HOI BUN INVESTMENTS NO.1 LTD v. BDH COMMERCIAL LOGISTICS LTD AND ANOTHER

HCA 2331/2025

[2026] HKCFI 5188

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2331 OF 2025

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DECISION

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I.   Introduction

1.  This is the hearing of the Plaintiff’s application by Summons dated 20.1.2026 for summary judgment to be entered the against the 1^st Defendant and the 2^nd Defendant in a landlord and tenant dispute (“the O 14 Summons”).  The premises concerned is known as Portion of Factory/Godown Unit on Ground Floor, Factor/Godown Unit on 1^st Floor and Factory/Godown Unit on 2^nd Floor of the building known as SEAPOWER INDUSTRIAL CENTRE (“the Building”), 177 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong (“the Premises”).  The parties of the action are:

(1)  The Plaintiff (“P”), the registered owner and landlord of the Premises;

(2)  The 1^st Defendant (“D1”), the tenant of the Premises under a lease (“the Lease”) and a side letter (“the Side Letter”), both dated 7.10.2021 , which provide that the term of the Lease was 4 years from 1.12.2021 to 30.11.2025 (both dates inclusive); and

(3)  The 2^nd Defendant (“D2”), which was and is at all material times the controlling shareholder of D1, and which unconditionally guaranteed D1’s due and punctual performance of the Lease under a Deed of Guarantee dated 1.8.2018 (“the Guarantee”) (D1 and D2 collectively, “Ds”).

A.   Background and Indisputable Facts

2.  The following facts, as discerned from the agreed Chronology and exhibited documents referred to thereof, are indisputable and relevant:

(1)  D1 commenced a lease with the former owner of the Premises since 29.1.2013.  The Premises were assigned to P together with the then lease on 1.3.2021, with the relevant holdover and/or extension of such lease to 30.11.2021. 

(2)  P and D1 entered into the Lease, secured by the Guarantee with D2 as the guarantor on 7.10.2021.  As acknowledged in the Side Letter, D1 used and occupied the Premises as public cold storage.  

(3)  D1 failed to pay rent pursuant to the terms of the Lease on or around 1.8.2024.  

(4)  In a letter dated 27.8.2024 (“D1 August Letter”) (the contents and admissibility of which will be addressed below), D1 asked inter alia for extension to pay rent as a result of poor economic downturn.  This was not accepted by P. 

(5)  On 29.8.2024, P commenced DCCJ 5095/2024 against D1 and D2 for rent in arrears for the period from 1.8.2024 to 30.8.2024.  DCCJ 5095/2024 was subsequently discontinued.  

(6)  On 31.12.2024, D1 attempted to repudiate the Lease by returning the keys of the Premises to P.  On 3.1.2025, P informed D1 that P does not accept the repudiation of the Lease, and insisted on affirming the Lease. 

(7)  On 8.1.2025, P presented a winding up petition against D2 in HCCW 13/2025 based on D2’s liability under the Guarantee for inter alia the unpaid rent for the period from 1.9.2024 to 31.12.2024 in the undisputed outstanding amount of HK$2,611,643.90[1].

(8)  On 24.3.2025, D2 obtained a validation order in HCCW 13/2025 upon giving the undertaking to pay the sum of HK$2,611,643.90 into Court, which was so paid into Court subsequently. 

(9)  On 30.9.2025, HCCW 13/2025 was heard by DHCJ Alan Kwong, who gave judgment on the same day.  HCCW 13/2025 was eventually dismissed, but the circumstances of such dismissal shall be addressed further below.  In the same judgment, DHCJ Alan Kwong found that D2 has failed to raise any bona fide dispute[2].  DHCJ Alan Kwong also found that the payment into court by D2 does not ipso facto constitute security over and/or compounding for the petitioning debt.[3]  It was in light of D2’s indication that D2 “would consent that the sum paid into court be released to [P]” that DHCJ Alan Kwong accepted D2 appears to have the means to pay the petioning debt.  DHCJ Alan Kwong then adjourned the matter to 27.10.2025 with the indication that, if D2 pays the petitioning debt before the hearing, an application can be made to have the petition dismissed[4]. 

(10)  The sum of HK$2,611,643.90 was eventually paid by D2 to P, and the HCCW 13/2025 petition was dismissed on 27.10.2025.  Such sum was duly credited for and not claimed by P in this Action.  The Judgment in HCCW 13/2025 remains neither appealed nor set aside.  

(11)  P issued demand letters for sums in arrears under the Lease from 1.8.2024 to 30.11.2025, which was not complied by D1.  The Lease expired on 30.11.2025.  P recovered possession of the Premises on 1.12.2025 with rent, rates and charges remaining outstanding.  P also issued letter to Ds for reinstatement of the Premises.  

(12)  P thereafter commenced this action against Ds.  

3.  Under the Lease and the Side Letter, the following terms are relevant and material. 

(1)  The Lease is for a fixed term of 4 years from 1.12.2021 to 30.11.2025 (both dates inclusive).  

(2)  Under clause 5.1 of the Lease, the obligation to pay rent, rates and charges etc was explicitly stated to be “clear of all deductions and without set-off, cross claim or counterclaim (whether arising from any subject matter relating to the tenancy or the Premises or otherwise whatsoever and whether it be legal or equitable in nature)”[5].

(3)  Clause 6 of the Lease provides for quiet enjoyment of the Premises without interruption by P. 

(4)  Under clause 7.4 of the Lease, if a Destruction Event occurs as defined therein, rent may be abated (as determined by P) or the Lease may be determined failing rectifying of the same.  

(5)  Under clause 1.6 of the Side Letter, D1 shall be solely responsible for and take all precautions to protect the Premises and the Building from damage by condensation due to D1’s use of the Premises as a public cold storage. 

4.  By its Writ and Statement of Claim dated 19.12.2025 (“SOC”), P claims for outstanding unpaid rent, rates and charges for the total sum of HK$15,053,031.30, plus Rectification Costs of HK$427,278.00 and Reinstatement Costs to be assessed.

5.  There is no dispute as to the content and validity of the Lease, the Side Letter and the Guarantee, and P, on its case on the SOC, is prima facie entitled to judgment.  There is no specific dispute regarding the arithmetic of the outstanding unpaid rent etc at the amount of HK$15,053,031.30, although Ds dispute liability.  Ds do take issue with the liability and quantum of the claim for Rectification Costs and Reinstatement Costs.  D2 has not put up any separate defence in relation to its liability under the Guarantee.  The core issue therefore is whether D1 has succeeded in showing any arguable defence or triable issue with sufficient particulars in answer to its liability under the Lease to pay rent.  

6.  Ds in essence advanced the following defences:

(1)  D1’s right under Clause 6 of the Lease for quiet enjoyment had been interfered with by P, by virtue of the alleged water seepage caused by P, which is serious enough to amount to wrongful repudiation of the Lease (“the Quiet Enjoyment Defence”). 

(2)  A “Destruction Event” under Clause 7.4 of the Lease occurred by virtue of the alleged water seepage caused by P, such that the Premises are wholly or substantially unfit for the occupation and use by D1.  Therefore, D1 is entitled to determine the Lease by not less than one month’s notice, and the Lease was terminated by the end of January 2025 (“the Destruction Event Defence”). 

(3)  P has renunciated the Lease by insisting D1 shall rectify the water seepage problem and/or threatening to terminate the Lease if D1 fails to do so, when the water seepage is not the responsibility of D1 and is outside the scope of fixing duty of D1 under the Lease and/or the Side Letter.  Accordingly, D1 accepted P’s renunciation by August 2024 (“the Renunciation Defence”). 

(4)  P’s commencing and discontinuing of the DCCJ 5095/2024 action constituted a Henderson Abuse when P should have pursued rent in arrears from November 2024 to January 2025 in DCCJ 5095/2024 (“the Henderson Abuse Defence”). 

(5)  P has “failed to mitigate” by not trying to let out the Premises after D1 sought to hand over vacant possession of the Premises and return the keys back to P (“the Mitigation Defence”). 

(6)  Ds deposed that the state of the Premises was the same as the commencement of the Lease until D1 returned the keys of the Premises back to P on 31.12.2024 (“the Reinstatement Costs Argument”), which Ds say P has not adduced evidence to rebut.  

7.  D1 also mounted a counterclaim.  This is based on D1’s alleged exclusive use agreement with a Fifth Party Logistics Limited (“Fifth Party”) for the exclusive right to use the cold store at the Premises.  D1 says that due to the same allegations of water seepage and falling pipes etc which P caused and/or is responsible for, Fifth Party has terminated the exclusive use agreement prematurely, causing loss and damages in monthly rent/expenses payable by Fifth Party to D1 (“the Fifth Party Counterclaim”).

B.   Whether the D1 August Letter is privileged

8.  It is convenient at this juncture to deal with the admissibility of the D1 August Letter, as it sets the context and scene for the analysis below.  It is clear that the D1 August Letter was not marked “without prejudice”.  In Ds’ Skeleton filed on 11.6.2026, Ds objected to P’s reliance on the D1 August Letter “to support any fact finding of the seriousness of water seepage in the Premises”, claiming that the letter was “protected by without prejudice privilege and inadmissible in these proceedings”, and submitted that the letter was “genuinely aimed at settlement and despite not marked ‘without prejudice’, it is still inadmissible”.  Ds relied on Rush & Tompkins Ltd v Greater London Council & Anor [1989] AC 1280 for the general proposition that the application of the without prejudice rule is “not dependent upon the use of the phrase ‘without prejudice’ and if it is clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of those negotiations will, as a general rule, not be admissible at the trial and cannot be used to establish an admission or partial admission.”  

9.  Ds’ arguments are clearly without basis which I reject.  I hold that the D1 August Letter is clearly admissible in evidence for these proceedings for the following reasons. 

10.  As a matter of legal principles:

(1)  The “without prejudice” rule is founded partly in the agreement of parties, is not absolute, and parties can expressly or implicitly consent to the deployment of the “without prejudice” material in evidence and/or accept a repudiatory breach of the implied contract, freeing parties to deploy such evidence.  If one party seek to place material so subject to privilege in proceedings, the other may choose to accept such a breach of the implied contract not to deploy such material, or consent to its use, and thus giving a waiver of such privilege.  The Court is to assess whether there was implied consent or agreement for waiver of privilege objectively, taking into account all the circumstances of the case.  See Foskett on Compromise (10^th ed), §§19-04, 19-57. 

(2)  Further, as rightly submitted by counsel for P citing SJ v Wong Lai Yin & Anor [2022] 1 HKLRD 258, a mere request for (or analogous to) time to pay an undisputed liability or for a reduction of the amount to be paid is not covered by without prejudice privilege if there is no dispute of the right.  The distinction is drawn between attempts to resolve a dispute over the existence or extent of a liability (which is privileged) and discussions as to how an admitted liability is to be paid (which is not).  

(3)  Put in another way by Kwan J (as she then was) in Re Jinro (HK) International Ltd [2002] 4 HKC 90, applied in Wong Lai Yin, “[t]he fact that a communication concerns a dispute between the parties is not sufficient to confer privilege- it must be made in furtherance of the settlement of the dispute…There were merely requests for accommodation when there was no challenge to the petitioners’ rights. The without prejudice privilege cannot be invoked in these circumstances.”[6]

11.  Properly analysed, it is clear that the D1 August Letter was not covered by without prejudice privilege, and even if so covered any privilege had been clearly and unequivocally waived in any event.  

(1)  The starting point of the analysis must be that prior to Ds’ Skeleton, there had never been any indication that Ds intended for the D1 August Letter to be covered by without prejudice privilege, or otherwise object to its admission in these proceedings.  The fact that the letter was not marked “without prejudice” is not by itself conclusive, as is trite.  But this is nonetheless an indicator against parties’ intention for ever treating the D1 August Letter as covered by without prejudice privilege in the first place.  

(2)  The contents of this letter is relevant. D1 August Letter was in reply to P’s demand for payment of rent, failing which P shall commence legal proceedings against Ds.  In reply, in the D1 August Letter, D1 inter alia asked for the monthly rental of August and September 2024 to be offset from the existing rental deposit, rental deduction from August 2024 up to and inclusive of 30.11.2025, and/or termination of the Lease before the end of November 2025.  The reason(s) cited by D1 for the requests were D1’s short term financial hardship, COVID affecting overall economy of Hong Kong, and long cordial relationship between D1 and P.  D1 also invited P to “investigate the issues of the water dripping caused at the main electricity supply room so as to work out a sensible remedial solution although it is not caused by [D1]”, but noticeably did not tie the issue of water dripping with D1’s liability to pay rent to P. In gist, this was a mere request of accommodation by D1 to P for leniency in the timing of P’s exercise of its right to demand payment of rent and/or for early termination of the Lease, without any dispute nor challenge to P’s right to so demand full payment of the rent for the full term of the Lease. This is precisely the sort of “discussions as to how an admitted liability is to be paid” which, applying Wong Lai Yin and Re Jinro, would not attract without prejudice privilege. 

(3)  Not only was the letter not so marked “without prejudice”, the letter was in fact:

(a)  Expressly referred to in P’s affirmation as admission by D1 of non-payment of rent[7], as well as the agreed chronology; and

(b)  Included in the Hearing Bundle without objection by Ds prior to Ds’ Skeleton. 

(4)  Given the above, it is clearly that the D1 August Letter was never covered by without prejudice privilege, and even if so covered any such privilege had been clearly waived by the conduct of Ds.  

12.  As such, D1 August Letter is fully admissible, and forms part of the indisputable factual matrix of this case.  Its relevance and/or effect on my analysis will be addressed below. 

II.   Legal Principles for Summary Judgment Applications

13.  The principles regarding summary judgment applications under RHC O 14 r 1 are trite and not disputed between parties:

(1)  Summary judgment is for clear cases, that is, cases in which there is no serious material factual dispute and, if a legal issue, then no more than a crisp legal question as well decided summarily as otherwise; 

(2)  The test at the summary stage is whether the defendant’s assertions are believable.  But it must be recognized—because failure to recognize it would create a debt-dodger’s charter—that whether the defendant’s assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as is either undisputed or beyond reasonable dispute; 

(3)  if P’s application is properly constituted, P is prima facie entitled to judgment unless the defendant shows cause to the contrary; 

(4)  In showing cause, the defendant must show that there is an arguable defence or triable issue and provide sufficient particulars. A mere assertion in an affidavit is insufficient, ipso facto, to justify leave to defend; 

(5)  The defendant must satisfy the Court that its evidence is credible and that, on that basis, there is a fair or reasonable probability of the defendant having a real or bona fide defence; 

(6)  The issue is not whether the defendant’s assertions are to be believed, it is whether those assertions are believable; and

(7)  In considering whether there are triable issues, the Court will not take the defence on its face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents, whether the alleged defence is inconsistent with the defence previously put forward or whether the defence is only recently raised despite opportunity being given to the defendant to respond earlier.  The Court will also consider the inherent probability of the defence but what the Court should not do is to conduct a mini-trial on complicated factual issues. 

See:  HKCP 2026, Vol. 1, §14/4/9

Time Rich 08 Limited v DBE (HK) Limited & Ors [2018] HKCA 404, §5.2

Re Safe Rich Industries Ltd (CACV 81/1994, [1994] HKLY 183) at §§11-13

Guanghua SS Holdings v Lim Yew Cheng and Anor [2022] HKCFI 1052 at §13

United Overseas Bank v Total Enterprise Limited and Ors [2025] HKCFI 558 at §23-25

Jiang Jianxin v Yiu Ming Fung [2020] HKCA 916 at §6.4

UMG Recordings Inc & Ors v Profit Chart Development Limited & Ors (CACV 262/2012, unrep, 19 February 2013) at §7

III.   Analysis

A.   Ds’ case of P causing/being liable for water seepage wholly unbelievable

14.  As is apparent from the above summary, the main crux of parties’ dispute revolves around whether Ds can establish a believable case of water seepage caused by and/or was the responsibility of P.  Ds’ Destruction Event Defence, Quiet Enjoyment Defence, Renunciation Defence all hinge on the same.  

15.  Ds’ opposition to the O 14 Summons is based on the 2^nd Affirmation dated 6.3.2026 by Mr Yuen Tze Fai (“Yuen”)[8] (“Yuen 2^nd”).  Yuen was at all material times a director of D2.  D2 in turn was at all material times the majority shareholder of D1.  Yuen however was never a director of D1.  It is also accepted by Ds that it was inter alia one Mr Quincy Leung of D1, not Yuen, who was the responsible staff handling matters regarding the Lease.  Save for a few fleeting instances which will be addressed below, Yuen on affirmation does not claim to have personal knowledge nor memory of the events surrounding the alleged water seepage and/or matters regarding the Lease.  In the words of Ds’ Skeleton, “there is a complete lack of evidence that Mr Yuen was in control of or behind the management of D1 when D2 was contesting HCCW 13/2025 in 2025”.  It is thus clear Yuen (save for the several fleeting instances) does not have personal direct or indirect knowledge of the events/allegations he deposed to in his affirmation.  Counsel for Ds did not argue otherwise.  

16.  Based on the above, P argues Yuen 2^nd is generally inadmissible[9].  Ds oppose to this submission, arguing that these are mere technical objections, it is clear that Yuen’s source of knowledge is from contemporaneous documentary records left by Quincy Leung, and Ds had proper explanation for having Yuen make the affirmation as Quincy Leung had since left D1’s employ as Yuen deposed to. 

17.  The principles regarding affirmation evidence for the use of RHC O 14 applications are clear:

(1)  Under RHC O 14 r 2(2) and r 4(2), an affidavit for the purposes of O 14 applications may contain statements of information or belief with the sources and grounds thereof.  This is the exception to the general rule under RHC O 41 r 5 that an affidavit may contain only such facts as the deponent is able of his own knowledge to prove.  

(2)  The phrase “with the sources and grounds thereof” has been explained in HKCP 2026, Vol. 1:

(a)  §14/4/4: “Matter of hearsay is admissible in the defendant’s affidavit…provided that the sources and grounds of information or belief are disclosed…cf O 41 r 5”

(b)  §41/5/3: “O 41 r 5(2) [regarding need to provide sources and grounds of statements of information or belief] should be strictly complied with where objection is likely to be taken, and especially where it is an objection of substance and not a mere technical and frivolous objection.”  

(3)  The Court’s approach on objections to failure to state sources and grounds had also been discussed in Bedat & Co (HK) Ltd v Akstrom Imports Inc [2021] HKCFI 812 at §§11-17.  In gist, this rule is to be applied pragmatically, the Court will take into account the circumstances of the case including the substance of the objection.  Where the objection of substance is taken which is not mere technical and frivolous, the Court would be acting contrary to its plainest duty if it refused to observe the rule.  

18.  Applying the principles, for the reasons stated below, I do not find the objections by P to be mere technical and frivolous.  I do rule out Yuen 2^nd insofar as it purports that P caused and/or was responsible for the alleged water seepage incidents and “other issues at the Premises”[10]. Further, I do find that Yuen 2^nd is of no weight in any event insofar as it puts the blame and/or responsibility for the water seepage on P, and this renders Ds’ case wholly unbelievable.  

19.  Yuen’s clear lack of personal knowledge has a fatal impact on the lack of basis of his statements, as the documents/evidence/source he referred to for his statements do not in fact support the statements he makes at all.  The statements by Yuen were simply not his personal knowledge, not supported by the documents/evidence he referred to, and wholly contradicted by indisputable contemporaneous documents and facts.  This is not, contrary to Ds’ arguments[11], just a drawing of “adverse inference” solely based on technical grounds.  Rather, this is the Court’s exercising its judgment when considering whether Ds have shown a triable issue based on believable assertions, testing such assertions against the indisputable contemporaneous documents.  

20.  Firstly, save for a few fleeting instances, Yuen in Yuen 2^nd never claimed any direct or indirect knowledge as to the events surrounding the alleged water seepage:

(1)  Beyond the bare assertion that he was “duly authorized by [Ds] to make this Affirmation”, Yuen did not state his connection and/or role in relation to the operation of D1 and/or the Lease, or when and/or how he was involved in the events leading to the disputes at the material time.  The only known connection of Yuen with D2 in that Yuen signed the Guarantee on behalf of D2 and Yuen was a director of D2 at the material time, but nothing was said regarding the Guarantee in Yuen 2^nd, nor does Yuen claim he had ever visited the Premises or dealt with matters regarding the Lease at all at the material time; 

(2)  At Yuen 2^nd §§13-14, Yuen generally deposed as to the alleged “serious incidents of water seepage or leakage at the Premises completely not caused by [D1]”, asked the Court to “inspect the photographs and video exhibits”, and claimed that the water seepage cause dirty water to contaminate food items and/or further subsidiary issues, seriously affecting the use of the Premises as cold storage.  

(3)  At Yuen 2^nd §§15-17, Yuen referred to Exhibit YTF-1 being a USB containing video or audio file exhibits, and Exhibit YTF-2 being what he says to be a bundle of documents evidencing the details of water seepage or leakage problem at the Premises.  He says by 1.8.2024 the water seepage “had been persistent and egregious”, there were “many such serious incidents”, but there were no stated source or ground for such statement beyond saying because Quincy Leung left D1 and due to lapse of time, further proof “may fail to be located at this juncture”. 

(4)  Yuen then went on at §§18-22 to make various statements regarding alleged dates and details in which flooding and/or other problems had occurred, referring to specific pages/parts of exhibits which he says were “from D1’s computer files” as he goes.  However, from the content of §§18-22, there is no allegation at all (beyond referring to the documents) as to what were the sources or grounds upon which Yuen learned of these events occurring as he claimed, nor as to how Yuen learned that P was the one who caused and/or was responsible for such water seepage and/or problems.  Looking at the referred to parts of YTF-1/YTF-2, none of the pictures/videos could have shown that P caused and/or was responsible for the complaints made.  

(5)  Yuen 2^nd at §23, where Yuen referred to YTF-2 pages 18-27 and alleged water seepage causing dampening/damage to carton boxes, was the only occasion in which Yuen claimed he “remember this incident happened” insofar as water seepage is concerned, thereby claiming personal knowledge.  However, again, there is no allegation as to the basis upon which Yuen learned that P caused and/or was responsible for the same. Yuen 2^nd at §30, 32 also alleged that Yuen “remember [electricity cut off and food going bad/boxes and bags bitten by rodents] some time in 2024”, again without allegation that P caused and/or was responsible for the same.  Looking at the referred to parts of YTF-1 to 3, none of the pictures/videos could have shown that P caused and/or was responsible for the complaints made. 

(6)  The tenor of Yuen 2^nd continues in similar vein at Yuen 2^nd §§24-29, 31, 33 with Yuen referring to pages of documentary exhibits and/or videos as “from D1’s computer files”, making allegations of P’s “general nonchalant attitude...in dealing with water seepage” in other parts of the Building, cutting off of electricity, falling of pipes etc, but again with no particular source nor ground (beyond referring to the documents) as to how Yuen knew what has occurred and why P caused and/or was responsible for the same. 

(7)  Yuen 2^nd at §§34-45 then went on to comment on P’s evidence and case against D1 for causing water seepage in the Building, with Yuen claiming that the evidence “corroborates [D1]’s case of a serious water seepage…problem at the premises…demonstrates that [P’s] evasive attitude in… falsely blame the tenant for water seepage, when [P] itself is causing it”.  Yuen then continues in his affirmation to refer to parties’ correspondences, with P requesting D1 to remedy the water seepage, D1 refusing and denying responsibility, ending with Yuen claiming that “[D1] is not responsible for such water seepage so must not be liable to indemnify [P].”  However, yet again, Yuen provided no particular source nor ground as to how Yuen knew what has occurred and why P caused and/or was responsible for the same. 

21.  In gist, it is obvious that Yuen 2^nd is not proper basis and of no value at all insofar as Ds seek to establish a believable case of P having caused and/or was responsible for any water seepage.  Yuen 2^nd, other than at §§23, 30, 32, boiled down to nothing more than commentary by someone with no alleged direct or indirect knowledge on the exhibits referred to, opining if not guessing what he thinks may have occurred and who he thinks should be responsible without basis.  

22.  Secondly, when looking at the exhibits, none of the exhibits referred to goes anywhere close to supporting Ds’ claims that the water seepage occurred in the way Ds described and/or P caused and/or was responsible for the same.  They were nothing more than pictures and videos of what appears to be some water seepage and/or other incidents without any context whatsoever.  Even when it comes to §§23, 30 and 32, Yuen 2^nd only claimed vaguely he “remembers the incident occurred some time in 2024”, but without any alleged source or basis in attaching blame onto P.  If the Exhibits so referred to themselves do not support the statements in Yuen 2^nd, this Court cannot properly attach any reliance nor weight to Yuen 2^nd as to what was said to have occurred and/or that P was to be blamed, especially when tested against the contemporaneous and indisputable documents. 

23.  Counsel for Ds went on to argue that the evidence by Yuen is admissible and/or of value because they were Yuen’s accurate description of what happened in the photographs and videos from D1’s records, and that it was Yuen’s opinion that as these were part of the fixture, it would be the responsibility of the landlord.  With respect, this is in truth an admission to their own detriment by Ds that Yuen 2^nd is entirely hollow and inadmissible.  What Yuen did was nothing more than looking at the pictures and videos, with no direct or indirect knowledge whatsoever as to what actually occurred and why they occurred, making guesses when the pictures and videos do not get anywhere close to supporting his conjecture.  Yuen is, as an affirmant, no better than a bystander.  Ds do not even purport that, as a matter of hearsay, those having knowledge at the time (eg Quincy Leung) held such views.  Ds’ case, based on mere opinion and conjecture by someone with no asserted knowledge nor expertise, is hopeless.  

24.  Thirdly, it is beyond doubt that when tested against the indisputable evidence disclosed in the affidavit including contemporaneous documents, Ds’ case stands to be dismissed as wholly unbelievable:

(1)  P had been continuously complaining by letters against D1 for water condensation problems caused by D1 since by latest May 2021, causing and/or threatening water seepage, property damage, electricity shortage and fire, and requesting remedial actions, precautions and/or compensation by D1 under the Lease and/or the Side Letter.  It is also indisputable that D1 has duly received such complaints, and had passed the matter to its solicitors since June 2022.  Reports were compiled by P pointing to D1 being the cause of such water seepage, and the same were duly sent to D1 at the material time.  

(2)  Throughout the correspondence (including via D1’s solicitors at the time), D1, whilst denying liability, never alleged P was responsible for water seepage as they do now.  The identifiable times on documents that D1 did request P’s remedial works were:

(a)  On one occasion on 13.9.2022 regarding fixing of sprinkler pipes, which on document P replaced promptly on 26.9.2022[12].

(b)  On one occasion on 26.4.2024 regarding pipe loose and falling, with P notifying D1 repair work will be carried out, and P repairing the same on 30.4.2024.[13]

(3)  Contrary to Ds’ stance now, all of the voluminous correspondences point to P stating the water seepage issues being due to D1 and the water condensation problem, D1 denying liability, and D1 looking for contractor(s) to provide solution to rectify the water condensation issue[14], but never alleged P was responsible and/or to be blamed. 

(4)  Even when D1 through its solicitors asked for extension of time to pay rent by the D1 August Letter in August 2024, and later claimed that P repudiated the Lease by a letter dated 31.12.2024, and when faced with the DCCJ 5095/2024, there was still no mention at all of P causing and/or was responsible for water seepage.  This is especially unbelievable given by 7.8.2024, Fifth Party had already given notice to terminate its agreement with D1, citing inter alia severe water condensation as the cause[15].

25.  If Ds’ case is to be accepted, it would mean that D1 has willingly remained completely silent despite suffering from egregious, continuous and destructive water seepage for years caused by P since at least August 2022, even though when it comes to relatively minor events, such as the fixing of sprinkler pipes on 13.9.2022 and repairing pipe loose and falling on 26.4.2024, D1 had channels to and did complain to P, which P duly addressed and rectified.  Ds will have this Court believe their case despite Ds only recently raised such allegations, despite opportunity for years to raise or respond earlier, and despite D1 having previously instructed solicitors and/or contractors to deal with P’s complaints of water seepage against D1.  Ds by affirmation or by submissions have no explanation for such complete and prolonged silence.  The only argument counsel for Ds could offer was to refer to D1’s solicitors’ letters where D1 denied liability for water condensation issues[16] and claimed (without particulars) repudiation by P[17]; but as I have noted at the hearing, D1’s denial of liability for water seepage cannot possibly be read as D1’s claim against P for causing/being liable for water seepage.  Ds’ arguments and assertions are non-sensical and fly in the face of logic and plain reading of indisputable documents.  

26.  In coming to my finding, I am mindful that Ds have referred to the various photos and videos, “implore” that I “not only read [Yuen 2^nd] but also to inspect the photographs and video exhibits”, which I have gone through in detail (albeit Ds themselves were not able to point out with any specificity where and how such exhibits support their case).  I am also mindful of the passages from HKCP 2026, Vol 1, §§14/4/3, 41/5/3 and the case of Huang Yu Hui v Zheng Shizhi (HCA 646/2015, unrep, 13 January 2017) referred thereto.  In gist:

(1)  The Court will generally require the affidavit from the defendant to show the real triable issue or question, or the reason that there ought to be trial.  The “or otherwise” term is not intended to open wide the door for giving leave to a defendant who has no real defence; and

(2)  The “or otherwise” limb may, in exceptional and obvious cases, allow for the Court to look at the substance of the materials relied upon by a defendant in case they are not covered by a proper affidavit in a summary judgment application. 

27.  However, I do not find the current case to be such an exceptional and obvious one which allows me to ignore the fundamental flaws (both on admissibility and credibility) of Yuen 2^nd and open up the “or otherwise” ground.  Unlike in Huang Yu Hui[18], the assertions in Yuen 2^nd do not have any proper foundation, and the opinion or interpretation given by Yuen simply cannot be borne out from the photo and video exhibits referred to at all.  More problematically, Yuen 2^nd falls far short of giving even a proper explanation as to why he, with no direct or indirect knowledge, was the affirmant for Ds.  Whilst it was stated that Quincy Leung had since left the employ of D1, it is not being said that Ds tried to find Quincy Leung to give evidence, nor was it being said that all the personnel with direct or indirect knowledge of the events are not available[19].  In such circumstances, the Court would be acting contrary to its plainest duty if it refused to observe the rule by giving admissibility and weight to Yuen 2^nd.  

28.  Given the above, in light of the clear lack of direct or indirect knowledge of Yuen, lack of support of Ds’ case from the exhibit, the failure to properly state the sources and grounds of his information and/or belief, and inexplicable silence for years of Ds’ complaints belatedly raised, I find that Yuen 2^nd is inadmissible and unbelievable insofar as it alleges P causing and/or being liable for water seepage in the Premises.  Consequentially, Ds’ Destruction Event Defence, Quiet Enjoyment Defence, Renunciation Defence have no admissible or believable basis and stand to be dismissed summarily. 

29.  I shall now proceed to further analyze Ds’ defences individually.  The findings below stand true regardless of my ruling on the admissibility of Yuen 2^nd above.  

B.   Quiet Enjoyment Defence

30.  Ds’ Quiet Enjoyment Defence relies on Clause 6 of the Lease, which reads:

“6. Quiet Enjoyment

The Landlord agrees, subject to:

6.1 the Tenant complying with its obligations under this Lease; and

6.2 any rights granted to the Landlord by this Lease,

To permit the Tenant peaceably to hold and enjoy the Premises without any interruption by the Landlord or any person lawfully claiming through, under or on trust for it. ”

31.  Ds, relying on Southwark LBC v Mills [2001] 1 AC 1, Vasiliou v Hajigeorgiou [2010] EWCA Civ 1475 and Peregrine Systems Ltd v Steria Ltd [2005] EWCA Civ 239, argue that water seepage could cause a breach of covenant of quiet enjoyment so serious as to amount to wrongful repudiation of the lease.  P submits that the above cases are all inapplicable and/or distinguishable, in that interference arising from the inherent condition of premises demised “as-is” falls outside the covenant, actionable interference flowed from the landlord’s own works, and the threshold for repudiation is that the tenant has to be deprived of substantially the whole benefit which it was intended he should obtain from the lease.  

32.  I agree with P’s submission and reject Ds’ arguments:

(1)  Given the analysis above on lack of weight of Yuen 2^nd, there is no credible basis for Ds to begin to suggest that P caused and/or was responsible for any of the alleged water seepage incidents.  To the contrary, the volumes of records show that water seepage were caused due to condensation issues flowing from D1’s use of the Premises as cold store, which under the Side Letter is D1’s responsibility.  Given Yuen has no direct or indirect knowledge of what has occurred, nor do any of Ds’ exhibits support Yuen’s assertions, they remain bare denials.  With Ds bearing the burden to show a bona fide dispute or triable issue, Ds’ bare denial of the evidence from P (including the various reports) does not assist Ds.  

(2)  It is wholly unbelievable for Ds to suggest that D1 was deprived of substantially the whole benefit of the Lease.  

(a)  Ds now claim that by August 2024 the water seepage was so egregious that the Lease was repudiated.  However, it is undisputed that D1 continued to occupy the Premises and only sought to return the keys on 31.12.2024, without ever mentioning them deprived (let alone substantially so) of use of the Premises.

(b)  In the D1 August Letter, nothing was mentioned of deprivation of use of the Premises.  To the contrary, D1 was citing “deteriorating trend of the current economy” for the “payment from customers…[being] deferred quite seriously which impacts [D1’s] cashflow”, and says that D1 will “put back the rental deposit…once its receivable situation improves, which expects to be within a couple of months optimistically.”  This is despite D1 also mentioned (but not using this as a reason for financial difficulty and/or rental extension/reduction/termination) issues of “water dripping”- not only was there no mention of D1 not being able to continue using the Premises, D1 went on to suggest they would invite P to “work out a sensible remedial solution”.  If D1 was already deprived substantially of the whole benefit of the Lease as Ds now claim, D1 would not have expected receivable situation to improve at all nor that there can be a sensible remedial solution. This directly contradicts Ds’ case now.  

(3)  I am also mindful of the termination notice and pleaded case of Fifth Party in HCA 1830/2024, which Ds rely on to say that the Fifth Party was unable to conduct business at the Premises, serious enough for Ds to repudiate the Lease.  However, the termination notice by the Fifth Party squarely stated that the serious water seepage was caused by the water condensation issue[20], not some other “separate matter from Ds’ complaint of water seepage suffered by the Premises and caused by other parts of the Building” as Counsel for Ds argue without basis[21]. In truth, Fifth Party’s termination due to condensation issues further contradict rather than support Ds’ case.  

33.  Given the above, the Quiet Enjoyment Defence raises no arguable or triable issue.  

C.   Destruction Event Defence

34.  Ds’ Destruction Event Defence relies on Clause 7.4 of the Lease, which as material reads:

“7.4 Damage and Destruction

7.4:1 In this clause 7.4, Destruction Event means any of the following events:

(a) the Premises or any part of them are damaged or destroyed by a Risk so that the Premises are wholly or substantially unfit for the occupation and use by the Tenant;

(b) having regard to the nature and location of the Premises and the normal means of access, the Premises are wholly or substantially inaccessible; or

…

7.4:2 If a Destruction Event occurs then until the relevant event has been rectified, the Rent or a fair proportionate part of the Rent (as determined by the Landlord, which shall be conclusive and final) abates.

7.4:3 Unless the Landlord shall have notified the Tenant within three months after the Destruction Event occurs that it intends to rectify the relevant event, this Lease may be determined by not less than one month’s notice by either party…

7.4:4 The Landlord may after any Destruction Event and in its absolute discretion determine this Lease by giving not less than one month’s notice to the Tenant. At the end of that notice this Lease will be at an end…

7.4:6 This Clause 7.4 (other than 7.4:4) does not apply where:

(a) the Destruction Event was caused or contributed to, or arises from, any act or omission of the Tenant; and

(b)  any insurance policy or policies for the Premises has been avoided, or payment of the policy money refused or reduced, as a result of that act or omission.”

35.  Ds argue that “water” is a risk defined under the Lease[22], there is a triable issue that a Destruction Event has occurred by August 2024, and Clause 7.4 has been triggered such that (a) rent or a fair proportion thereof abates and (b) Ds’ solicitors letter dated 31.12.2024 is a valid termination notice invoking clause 7.4:3 and the Lease was terminated by January 2025.  

36.  Similar to under the Quiet Enjoyment Defence, I find that the D1 August Letter, the complete lack of allegation of Destruction Event by D1 to P at all material times, coupled with the complete lack of direct or indirect knowledge of Yuen, are fatal to Ds’ case here.  The pictures and videos simply do not begin to suggest that the Premises had been wholly or substantially unfit for the occupation and use by D1.  D1 in the D1 August Letter, no doubt written with instructions from personnel privy to the facts at the time, were inviting P to “work out a sensible remedial solution” ie the situation can be remedied (regardless of who is to blame).[23]  Save for Yuen’s opinion or conjecture, all of the presented evidence of water seepage were that caused by the condensation issue which were D1’s liability under the Side Letter.  Yuen’s suggestions otherwise made belatedly, without direct or indirect knowledge, are unbelievable opinion and guess work of no value.  

37.  Given the above, the Destruction Event Defence raises no arguable or triable issue.  

D.   Renunciation Defence

38.  Ds’ arguments under the Renunciation Defence are without legal basis and stand to be dismissed ad limine.  Beyond broadly referring to Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd [2015] 1 CLC 356, Ds are unable to explain why P’s asking D1 to rectify the water seepage problem and/or threatening (but without claiming) to terminate the Lease if D1 fails to comply can constitute conduct which “evinces an intention to commit a repudiatory breach… leading [D1] to the conclusion that [P] does not intend to perform [the Lease]”. Such acts are consistent with P requiring performing of D1’s duties under the Lease and/or the Side Letter. 

39.  It is clear and without doubt that in the correspondences relied on by Ds in this line of argument [24], P have consistently reserved its rights and remedies, and has not evinced clear intention to terminate the Lease.  I cannot accept Ds’ argument, made without proper authorities in support, that mere mention of possibility of law suit and/or termination will suffice.  D1 was also clearly aware of P’s position. 

(1)  The tenor and effect of the correspondences throughout were that of P requesting D1 to conduct remedial actions and/or pay compensation, D1 denying liability and/or stating that it has already conducted appropriately under the Lease and/or Side Letter. 

(2)  By the D1 August Letter, D1 was inviting P to “work out a sensible remedial solution” and asking for rent extension/reduction/early termination.  D1 would not have requested for “special options” for the early termination of the Lease before the end of November 2025 as “last resort” if D1 was of the view that P had already repudiated the Lease. 

(3)  By 3.9.2024, P through solicitors’ letter clearly evinced intention to continue with the Lease by stating that “the Lease is still subsisting” and rejected D1’s suggestion for rent extension/reduction/early termination.  

40.  Therefore, D1’s purported “acceptance of P’s repudiation” by solicitors’ letter coupled with return of the keys on 31.12.2024 was without basis.  P duly via solicitors’ letter on 3.1.2025 and 8.1.2025 refused D1’s attempt and returned the keys to D1.  D1’s act was nothing more than a unilateral abandonment of the premises by D1 and return of the keys thereto, which as is trite law will not constitute a binding early termination nor renunciation of the Lease for its full term.  See: Megarry & Wade, 10^th ed, §17-088 to 17-089; Artworld Financial Corp v Safaryan [2009] L&TR 20 at §39.  

E.   The Henderson Abuse Defence

41.  The Henderson Abuse Defence is hopelessly defective and can be dismissed swiftly:

(1)  Ds rely on the discontinuance of DCCJ 5095/2024, where P sued Ds for rent in arrears of August 2024, for this argument.  Ds argue that P “could have amended its statement of claim [in DCCJ 5095/2024] to further claim for [further arrears].”

(2)  It is undisputed that P does not in this action claim for any arrears previously claimed in DCCJ 5095/2024, which were thereafter paid for. 

(3)  O 21 r 4 of the RHC and O 21 r 4 of the RDC expressly provide that “[s]ubject to any terms imposed by the Court in granting leave [to discontinue an action], the fact that a party has discontinued an action or counterclaim or withdrawn a particular claim made by him therein shall not be a defence to a subsequent action for the same, or substantially the same, cause of action”.  HKCP 2026, Vol 1, §21/5/13 explains, as is trite and elementary, that “the discontinuance of an action or the withdrawal of part of a claim without leave is no bar to a subsequent action for the same cause of action…[t]he effect is the same where the discontinuance is with leave, unless the order giving the leave expressly prohibits the commencement of a fresh action… The plaintiff may therefore commence a new action for the same cause, to which such discontinuance will be no defence.” Ds have no answer to the applicability and correctness of the above. 

(4)  Ds’ suggestion that P should have amended the writ in DCCJ 5095/2024 dated 29.8.2024 to include further rent is also against the Eshelby rule as applied in Sunbroad Holdings Ltd v A80 Paris HK Ltd [2022] 6 HKC 155, as the claims for rent of the following months after the writ did not arise or exist as at the date of the writ.  There can be no abuse of process in P now claiming what has not previously arisen in DCCJ 5095/2024.  

F.   The Mitigation Defence

42.  I agree with P’s submission that the Mitigation Defence is bad in law, without basis, and shall be summarily dismissed ad limine.

43.  The cases cited by Ds for the Mitigation Defence are simply not applicable to lease and action for arrears of rent.  As held in Sunbroad Holdings, a lease could not be unilaterally terminated unless expressly provided for.  A repudiation not accepted could not terminate a lease.  An action for rent in arrears was one for an agreed sum as a debt, which was not subject to a duty of mitigation.  The tenant would have the burden to show that the landlord’s election to keep the lease alive would be wholly unreasonable and that damages would be an adequate remedy, or the landlord would have no legitimate interest in making such election. 

44.  Yuen 2^nd made no allegations at all as to why it was unreasonable for P to elect to affirm the Lease.  The Lease was for a fixed term of 4 years, with D2 acting as Guarantor.  The Guarantee is precisely to secure performance of the Lease by D1 for its full term, failing which D2 will also be liable.  There is no suggestion of any ready and willing replacement tenant(s), nor have Ds indicated or undertaken to compensate P for any loss.  There is also no suggestion that D2 is financial unable to pay the guaranteed amount. There is nothing unreasonable for P to elect to affirm the Lease despite D1’s professed unwillingness to pay rent, as P will be fully entitled to (as they now do) claim against both D1 and D2 through this action.  

G.   The Reinstatement Costs Argument and Rectification Costs

45.  Regarding the Rectification Costs:

(1)  In the SOC, P claims Rectification Costs caused by water seepage due to condensation issues to common parts of the Building and vehicles of other occupiers of the Building for the amount of HK$427,278.00.  In the O 14 Summons, P asks for judgment as per the prayer of relief found in the SOC;

(2)  P’s claim for Rectification Costs was addressed in the 1^st Affirmation of Tsui Kam Man (“Tsui 1^st”) at §27, with Exhibit TKM-5 being a solicitor letter with invoices attached. Rectification Work Cost and fees were also referred to in the Letter from Goodman to Ds in TKM-6.  The cause and necessity of rectification due to condensation issues caused by D1 were also adequately addressed in the 2^nd Affirmation of Tsui Kam Man (“Tsui 2^nd”) at §§14-21, with exhibits of the relevant reports on the seepage due to condensation issues from various consultants.  

(3)  Ds’ evidence by Yuen 2^nd did seek to suggest that D1 did not cause the water seepage, but on analysis these were plainly nothing more than (a) solicitors’ letters with bare denials by D1 and (b) conjectures, comments and/or bare denials by Yuen as to the source of water seepage.  Ds’ Skeleton similarly amounted to only a bare denial of the Rectification Costs being not quantified or substantiated.  

46.  With P having verified the SOC and supported the case on Rectification Costs by affidavit, the burden lies in Ds to raise a real or bona fide defence on both liability and quantum of the Rectification Costs claim.  I find that Ds have failed to satisfy the burden, and Ds are summarily liable for the Rectification Costs as claimed.  

47.  Regarding the Reinstatement Costs Argument:

(1)  In the SOC, P claims for Reinstatement Costs for reinstatement of the Premises including removing all of the fixtures and fittings, to be assessed.  In the O 14 Summons, P asks for judgment as per the prayer of relief found in the SOC.

(2)  In Yuen 2^nd, Yuen did say that the state of the Premises was the same between the commencement of the Lease and when D1 returned the keys.  However, that was again bare assertion, and the problem with Yuen not having any asserted personal knowledge subsists. 

(3)  Importantly, under the Lease clauses 5.49:5:

“The Landlord will after having inspected the Premises within a reasonable time prior to the Term End Date provide the Tenant with a schedule or list of reinstatement works required to be carried out by the Tenant pursuant to this clause 5.49 together with a quotation of the cost of such reinstatement works (reinstatement costs). If the Tenant shall fail to reinstate the Premises in accordance with this clause 5.49, the Tenant is required to hand back the Premises to the Landlord…and in such circumstances, the Landlord shall be entitled to deduct from the Deposit the amount of the reinstatement cost and any other Costs sustained or incurred by the Landlord as a result of the breach…. and if the Deposit shall not be sufficient to cover such amounts, any outstanding amount thereof shall be recoverable from the Tenant as a debt.”

(4)  By letter dated 15.12.2025[25], D1 was duly notified of the reinstatement obligations under Clause 5.49 of the Lease, with schedules containing inventory and schedule of condition of the Premises, photo records of the Premises documenting its state, quotation issued by contractors for estimated costs for the required reinstatement.  

(5)  Beyond bare denial, Ds had advanced no specific grounds to deny the accuracy of the letter dated 15.12.2025 and the schedules thereof.  

48.  It is trite that bare denial of liability, surmise and/or Micawberism will not get a defendant leave to defend.  I find that Ds have failed to satisfy the burden in defence of liability regarding the Reinstatement Costs.  Judgment shall summarily be entered for damages to be assessed.  

H.   Fifth Party Counterclaim

49.  I reject Ds’ arguments regarding the Fifth Party Counterclaim for the following reasons.  

50.  Firstly, for the reasons stated above, there is simply no believable basis for Ds to suggest that P caused and/or is liable for the Fifth Party’s claim against D1, or otherwise substantiate the strength of such counterclaim.

51.  Secondly, the Fifth Party Counterclaim is clearly based on D1’s breach of the Lease, and D1 is estopped from relying on its own breach by operation of the prevention principle as held in Kensland Realty v Whale View Investment Ltd (2001) 4 HKCFAR 381:

(1)  Clause 5.41 of the Lease expressly provides that D1 shall not inter alia “assign, sublet, license or otherwise part with the possession of or transfer the Premises or any part thereof or any interest therein in any way…without the approval of the Landlord”.

(2)  The Exclusive Use Agreement entered into between D1 and the Fifth Party was for “the exclusive right to use the cold store at the Premises…without interruption of [D1]”, “exclusive right to the use of the Premises…providing that the existing lease with the landlord shall continue under the terms of the lease.”, “Fifth shall have quiet possession and enjoyment of the Premises during the Term without any unreasonable interruption by [D1]” and “[D1] shall not be involved in its business operations except with special arrangement to be agreed between the parties”.

(3)  It is plain and obvious that D1 has at least licensed and parted with possession of at least part (if not all) of the Premises to Fifth Party.  This is the way D1 itself puts its case in HCA 1830/2024 against Fifth Party[26]. Counsel for Ds’ absurd argument that use of the cold storage is not the same as use of the Premises, when under the Side Letter parties acknowledged that D1 “has used and occupied the Premises as public cold storage”, is no different from asserting a white horse is not a horse.  

52.  Thirdly, there is a “no set-off/counterclaim” clause in the Lease.  Ds have provided no reason, let alone exceptional circumstance, for asking the Court to stay execution pending trial of Ds’ counterclaim.

(1)  As stated in HKCP 2026, Vol. 1, §14/4/14B, the mere fact that the defendant has a counterclaim does not necessarily entitle him to leave to defend.  Where there is clearly no defence to the plaintiff’s claim, the order should not be for leave to defend but should be for judgment for the plaintiff with costs.  The degree of connection between the claim and counterclaim, the strength of the counterclaim and the ability of the plaintiff to satisfy any judgment on the counterclaim are some of the considerations which the Court may take account of in the exercise of its discretion whether or not to order a stay of execution of the judgment for the plaintiff pending trial of the counterclaim.  

(2)  Clause 5.1 of the Lease expressly provides that payment of rent and management charges shall be “clear of all deductions and without set-off, cross claim or counterclaim”.  No authorities nor arguments had been advanced by Ds against the applicability and/or effectiveness of such terms. 

(3)  As held in Continental Illinois National Bank & Trust Co of Chicago v Papanicolaou (The Fedora) [1986] 2 Lloyd’s Rep 441 at 445 and CF v SHK [2024] HKCFI 1493 regarding no set-off/ counterclaim clauses:

(a)  Whilst the Court has jurisdiction and discretion on whether to order a stay of execution, generally speaking, the relevant terms of the contract between the parties must be paramount and take precedence over the Court's discretion. 

(b)  Ordering a stay of execution pending trial of the counterclaim would negate the very purpose of inserting a provision excluding rights of set-off/counterclaim, the purpose being to prevent a situation arising in which the creditor is kept waiting for payment. 

(c)  The Court nevertheless has a discretion to grant a stay, which may be exercised in exceptional circumstances.  

53.  Given the complete lack of merits of the Fifth Party Counterclaim, the breach of the prevention principle and the “no set-off/counterclaim” clause being binding and operative, I find that the Fifth Party Counterclaim is no defence to P’s claim, and I will not exercise discretion for stay of execution of judgment pending trial of the counterclaim as there is no grounds for such course.  For completeness, I also dismiss summarily the further counterclaims advanced by Ds in Yuen 2^nd at §§60-63 as unbelievable and without particulars, and they were not in any event advanced by Counsel for Ds at the hearing.  

IV.   Conclusion and Costs

54.  Given the above, all of Ds’ defences and counterclaim are plainly without basis, without merits and unbelievable.  Judgment shall be entered for P against Ds.  The length of this decision should not be read as there being any genuine complexity in the case.  Rather, it reflects Ds’ regrettable attempt to create an illusion of complexity via bulky outer garments when none in fact exists, be it in evidence or in legal arguments.  The cavalier approach by Ds, and those representing them, permeated to their failure to properly and timely address real issues regarding validity of representation by Messrs Chan & Associates as solicitors of D1, which regrettably necessitated further filings and wastage of time and costs for all concerned. 

55.  Costs should follow the event.  P is entitled to costs of this action and such costs shall be summarily assessed on indemnity basis, with certificate for counsel.  

(1)  Where parties had entered into a commercial transaction on the basis that costs are to be on a particular basis, the Court should be slow to disturb the parties’ agreement, unless the circumstances were such as to cause the Court in the exercise of its discretion to intervene.  See: Bank of China (Hong Kong) Ltd v Twin Profit Ltd [2011] 3 HKC 59.

(2)  P in its SOC and Skeleton sought costs on indemnity basis pleading and relying on Clause 5.46:2 of the Lease.  Ds made no submissions otherwise.  As such, terms of the Lease for indemnity costs shall prevail.  

(3)  Lest it is not clear, I would have no doubt in my mind that P would have been entitled to indemnity costs even without the contractual clause.  The way Ds have conducted their dealings with P and this litigation falls squarely within the kind of situations where a reasonable bystander will feel “proper sense of indignation at the unsuccessful party’s conduct” as per Godfrey J (as he then was) in Overseas Trust Bank Ltd v Coopers & Lybrand (a firm) [1991] 1 HKLR 177, 183F-G.

DISPOSITION

56.  For the reasons given above, I order that Final and Interlouctory judgment be entered against D1 and D2 in favour of P as per the prayer of relief found in the SOC. 

57.  There shall be costs order nisi that P do have costs of the action (including any costs reserved) to be paid by Ds, on indemnity basis, to be summarily assessed, with certificate for counsel.  Such costs shall be summarily assessed on paper, and I give further directions as follows:

(1)  P shall within 3 days of this Decision lodge with the Court and serve to Ds P’s updated statement of costs;

(2)  Ds shall lodge with the Court and serve to P their objections to P’s updated statement of costs (if any) within 3 days thereafter. 

  

  

[1] Written Judgment of DHCJ Alan Kwong in HCCW 13/2025, [2025] HKCFI 4998, §6

[2] [2025] HKCFI 4998, §42

[3] Ibid, §§43-53

[4] Ibid, §§53-57

[5] The Lease, §5.1

[6] Re Jinro, §§13, 15

[7] Tsui 2^nd, §31 [HB1/97]

[8] Ds have on affirmation and skeleton confirmed that Yuen’s 1^st Affirmation was merely a “holding affirmation”, Yuen 2^nd repeats what was in Yuen 1^st, Yuen 2^nd is self-contained, and that they only rely on Yuen 2^nd for the purposes of this hearing.

[9] P’s Skeleton, §36-41

[10] This include paragraphs 9, 13, 17 to 26, 29 to 33, 35

[11] Ds’ Skeleton, §13

[12] See: [HB2/324]

[13] See: [HB2/506-510]

[14] See for example, Letter from D1’s solicitor to P’s solicitor, [HB2/486]; email from Quincy Leung dated 8.4.2024 [HB2/505].

[15] [HB4/1111]

[16] [HB2/440, 451, 486]

[17] [HB2/545]

[18] Where, as shown from §§18-23, sufficient foundation was found inter alia from indisputable facts such as land search records, whatsapp messages, signed documents, unexplained money trail, crossing of signature, and objection by the defendant shortly after the impugned transaction and prior to legal action.

[19] This is despite P specifically criticising Ds for not identifying why Quincy Leung, Josephine Ng and another former director Mr. Yim have been invited to give evidence for Ds, nor does Yuen identify his role/involvement that would explain his purported knowledge on the matters. See: Tsui 2^nd, §54-57

[20] [HB4/1111]

[21] Ds’ Skeleton, §§15, 17

[22] Clause 2.25

[23] According to the evidence, Quincy Leung was director of D1 at all material times until 27 March 2025. See: [HB3/676+]

[24] Ds’ Skeleton, §56

[25] [HB2/556 onwards]

[26] HCA 1380/2024, D1’s Statement of Claim, §§3-5 at [HB4/1120-1121]