CHUEH YUEH CHUAN AND ANOTHER v. WONG TAT KEUNG

HCA1608/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

ACTION NO. 1608 OF 2005

D E C I S I O N

1.  This is an appeal against an order of Master Au-Yeung made on 19 December 2005.  The order requires the defendant to deliver up vacant possession of Shop A on the Ground Floor of Lun May Building, Nos. 386-390 Castle Peak Road and to pay the plaintiffs’ mesne profits, management fee, government rent and rates all from 13 August 2005 until delivery up of vacant possession and damages for trespass and costs.

2.  Right at the start of the appeal, Mr Yee, counsel for the plaintiffs, voluntarily and very rightly conceded that the plaintiffs could not have both mesne profits and damages for trespass and he wanted to forego the damages for trespass.  I therefore allowed the appeal in part by setting aside the part of the order for damages for trespass to be assessed with no order as to costs.  I now deal with the rest of the appeal.

3.  The shop used to be owned by one Bonfield (China) Limited (“Bonfield”), which purchased it on 18 August 1994.  Bonfield entered into a written tenancy with the defendant on 31 July 1995.  The term was from 4 June 1995 to 31 December 1997.  The rental was at $48,000 per month from 4 June 1995 to 3 December 1995 and at $60,000 per month from 4 December 1995 to 31 December 1997.

4.  The shop was sold to Messrs Li Fu-annt and Au-Yeung Man-lung, Manuel, on 13 April 1996.  Li Fu-annt, in the name of one Callen Limited as the landlord, entered into a written amendment to tenancy agreement dated 20 May 1996 with the defendant.  The amendment reduced the rental from $60,000 to $45,000 per month for the period from 13 April 1996 to 31 December 1997.  It also gave the defendant a new tenancy from 1 January 1998 to 12 April 2001.  The rental was at $45,000 per month from 1 January 1998 to 12 April 1999 and at $54,000 per month from 13 April 1999 to 12 April 2001.

5.  Apart from the written tenancy and the written amendment, there was no other written agreement between the owners of the shop and the defendant. 

6.  The plaintiffs entered into a provisional sale and purchase agreement dated 19 April 2005 with Messrs Li and Au-Yeung.  The provisional agreement was superseded by a formal agreement dated 5 May 2005.  Both the provisional and formal agreements contained a term saying that the tenancy of the shop had expired, the shop was let on a monthly basis at a rental of $20,500 per month plus management fees and rates, there was no deposit and no tenancy agreement had ever been signed.  The plaintiffs’ purchase was completed on 21 June 2005.

7.  In the meantime and before completion of the sale, Li and Au-Yeung, through their solicitors, wrote to the defendant on 17 June 2005 saying that the defendant owed them arrears of rent, rates and management fees from 13 January 2004 to 12 June 2005, totalling $236,530 (after deduction of rental deposit of $135,000).  Paragraph 4 of the letter read:

“We are further instructed to put on record that the various post-dated cheques sent by you to our clients in purported payment of the outstanding rents, rates and management fees of the captioned premises for the period from 13th July 2003 to 12th January 2004, shall be presented for payment on their respective dates.  You are therefore reminded to ensure that sufficient funds are available in your bank account to meet the payment of these cheques.”

8.  After completion of the sale on 21 June 2005, the plaintiffs, through their own solicitors, notified the defendant about the change of landlords and told the defendant to pay the rent to the plaintiffs.  On 22 June 2005, the plaintiffs’ solicitors served a written notice to quit on the defendant, requiring him to vacate the shop on 12 August 2005. 

9.  The defendant, through his solicitors, only replied to the previous owners on 5 July 2005, which was 18 days later.  The reply denied the allegation of arrears of rental, management fees and rents.  It further said, at the end:

“Further, we are instructed that our clients have already deposited 24 post-dated cheques in purported payment of the monthly rent, rates and management fees from July 2005 to July 2006 with your clients (not for the period from 13th July 2003 to 12th January 2004 as alleged).  Since your clients are no longer entitled to keep the said cheques in their possession and/or present the same for payment, please return the said cheques to us forthwith for our client’s disposal.”

10.  The defendant’s solicitors also replied to the plaintiffs’ solicitors in relation to the notice to quit on 11 July 2005, which was 19 days after the date of the notice.  The letter said that pursuant to the agreement between the former owners and the defendant, the lease of the shop would only expire on 12 July 2006.  The letter also enclosed 12 cheques for payment of rent, management fees and rates from 13 July 2005 to 12 July 2006 with each for $22,010.

11.  On 12 July 2005 the solicitors for the former owners replied to the letter of 5 July 2005 from the defendant’s solicitors.  They maintained that there were arrears of rental, management fees and rates and enclosed a statement of payments.  The letter then said:

“We are instructed that our client has earlier received from his post office mailbox 12 post-dated cheques signed by your client without any covering letter.  The envelope containing these cheque was postmarked 13th June 2005 and was not received by our client until after our issuance of our letter dated 17 June 2005 to him.  It appears that these cheques being respectively post-dated the 15th day of January to June 2006 were intended by your client for payment of the rent and rates for the said months. 

Our client of course knows that as he completed his sale of the above property on 21st June 2005, he is no longer entitled to receive rent, etc. for the period thereafter.  The above 12 cheques will therefore returned to your client, but on the condition that your client do forthwith pay to our client the sum of HK$236,530 being the total arrears of rent, rates and management fees of the above property for the period from 13th January 2004 to 12th June 2005 (together with all the arrears from 13th June 2005 to 21st June 2005) as demanded in our letter to your client dated 17 June 2005.”

12.  These 12 cheques were obviously not the same post-dated cheques referred to in their first letter of 17 June 2005.  In their first letter, they were reminding the defendant to provide sufficient funds in the bank account to clear the post-dated cheques which were for arrears.  For the 12 cheques mentioned in this letter of 12 July, they said that these were for future rental which their clients as the previous owners were not entitled to receive.  They also said that these 12 cheques would be returned to the defendant on condition that the defendant would forthwith pay up the arrears as referred to in their letter of 17 June. 

13.  On 18 July 2005, the plaintiffs’ solicitors, after having received a copy of the said letter of 12 July 2005 from the solicitors of the previous owners to the defendant, also wrote to the defendant’s solicitors denying that the tenancy had been extended to 12 July 2006.  They also returned the 12 cheques as referred to in paragraph 10 above.

14.  On 26 July 2005, the defendant’s solicitors again wrote to the solicitors of the previous owners and maintained that there was no rental or other payment in arrears.  They further demanded the return of the 24 cheques which they had mentioned in their letter of 5 July 2005, but they never disputed that there were 12 cheques sent to the previous owners as referred to and particularised in the letter of 12 July by the solicitors of the previous owners. 

15.  The defendant did not move out after 12 August 2005 and the plaintiffs duly issued this action against him on 19 August 2005.  A summons under Order 14 was also issued on 9 September 2005 which was supported by an affirmation of the 2nd named plaintiff filed on the same day. 

16.  The defendant filed an affirmation to oppose the application on 22 September 2005.  The relevant paragraphs in his affirmation are as follows:

“8. Since there was no written agreement, the former landlords and I agreed that I should deposit a number of post-dated cheques with the former landlords for the agreed terms of tenancy being the monthly rent and management fees payable by me.  The former landlords would present the cheques for rent to bank for payment and forward the cheques for management fees to the management company on their respective due days.  On some occasions, I might not have sufficient money in my current account and I would pay cash to the former landlords instead.  There is now produced and shown to me marked “LSC-2” a copy of the bank statements of my bank account number … with Shanghai Commercial Bank Limited for June 2003 to May 2004 showing the payment of rent and management fees by way of cheques in the sums of HK$17,500 and HK$510, respectively.

9. Subsequently, in June 2004, since there was slight improvement in the financial situation, it was agreed that the monthly rent be increased to HK$20,500.00.  Again I would deposit a number of post-dated cheques with the former landlords for the agreed terms of tenancy being the monthly rent and management fees payable by me.  There is now produced and shown to me marked “LSC-3” a copy of my bank statements for June 2004 to April 2005 showing the payment of rent and management fees by way of cheques in the sum of Hk$20,500.00 and HK$510.00 respectively, save and except September 2004 the rent was paid by way of cash.

10. From the month of May/June 2005, upon the request of the former landlords, I started to pay a further sum of HK$1,000 per month to them as contribution of rates in respect of the subject premises.  The former landlords did not tell me the exact figure of the rates payable but we simply agreed that a sum of HK$1,000 per month would be paid by me.  For this reason I deposited with the former landlords a number of cheques drawn in favour of Li Fu-aant, each in the sum of HK$1,510.00 being the total sum of rates and management fees payable by me instead of a sum of HK$510.  There is now produced and shown to me marked “LSC-4” a copy of my bank statements for May and June 2005 showing the payment of rent in the sum of HK$20,500 and management fees and rates in the total sums of HK$1,510 by way of cheques. 

11. Pursuant to the agreement with the former landlords, I deposited a number of post-dated cheques with them for the monthly rent and management fees and rates up to the month of June/July 2006 reflecting the agreed terms of the tenancy.  In the circumstances, the tenancy of the subject premises will only expire on 12th July 2006.  There is now produced and shown to me marked “LSC-5” a copy of the counterfoils of the post-dated cheques deposited with the former landlords for the monthly rent and management fees and rates up to the month of June/July 2006.”

17.  The second named plaintiff also filed a second affirmation which contained some hearsay evidence from the previous owners denying that the tenancy had been extended to 12 July 2006. 

18.  At the hearing this morning, Mr Yip, counsel for the defendant, accepted that for the period between 13 April 2001 and June 2003, the defendant had a monthly tenancy only.  He then put forward the defendant’s case as from June 2003, which was different from the previous period.  He said the defendant’s case was built on the arrangement deposed to in paragraph (8) of his affirmation.  Under that arrangement as from June 2003, the future terms of the tenancy would be dictated by the defendant’s tender of post-dated cheques to the previous owners from time to time.  That meant if the defendant should tender a bundle of six cheques for the rental of six months, the period of the term would be fixed at six months.  If the defendant should just tender two cheques for the rental of two months, the term as dictated by this tender would only last for two months.  The former owners had no say in this once the post-dated cheques were tendered by the defendant.  They had to abide by the term as covered by these cheques. 

19.  This was no doubt an unusual arrangement as Mr Yip instantly admitted.  I doubt whether any owner of premises would be prepared to enter into such an arrangement with a tenant whereby the tenant alone could dictate how long he could occupy the premises.  Furthermore, as pointed out by Mr Yee, such an arrangement had never been deposed to by the defendant in any affirmation, either for the hearing before the Master or for the appeal or, indeed, in any of the letters issued by his solicitors.

20.  Mr Yee has also very helpfully compiled a table showing the numbers and amounts of the defendant’s cheques that had been used to pay rent to the previous owners and their dates of clearance.  The information was gathered from the bank statements produced by the defendant.  I insert this table here. 

Date	Cheque No.	Amount
09.06.03	cheque (067760)	HK$17,500
08.07.03	cheque (071865)	HK$17,500
05.08.03	cheque (071873)	HK$17,500
07.10.03	cheque (071904)	HK$17,500
05.11.03	cheque (071903)	HK$17,500
09.12.03	cheque (074010)	HK$17,500
09.01.04	cheque (074011)	HK$17,500
07.02.04	cheque (076795)	HK$17,500 (bounced)
08.03.04	cheque (076795)	HK$17,500
08.04.04	cheque (076796)	HK$17,500
15.05.04	cheque (076797)	HK$17,500
14.06.04	cheque (079157)	HK$20,500
13.07.04	cheque (079158)	HK$20,500
17.08.04	cheque (079159)	HK$20,500
25.10.04	cheque (082335)	HK$20,500
24.11.04	cheque (082336)	HK$20,500
18.12.04	cheque (082337)	HK$20,500
22.01.05	cheque (086187)	HK$20,500
28.02.05	cheque (086188)	HK$20,500
21.03.05	cheque (086189)	HK$20,500
20.04.05	cheque (090941)	HK$20,500
18.05.05	cheque (090942)	HK$20,500
15.06.05	cheque (090943)	HK$20,500

21.  The table clearly shows that only short consecutive periods were covered by cheques that were in the same series and plucked off from the same chequebooks.  As for the cheques purportedly covering the period up to July 2006, they formed a series starting from the one cleared on 20 April 2005, the day after the signing of the provisional agreement aforesaid.  It is incredible that the previous owners would on 19 April 2005 enter into a provisional agreement selling the shop and stated in the agreement that the shop was subject to only a monthly tenancy, but would on the next day accept a long series of cheques that could extend the tenancy till July 2006.

22.  It may be argued that those cheques might have been delivered earlier, but I cannot see any reason why the previous owners, if they should have received those cheques and had the term of the tenancy extended to July 2006, should still enter into the provisional agreement with the term referred to above.  I can only say that the defendant’s case as presented by counsel is entirely incredible and not believable at all (see paragraphs 14/4/8 to 14/4/9 of Hong Kong Civil Procedure 2006). 

23.  Turning to the affirmation of the defendant, he has given no particulars on when, where and by whom the so-called agreement alleged in paragraph (8) of his affirmation was made.  He has also failed to give any particulars on when and how he had deposited a number of post-dated cheques with the previous owners to cover the rental and other payments up to July 2006 as deposed to in paragraph 11 of his affirmation.  Regarding the so-called agreed terms referred to in paragraph (11), he has also failed to give any particulars on when, where and by whom were made.

24.  Mr Yip argued that the matter should go to trial and the former owners should be cross-examined.  However, considering all the matters presented by both sides, I am of the view that the defendant’s story, whether as presented through counsel or as presented in his affirmation, is unbelievable.  I would also highlight the fact that defendant’s solicitors’ letter alleging that the tenancy would last until July 2006 was only issued 19 days after the notice to quit had been issued.  I cannot understand why there should be such a long delay if the defendant had indeed obtained a tenancy until July 2006.

25.  I am of the view that the defendant has no defence to this action.  I dismiss the rest of the appeal with costs against the defendant.