BERTHIER GODOWN LIMITED v. E. WAH REALTY LIMITED AND ANOTHER

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JUDGMENT

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1. There are two summonses before the court between these parties. The first dated the 6th of December, 1985 by the defendants to strike out the claim as an abuse of process under 0.18 r.9 and in pursuance of the inherent jurisdiction of the court. The second (although the first in time) dated the 28th of November 1985 by the plaintiff asking for summary judgment. They ask in the statement of claim for a declaration that the plaintiff is tenant of the defendants and secondly an order restraining the defendants from executing judgment for possession of the premises until those proceedings are complete. It was agreed between the parties that I should deal with the defendants' summons to strike out first because if that summons were to succeed then the plaintiff's application would be unnecessary.

2. The history of this matter is fairly complicated. The chronology is set out in Exhibit 4 to Mr Carolan's affidavit of the 11th December. For present purposes the history is this. There are two premises involved each owned by one defendant. For practical purposes they can be dealt with together. Those premises were let to Surewin, the tenant, on the 16th July 1984. The premises were sublet by Surewin to the plaintiffs by an earlier agreement. The situation therefore so far as these proceedings are concerned is that originally the plaintiffs were sub-tenants and the defendants were the landlords. In August 1984 Surewin, the tenant defaulted and the landlords took proceedings. On the 19th December 1984 there was judgment by consent for possession and arrears of rent. However, the tenant made further default and on 7th January 1985 there was a default judgment, also by consent, for possession. On 12th of April 1985, the defendants, the landlords, applied for leave to issue a writ for possession and it follows from that the plaintiffs, (sub-tenants) received notice of that application for leave. It is therefore probably as a result of the notices that on the 10th of April, two days before the application for leave to issue the writ for possession the plaintiffs took out an inter-partes summons asking to be joined as defendants in the action between the landlord and the tenant (landlord being the defendants in these proceedings and the tenant being Surewin).

3. On 16th April 1985 that inter-partes summons was dismissed. It is not clear to me on what basis it was dismissed but it is certain that the plaintiff never suggested in the course of any hearing that they had a right to remain in possession consequent upon a surrender of the lease by the tenant, Surewin.

4. On 17th April 1985 the day after the hearing of the plaintiff's summons to be joined as a defendant in the action between the landlord and the tenant - a summons was taken out by the plaintiffs applying to the court for relief against forfeiture asking for a vesting order under Section 58(4) of the Conveyancing & Property Ordinance. It can be seen from the provisions of that sub-section that the application by the plaintiffs was made claiming for a vesting order as under lessee. They were only entitled under that Ordinance to claim as under lessee and the application could only have been made on that basis. Further it could only have been made on the basis that the plaintiff had no other right to remain in the premises and on the basis that their sub-tenancy would be terminated by forfeiture if the landlord proceeded to execution of their writ of possession against Surewin. It also must mean that the plaintiffs were accepting at that time that they had no tenancy with the defendants. The importance of this matter will appear.

5. On 19th September 1985 the plaintiff's application for a vesting order under Section 58(4) was heard by Master O'Donnell. The plaintiff apparently indicated that the usual conditions as to the payment of the arrears of rent and soforth were not acceptable to them and so it was that the application was dismissed.

6. At about the same time, I think the 19th September, the landlord was given leave to issue a writ of possession and on the 26th September the writ of possession was issued.

7. The plaintiffs appealed against the order of Master O'Donnell dismissing their application under Section 58(4) and on the 11th October 1985 that appeal was heard by Deputy Judge O'Dea. He made a vesting order in favour of the plaintiffs subject to conditions to be completed within 7 days. The plaintiffs did not comply with those conditions but on the 24th of October 1985 there was a considerable activity by them. First of all, they took out a summons for stay of execution of judgment for possession. They obtained an interim stay that day and they filed a notice of appeal against the order of Deputy Judge O'Dea.

8. That notice of appeal raised a new matter. It has been called in the course of these proceedings, "the surrender point". In that notice of appeal, the plaintiffs seek leave of the Court of Appeal to argue that they are entitled to occupy the premises on the basis that their sub-tenancy with the defendants was and still is subsisting and binding notwithstanding the termination of the tenancy with Surewin. The basis of the argument is that consequent upon the consent orders between the defendants and Surewin, Surewin surrendered their tenancy so that the plaintiffs, as sub-tenants, are entitled and continue to be entitled to occupy the premises.

9. On the 13th November 1985, the plaintiffs went back before Deputy Judge O'Dea. They raised that before him the surrender point. Consequent upon the arguments presented to him a stay of execution of the judgment for possession was granted. In due course the appeal against his order was set down. In fact leave have to be granted to set that appeal down out of time on the 6th December 1985.

10. In the meantime, on the 8th November 1985, the plaintiffs began the present action. On that day they served the statement of claim asking for the declaration that they had become tenants to the defendants; seeking to have a declaration, therefore, in separate proceedings on the surrender point.

11. At this stage the situation is this. First, there is judgment for possession of the premises in favour of the defendants which is stayed. Second there is an order of the court vesting the residues of the plaintiffs term subject to the payment of certain sums. Although the plaintiffs did not fulfil the conditions of that vesting order, that order is under appeal and by reason of that, the order and those proceedings are still alive. Thirdly, by the notice of appeal, the plaintiffs seek to argue the surrender point. They seek to argue that the plaintiffs are tenants of the defendants by reason of the surrender by Surewin of their tenancy. The argument is that the surrender was by operation of law following their consent to judgment for possession and the writ of possession of the 26th September 1985.

12. The reason for this situation is that the plaintiffs wish to raise an argument which they concede is inconsistent with their original application for a vesting order under section 58(4). They say that their application may have been misconceived in that the tenant had surrendered by operation of law so that the sub-tenant now holds and has held since the 26th of September, (the date of writ of possession) as tenant of the defendants. The "surrender point", argument could have been raised at the time of the application for a vesting order under Section 58(4) if the plaintiffs had appreciated or known of the point. I say could have been raised because in any proceedings it is open to a party to argue conflicting and alternative cases. The plaintiffs could have argued first that they held a lease consequent upon the tenant's surrender but if they were wrong about that, they could apply for a vesting order. Now, for the purposes of this application, I have not heard any full argument upon the surrender issue. The plaintiffs have indicated what their argument will be and I make no finding upon it of any kind. It is clear that in order to establish their argument, which is an argument simply upon the effect of the orders made by the court, they may well face an uphill task.

13. For the purposes of this application, the question whether the plaintiffs could have taken the surrender point at the time of their application for a vesting order is in dispute. They say first it was not open to them to take the point until after the 26th September 1985, second that they did not know the facts upon which the surrender argument is based until about then, and third that their legal advisers could not have discovered those matters even with reasonable diligence.

14. For the purposes of this application only, I have accepted that the plaintiffs may well not have known and could not have discovered with reasonable diligence, the point in order to take it at the time when they applied for a vesting order. I have not therefore admitted or considered the affidavit of Mr Hui Kai Wing and the enclosures with it which the defendants sought to put into evidence. Its admissibility was challenged by the plaintiffs. The only purpose that that affidavit could serve in these proceedings is to raise an issue as to whether or not the plaintiffs could have raised the surrender point at the time of the application for the vesting order and whether they had the necessary knowledge. It seems to me that I could not try that issue of fact simply on affidavits and so for the purposes of these proceedings I was prepared to assume that the plaintiffs did not have the necessary knowledge and could not have obtained the necessary knowledge at that time with reasonable diligence.

15. It follows that in taking proceedings for the vesting order, the plaintiffs accepted that at that time that there were valid proceedings by the defendants against Surewin for forfeiture. With the result that although the point was open to them and they did not know about it the court made the order vesting the tenancy upon the fundamental assumption that the plaintiffs did not otherwise, have a right to occupation of the premises.

16. Having obtained that order upon that fundamental assumption and the order of the court still being in the existence and governing such rights as there are for the plaintiffs to occupy the premises, the plaintiffs now wish in the present proceedings (begun on the 8th November of last year) to raise an argument which is diametrically in conflict with the vesting order and the conditions made. Having presented the case the way they did, they are now saying that they were in error as a result of information that has come into their possession more recently, and so they have chosen to ask the Court of Appeal to set aside the vesting order on the grounds of the earlier surrender by the tenant by operation of law.

17. This seems to me to be the proper approach. There is in existence an order of the court vesting the tenancy on conditions in proceedings between the parties about the right to occupy the premises and if there has been a fundamental error then that should be put right by raising the matter on appeal in those existing proceedings.

18. By the present proceedings for a declaration, the plaintiffs are seeking to litigate the same point in separate proceedings. A point which was not taken in the earlier proceedings, and they seek an order of the court which is totally in conflict with the vesting order already made. The absurdity of this situation is emphasized by the fact that there is a summons before me for summary judgment on the plaintiffs' claim. Mr Wu in the course of arguing the case for the plaintiffs obviously (to my mind) appreciated the absurdity of this situation and so indicated that he would not press for summary judgment and that if these proceedings were allowed to continue he would concede that the defendants were entitled to unconditional leave to defend.

19. If the plaintiffs were to succeed in the present proceedings therefore there would be a declaration that they are entitled to occupy the premises as sub-tenants following the surrender by Surewin, the tenant. There would also be an existing order of the court, now under appeal, for possession of the premises with a vesting order in favour of the plaintiffs subject to conditions and the Court of Appeal are still to hear the appeal against that vesting order in which the plaintiffs seek to raise the surrender point. There can be no doubt that save in the most exceptional circumstances a party must take all the points he wishes to raise on any issue in the same proceedings. It is quite clear that separate proceedings on the same issue cannot be maintained. It is not only. a duplication of proceedings but it leads to the danger that there will be inconsistent and conflicting. judgments of the court between the same parties. That cannot in normal circumstances (and possibly in any circumstances) be tolerated.

20. The defendants themselves are in an impossible position. They await the outcome of the appeal. In the mean time they get no rent and they cannot get possession. If these proceedings continue whether they win or lose in the Court of Appeal the plaintiffs seek to proceed with the action. In fact the surrender issue will be decided one way or the other by the Court of Appeal. It is open to the plaintiffs to raise the issue, they seek to raise the issue, and the Court of Appeal will deal with it in such way as they think just.

21. The present proceedings amount to an attempt to appeal a decision of this court by bringing a separate action. Similarly if the proceedings continue after the Court of Appeal decision it would be an attempt to try again issues which are in front of the Court of Appeal.

22. Here the plaintiffs have made a fundamental assumption that they were not entitled to remain in occupation of the premises and therefore they applied for a vesting order. They have now obtained such an order in separate proceedings. Its not open to them to seek in these proceedings to raise a matter inconsistent with-the assumptions and the approach which they made then. Nor can they raise new legal issues in these proceedings which could have been raised and still can be raised in those other proceedings. It is undoubtedly the law that a person who takes proceedings must take all the points that are available to him in those proceedings and not in other proceedings. The authority (if such is needed) for these propositions can be found in Hoystead & Others v. the Commissioner of Taxation 1926 A.C.155 at page 155:-

"In the opinion of Their Lordships it is settled, first, that the admission of a fact fundamental to the decision arrived at cannot be withdrawn and a fresh litigation started with a view of obtaining another judgment upon a different assumption of fact. Secondly the same principle applied not only to an erroneous submission of the fundamental fact but to an erroneous assumption as to the legal quality of that fact. Parties are not permitted to begin a fresh litigation because of new views they may entertain of the law of the case or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. "

Further, on page 170:-

"It seems from this citation of authority that if in any court of competent jurisdiction a decision is reached a party is estopped from questioning it in a new legal proceeding. But the principle also extends to any point whether of assumption or admission which was in substance the ratio of and fundamental to the decision. "

There is similar authority for that proposition in Yat Tung Investment Co., Ltd v. Dao Heng Bank Ltd [1975] A.C.581. At P.590 the 'locus classicus' in Henderson v Henderson (1843) 3 Hare 100 at 115 is cited. It is therefore if the party seeks to raise new matters in separate proceedings or seeks to reverse a previous assumption that has been the basis of earlier proceedings in new proceedings that amounts first of all to an abuse of the process and second he is estopped from doing so. , A fortiori this must be so if the earlier proceedings are still in existence and the party can raise those matters in the proceedings which have already being started and in which orders have already being made. He certainly cannot seek to raise factual and legal issues in conflict with his earlier stance and the earlier order of the court. He must pursue all the remedies available to him and raise all the arguments that are available to him in the first proceedings. Indeed that is exactly what the plaintiffs seek to do in the Court of Appeal.

23. The question of knowledge of the surrender point is of course important. Although it was obiter in the Yat Tung case, the Privy Council said at P.590:-

"The shutting out of a 'subject to litigation' - a power which no court should exercise but after a scrupulous examination of all the circumstances - is limited to cases where reasonable diligence would have caused the matter to be earlier raised. Moreover, although negligence, inadvertence, or even accident will not suffice to excuse, nevertheless, 'special circumstances' are reserved in case justice should be found to require the non-application of the rule. "

24. It is necessary to proceed with great caution for a party must never be shut out from the court if justice requires that he should be allowed to raise matters even though he has not raised them before. Especially this would be the situation if he was not able to raise those matters in the earlier proceedings.

25. In this case however the question of knowledge does not assume the importance that it might in many others. Accepting as I do that the plaintiffs did not have knowledge of the surrender point and could not have had such knowledge with reasonable diligence (I accept that I emphasize simply for the purposes of this application) the fact remains that the plaintiffs are not shut out from the court because the earlier proceedings are still in existence. They are raising the point in the Court of Appeal and that issue will be dealt with by the Court of Appeal. Proceeding with the greatest caution as I must and recognizing that a party must not be shut out from the court there is no question of shutting out the plaintiffs from raising this point in litigation in the proper way.

                It is clear to me therefore that these proceedings are an abuse of the process of the court by the plaintiffs, and further, that they are estopped in these proceedings from raising the 'surrender argument'. Were the situation otherwise there would be not only chaos in litigation in separate proceedings dealing with the same issues but also it puts justice at risk between the parties because conflicting the decision of the court are sought. In these circumstances I do not, in the end, have any hesitation in striking out these proceedings.