YU HING TONG LTD v. FUNG HING CHIU CYRIL

HCA 1360/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1360 OF 2016

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DECISION

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Introduction

1. This case involves a claim for vacant possession of, and for unpaid rent and mesne profits said to be owed by the defendant as tenant of, Rooms 502 and 1102 in the Shiu Fung Hong Building (“the Premises”).  The Premises are owned by Dawns Light International Limited (“Dawns Light”) and Connaught Real Estate Ltd (“Connaught”) as tenants in common.  Dawns Light and Connaught are, therefore, landlords of the Premises under the material tenancy agreements.

2. The claim was commenced by Writ dated 23 May 2016.  In its original form, the Writ identified the plaintiff as “YU HING TONG LIMITED (as the true and lawful attorney for and on behalf of Connaught Real Estate Limited and Dawns Light International Limited)”.  The Statement of Claim was specially endorsed on the Writ.

3. By summons dated 3 August 2016, the defendant has applied to strike out the Statement of Claim and for the action to be dismissed, on the ground that the plaintiff lacks the authority to sue in its own name ("the Striking Out Application").

4. By Order of Master Hui made on 2 September 2016, the Striking Out Application was adjourned for argument before a Judge in Chambers.  It came before me for that argument.

5. In the same Order, the Master gave the plaintiff leave as sought by its summons dated 15 August 2016 (“the Amendment Summons”) to amend the Writ endorsed with the Statement of Claim, essentially to remove from the description of the plaintiff the reference to Connaught (with consequential amendments to the body of the claim).  Hence the description of the plaintiff on the Writ is now “YU HING TONG LIMITED (as the true and lawful attorney for and on behalf of Dawns Light International Limited)”.  The costs of the Amendment Summons were reserved to the Judge hearing the Striking Out Application.

6. The same Order also dealt with two other applications.  One was the application made by summons dated 16 August 2016, by which the plaintiff sought judgment in default of the filing of a Defence (“the Default Judgement Summons”).  The Master made no order on that summons, save that the costs of it were reserved to the Judge hearing the Striking Out Application.

7. The other application was an application for extension of time within which the defendant might file a Defence (“the Time Extension Summons”).  The Master gave leave to the defendant to file and serve his Defence (if necessary) within 14 days after the final disposal of the Striking Out Application.

8. At the hearing, therefore, I was concerned to deal with:

(a) the Striking Out Application, and any costs consequences;

(b) the costs of the Amendment Summons; and

(c) the costs of the Default Judgement Summons.

9. The defendant was represented at the hearing by Mr Michael Lok, and the plaintiff by Mr Jonathan Chang together with Mr Martin Ho, all of Counsel.

Background

10. For current purposes, I am not concerned with an evaluation of the merits of the substance of the claim.  However, it is necessary to set out some factual background.

11. The building (“the Property”) in which the Premises are located was originally owned by two brothers, as equal tenants in common.  Each of them subsequently assigned their respective half share in the Property(and hence in the Premises) to Connaught and Dawns Light respectively.

12. By two Powers of Attorney (“POAs”) made in 1997, and which are in substantially identical terms, Dawns Light and Connaught each appointed Yu Hing Tong Limited (“YHT”) as their attorney in relation to the Property.  The terms of the POAs included that YHT was appointed to be “our true and lawful attorney for us and in our name to do the following acts and things or any of them in relation to our share and interest of and in the Property”, such as:

(a)  “to instruct … Solicitors as the Attorney shall select to act for us in and to advise on all matters relating to the property … and to … prosecute for us … any decree order judgment … in any proceedings relating to the Property”;

(b)  “to demand sue for and receive all rents and arrears of rent due or which at any time shall become due to us by any tenant or tenants or occupier or occupiers in respect of the Property or any part thereof”;

(c)  “to commence prosecute defend or compromise and determine upon such terms as the Attorney shall deem desirable any action suit or other proceedings touching and concerning the Property or any part thereof”.

13. By virtue of various tenancy agreements and renewals, the defendant became tenant of the Premises.  It seems that each of the agreements was made through YHT as attorney, but that the landlords were identified and defined as Connaught and Dawns Light.  In other words, YHT is not a party to the relevant tenancy agreements.

14. The claim now made arises out of the alleged default in payment of rent in relation to the defendant's occupation of the Premises.

15. After the commencement of the claim, on 27 July 2016 Connaught (which is apparently now controlled by the defendant) revoked its POA under which YHT had been its lawful attorney.  It is that fact which led to the Amendment Summons, under which the amendment itself was not controversial save as to the appropriate costs consequences.

16. It is also to be noted that there has been considerable correspondence between solicitors for the parties as to whether or not the claim as formulated has been properly constituted, as well as to the reason why the Amendment Summons became necessary, and as to the issue of the Default Judgement Summons.  I do not think for present purposes it is necessary to detail that correspondence, except to point out that it identifies the battle lines drawn by the parties reflected in the arguments dealt with below.

The Striking Out Application

17. The principles applicable on an application to strike out a pleading are well known and are not in dispute.  They are summarised in, for example, the Hong Kong Civil Procedure 2017 at §18/19/4.  In short, the court should exercise its summary powers to strike out any pleading only in plain and obvious cases.  There should be no trial on affidavit and any disputed facts are to be taken in favour of the party whose pleading is sought to be struck out.  Difficult points of law should not be decided in striking out applications.  For a claim to be struck out, it must be obviously unsustainable; and it must be impossible not just improbable for the claim to succeed before the court will strike it out.

18. Mr Lok also drew my attention to Kammy Town Limited v Super Glory Corporation Limited (unreported, HCA 3524/2003, 14 January 2005), in which A Cheung J (as he then was) accepted that where there is a question of authority on the part of someone to bring proceedings in the name of the plaintiff, it is not open to the defendant to raise that question by way of defence to the action.  Rather, the proper course is to move at an early stage of the action to have the name of the plaintiff struck out, and so bring the proceedings to an end.

19. Therefore, it seems to me that the usual principle, that allegations in pleadings will only be struck out in plain and clear cases, is not strictly applicable in a case such as the present, where the basis of the application is that the named plaintiff had no authority to sue and/or had no cause of action itself.  On the basis that it is settled law that an issue as to lack of authority cannot be raised by way of defence, a strike‑out application made on that basis seems to me to fall to be decided simply on the court’s decision as to whether the plaintiff had authority or not, or had an arguable cause of action itself or not.

20. Mr Lok identifies that it is well established that a donee of a power of attorney cannot sue in his own name, and must sue in the name of the donor.  He referred me to Hong Kong Civil Procedure 2017 at §6/1/9, and to the cases of Jones and Saldanha v Gurney [1913] WN 72 and Davis v Anthony (unreported, 5 July 1995, English Court of Appeal).

21. In the first case, Mr Jones was the principal who had granted a power of attorney to his lawyer, Mr Saldanha.  Both were made plaintiffs to the action, but the court held that there was no ground for making the latter a party, as proceedings taken by an attorney ought to be taken in the name of his principal.  The statement of claim showed no cause of action at all in Mr Saldanha, and it appeared that his name had been added with the obvious purpose of seeking to escape security for costs.

22. In the other case, Mr Davis was originally the sole plaintiff making a claim for himself personally.  Subsequently, he sought and was granted leave to amend the claim to join, subject to its consent, “Javelin Charters Ltd, suing by its attorney, Paul Michael Davis”.  Later, when ordering that company to provide security for costs, the judge struck out the words “… suing by its attorney, Paul Michael Davis” on the expression of his view that Javelin Charters should either be a plaintiff in the action in its own right, and with the obligations that that might entail, or it should not.  It should not be in a position, as it were, to hide behind Mr Davies as its attorney.

23. When Javelin Charters failed to give its consent to be joined, Mr Davis applied for an amendment to remove it as a party. Leave was granted, but the defendant applied to strike out the action with Mr Davies left as sole plaintiff.  The judge accordingly had to decide whether, on the basis that Mr Davis himself was left as the sole plaintiff, any reasonable cause of action survived.  The action was struck out and Mr Davis appealed.

24. In the Court of Appeal, Sir Thomas Bingham MR upheld the reasoning of the judge that the donee of a power of attorney is not empoweredto commence an action in his own name on behalf of the donor of the power.  The power of attorney entitles him, if its terms so provide, to commence proceedings using the name of the donor of the power.  Otherwise, one would have actions brought in the name of persons who were not actually the plaintiff.  It was held that this would have strange consequences, one of which may have been particularly relevant to that action, being that security for costs may be awarded against a limited company as plaintiff, but that might be avoided by the limited company executing a power of attorney naming an individual as donee, and for the donee to commence the action in his own name, avoiding the risk of a potentially penniless company having to provide security.

25. The Master of the Rolls also agreed with the judge’s conclusion that Mr Davis is not able to stand in the shoes of Javelin Charters in the action by reason of any power of attorney.  If Javelin Charters had a cause of action which it wished to pursue, it must have been named as party to the action in the ordinary way and to have accepted all the consequences that follow from that.

26. The legal principle against an agent bringing proceedings in his own name on behalf of his principal where no cause of action is vested in the agent has been applied in Hong Kong: see, for example, Liu Yiu Keung v Keen Lloyd Resources Ltd [2006] HKLRD 280.  In that case, Barma J (as he then was) (at §9) referred to the two English cases cited above, and added to the list of potential undesirable consequences, which could follow if an attorney were permitted to sue in his own name.

27. Importantly, Barma J held (at §10) that it was right that the likelihood or otherwise of abuse in the particular case was not a matter which should be determinative of the application.  He held that it was not necessary, nor was it appropriate, to attempt to evaluate in the context of the striking‑out application whether or not any abuse would be likely to ensue.  Rather, the principle exists to prevent potential abuse of the sort described, and it matters not, in any particular case, whether or not some such abuse is in fact likely to occur.

28. The case involved a receiver as plaintiff, and Barma J (at §26) came to the clear conclusion that the receiver was not entitled to sue in his own name in respect of the claims advanced in the proceedings, so that he should strike out the statement of claim and dismiss the action.  However, as he pointed out, that did not mean that the bank which appointed the receiver would be without recourse if it should have a valid claim, for there was nothing to prevent it from bringing proceedings itself in its own name, as Barma J thought would have been the appropriate course.

29. The Jones v Gurney case has also been approved by the Court of Appeal in China Vest II–A LP v Chan Keung Un, Roy (unreported, CACV 145/1998, 8 October 1998) at §19.  The position at common law is, therefore, clear.

30. The question has arisen as to whether or not the common law has been varied by the provisions in section 6(1) of the Powers of Attorney Ordinance, Cap 31.  That section provides that the donee of a power of attorney may, if he thinks fit (a) execute any instrument with his own signature and, where sealing is required, with his own seal; and (b) do any other thing in his own name, by the authority of the donor of the power; and any document executed or thing done in that manner shall be as effective as if executed or done by the donee with the signature and seal, or, as the case may be, in the name, of the donor of the power.

31. However, I accept the submission that the effect of section 6(1) is purely procedural, and merely allows an attorney to use his own signature instead of that of his principal in the execution of an instrument which he was empowered to execute on his principal's behalf; it does not enlarge the scope of things which could be done by the attorney beyond that which was already established: see Clauss v Pir [1987] 2 All ER 752, at 756a–c.  The section simply provides an alternative way of execution, so that the attorney can now execute the deed, signing in his own name, albeit that there must be reference to his capacity as attorney: see Au Wai Ming v Kam Tze Ming Alfred [2010] 1 HKLRD 198, at §25.

32. For his part, Mr Chang also referred to section 6(1) and the Au Wai Ming case.  He further referred to Wilks v Back (1802) 102 ER 323, at 324, where Grose J referred to the doctrine in all cases cited to him, that an attorney must execute his power in the name of his principle and not in his own name, but said that in the case before him that had been done, as it made no difference whether the attorney put his name first or last.

33. Mr Chang also relied on the Queensland Court of Appeal case of Neilsen v Capital Finance Australia Ltd [2014] QCA 139, in which, after endorsing the proposition found in the Wilks case, McMurdo P concluded (at §24) that as a matter of common law, in determining whether the attorney had executed the instrument in the name of the principal, the whole of the document must be considered and there is no express form of words that need to be used.

34. Mr Chang submitted that it did not matter that the cases cited by him were cases relating to the execution of documents, rather than relating to the commencement of proceedings.  He submitted that in all cases the relevant question was ultimately one of construction.  Here it is common ground that YHT was expressly authorised by the POAs to commence the present action in the names of Dawns Light and Connaught to recover unpaid rent from the tenant, and at the date of the writ both POAs remained valid and effective to confer authority on YHT to commence the present action in the name of the principals.  Hence, Mr Chang submitted I need only construe the writ as a whole to see whether it is in fact an action commenced in the name of the principals.

35. On that basis, where YHT is described as a plaintiff expressly acting as the lawful attorney for and on behalf of named principals, Mr Chang says it is clear that the claim is brought in the name of the principals, and there is therefore no merit in the complaint as to lack of authority.  He also says it is clear that any potential abuse of the sort contemplated in the Davis and Liu Yiu Keung cases would not arise in this case.

36. I disagree.  First, even looking at the statement of claim as a whole, it is apparent that the plaintiff is clearly identified as YHT.  But it is common ground that YHT has no cause of action against the defendant, as it is not itself an owner of the Premises or a party to the tenancy agreements on which the claim is brought.  This seems to me to be a classic situation where the claim is being brought by an agent, and the simple fact is that the agent or attorney does not need to be a party, and for the reasons explained in the authorities should not be a party.

37. A distinction is to be drawn between acting as a party and acting for a party to proceedings.  So, for example, whilst I accept that the statement of truth on a pleading might be signed by YHT as the attorney for Dawns Light, that does not mean that YHT can properly be named as the plaintiff itself.  I also reject the submission that naming YHT as the plaintiff whilst at the same time stating it is the attorney for and on behalf of Dawns Light is the same thing as saying Dawns Light is the plaintiff.  I also have in mind the fact that the POAs specifically empower the attorney to bring any action in the name of the principals, which I do not think is the same thing as bringing it in the name of the attorney for and on behalf of the principals.  Indeed, that is almost precisely the formula disapproved in the cases cited.

38. Secondly, I accept that the rule exists to prevent potential abuse, and it is no proper part of my consideration as to whether or not any actual abuse will arise on the facts of this case.

39. In the circumstances, I accept the claim as presently formulated is liable to be struck out.  This is because I am satisfied, or to put it another way it is plain and obvious, that YHT is not a proper plaintiff on the claims and to the relief sought in the action, and it lacks authority to bring the claim.

40. I therefore do not need to deal with Mr Lok’s secondary point that now that Connaught has revoked its POA, YHT or Dawns Light cannot maintain the action as it would be brought by only one of two tenants in common and both landlords should be joined as plaintiffs.  But, in any event, whilst I accept that there may be some support for the proposition that in an action for breach of the covenant on a lease granted by two tenants in common, both landlords must be joined as plaintiff, even Mr Lok fairly accepted there is authority the other way.  That authority is to be found in the Hong Kong Court of Appeal decision of Chin Lan Hong v Cheung Poh Choo [2005] 3 HKLRD 811, at §32, and in Incorporated Owners of Chungking Mansions v Shamdasani [1991] 2 HKC 342, at 352G–353B.

41. In the end, Mr Lok did not push this point, but anyway I would not have found this a reason to strike out the claim.

42. During argument, I asked whether, should I accede to Mr Lok’s submissions, the action might nevertheless be saved by an amendment, perhaps by striking from the description of the plaintiff all words except the name of Dawns Light.  That would be enough to show Dawns Light as the actual plaintiff, though there would also be need for some changes to the body of the Statement of Claim to reflect that same point.

43. Though there was no formal application for amendment as an alternative, Mr Chang was content to accept that this approach might be a fall‑back position for him (though understandably he did not want to look enthusiastic about a fall‑back whilst advocating that I should accept his primary argument).  For his part, Mr Lok said that I should just strike out the action and leave it to Dawns Light to bring a new claim in its own name if it wanted to do so.

44. There is no suggestion that YHT’s appointment as attorney for Dawns Light is likely to be revoked, and it seems to me that that it would be odd to think Dawns Light would not wish to continue the claim against the defendant, and to do so by its attorney YHT.  Dawns Light could have brought the action in its own name as at the date of the Writ.  No ‘relation back’ issue arises, and the amendments necessary to permit Dawns Light properly to continue the claim in its own name would perhaps be relatively minor.

45. It might therefore be thought just and expedient, and perhaps save costs being wasted, if I were not to dismiss the whole action but to allow the Amended Writ and Statement of Claim to be further amended along the lines I have indicated.  Mr Lok is yet to see any formulated amendment, and he would have to have that chance.  The amendments I have indicated are not likely to be controversial, and presumably could be provided by Mr Chang within 7 days, and Mr Lok could no doubt state whether he accepts the proposed changes as amendments that can be made (obviously without prejudice to any arguments on the merits of the claim as amended) within 7 days thereafter.

46. But that would all take time, and leaves open potential future argument.  If the action is simply dismissed now, a new one (if desired) could be started almost at once.  Nor am I convinced that the amendment course would really save costs.  So, on balance, it seems to me that the right thing to do in these circumstances is to strike out the Writ and Statement of Claim and to dismiss the action.

47. I think costs are bound to follow that result, and that the plaintiff should pay the defendant’s costs of the Striking Out Application and the costs of the action (save those costs dealt with separately) to be taxed on the party and party basis if not agreed.  However, I shall make that a nisi order, to become absolute after 14 days if no party seeks to vary it.

Costs of the Amendment Summons

48. There is no dispute that questions of costs are in the discretion of the Court, applying itself judicially to the matter.

49. Mr Chang says that the amendment of the writ arose because the defendant (who now controls Connaught) revoked the POA it granted toYHT, even though that was valid and in force at the date the writ was issued.  On that basis, he says the plaintiff should not be liable for bearing any of the costs of the amendment, and rather it should have them from the defendant.  He also says that one reason why the defendant should pay the costs is that it was only in an attempt to delay satisfying the outstanding rent that the defendant procured Connaught to revoke the POA.

50. Mr Lok on the other hand says that it was the plaintiff’s wrongful step in relying on the POA to start the action that caused the revocation of the POA.  Anyway, he relies also on the usual costs order that a party seeking to amend pleadings with leave should pay the costs of and occasioned by the amendment.

51. I do not think I am really in a position to decide if either party has acted wrongfully in relation to the use of or revocation of the POA.  Instead, it seems to me that the amendment arose simply because of an event which occurred post‑writ. I do not see the plaintiff as at fault in having to make that amendment, and it is right that it was triggered by a step procured by the defendant (whatever the rights and wrongs).  I bear in mind that the actual costs involved are likely minimal for either party.  In the exercise of my discretion, I consider the correct order to make is that there be no order as to the costs of the Amendment Summons.

Costs of the Default Judgment Application Summons

52. Mr Chang is correct when he says that when the Default Judgment Summons was issued on 15 August 2016, the extension of time for filing a Defence previously obtained by the defendant had expired on 8 August 2016, and no further extension had been sought (though there was a paragraph in the Striking Out Application Summons seeking a stay of the action until after the determination of that summons).

53. But I see the force in Mr Lok’s submissions that, in the circumstances, it was inapt and inconsistent with the underlying objectives set out in RHC Order 1A to have sought a judgment in default of filing of a defence.  This is particularly so when the Striking Out Application had been issued on 3 August 2016, and there had been correspondence about it, and where the very basis of the strike out sought was not a matter that would be pleaded in the Defence and, if correct, would obviate the need for any Defence to be filed.  This is why this kind of point taken falls to be determined before the action is continued (if it is then continued).

54. In those circumstances, I accept it was wholly unnecessary and inappropriate, and it was also disproportionate, to have issued the Default Judgment Summons.  The Master seems to have taken the same view in making no order on it save to reserve the costs to me.  Though again the costs are probably relatively small, I order those costs to be borne by the plaintiff on an indemnity basis.

Conclusion and Orders Made

55. In the result, I make the following orders:

(a) the Writ and Statement of Claim are struck out, and the action is dismissed;

(b) an order nisi that the costs of the Striking Out Application and the costs of the action (save as separately ordered) be paid by the plaintiff to the defendant on a party and party basis, to be taxed if not agreed;

(c) there be no order as to the costs of the Amendment Summons;

(d) the costs of the Default Judgment Summons be paid by the plaintiff to the defendant on an indemnity basis, to be taxed if not agreed.