THE ONE PROPERTY LTD v. THE SWATCH GROUP (HONG KONG) LTD

HCA 268/2021 and HCA 269/2021
(Heard Together)

[2022] HKCFI 1693

HCA 268/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 268 OF 2021

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BETWEEN

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and

HCA 269/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 269 OF 2021

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BETWEEN

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(HEARD TOGETHER)

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DECISION

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1.  These are applications by The Swatch Group (Hong Kong) Limited (“the defendant”) the tenant of 2 different shop premises in Tsim Sha Tsui by summonses dated 12 April 2022 to stay its appeals from orders dated 8 February 2022 of Master Alexander Tang granting summary judgment to the respective landlords (“the plaintiffs”). Final judgment was entered on the liquidated sums claimed with interest and interlocutory judgment in respect of the unliquidated damages, with damages to be assessed. At the conclusion of the hearing, the Decision was reserved which I now give.

Background

2.  The leases in both actions (HCA 268/2021 and HCA 269/2021) were three-year leases of shop premises to be operated as luxury watch retail stores with the terms commencing in late September/early October 2018.

3.  The defendant defaulted on payments of rent from 1 July 2020. On 18 December 2020 it claimed that the tenancy had been frustrated from 30 June 2020. When the defendant returned the keys in January 2021, each of the plaintiffs accepted the defendant’s breach and terminated the relevant lease.

4.  The plaintiffs commenced these actions for unpaid rent and damages for breach of the tenancy agreements. The defendant claimed that the tenancy agreements were frustrated as a result of the social unrest in 2019-2020 and the Covid-19 pandemic and/or that the rent abatement clauses were triggered by the same events.

The stay application

5.  The defendant seeks a stay of its appeals from the Master’s Decision of 8 February 2022 pending the decision of the Court of Appeal in the defendant’s appeals from the decision of this Court in Vember Lord Limited v The Swatch Group (Hong Kong) Limited [2022] HKCFI 279 (“the Vember Lord Decision”) which was handed down on 20 January 2022, shortly before the Master’s hearing.

6.  The Vember Lord appeals have been set down. Since the hearing, the Court has been informed that the appeal will be heard on 9 September 2022. Those appeals involve an unrelated dispute between another landlord and the defendant.

7.  Mr Keith Chan, counsel for the defendant, submitted that the present appeals and the appeals to the Court of Appeal in Vember Lord relate to the same issues and involve the same tenant. The defence run by the defendant in Vember Lord before this Court was also based on rent abatement and frustration. It failed on both issues.

8.  The Master adopted and followed much of the reasoning in the Vember Lord Decision. Hence it was submitted that the Court of Appeal’s decision would likely have a critical impact on how the present appeals would be conducted and the arguments deployed.

9.  It was further submitted that there would be no prejudice to the plaintiffs if the court were to grant a stay. The defendant is prepared to make full payment of the liquidated sums to the plaintiffs and is willing to proceed with an assessment of damages. There would be no stay of the Master’s Decision.

10.  On rent abatement, the defendant emphasised a shared unusual feature of the clause in question being the absence of any reference to ‘damage’. The defendant’s contention in Vember Lord was that physical damage is not a precondition for the application of the rent abatement clause such that the clause was engaged by the twin events of social unrest and the pandemic. That contention failed.

11.  The defendant submitted that Court of Appeal’s decision on that issue would undoubtedly have a significant bearing on how the defendant would conduct the present appeals although the Court of Appeal’s decision would not be binding on the parties to the present appeals as they are not the same. Nor would it finally resolve any of the issues.

12.  Mr Chan referred to Rankothpedi Durayalage Kamalawathi v The Director of Immigration [2018] HKCFI 1579 where Chow J (as he then was), after citing the English Court of Appeal’s decision AB (Sudan) v Sec of State for the Home Department [2013] EWCA Civ 921, stated (at §15) that:

“It is clear from the above authority that a stay of proceedings in an action may be granted if the outcome of a pending appeal in another action has, or is likely to have, a critical impact of the action even if it cannot be shown that the outcome of that appeal would be decisive or determinative of the action. This having been said, the power to stay must be exercised cautiously. Ultimately, the court has to perform a balancing exercise to further the ends of justice as between the parties to the action, as well as the due administration of justice generally.” (emphasis added)

13.  AB (Sudan) was an immigration case and the dicta was said in that context. Rankothpedi involved a systemic constitutional challenge to the Live-In Requirement for domestic workers. In Infinger v Hong Kong Housing Authority [2019] HKCFI 557 at §10, Chow J held those principles to be applicable in all cases where a stay is sought pending the outcome of a pending appeal in another action raising the same or similar issues.

14.  Mr Chan naturally relied on the italicised part of the principles in submitting that the Court of Appeal’s decision would have a critical impact on the appeals sought to be stayed. The clause in italics in the passage from Rankothpedi set out above appears to be a gloss on the original dicta. Nevertheless, each case has to be considered on its own facts in determining whether a critical impact is made out.

15.  The defendant accepts that differences exist in the wording of the clause in the present appeals and that in Vember Lord. Such differences could render the Vember Lord decision distinguishable as the defendant had sought to do before the Master.

16.  The saving in time and costs that a stay of proceedings in the present case would generate is uncertain if not speculative given the non-binding nature of the Court of Appeal’s decision and the possibility of the decision being distinguished on the facts.

17.  Frustration which is the other issue is highly fact-sensitive. There is no novel point of law involved. Rather, it would involve the application of established principles to the facts.

18.  On the issue of prejudice, the defendant submitted that there will be none as there will be no stay of the Master’s Decision. In so far as the plaintiffs have to make a choice between proceeding with the assessment or not and possibly wasting costs, it was submitted that the dilemma remains whether or not the court grants a stay of the appeals.

19.  I do not agree. A stay would necessarily involve a delay. While there is now a date for the hearing of the appeal, taking into account the new Practice Direction relating to the delivery of judgments, the defendant accepts that it could mean a delay of 9-10 months. Delay in itself will cause prejudice to the plaintiffs: see Poon Ka Man Jason v Cheng Wai Tao [2018] HKCFI 771 at §68.

Conclusion

20.  As I do not consider that the defendant has shown that the Court of Appeal’s decision is likely to have a critical impact on the appeals, coupled with the prejudice the plaintiffs will suffer, and having regard to the underlying objectives set out in RHC Order 1A of cost-effectiveness and expeditious resolution of cases, the application for a stay is dismissed.

21.  There is to be an order nisi of costs in favour of the plaintiffs with certificate for counsel, such costs to be summarily assessed and payable forthwith.

22.  The plaintiffs are directed to lodge their statements of costs within 7 days of this Decision, the defendant its objections within 14 days thereafter and the plaintiffs their reply (if any) within 7 days thereafter.

23.  Summary assessment will be conducted in Chambers.