OLYMPIAN CITY 1 MANAGEMENT CO LTD v. BILLION WIN MANAGEMENT LTD

HCA 51/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 51 OF 2003

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J U D G M E N T

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1. This is an application for an Order 14 RHC summary judgment or, in the alternative, for interim payment under Order 29 rule 12.

2. First, a background.

3. By a condition of grant no. 12375 (the Grant) Lot 11704 was granted by the Hong Kong Government to the MTRC for a term to expire on 30 June 2047. Lot 11074 is on the West Kowloon reclamation. The MTRC is in the process of developing the lot under the name Olympian City. Phase I is completed. That comprises residential blocks, an office tower and a shopping arcade. Incorporated in the development is a car park building to provide parking for occupants and authorized invitees, in compliance with a term of the Grant to provide adequate parking. Clause 36(a) deals with this. 36(a)(i) and (ii) concern residential and commercial parking and are not relevant to this matter. 36(a)(iii) is and I repeat it verbatim. "Director" is the Director of Lands:-

"Parking requirements: 36(a) The Grantee shall provide within the lot to the satisfaction of the Director:

(i) ...

(ii) ...

(iii) 330 spaces or such other number as may be approved by the Director for the parking of private motor vehicles to be used by the Retail Accommodation. Each of the spaces so provided shall occupy an area of 2.5 metres in width and 5.0 metres in length with a minimum headroom of 2.4 metres.

The spaces so provided shall not be used for any purpose other than for the parking of motor vehicles licensed under the Road Traffic Ordinance and belonging to the residents or occupiers of the building or buildings erected or to be erected on the lot and their bona fide guests and visitors. The said spaces shall not be used for the storage, display or exhibiting of motor vehicles for sale or otherwise." (emphasis added)

4. When the car park was built the plaintiff was appointed the sub-letting sub-agent of, inter alia, the car parks under 36(a)(iii) reserved for the retail sector.

5. A property agent called Sino Base Development Consultant Limited (Sino Base) wrote to the plaintiff by letter of 22 March 2002. This amounted to an offer made on behalf of a named principal to lease 167 car parks which was all the available space on one floor. The letter was sent for the attention of Mr John Lam, whose designated post is described as Senior Property Manager of Olympian City 1. The proposed use was described in the offer as "Proposed Car Show and Bulk Parking" and elsewhere as "Motor Show and Bulk Parking". It is not disputed that this is a use not permitted by 36(a)(iii) of the Grant. The proposed tenant was named Best Top Investment Limited (Best Top). The response from the plaintiff was to prepare a draft form of licence which was sent to Best Top for the attention of the contact person, a Mr So Ping Fai (Mr So). The designated user clause (clause 13) stated:-

"Restricted for private vehicle parking only."

6. Sino Base faxed the same back to the plaintiff on 4 April with handwritten amendments. Against licensee - Best Top, was written "(to be confirmed)". There were other amendments. Clause 13 remained undisturbed.

7. On the same date the plaintiff over the signature of its General Manager Wyatt Choy wrote to Best Top, for the attention of Mr So. I repeat the letter in full:-

" OLYMPIAN CITY

4 April 2002

Best Top Investment Ltd
G/F, 17 Lun Cheung Street
Tokwawan
Kowloon

Attn: Mr So Ping Fai

Dear Mr So,

Re:	Licence for Car Park's Spaces
	Olympian City

We have pleasure to advise you that we are in the process of considering your Offer to Lease for our car parking spaces on the first floor of Olympian City 1.

We are given to understand that you will be using the premises for beautification, testing running, minor repair, exhibition and sale of private motor vehicles. In this connection, we have to draw your attention to Section (36) (a) of the Land Grant of the subject Lot which states clearly that:-

"The spaces so provided shall not be used for any purpose other than for the parking of motor vehicles licensed under the Road Traffic Ordinance ... The said spaces shall not be used for the storage, display or exhibiting of motor vehicles for sale or otherwise."

We reiterate that it shall be entirely at your own risk if such user shall not be allowed by the Hong Kong SAR Government. Neither the Landlord nor its Agent/representative will be liable for any losses, damages or whatsoever so incurred.

Yours faithfully,

(Signed)

Wyatt Choy
General Manager"

 

8. The letter is important because it records:-

(a) what the proposed licensee intended for the licensed space;

(b) that such user was not authorized by the Grant;

(c) that unauthorized use by the proposed licensee was at its risk.

9. Under separate cover, on the same date, Mr Lam of the plaintiff faxed a copy of the page of the Grant which includes clause 36(a)(iii).

10. Meanwhile the defendant was incorporated, with Mr So one of two shareholders and directors, and gave notice that it was to be the designated licensee.

11. On 12 April 2002 Mr So, as authorized signatory for the defendant, signed a document called an "offer to licence," directed to the plaintiff. Clause 13, the user clause, was as before - "Restricted for private vehicle parking only." This was followed by the preparation by the plaintiff of a document called "Licence Agreement" which was dated 28 May 2002 and signed by the parties. Of its many clauses, clauses 1 and 3 recorded, by reference to the schedule, the premises, the term and the monthly fee, and clause 7 that the Government rates were to be shared. Clause 15 stated:-

"The licensee shall use the premises only for the purposes set forth in Part V of the first schedule."

Part V stated:-

"Restricted for private vehicle parking only."

I repeat clause 28 verbatim:-

"28. In the event of the Licensee committing a material breach non-observance or non-performance of any covenants provisions conditions and/or stipulations contained in this Licence on the part of the Licensee to be observed and performed, the Licensor shall be entitled at any time thereafter to determine this Licence but without prejudice to any right or action by the Licensor in respect of any antecedent breach or non-observance or non-performance by the Licensee of any of the terms and conditions of this Licence.

And clause 36:

"36. If there shall be any notice from the Hong Kong SAR Government, that such user shall not be allowed, the Licensee shall cease immediately, surrender and deliver the Premises to Licensor without any compensation on losses, damages or whatsoever."

12. It is the plaintiff's case that "such user" means "actual user" and that "the licensee shall cease immediately, surrender ..." is shorthand for "the licence shall cease immediately and the licensee shall surrender ...". It concedes the drafting is not elegant but the meaning beyond doubt.

13. It is not disputed that the defendant as from 1 June 2002 began operating a motor vehicle showroom and office within the premises. It is not disputed that the plaintiff and its manager were aware of this user.

14. But soon after, that unauthorized use under the Grant came to the attention of the Lands Department of the Government. Its officers carried out a site inspection on 5 June. By letter of 19 June, over the signature of the Chief Estate Surveyor, MTRC was informed that the space in the car park designated to provide parking for the shopping arcade was being used "for display of cars for sale storage and temporary offices" and was contrary to the terms of the Grant, and that this amounted to a breach requiring rectification within a month. This was communicated to the defendant. The parties engaged in negotiations. It is not disputed that both were keen to continue the licence on such terms as would suit the parties and would be within the terms of the Grant. But there was no agreement achieved.

15. The plaintiff then sent a letter to the defendant dated 11 September 2002 that I repeat verbatim:-

" OLYMPIAN CITY

11 September 2002

Billion Win Management Limited
Shop 112, Olympian City 1,
11 Hoi Fai Road, West Kowloon,
Hong Kong

Attn: Mr So Ping Fai

Dear Sirs,

Re: Notice To Quit - Billion Win Management Limited
We refer to the license agreement dated 28 May 2002 signed between Olympian City 1 Management Company Limited ("Licensor") and Billion Win Management Limited ("Licensee").

This serves to inform you that we have received notice from government that your business of running a car show in the premises is in contravention with the conditions of the Land Grant and immediate rectification of the breach is required.

Kindly note that, in accordance with Clause 36 of the said license, your license of the herein described premises is hereby terminated at the expiration of 7 days after this notice served on you. You are hereby required to quit on the said date and deliver up the possession of the premises held and occupied by you to us under such license. The said premises is known as:-

Car Parking Spaces on the First Floor Car Park (Total
167 spaces) at Olympian City 1, 11 Hoi Fai Road,
West Kowloon, Hong Kong

This is intended as a 7 days' notice to quit, for the purpose of terminating your license aforesaid.

Yours faithfully,

'Signed'

____________
Wyatt Choy
General Manger"

 

16. The defendant declined to vacate and continue to operate as before. There was correspondence between the parties and, subsequently, their solicitors. Then the defendant stopped paying the licence fee, and share of rates.

17. A further letter was sent by the Director of Lands to the MTRC on 27 December 2002. The letter recorded that there was continued unauthorized use of the car park and gave notice that unless there was compliance within 28 days, or within 3 months upon payment of a premium of $847,838, the Government would be entitled to re-enter and take possession of lot 11074.

18. Faced with this threat of repossession, the plaintiff through its solicitors wrote to the defendant by letter of 4 January 2003 again giving notice of termination under clause 36, without prejudice to the notice of 11 September 2002. When the defendant remained steadfast, the plaintiff issued a writ on 7 January 2003. In the statement of claim, the plaintiff pursues three causes of actions, namely:-

(1) termination under clause 36 of the licence agreement upon the Government's notification that the defendant's user of the premises is not allowed;

(2) termination under Clause 28 of the licence agreement by the defendant's persistent failure to pay licence fees and Government rates; and

(3) termination under clause 28 of the licence agreement by the defendant's breach of the user clause.

19. The plaintiff made immediate application, on notice, for an injunction to restrain the use by the defendant of the premises for "the storage, display or exhibition of motor vehicles for sale or otherwise or as a showroom or show area for motor vehicles or as an office until after the trial of this action or further order ...".

20. In the event the application was unopposed and an order was made on 10 January 2003.

21. By summons of 21 January 2003 the plaintiff made application for summary judgment, the first of the matters before me. By that summons the plaintiff seeks judgment for:-

(1) vacant possession;

(2) an injunction restraining use, permanently, in terms of the order of 10 January 2003;

(3) mesne profits equating with licence fees and rates to the date of delivery up of vacant possession;

(4) interest;

(5) costs.

22. Then by way of alternative relief by summons of 7 February 2003 it made application for interim payment of the licence fees and rates in arrears and thereafter monthly to the date of final disposal of the action.

23. During the hearing I was informed that in the meantime the defendant has paid the licence fees for the months February to May and for July 2003. (Payment for June has been withheld because under the licence agreement that was waived). A payment on account of rates has also been made. What therefore is now pursued under the Order 14 application or in the alternative Order 29 rule 12 application are the licence fees and rates or their equivalent as mesne profits up to the date vacant possession is delivered up less the amounts paid.

24. Directions for evidence were made in February 2003. There are affidavits filed for the plaintiff in support, one by Mr So of the defendant in opposition and several more from the plaintiff in response to that.

25. What emerges from the evidence is the history of events which in broad terms I have attempted to summarize. There is also evidence, as adduced by Mr So, that the senior management of the plaintiff all along was aware of the use the defendant intended for the premises, stood by to let that happen, and in fact provided active assistance when called upon.

26. Whilst there is a general denial that conduct by those in the plaintiff's camp gave rise to a waiver of its right to pursue its remedies for breach of the licence, Mr Chow for the plaintiff conceded that there are disputes of fact which might weigh against the granting of summary judgment under the second and third causes of action pleaded, that is termination for breach of contract. But, he submits, there can be no defence to the plaintiff's case that the licence terminated upon receipt of the notice referred to in clause 36.

27. The only opposition to that is by Mr So, who said in evidence that clause 36 was incorporated into the contract without his prior knowledge; that relying on an assurance by Mr Lam that the licence agreement "basically incorporated the terms in the offer to licence only" he caused the defendant to sign the licence agreement without seeking legal advice.

28. Mr Chow was able to demonstrate through exhibited correspondence and incontrovertible evidence that a Miss Amy Chow of the defendant's solicitors had conduct of the transaction and possession of a draft prior to the signing. Certain amendments were made to the draft before a fair copy was made and signed. Clause 36 was not disturbed. Thus the parties expressly agreed that the licence agreement was terminable upon the Government giving notice that the defendant's user of the premises was not allowed, as a condition subsequent. The condition was satisfied and the agreement terminated accordingly.

29. Mr Ho for the defendant submitted that undeniably the parties negotiated and then contracted in the licence on the premise that the car park was to be used for showing-off cars for sale; that considerable expenditure was incurred by the defendant in set-up costs; that the plaintiff actively promoted the proposed use in its shopping complex; that it assisted the defendant in hiding the use from Government officers; that even after the so-called termination it accepted payment for rent and rates; that regardless of what clause 36 states, the conduct of the plaintiff throughout gives the defendant at least arguable defences under the heads of collateral agreement, waiver, forbearance and/or equitable estoppel.

30. Mr Ho began his submissions by stating:-

"The plaintiff had been blowing hot and cold and acted in a most high handed manner throughout its dealing with the defendant."

But the crucial aspect of the relationship is that at all times leading up to the signing of the licence both parties were alive to the fact that the display of cars for sale was contrary to the provisions of the Grant. When the parties contracted they did so on the basis that the contract would terminate if notice of re-entry was given or threatened. I reject Mr So's complaint that clause 36 was slipped into the document without warning. Mr Ho's submissions that the defendant has at least arguable grounds of defence are defences to the plaintiff's pleaded case for termination on the grounds of breach of contract. They are no defence, as I find, to termination by virtue of clause 36.

31. In the circumstances, I order in favour of the prayer set out in the Order 14 application for summary judgment. I calculate the mesne profits based on a table produced by Mr Chow showing the amount of licence fees and rates outstanding to 27 July 2003. I calculate the licence fees to be $709,750.00 and the rates $4,813.71, that is a total of $714,563.71 (I am factoring in the rent "holiday" for June 2003); thereafter at $4,727.57 per day pending vacant possession.

32. There shall be no interest save that it shall run from today at the judgment rate. The application for interim payment falls to be dismissed. Costs, nisi at first instance, are to the plaintiff taxed if not agreed, including any reserved.