XCHRX CATHAY PACIFIC AIRWAYS LTD. v. WINLIGHT DEVELOPMENT LTD.

DCCJ10199/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 10199 OF 2001

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JUDGMENT

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1. The chronology of events agreed by the parties pretty much puts in focus the issues before me:-

Date	Events
30th May 1997	The Plaintiff as tenant and the Defendant as landlord entered into a Tenancy Agreement of House 3, Hong Lok Road East, Hong Lok Yuen, Tai Po, New Territories (the "Property") and the Plaintiff paid HK$90,000 to the Defendant by way of rental deposit (the "Deposit").
31st July 1997	The Defendant assigned the Property to King Step Investments Limited ("King Step") and transferred the Deposit to King Step.
19th March 1998	The Plaintiff gave notice to King Step to terminate the tenancy.
19th May 1998	The Plaintiff delivered up vacant possession of the Property to King Step.
13th November 1998	The Plaintiff's solicitors issued a letter to the King Step requesting for refund of the Deposit.
24th May 2001	The Plaintiff's solicitors issued a letter to the Defendant requesting refund of the Deposit.
29th June 2001	The Plaintiff issued a Writ of Summons against the Defendant for return of the Deposit.

2. On 3rd December 2001, the parties came before me on cross summonses. The Plaintiff sought summary judgment. The Defendant applied to strike out the Plaintiff's claim for being frivolous, vexatious or an abuse of process. Actually, there is no reason at all to think that the Plaintiff's claim was frivolous, vexatious or an abuse of process. The application to strike out the claim was misconceived. What the Defendant in fact argued, through Miss Lam, was that the Defendant had three defences to the claim. So my responsibility, really, was to determine whether the Defendant had good arguable defences to resist the Plaintiff's summons for summary judgment.

3. It is common ground that the Plaintiff as tenant has delivered up vacant possession of the Property to the satisfaction of King Step. It is also admitted that the Defendant did receive and hold the Deposit of $90,000. But the Defendant alleged that at the time of the assignment of the Property it had also paid over the Deposit to King Step and that the Plaintiff knew about this transfer of the Deposit to King Step.

4. Against the Plaintiff's claim, the Defendant relied on three defences:-

(1) the Tenancy Agreement provided that the Deposit was refundable only after the Plaintiff had delivered up vacant possession to the Defendant. Since the Plaintiff delivered vacant possession to the King Step, the Plaintiff was not entitled to refund of the Deposit from the Defendant.

(2) The Plaintiff knew about the transfer of the Deposit by the Defendant to King Step, hence the Plaintiff is estopped from claiming against the Defendant for the Deposit.

(3) the Plaintiff has been late in claiming against the Defendant, the Defendant was protected by laches.

5. As Miss Yeung for the Plaintiff contended, the covenant to return the Deposit is a personal covenant which does not run with the land and the Defendant remain personally liable to refund the Deposit to the Plaintiff notwithstanding that it has assigned the Property to King Step. See Hua Chiao Commercial Bank Limited v. Chiaphua Industries Limited [1988] 1 HKLR 443 and Hui Sai Hoi v. Chan Lai Wan and Wong Leung Shi [1932-1933] HKLR 31. I find that the principle in this regard is well established. The fact that the Plaintiff delivered up vacant possession to King Step simply supports the Plaintiff's claim for refund of the Deposit.

6. As to knowledge on the part of the Plaintiff that the Deposit had been transferred and yet the Plaintiff did or said nothing, it is trite law that silence is not consent. The Plaintiff's inaction or silence certainly did not amount to consent to novation. The Plaintiff might or might not realize that the Defendant (who was represented by solicitors in the assignment of the Property) was labouring under the illusion that by transferring the Deposit to King Step it (the Defendant) would be discharged from liability to refund the Deposit to the Plaintiff. The Plaintiff did no act to waive its rights to claim against the Defendant for breach of agreement. In any event, it is not the duty of the Plaintiff to advise the Defendant what to do to protect the Defendant's interest. The transfer of the Deposit was not an act detrimental to the interests of the Plaintiff such that if the Plaintiff did not take remedial action it (the Plaintiff) could be taken to have acquiesced in the Defendant's act. Whatever prejudice suffered by the Defendant following the transfer of the Deposit was the result of the Defendant's own mistaken belief about its (discharged) obligations to the Plaintiff. Hence, the Plaintiff is not estopped from claiming against the Defendant.

7. As to laches, Miss Yeung submitted that the Plaintiff brought this action within the statutory time limit and therefore the equitable objection of laches by the Defendant does not apply. See Section 4(1) of Limitation Ordinance (Cap. 347); Halsbury's Laws of England, volume 16 para 925; Snell's Principles of Equity para 3-18; and Re Pauling's Settlement Trusts Younghusband v. Coutts & Co. [1961] 3 ALL ER 713. Again the law is quite clear. I agree with Miss Yeung entirely.

8. Since all three pleaded defences were unsupportable, and there being no factual issue for trial, I dismissed the Defendant's application to strike out with costs to be taxed if not agreed and gave judgment for the Plaintiff in the following terms:-

2. The Defendant do pay the Plaintiff :

(a) Rental deposit in the sum of HK$90,000.00;

(b) Interest on the said sum of HK$90,000.00 at the rate of 10.86% per annum from 24th May 2001 to the date hereof and thereafter at judgment rate until payment; and

(c) Costs of the action to the Plaintiff to be taxed if not agreed.

9. There remained the Defendant's claim against a third party. Since I was not seized with that aspect of the case the Defendant will have to take further steps in that regard.