Lease.  The principles of tenancy by estoppel discussed above explain.

Request (3)

44.There is no dispute that Vero Chocolate is the vendor currently occupying the 1^st Floor of the Arcade.  I do not see how the documents relating to the rent or service charges SGA is receiving from this particular vendor and the other vendors on the 1^st Floor could be relevant to the dispute between SGA and CNL.

45.The rest of request (3) was for the written consent from the District Land Officer for letting of the 1^st Floor to Vero Chocolate.  I repeat what was said regarding requests (1) and (2) above.

Discretion

46.The court retains the discretion under O.24, r.8 not to order for the specific discovery requested if it is not necessary for the fair disposal of the matter or for saving costs.  Even assuming that CNL managed to pass the hurdle of establishing a prima facie case of existence and possession of the documents requested, I would not consider that discovery of these documents was necessary for the purpose of O.24, r.8 in the circumstances of this case.

Order

47.In respect of SGA’s application, the following parts of the Defence and Counterclaim were struck out:

(1)  The sentence “and (b) it is denied that the Plaintiff is entitled to possession of the premises.  Consequently, the Plaintiff is put to proof as to its title to sue herein” in paragraph 1 (as cited above); and

(2)  the last sentence of each of paragraphs 3, 4 and 9 (as cited above).

48.CNL’s application for specific discovery was dismissed.

49.I considered that SGA succeeded substantially and therefore SGA should have the costs of its application.  Upon dismissing CNL’s application, I also ordered the costs to follow such event.  The conclusion was that the costs of and occasioned by the parties’ respective applications, including any costs reserved, should all by borne by CNL.  I so ordered.

50.Considering the substance of these applications and the submissions and authorities put forward not only by Mr Shum but also by Ms Nigam, I was satisfied that engagement of counsel by SGA was reasonable.  I saw no reason why costs should not be summarily assessed.  I did so and arrived at the sum of HK$86,200 which CNL shall pay to SGA forthwith.

Representation:

Mr Erik SHUM instructed Messrs Ho Tse Wai & Partners for the Plaintiff

The Defendant represented by its director, Mrs Christine NIGAM.