Maxdo Project Management Co Ltd v. Marquis Thomas Francis

DCCJ 1004/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1004 OF 2010

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Before: Deputy District Judge R. Yu in Chambers (open to public)

Date of hearing: 27^th August 2010

Date of handing down Decision: 21^st October 2010

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DECISION

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1.There are two applications before the Court this morning. The Plaintiff has taken out an order 14 application seeking final judgment against the Defendant. In support of this application, the Plaintiff has filed the Affirmation of Pang Yuk Sin, the vice president of the Plaintiff dated 11 June 2010 and the 2^nd Affirmation of Mr. Pang dated 7 July 2010. The Defendant opposes the application and he has filed his Affidavit dated 8 July 2010.

2.The second application has been taken out by the Defendant applying for leave to adduce his 2^nd Affidavit. The application is opposed by the Plaintiff and I shall first deal with the Defendant’s application.

3.The Plaintiff complains that this application has been taken out very late and they only received the summons at 5 p.m. yesterday.  Given that the 2^nd Affirmation of Pang Yuk Sin has been filed on 7 July 2010, there has to be strong reason for filing an Affidavit at such a late stage.

4.I am informed by Mr. Hew, counsel for the Defendant, that the Defendant has been residing in Guangzhou.  There are difficulties to obtain instruction from him.  He also submits that the contents of the Affidavit are relevant background facts and should be admitted.

5.I am not convinced that there are any special circumstances that justified a late application.  If the Defendant has to travel between Hong Kong and Guangzhou, he has to make himself available to assist his own legal advisor to protect his own interest.  I see no reason why he cannot come to Hong Kong and why this application has to be taken out so late. Further, by the order of Master S. Lo dated 25 June 2010, the Court has directed that no further Affirmation shall be filed without leave of Court.  This is not only a standard direction, but the intention of the Court that ping-pong exchange of Affidavit is not to be encouraged.  Parties are to set out all the evidence to be relied on in one go.  Having considered all the matters, I dismiss the application and allow costs of the summons to the Plaintiff.

6.I now turn to consider the application by the Plaintiff.  As the background, I have to consider the Plaintiff’s case as pleaded in the Statement of Claim.

7.The Plaintiff was at all material times and is a company engaged in the business of property investment and management.  By an employment contract dated 20 July 2009 made between the Plaintiff and the Defendant (“the Employment Contract”), the Plaintiff has employed the Defendant as the Chief Executive Officer of its Real Estate Division.

8.It is not disputed that Clause 7.1 of the Employment Contract provides that the Plaintiff is not responsible for provision of any housing allowance to the Defendant.  As a gesture of welcoming the Defendant to join the Plaintiff and facilitating the Defendant to settle down in Hong Kong, the Plaintiff would provide a one-off subsidy of rental expenses during the period from 7 September 2009 to 21 September 2009.  The rental subsidy would be paid directly to the landlord for an apartment to be selected by the Defendant.  Clause 7.1 also provides that “from 22 September onwards, although the Company will still, on your behalf, settle the rental expenses with the landlord, you acknowledge that such rental expenses shall be borne by yourself and you hereby agree and authorize the Company to deduct the advanced amount directly from your monthly salary.”

9.Mr. Pang in his Affirmation states that the Plaintiff is not obliged to provide any housing allowance or quarter for the Defendant, which is not disputed.  He further states in his 2^nd Affirmation that the process of searching for a suitable apartment has been carried out by the Defendant himself.  The Defendant has engaged Colliers International Agency Limited to look for an apartment and after he has decided to rent a premises at Unit B, 29^th floor of Aigburth, No. 12 Tregunter Path, Hong Kong (“the Property”) at the monthly rental of HK$117,000 for a term of 2 years commencing from 15 August 2009, the Defendant asks Colliers to approach the Plaintiff for signing of the relevant tenancy agreement.

10.It is the case of the Plaintiff that the Defendant has by an e-mail to one Ms. Betty Pang of the Plaintiff dated 28 July 2009 (“the E-mail”) authorized the Plaintiff as the Defendant’s agent to enter into the tenancy agreement of the Property on his behalf.  The contents of this E-mail has been set out in paragraph 4 of the Statement of Claim and I only intend to repeat the relevant part:

“I hereby procure and authorize [the Plaintiff] to act on my behalf to enter into a lease arrangement in capacity as tenant with the Landlord, Mid-Level Portfolio (Aigburth) Limited, and its agencies for the above property. I confirm that I agree with the terms of the offer letter dated 22 July 2009 and the draft tenancy, in particular:

Term: 2 years commencing from 15 August 2009

Rental: HK$117,000 per calendar month

I further authorize [the Plaintiff] to deduct from my salary such rent, management fees, service charges and such other related fees, expenses and disbursements levied by the Landlord or its agencies from time to time.”

11.It is the Plaintiff’s case that pursuant to the terms of the E-mail, the Plaintiff has entered into a tenancy agreement of the Property with Mid-Level Portfolio (Aigburth) Limited (“the Landlord”) in its own name (“the Tenancy”). Further, the Plaintiff has paid to the Landlord the sum of HK$234,000 representing two months’ rent as deposit.

12.According to the Affirmation of Pang Yuk Sin, the employment of the Defendant has been terminated on 8 December 2009 (and which is not in dispute). The Plaintiff claims that this is a wrongful termination on the part of the Defendant and the issue is the subject of an application in the Labour Tribunal, which does not concern me one way or the other in this application.

13.By a letter dated 13 January 2010, the Defendant informed the Plaintiff that he would vacate the Property and return the keys to the Plaintiff on 14 January 2010.  The Defendant has vacated the premises on 14 January 2010. 

14.The Solicitor for the Plaintiff has entered into negotiation with the Defendant’s Solicitor on how to resolve the liability under the Tenancy.  The Defendant denies that he has authorized the Plaintiff to enter into the Tenancy as agent for the Defendant.  In reply, the Plaintiff maintains the position that it has entered the Tenancy as agent for the Defendant and it would be in the Defendant’s interest to secure an earlier termination of the Tenancy with the Landlord.

15.The Plaintiff has negotiated with the Landlord for an earlier termination of the Tenancy.  The Landlord would be prepared to accept a surrender of the Tenancy on condition that the said deposit in the sum of HK$234,000 be forfeited to the Landlord.  The Plaintiff’s Solicitor has invited the Defendant to confirm the terms of earlier termination as proposed by the Landlord is acceptable but the Defendant’s Solicitor has refused to make any comment and maintained that the Defendant has no responsibility under the Tenancy.

16.In order to mitigate any potential loss, the Plaintiff has accepted the Landlord’s proposal and signed a Surrender Agreement allowing the Landlord to forfeit the said deposit.  An additional sum of HK$5,000 was paid to the Landlord as cost of the Surrender Agreement.

17.The present action is a claim by the Plaintiff for reimbursement of the total sum of HK$239,000, being the deposit forfeited and the costs of the Surrender Agreement.  As pleaded in paragraph 7 of the Statement of Claim, the Plaintiff asserts that it is an implied term of the E-mail (which the Plaintiff claims to create an agency agreement with the Defendant) that the Plaintiff shall be indemnified by the Defendant against all losses and liabilities and be reimbursed for all expenses incurred by it in the execution of its authority as an agent for and on behalf of the Defendant. 

18.In his Defence, the Defendant said he has been formerly employed by the Plaintiff in 2001.  And in 2004, the Defendant has sustained a serious neck injury and was immobilized in a hospital in Span for a period of 3 months.  He has not received his salary for October, November and December 2004.  Upon his complaint, his employment has been terminated by the Plaintiff.  Upon termination, he was left with the responsibility of paying the rental for his rented house in Hong Kong for the remainder of the lease term, and suffered financial loss as he did not have earnings at the material time.

19.In about early July 2009, the Plaintiff has approached the Defendant to persuade him to rejoin the Plaintiff.  In the negotiation for his employment, the Defendant claims to have made it clear to the Plaintiff that during his employment, he would not be a party to a lease agreement.  He only accepts that he would have to be deducted an amount from his monthly earning to pay for the rental payment.  He also denies that the E-mail to Ms. Betty Pang is an agency agreement between the Plaintiff and the Defendant.

20.The Defendant states in his Affidavit that pursuant to Clause 7.1 of the Employment Contract, he is entitled to select the apartment for residing.  He has selected the Property and informed the Plaintiff.  On 28 July 2009, Miss Venice Chan of the Plaintiff sent him an e-mail stating, inter alia, that “as a matter of procedure, [the Plaintiff] would like you to issue a written formal instruction/authorization to handle this matter on your behalf”.  The remainder of the e-mail from Ms. Venice Chan set out the wordings of the proposed agency instruction/authorization.  It is the Defendant’s case that the terms of the written instruction/authorization has been drafted by the Plaintiff and he has only copied the same into the E-mail and returned to the Plaintiff.

21.I shall now proceed to consider the argument by counsels for the parties.  The applicable principal for summary judgment is not really in dispute.  I would borrow from the written submission of Mr. Hew, counsel for the Defendant, where he summaries the view of the learned authors of the Hong Kong Civil Procedure 2010 vol. 1 14/4/9 – 14/4/12: 

(1) Summary judgment under order 14 is for clear cases only, the procedure should not be applied unless the Defence is “frivolous or practically moonshine”.  

(2) In regard to this, the test is not whether a Defence is to be believed but whether it is capable of belief. If so, Defendant must have leave to defend.  There is no need to show a complete Defence; a triable issue and/or a reasonable probability of showing a real or bona fide Defence will be sufficient. 

(3) The Court should not conduct a mini trial on affidavits. 

(4) Summary judgment should not be granted, and leave to Defence should be given when a difficult question of fact which ought to be trialed, or a difficult question of law is raised.

22.There are two issues in dispute.  Firstly, whether there is an agency relationship between the Plaintiff and the Defendant, for the Plaintiff to enter into the Tenancy in its own name but on behalf of the Defendant.  Secondly, in agreeing with the Landlord to surrender the tenancy agreement subject to the condition that the deposit be forfeited, is the Plaintiff acting within his power and hence entitled to be indemnified by his principal, the Defendant.

23.On the agency issue, Mr. Fung, counsel for the Plaintiff refers to the judgment by Madam Justice Chu in First Good International Limited v. Shum Kin & others HCA 614/2004 (unreported, 9^th May 2005) at paragraph 26:-

“What is critical in establishing the principal and agent relationship is the consent of the principal and agent. The party will be held to have consented if they have agreed in what amounts in law in such a relationship, even if they do not recognize it and even if they have professed to decline it. The consent must have been given by each of them, either expressly or by implications from their words or conduct.[my emphysis]”

24.Mr. Fung submits that in the present case, there is ample contemporaneous evidence demonstrating that the agency relationship between the Plaintiff and the Defendant.  He refers me to the E-mail, the Employment Contract in particular Clause 7.1, the Tenancy and the estate agent’s invoice which both named the Defendant as the occupant of the Property.  And on the Defendant’s assertion that he has only adopted the wordings from the e-mail by Miss Venice Chan, Mr. Fung submits that by adopting the wordings, he has approved and consented to the same.  He submits that the Defendant’s denial of agency relationship is practically moonshine.

25.I agree with the able ruling of Madam Justice Chu.  It is quite apparent from her ruling that in many cases, in order to decide if there is an agency relationship, there have to be findings of fact.  I do not agree that the E-mail is an agency agreement in itself and is at best evidence of agency relationship.  To decide if an agency relationship exists at the material times, and what are the terms of the agreement, the Court has to hear evidence and to make finding on the intention of the parties.

26.As Mr. Hew put it, his client is entitled to give evidence as to how he came to issue the E-mail.  The need to have regard to oral evidence and findings of fact shows that this is not an appropriate case for summary judgment.

27.What is interesting about the arrangement is this, if the Plaintiff is just to enter into a tenancy as an agent for the Defendant, there is no requirement for the Plaintiff to enter into the tenancy in his own name. Indeed, in most of the cases I come across, an agent would not enter into an agreement in his own name to save the possibility of incurring personal liability. 

28.There is a missing link from the evidence as to who has asked the Plaintiff to enter into the Tenancy in its personal name, and why has the Plaintiff agreed to this request, and whether there was other related arrangement.  To say the least, this arrangement tallies with the Defendant’s Defence in that he would not wish to incur any personal liability from any lease in the event that his employment might be terminated before the expiry of the lease.

29.The fact that the Defendant has been named as the occupant of the Property is not conclusive that he is the tenant.  In many tenancy agreements, the landlord would limit the occupants and the names of the occupants have to be included in the tenancy.  If there needs to be any written record, I thought it could be easier added in the Tenancy that the Plaintiff signed as agent for the Defendant. But there is no such written record.

30.It is clear that the issue on whether there is an agency relationship between the Plaintiff and Defendant and what are the terms could not be determined without oral evidence.  I believe that is sufficient to dispose of the order 14 application as it is a clear case that evidence has to be heard and finding on facts be made.  If I am wrong and there is an agency agreement, the Plaintiff still had to prove that the loss they seek to recover from the Defendant has no reasonable defence.

31.If we look at the document again, I note that the Plaintiff has paid the deposit for the Tenancy.  But there is no corresponding provision in Clause 7.1 for refund of the deposit or to deduct the same from the salary of the Defendant.  The better point may be that in the E-mail, it is provided that the Defendant allows the Plaintiff to deduct from his salary “such rent, management fees, service charges and such other related fees, expenses and disbursement levied by the Landlord or its agencies from time to time.” 

32.It is not clear if this could cover payment of deposit.  But understandable, the Plaintiff is not claiming reimbursement of the deposit. For if they only claim reimbursement of the deposit, the Defendant would argue that they could have recovered the same from the Landlord since the Tenancy has been terminated.  The Plaintiff would suffer no loss.

33.I note from the Statement of Claim that the Plaintiff seeks to rely on an implied term that it should be indemnified by the Defendant against all losses and be reimbursed for all expenses incurred by it, in the execution of its authority as an agent for the Defendant.  

34.The Plaintiff has not pleaded any special basis upon which they could claim implied indemnity from the Defendant.  This would mean that they are only relying on the general principal that when an agent is acting within his authority, he shall be indemnified by his principal for any loss. 

35.If we take a closer look at the Statement of Claim, at paragraph 15, the Plaintiff refers to a demand letter by its solicitor dated 4 March 2010 which has been exhibited as “PYS-12”.  The second paragraph of the letter reads –

“[The Plaintiff] has entered into the Surrender Agreement with the Landlord and paid to the Landlord the sum of HK$234,000 as compensation for early termination of the tenancy and the sum of $5,000 as the costs of the Surrender Agreement. …

“On [the Plaintiff]’s behalf, we hereby demand a full indemnity by [the Defendant] of the said total sum of HK$239,000 …..”

It is clear that what the Plaintiff claims is not reimbursement of the deposit paid.  When the Defendant claims is the refund of the compensation they paid for early termination of the Tenancy.  The Plaintiff has chosen to negotiate a surrender of the Tenancy with the landlord, I presume to mitigate their potential liability.  

36.I has been referred by Mr. Hew to Bowstead and Reynolds on Agency, 18^th Edition, at paragraph 7-58:

“Where the agency agreement is contractual, the agreement to reimburse and indemnify in return for what has been requested, if not expressed, can be regarded as an implied term of the contract that operates unless clearly excluded. There is thus no difficulty in such cases in holding that the principal is liable to reimburse and indemnify the agent for all payments made and liabilities incurred within the agent’s express or implied authority. This would include not only payments that the principal is legally bound to make, but also payments which the agent is legally bound to make though the principal would not be liable for them, cases where the agent is bound by the usage of a market, cases where the agent makes an authorized but gratuitous payment on the principal’s behalf, cases where the agent makes a payment which could not have been enforced but which there is a strong and legitimate pressure to make, cases where the agent, though under liability has as yet suffered no loss, and cases where a payment is reasonably but mistakenly made by the agent. Cases where the agent acts beyond his instructions, or interferes without request, would not be however being included.[my emphasis]”

37.By entering into that surrender agreement, it would be arguable that the Plaintiff is not acting within the authority of the original agency agreement. For the terms of the agency agreement, the Plaintiff relies mainly on the E-mail. If I look at the E-mail again, it is at best an authorization for the Defendant to enter into the Tenancy for the Defendant.  Mr. Hew submitted that entering into the surrender agreement would not be part of the express authority of the alleged agency agreement, and hence the Defendant would not be liable to indemnify the Plaintiff.  I agree that is at least an arguable defence.

38.Mr. Hew has also raised a number of other argument.  From the above analysis, it is sufficient to show that this is not an appropriate case for summary judgment be awarded and I do not intend to go through the other matters. 

39.In conclusion, I grant unconditional leave to the Defendant to defend the case.  I should also give direction for the future conduct of this case.  Towards the end of the hearing, I have raised with Mr. Fung that if I am against him on the application, possibly the Statement of Claim has to be amended.  Mr. Fung agreed.  In the circumstances, I believe there may be application for amendment or other direction required. 

40.I would direct the Plaintiff to file and serve a Reply within 14 days. If they need to amend the Statement of Claim, the Plaintiff shall apply by inter parte summons when the time for filing of pleadings could be further adjusted.  If no amendment is necessary, the parties shall comply with Order 24 and 25 on close of pleadings.  I grant liberty to both parties to apply in the event they wish any further case management direction in relation to the further conduct of this action.

41.And on question of costs, I give an order nisi that the Defendant do have cost of the Order 14 summons with certificate for counsel, such order to become absolute within 14 days from today.  Upon order being absolute, the Defendant shall within 7 days file the statement of cost for my summary assessment, and the Plaintiff may file the statement of costs on the Defendant’s summons at the same time for my summary assessment, and I would set off the cost against each other.

42.Last, I thank counsels for their kind assistance.

Mr. Elliot Fung, instructed by Messrs. Hastings & Co., for the Plaintiff

Mr. Yang-Wahn Hew, instructed by Messrs. Gall, for the Defendant