AJI ICHIBAN CO v. ALL OVERSEAS LTD AND ANOTHER

DCCJ710/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 710 OF 2002

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J U D G M E N T

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1. In this action, the Plaintiff has claimed against the 1st Defendant for possession and arrears of rent, rates and other charges and/or mesne profits for the latter's use or occupation of the Premises known as Office 1 on 20th floor (also known as 20/F-A) No. 25 Yiu Wa Street, Causeway Bay, Hong Kong, ("the Premises") and against the 2nd Defendant for possession, mesne profits for its use or occupation of the Premises, rates and other charges.

2. The 1st Defendant was the tenant of the Premises under a Tenancy Agreement dated 25 May 1999 ("the Tenancy Agreement" -Exhibit PD2) made between the Plaintiff's predecessor-in-title, Chinasane Industries Limited ("the Former Landlord") as landlord and the 1st Defendant as tenant. The Premises were let to the 1st Defendant for use as an office. As evidenced by an Assignment dated 23 October 2001 made between the Former Landlord as vendor and the Plaintiff as purchaser (Exhibit PD3), the Plaintiff acquired the whole building at No. 25 Yiu Wa Street, Causeway Bay, Hong Kong ("the Building"), including the Premises. Consequently, the Plaintiff became the landlord of the Premises under the Tenancy Agreement.

3. Judgment was entered against the 1st Defendant on 15 April 2002, inter alia, as follows:

(a) The 1st Defendant do deliver to the Plaintiff vacant possession of the Premises;

(b) The 1st Defendant do pay to the Plaintiff the sum of HK$28,713.51;

(c) The 1st Defendant do pay to the Plaintiff further arrears of rent and/or mesne profits, rates and air-conditioning and/or management fees in respect of the Premises at specified rates from 1 January 2002 to the date of delivery of vacant possession of the Premises to the Plaintiff.

4. On the same day, it was adjudged that the 2nd Defendant do deliver to the Plaintiff vacant possession of the Premises.

5. The Plaintiff recovered possession of the Premises on 30 September 2002 with the assistance of the court bailiffs.

6. What remained to be dealt with at the present trial are the Plaintiff's claims against the 2nd Defendant for, inter alia, mesne profits, rates and air-conditioning and/or management fees from 24 October 2001 to the date of delivery of vacant possession of the Premises to the Plaintiff, that is, 30 September 2002.

7. Pursuant to the order of Her Honour Judge H C Wong in chambers dated 4 March 2003, leave was granted for the 2nd Defendant's solicitors to cease to act in the present proceedings upon compliance with the requirements of Order 67 Rule 6(1) of the Rules of the District Court. The 2nd Defendant now acts in person but was absent yesterday and today. As the 2nd Defendant's former solicitors were well aware of the trial dates, the trial then proceeded in the absence of the 2nd Defendant.

8. I note that the term of the tenancy as expressly provided in the Tenancy Agreement expired on 4 May 2001. However, I am satisfied that Part V of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 applies to the said tenancy. Therefore, in the absence of any written notice of termination as prescribed by that Part (and there is no evidence of such notice), the said tenancy was statutorily continued pursuant to section 122(1) of the said Ordinance.

9. The Plaintiff claimed that the 1st Defendant, in breach of clause 2.1(ag) of the Tenancy Agreement, assigned, sublet or parted with possession of the Premises or any part thereof to the 2nd Defendant without the knowledge and consent of the Plaintiff or the Former Landlord.

10. The 2nd Defendant in its Defence denied knowledge of the Tenancy Agreement, saying that it was not a party thereto and hence there is no privity of contract between the Plaintiff and the 2nd Defendant. The 2nd Defendant further denied that it was in actual physical occupation of the Premises or any part thereof. It pleaded that at all material times it only utilised the address of the Premises as its registered office for the sake of business efficacy. In the circumstances, it rejected the Plaintiff's claims.

11. Madam Ip Man-nga, Kendy (PW1), a property officer of the Plaintiff, gave evidence. She adopted her witness statement filed on 5 July 2002 as part of her evidence-in-chief and she confirmed the accuracy of the contents therein. She confirmed that the monetary judgment obtained by the Plaintiff against the 1st Defendant is to date wholly unsatisfied.

12. PW1's evidence is that since about January 2002, the 2nd Defendant, without the consent of the Plaintiff and/or the Former Landlord, has occupied the whole or part of the Premises for operation of its trading/fashion business. In support of this, PW1 stated that the nameplates of the 1st Defendant at the main entrance of the Premises and at the main entrance of the Building were replaced by nameplates bearing the name of the 2nd Defendant in English and Chinese. She took photographs of the main entrances of the Premises and of the Building on 2 March 2003 depicting the same (Exhibits PD1A and PD1B). She also produced a Directory Confirmation Form dated 12 December 2001 in respect of the Premises (Exhibit PD6) signed by the 2nd Defendant on which the 2nd Defendant was named as tenant. She explained that the nameplates were changed after receiving the Directory Confirmation Form.

13. It was only in January 2002 that the Plaintiff realised that the 2nd Defendant was not the tenant of the Premises. The Plaintiff's solicitors then issued a letter to the 2nd Defendant dated 12 January 2002 (Exhibit PD7) alleging that the 2nd Defendant was an unlawful subtenant or licensee in occupation of the Premises on a date unknown to the Plaintiff. It went on to say that the 1st Defendant as tenant has failed to pay arrears of rent, rates, other charges and interest. The 2nd Defendant was demanded to pay mesne profits and outgoings for its occupation of the Premises and to deliver vacant possession of the same.

14. PW1 confirmed that possession of the Premises was recovered by the Plaintiff from the court bailiffs on 30 September 2002. This is evidenced by the bailiff's inventory of chattels found at the Premises on recovery of possession of the Premises dated 30 September 2002 (Exhibit PD11).

15. Mr Hung Yiu-nam (PW2), a security officer of the Plaintiff, next gave evidence on behalf of the Plaintiff. He also adopted his witness statement filed on 5 July 2002 as part of his evidence-in-chief and confirmed the accuracy of the contents therein. PW2 was formerly employed by Sky Properties Management Company Limited as deputy manager of security responsible for security matters in respect of the Building during the period from April 2001 to October 2001. When the Plaintiff acquired the Building in October 2001, he became the Plaintiff's employee.

16. PW2 stated that he did go to the Premises for carrying out repairs and for inspection. He saw a couple and an employee working there. He said that the couple were Madam Hau Yuen-ling (whom PW2 explained was erroneously referred to as "Hau Wing-lam" in his witness statement) and Mr Chan Chun-fai, but he did not know the name of the employee. He had not seen anyone else at the Premises. The Premises were decorated as an office with desks, photocopy machine, fax machine, stationery, et cetera.

17. PW2's evidence was that on 12 May 2002, Mr Chan Chun-fai and Madam Hau Yuen-ling (whom he also referred to as "Mr and Mrs Chan" in his witness statement) and the employee, together with some transportation company workers, came to the Premises, and loaded up and removed office equipment from the Premises. It would be noted that by 12 May 2002, the Plaintiff had obtained judgment against the 1st Defendant and also against the 2nd Defendant for vacant possession of the Premises.

18. PW2's evidence was that when Mr Chan Chun-fai and Madam Hau Yuen-ling returned to the Premises on 15 May 2002, a report was made to the police by the Plaintiff. The incident was confirmed by PC53873, Mr Cheung Man-kin (PW3), a police officer who was subpoenaed to give evidence on behalf of the Plaintiff. PW3 brought his notebook to court and a copy of the relevant extracts of his notebook in relation to the incident was produced as Exhibit PD16. He confirmed the record made by him in his notebook reflected what happened. Suffice to say that when PW3 arrived at the Premises, a woman by the name of Hau Yuen-ling told him that the subtenant of the Premises, that is, the 2nd Defendant, had started to move out of the Premises since 12 May 2002. She further said that she was a staff of the company and, having entered the Premises with a key, was packing up the properties of the company. She eventually took away properties which she expressed to be the name cards of the company's clients and the company's documents. I have considered, but need not deal with in any detail here, the other investigations by the police.

19. Various company, business registration and bankruptcy search records were produced. The company search records of the 2nd Defendant (Exhibit PD9) revealed that the Premises was its registered office from 15 November 1999 to 12 April 2002. According to the particulars of business address in the certified extracts of information on the business register in respect to the 2nd Defendant (Exhibit PD8), the business address was changed to the Premises on 4 September 2000. The particulars were updated with a new business address on 10 May 2002. I note that the 2nd Defendant gave a neighbouring address, that is, Flat or Room B, 20/F, No. 25 Yiu Wa Street, Causeway Bay, Hong Kong, as its business address on 19 June 2000. However, no other evidence was led on this neighbouring address and I do not wish to speculate on its significance, if any. A copy of what appears to be a tenancy agreement of the 2nd Defendant as tenant in respect of premises known as Unit B9B, 2nd Floor, Block B, Hong Kong Industrial Centre, Nos. 489-491 Castle Peak Road was produced as Exhibit PD12. However, no evidence was led to show how this copy document, which is very blurred, came into the hands of the Plaintiff or its solicitors, nor as to the accuracy of its contents. In the circumstances, I place no weight on the same.

20. On the other hand, the company search records of the 1st Defendant (Exhibit PD10) reveal that the Premises were also the registered office of the 1st Defendant from 1 March 2001 to 10 November 2002. However, the certified extracts of information on the business register in respect of the 1st Defendant (Exhibit PD13) do not indicate the Premises as its business address at all. At the material time, the 1st Defendant's business address was stated to be Flat H, 13/F, Block 2, City Garden, 233 Electric Road, North Point, Hong Kong.

21. I am satisfied on the above evidence that, at the very least, the 2nd Defendant used and occupied the Premises since the commencement of the Plaintiff's ownership of the Premises on 24 October 2001. Since the Plaintiff's claims do not relate to any period prior to 24 October 2001, it is unnecessary for me to make any finding on the occupation of the Premises prior to that date. Efforts have been made by the 2nd Defendant to identify the Premises as its registered office and business address via changes registered with the Companies Registry and the Business Registration Office. Further, the nameplates not only outside the Premises but also on the ground floor lobby of the Building (presumably for guidance of visitors to the Premises in this office building) were changed to reflect the 2nd and not the 1st Defendant. There is PW2's evidence of the presence of Mr Chan Chun-fai and Madam Hau Yuen-ling working at the Premises with an employee and also Madam Hau's admission to PW3 that the 2nd Defendant was a subtenant of the Premises and that she was on 15 May 2002 collecting the properties of the 2nd Defendant from the Premises. The totality of the evidence leads to an inference, on the balance of probabilities, of use or occupation of the Premises by the 2nd Defendant.

22. Although the 2nd Defendant did remove certain properties from the Premises on 12 and 15 May 2002, the Plaintiff did not recover vacant possession of the Premises until the court bailiffs delivered the same to them on 30 September 2002.

23. I also find that the 2nd Defendant's use and occupation was in breach of the Tenancy Agreement's prohibition against subletting and/or parting with possession of the Premises by the 1st Defendant as tenant.

24. I will now turn to the Plaintiff's claims against the 2nd Defendant.

(A) MESNE PROFITS

25. The Plaintiff originally claimed for mesne profits at the rate of HK$9,817.50 (exclusive of Government rates and management fees and other outgoing expenses) per month from 24 October 2001 to 30 September 2002. The claimed rate is equivalent to the monthly rent provided for in the Tenancy Agreement. In the absence of contrary evidence, I accept this rate.

26. I am satisfied that the Plaintiff is entitled to claim for mesne profits for the 2nd Defendant's use and/or occupation of the Premises, but not from 24 October 2001. According to paragraph 15 of the Amended Statement of Claim, the Plaintiff only forfeited the tenancy of the 1st Defendant in respect of the Premises by the issuance and service of the Writ of Summons. The Writ of Summons was issued on 30 January 2002. There is no evidence of the date of service of the same on the 1st Defendant, but it is evident that the court registry received its Acknowledgement of Service on 8 February 2002. The earliest time for service of the Writ of Summons was presumably on the date of issuance itself and Mr Chung, solicitor for the Plaintiff, asked me to adopt this date.

27. I raised with Mr Chung whether the 2nd Defendant can be made liable to the Plaintiff for mesne profits and other charges prior to the forfeiture of the said tenancy, the Plaintiff having no entitlement to possession prior to that date. The relevant principles of law are discussed in the judgment of Madam Recorder G Li SC in Zanuna Limited v Jingdou Trading Company Limited & Anor, HCA 2130/2001, 16 October 2001, which case was also discussed in the judgment of Deputy Judge Lam in Winsworld Properties Limited v Chance Full International Development Limited & Anor, HCA 4161/2002, 14 February 2002.

28. In the present case, there is no evidence of any earlier termination of the said tenancy prior to the aforesaid forfeiture by issuance and service of the Writ of Summons. Mr Chung very properly conceded that the Plaintiff cannot maintain a claim for mesne profits prior to 30 January 2002 and he abandons the claim in this respect. I am therefore only prepared to award mesne profits at the rate of HK$9,817.50 per month for the period from 30 January 2002 to 30 September 2002, that is, 8 months and 2 days, in the total sum of HK$79,173.39.

(B) RATES

29. The Plaintiff claims for rates at the rate of HK$470.00 per month from 24 October 2001 to 30 September 2002. For the reasons given above, the Plaintiff is not entitled to claim for rates prior to 30 January 2002, and Mr Chung accepts this. The Plaintiff produced two demands for rates issued on 21 December 2001 and 6 March 2002 respectively (Exhibit PD5). Concession in 2002 was noted in both demands for rates and neither indicated that rates were payable. No demand for rates was produced in respect of the third quarter of 2002. When Mr Chung's attention was drawn to the above, he indicated that the Plaintiff also abandons the claim for rates.

(C) AIR-CONDITIONING AND/OR MANAGEMENT FEES

30. The Plaintiff claims for air-conditioning and/or management fees at HK$2,337.50 per month from 24 October 2001 to 30 September 2002. Although this claim is essentially a claim for damages, I am satisfied that the Plaintiff suffered loss in respect of such charges as a result of the 2nd Defendant's use and/or occupation of the Premises. The claimed rate is as stated in the Fourth Schedule of the Tenancy Agreement. PW1 confirmed that the rate was unchanged during the relevant period. However, for the reasons given above, the Plaintiff is not entitled to claim for such fees before 30 January 2002 and Mr Chung accepts the same. In the circumstances, the Plaintiff is entitled to air-conditioning and/or management fee at the rate of HK$2,337.50 per month for 8 months and 2 days, that is, HK$18,850.81.

31. There will be judgment for the Plaintiff against the 2nd Defendant for the sum of HK$98,024.20 being the aggregate of the sums of HK$79,173.39 and HK$18,850.81. There is no need to take into account the security deposit of HK$36,456.00 provided by the 1st Defendant, the receipt of which was expressly acknowledged by the Former Landlord in the Tenancy Agreement (see the case of Hua Chiao Commercial Bank Limited v Chiaphua Industries Limited [1987] 1 AC 99).

32. The Plaintiff also abandons any claim for interest from the date of the writ to judgment and I need say no more on the same.

[SUBMISSIONS ON COSTS]

33. I see no reason why costs should not follow event. I, therefore, order that the Plaintiff is entitled to the costs of the action against the 2nd Defendant, to be taxed if not agreed, subject to the following proviso.

34. The Plaintiff's trial bundle consists of 352 pages, including copies of three affirmations and their Exhibits filed in relation to interlocutory applications, totalling about 75 pages. I refer to Practice Direction 27 paragraph 7.17 which applies Practice Direction 5.6 to the District Court. Practice Direction 5.6 at paragraph 1 provides that:

"Bundles must not include documents which are unlikely to be referred to at the trial. If documents unexpectedly become relevant during the trial, they can be added."

Where documents to be produced have been included in the trial bundle, as in the present case, I see little purpose in "duplicating" such documents by including Exhibits used in interlocutory applications. In the present case, the affirmants of the affirmations used in interlocutory applications have also provided witness statements, which have been included in the trial bundle. There is no application under Order 38 Rule 2 of the Rules of the District Court for the affidavit of any witness to be read at the trial. Practitioners should be aware that the court takes a strict view against excessive photocopying.

35. In the circumstances, the costs of the aforesaid 75 pages of the bundle will be disallowed.