RIGHTOP CORPORATION LTD AND ANOTHER v. YAU WING YAN JOYCE AND ANOTHER

HCMP 1209/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1209 OF 2015

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J U D G M E M T

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I.  INTRODUCTION

1. Lik Sang Plaza (“Plaza”) is a 4-storey shopping mall at Foo Yu Building, Tsuen Wan (“Building”) consisting of individual shops units that carried on various businesses. The 1^st plaintiff (“P1”) was/is the registered owner of Shops Nos G01 and G02 on the Ground Floor of the Plaza (“G01‑ G02”). The 2^nd plaintiff (“P2”) was/is the registered owner of Shops Nos G03 and G04 on the Ground Floor of the Plaza (“G03-G04”). P1 and P2 are referred to as “Ps”, and G01, G02, G03 and G04 are referred to as “Shops”.

(a)  Sale and purchase agreements

2. Ford Venture Limited (“FV”) was P1’s predecessor-in-title in respect of the Shops.  By a preliminary sale and purchase agreement dated 12 November 2012, FV as vendor agreed to sell and Canton Century Limited (“CC”) as purchaser agreed to purchase inter alia the Shops for the price and upon the terms and conditions set out therein (“PASP”).  By 2 sale and purchase agreements both dated 26 April 2013, CC as confirmor/vendor agreed to sell and P1 and P2 respectively as purchaser agreed to purchase G01-G02 and G03-G04 respectively for $6,300,000 upon the terms and conditions set out therein (“1^st and 2^nd SPAs” and collectively, “SPAs”). 

3. Clause 7 of the SPAs (“Clause 7”) provided inter alia as follows:

“7. (1) The Property is sold and purchased subject to and with the benefit of the tenancy (if any) described in Schedule 7 (“the Tenancy Agreement”).  In the absence of such tenancy, vacant possession of the Property shall be delivered to the Purchaser by the Vendor on completion.

(2) If the Property is sold subject to and with the benefit of the Tenancy Agreement, the Vendor shall, on completion of the sale and purchase herein, account and transfer to the Purchaser all rental deposits or any balance thereof (“the Rental Deposits”) which are being held by the Vendor in his capacity as the Landlord of the Property Provided that the Purchaser shall give in writing to the tenant named in the Tenancy Agreement an acknowledgment of the amount of the Rental Deposits so received and also an undertaking to return the same to the said tenant on the expiration or sooner determination of the term created by the Tenancy Agreement in accordance with the terms and conditions herein contained.

(3) Upon receipt of the Rental Deposits pursuant to Sub-Clause (2) hereof, the Purchaser shall as the new Landlord account to the Tenant named in the Tenancy Agreement the Rental Deposits at the expiration or sooner determination of the Tenancy Agreement and shall keep the Vendor fully and effectually indemnified against subsequent claim by the said tenant for the refund of the Rental Deposits.  The provisions in this sub-clause shall survive completion.

……”

In short, CC shall account/transfer all rental deposits to Ps provided Ps (as the new Landlord) shall acknowledge receipt in writing to the existing tenant Centaline Property Agency Limited (“CPA”) and undertake to account to CPA and return the rental deposits to it upon the expiration or sooner determination of the CPA Agt referred to in paragraph 5 below.

4. Schedule 7 of the SPAs (“Schedule 7”) provided as follows:

“(As per all the terms, conditions, provisos and reservations stipulated in the contents of the attached photocopy of the Tenancy Agreement mentioned above.)”

Schedule 12 of the SPAs set out further terms and conditions which included inter alia the following (“Clauses 5 and 6”):

“5. 賣方現承諾予買方該鋪位成交後每月以港幣$26,250.00給予買方作為該舖位租金之回報，直至租約完結為止(即2016 年8月2日或之前)。賣方更承諾予買方於交易前將全敷之租金回報存入予黃律師事務所之銀行户口內，並委託黃律師事務所於每個月之7號前(首日為2013年6月7日起)將所有之租金及租金回報以律師行支票形式給予買方。惟買方需於該舖位交易時前以書面形式委託及授予“黃律師事務所”代表買方向現存之租客(即“Centaline Property Agency Limited (中原地產代理有限公司)”)代為收取每月之租金並存入黃律師事務所之銀行户口內為荷。

6. 賣方承諾予買方予現存之租約租期完結時後的14天內，賣方必須將該單位之間格還原予買方並加裝來去水設施。” (my emphasis)

(b) CPA

5. The “Tenancy Agreement” referred to in Clause 7 and Schedule 7 was a tenancy agreement dated 3 July 2012 between FV as landlord and CPA as tenant (“CPA Agt”) in respect of the Shops and also Shops Nos G05, G06 and G07 on Ground Floor of the Plaza (collectively, “G01-G07 Shops”).  The CPA Agt provided inter alia that:

(a) FV agreed to let and CPA agreed to rent the G01-G07 Shops at a monthly rent of $68,000 for operation of “property agency” (clause 1 and Parts I, II, IV and V of the First Schedule);

(b) the tenancy shall be for a term of 2 years from 3 August 2012 to 2 August 2014 (Parts III and IV of the First Schedule);

(c) such tenancy shall be personal to CPA, and CPA covenanted not to assign, transfer, sub-let or part with possession of the G01- G07 Shops or any part thereof to any third party whether by sub-letting, lending, sharing or other means whereby such third party would obtain use/possession of the G01-G07 Shops or any part thereof (clause 2(o));

(d) CPA shall deliver up vacant possession of the G01-G07 Shops in proper tenantable repair/condition (reasonable fair wear and tear and all structural and inherent defects excepted) to FV at the expiration or sooner determination of the term of the CPA Agt notwithstanding any rule of law or equity to the contrary (clauses 4(c) and 13(i)).

6. Clause 15 of the CPA Agt provided that “the parties shall be obliged to those special conditions set out in the Third Schedule hereto”, and such special conditions in the Third Schedule included the following:

“……

5. 此合約為必租合約，雙方皆不能反悔。

6. If [CPA] shall be desirous of renewing this Tenancy Agreement for a further term of TWO YEARS (for the period from 3^rd August 2014 to 2^nd August 2016) (“the said Renewing Term”) from the expiration of the term hereby demised and shall have given to [FV] not less than THREE MONTHS before the expiration of the said term thereby demised notice in writing of such of their desire. [FV] and [CPA] shall enter into a new Tenancy Agreement for the said term hereby demised on the same terms and conditions as herein contained save for this option to renew at the revised market rental (exclusive of management fee & rates) (but the said new rental cannot in any event be higher than 10% of the present one stated herein) and at the revised rental deposit. Notwithstanding anything herein contained to the contrary, it is hereby agreed between the parties that [CPA] shall have the right to terminate the said Renewing Term hereby created by giving to [FV] not less than 3 months’ prior written notice to determine the said Renewing Term hereby granted. In the aforesaid event, the Renewing Term hereby granted shall expire on the date as specified in such notice AND neither party hereby shall have further claim or demand against the other party on account of such early determination of the tenancy hereby created”.

(c)  Completion

7. Ps completed the sale and purchase of the Shops on 3 May 2013.  The Shops were assigned directly from FV to Ps, so CC was never at any stage the registered owner of the Shops. 

II.  PRESENT PROCEEDINGS

8. On 15 May 2015, Ps issued the originating summons herein (“OS”) against D1 and D2 (collectively, “Ds”) for vacant possession of G01-G02 and G03-G04 respectively, mesne profits and/or damages for trespass to be assessed, and injunctions to retrain Ds from trespassing onto such shops and/or interfering with P1’s access to or use/occupation/ enjoyment of such shops.

9. On 28 and 29 May 2015, D1 (who was unrepresented) and D2 by its solicitors respectively filed acknowledgment of service giving notice of intention to defend.  On 15 May and 14 July 2015, Ps filed the 1^st and 2^nd affirmations of Ps’ sole director Hung Kin Ping (“Hung”) (“Hung 1^st and 2^nd Affs”).  On 11 June 2015, D2 filed the affidavit of its sole director Lam Wai Hung Owen (“Lam”) (“Lam Aff”).

10. On 2 September 2015, Ps filed Notice of Appointment to Hear OS to seek the following reliefs (“Notice”) on the return day which was scheduled to be heard by this court on 3 December 2015 (“Hearing”):

(a) the reliefs sought in the OS against Ds by way of summary disposal under Order 28 rule 4 of the Rules of the High Court (“RHC”);

(b) leave to file, serve and rely on Hung’s 3^rd affirmation concerning the present status of the Shops for the purpose of summary disposal of Ps’ claims against Ds;

(c) without prejudice to Ps’ entitlement to summary disposal of their claims against Ds, directions on obtaining/adducing expert evidence on market rental of the Shops with liberty to fix a date for hearing the OS. 

11. At the Hearing, I granted retrospective leave for Ps to file/serve Hung’s 3^rd affirmation filed on 15 October 2015 (“Hung 3^rd Aff”), for D1 to file/serve her affirmation filed on 28 October 2015 (“Yau Aff”), and for D2 to file/serve Lam’s 2^nd affidavit filed on 28 October 2015 (“Lam 2^nd Aff”). 

12. At the Hearing, D1 and Mr Ko (counsel for D2) confirmed (a) the Shops were presently vacant, and (b) D2 had delivered physical possession of the Shops to D1.  Ms Law (counsel for Ps) confirmed that (i) Ps would not ask for the injunctive relief sought in the OS and Notice, and (ii) Ps would only seek summary disposal of Ps’ claims on liability and would ask for case management directions for assessment of damages being mesne profits.

III.  Ps’ AFFIRMATION EVIDENCE

13. Hung claimed that pursuant to Clauses 5 and 6, CC agreed with Ps to carry out the following obligations after completion of the sale and purchase of the Shops (“Rental Return Agts”):

(a) CC undertook to Ps that after completion of the sale of the Shops CC would pay a monthly sum of $26,550 to each of P1 and P2 as monthly rental return after the expiry of a tenancy agreement (ie on/before 2 August 2016);

(b) CC further undertook before completion of the sale of the Shops to pay all such rental return into the bank account of Wong & Co (CC’s solicitors) and to authorise Wong & Co to pay to Ps before the 7^th day of each month (the first day being 7 June 2013) the monthly rental return for the Shops by way of Wong & Co’s solicitors’ cheque;

(c) Ps agreed with CC that after completion of the purchase of the Shops, Ps would authorise Wong & Co to represent them to collect the monthly rent attributable to the Shops from CPA (existing tenant) and to pay the same into the bank account of Wong & Co.

CC also undertook to Ps that within 14 days upon expiry of the CPA Agt (then existing tenancy agreement) CC would reinstate the partitioning walls of the Shops and install water inlet and outlet facilities.

14. During the period from 7 June 2013 to 6 January 2015, CC paid Ps total monthly rental return of $52,500 in respect of the Shops pursuant to the Rental Return Agts (“Total Monthly Sum”), but since CC undertook to pay the Total Monthly Sum “直至租約完結為止(即2016年8月2日或之前)”, Ps did not enquire with CC as to the status of the CPA Agt insofar as it affected the Shops.  But despite Ps’ requests, CC failed/refused to pay the Total Monthly Sum since 7 January 2015.  The correspondence between Wong & Co and Edmund WH Chow & Co (Ps’ former solicitors) since early March 2015 (“Correspondence”) showed Ps and CC were in dispute as to CC’s obligation under the Rental Return Agts, which Hung said was irrelevant to the present proceedings.

15. By a letter dated 10 March 2015 from Edmund WH Chow & Co to Wong & Co, Ps referred to Clause 5, demanded CC to pay the Total Monthly Sum under the Rental Return Agts, and went on to state as follows:

“ Relying on [Clause 5] which the warranty was made by [CC] in the said clause and also your firm’s implied undertakings to stakehold the said 租金及租金回報 and to release the said租金及租金回報 to [Ps] commencing from 7 June 2013 until the expiry of the tenancy on 2^nd August 2016, [Ps] completed his purchase of the [Shops] on 3^rd May 2013 which subject to and with the benefit of the [CPA Agt]. [Ps] also on 16^th May 2013 under [Clause 5] sent to your firm the authorization letter to instruct and to authorize your firm to receive the rental in respect of the existing tenancy and your firm duly accepted it.

   We are instructed by [Ps] wrongfully in breach of the [1^st/2^nd SPA] [CC] failed and/or refused to release the said sum of HK$26,250.00 being the rental each month to [Ps] since 7^th January 2015 and your firm also wrongfully in breach of the implied undertaking failed and/or refused to release the said sum of HK$26,250 being the rental receivable each month from the stakeholder money as stakeheld by your firm since 7^th January 2015.  Despite repeated demands by [Ps] through the estate agent [CC] still failed and/or refused to release the said sum of HK$26,250.00 (which accrued to the total sum of HK$78,750.00 as at the date hereof) to [Ps].”

16. By a letter dated 17 March 2015 from Wong & Co to Edmund WH Chow & Co  (“17/3/15 CC Letter”), it was stated inter alia that:

“…… the tenancy agreement referred to in [Clause 5] must have been referring to the then existing tenancy with [CPA] ([CPA Agt]). Your attention is drawn to the whole clause 5 and 6

……

The correctness of the interpretation is clear when one consider the use of the phrase ‘existing tenancy’ (“現存”之租約) in Clause 6; ‘existing tenant’ (“現存”之租客). Hence it is clear on the face of [Clause 5] that [CC’s] obligation in respect of the Rental Return (租金回報) began in June 2013 and ceased when the [CPA Agt] was terminated by the non-renewal of the same on 2 August 2014. The phrase “即2016年8月2日“或之前” clearly take into account this contingency by the inclusion of the phrase “or”. Objectively interpreted, [CC] cannot be held liable to pay the Rental Return to [Ps] after the cessation of the [CPA Agt].

On this basis, your allegation is denied and we further reserve all rights of [CC] in respect of any sums that he has overpaid [Ps] after 2 August 2014.”

17. By a letter dated 20 March 2015 from Edmund WH Chow & Co to Wong & Co, it was said that:

“ ……

The explicit [Clause 5] has the true meaning by the proper construction and which do not allow [CC’s] distortion. [CC] was definitely in wrongful breach of the [1^st/2^nd SPA].

……”

18. By a letter dated 26 March 2015 from Wong & Co to Edmund WH Chow & Co  (“26/3/15 CC Letter”), it was stated inter alia that:

“……

It is an undisputable fact that [CPA] had elected to terminate the tenancy of [the Shops] on 2 August 2014.

Our replies are as follows:

…… we are instructed that [CC] had fulfilled all their obligations under [Clauses 5 and 6], for they had paid all Rental Return (租金回報) to [Ps] up to the expiry of the fixed term of the [CPA Agt] up to 2 August 2014.

We consider that [CC’s] above “PRIMARY / FUNDAMENTAL” DUTY & OBLIGATION had been fulfilled by then. Should there be any secondary duty / duty / obligation and/or improved undertaking (which is denied) should automatically lapse by then. That is to say, there are no alleged breaches on [CC’s] part for outstanding or unpaid Rental Return (租金回報). It follows that no one, including [CC] and/or us, are under any obligation to pay after 2^nd August 2014 and no one is in breach of anything, even if alleged by you. We see no cause of action by you, and you shall bear the costs if you proceed with this claim without merit.

……

We wish to reiterate the following 2 points:-

1. [CC’s] obligation to pay Rental Return (租金回報) has ceased upon the expiry of the fixed term of the [CPA Agt] on 2^nd August 2014, for the tenant [CPA] had elected NOT to exercise their option to renew the tenancy thereupon (for a further period from 3^rd August 2014 to 2^nd August 2016).

……”

19. In short, by the 17/3/15 and 26/3/15 CC Letters, (a) Ps were repeatedly informed that CPA did not exercise its option to renew the CPA Agt such that CPA’s tenancy expired on 2 August 2014 and CC even threatened to claim for restitution of overpaid sums since 2 August 2014, and (b) CC evinced an intention no longer to be bound by the Rental Return Agts by saying it was not under any obligation to pay the Total Monthly Sum after 2 August 2014. 

20. Hung said since Wong & Co confirmed the CPA Agt had expired on 2 August 2014 and CC would not honour the Rental Return Agts, he made enquiries about the Shops with a view to regain possession.  So in March 2015 Hung visited the Shops and discovered they were occupied by a business that sold daily necessities.  Hung made enquiries with various property agencies in the vicinity to ascertain whether any one of them let out the Shops without Ps’ knowledge, authority and consent.  In doing so Hung stumbled upon Starry Property Agency Limited (“1^st Agency”) at Dung Fa Street, Tsuen Wan. 

21. Hung entered the 1^st Agency’s premises and was greeted by “Dickie”. He made enquiries with Dickie who upon checking some records told Hung their Ms Mon Chan (“Ms Chan”) acted as estate agent in letting out the Shops.  Hung told Dickie he (through Ps) was the owner of the Shops, and expressed surprise the Shops had been let out by/to unknown persons.  Dickie suggested calling a Mr Kwok (whom the 1^st Agency recorded as the “landlord’s” representative) to clarify the situation.  Dickie made an immediate attempt to call Mr Kwok, but Mr Kwok could not be reached.  Dickie then asked Hung to leave his mobile telephone number with him (which Hung did), and said he would let Hung know when he made contact with Mr Kwok. 

22. Upon making further enquiries, Hung was surprised to discover that without Ps’ knowledge/consent, D1 as purported landlord caused the Shops to be sub-let to D2 as purported tenant for 2 years from 3 August 2014 to 2 August 2016 at a monthly rent of $26,000.  Hung did not know Ds, and Ps had never held out D1 as their agent to act as landlord to enter into a Chinese tenancy agreement dated 2 July 2014 (“2/7/14 Agt”) with D2 as tenant.  To put it in another way, Ps never authorised/consented to allow D1 let out the Shops to D2.

23. By a letter dated 26 March 2015 from Ps’ solicitors to D1 (“26/3/15 D1 Letter”), it was stated that:

“……

[Ps] understand that by a tenancy agreement dated 2^nd July 2014 [D1 has] let out [the Shops] to [Lam] for a term of 2 years from 3^rd August 2014.

However, [Ps] have never authorised [D1] to let out or consented to [D1] letting out of the said properties. It seems [D1 has] unlawfully used and let out [Ps’] properties for a gain and depriving [Ps’] use of and rental from the said premises. This could amount to a criminal offence on [D1’s] part.

In this regard, and on behalf of [Ps], we demand that [D1] immediately cease such letting out of the said properties and deliver possession thereof to [Ps] by 1^st April 2015.

Alternatively, [Ps] are open to consider any arrangement that [D1] may propose in order that the possession or letting out of the said properties be returned to [Ps].

……”

24. After about a week, D received a message from Dickie saying he should meet Mr Kwok.  On/about 21 March 2015, Hung met Mr Kwok at the 1^st Agency’s premises, and he told Mr Kwok (whom he did not know) Ps owned the Shops and he could not understand how Mr Kwok could have let out the Shops without his knowledge, consent or authority.  Mr Kwok claimed to have some documents to prove his authority, but those documents were not with him then.  The meeting ended on the basis Mr Kwok would meet Hung again to show him the documents that allegedly conferred authority upon him to let out the Shops (and they exchanged contact telephone numbers for such purpose).

25. Afterwards, Dickie informed Hung that a Mr Lam of the “tenant” of the Shops had called him to say he had heard the true owner had turned up and he would like to continue to rent the Shops.  Dickie gave Hung Mr Lam’s telephone number, but when Hung telephoned to tell Mr Lam Ps were the owners of the Shops and to ascertain what Mr Lam’s intention was, Mr Lam was uncooperative and ended the call abruptly by saying he was too busy to talk. Hung had no further contact with Mr Lam, and although he tried to contact Mr Kwok on several occasions with text messages, Mr Kwok never responded and Hung had not heard from him since.

26. On/about 4 April 2015, Hung visited the Shops, informed the occupants he was the owner of the Shops and they were in illegal occupation, and advised them to leave.  When they refused to leave, Hung made a report to the police about such unlawful occupation.  He also made unsuccessful attempts to identify D1 by paying visits to Shop No 157 of the Plaza (ie D1’s correspondence address stated in the 2/7/14 Agt).  As at the date of the Hung 1^st Aff, Hung could not ascertain D1’s true identity, and was not aware of any relationship between D1 and CC/CPA.

27. By a letter dated 13 April 2015 from Ps’ solicitors to Wong & Co, Ps accepted CC’s repudiation of the Rental Return Agts, and Ps’ solicitors went on to state inter alia that:

“Pursuant to the [SPAs], [CC] had paid the fixed sums totalling HK$52,500.00 per month in respect of [the Shops] to [Ps] from June 2013 up to December 2014.

In breach of the [SPAs], [CC] has failed and/or refused:- (a) to pay the fixed sums totalling HK$52,500.00 per month to [Ps] as from 7^th January 2015 in respect of the [Shops] and the current arrears amount to HK$210,000.00; and ……

Further, in [the 17/3/15 and 26/3/15 CC Letters], [CC] has evinced a clear intention no longer to be bound by the [SPAs] when [CC] unequivocally stated that it is not under any obligation after 2^nd August 2014 to pay the total fixed monthly sum of HK$52,500.00 to [Ps], and refused to pay the arrears of the fixed monthly sums then outstanding.  Such act and/or conduct amounts to a wrongful repudiation of the [SPAs] which [Ps] hereby accept.”

28. By 2 letters both dated 13 April 2015 from Ps’ solicitors to D1 and D2 respectively, Ps gave notice that if they did not receive vacant possession of the Shops by 20 April 2015 they would take legal action against Ds to recover possession of the Shops and all damages/losses suffered by Ps with costs. 

29. Hung said Ps did not receive any further reply from CC and/or Ds, but Ds continued their wrongful/unlawful use/occupation of the Shops (which was not pursuant to any oral/written lease, tenancy, licence, consent or permission from Ps) that amounted to trespass on land for which Ps had suffered loss/damages due to Ds’ wrongful deprivation of their use/ enjoyment of the Shops and receipt of income therefrom since 3 August 2014 (and continuing). Also, Ds either individually or jointly had not made any payment of any rent, licence fees, occupation fees or other payments of like nature to Ps in respect of their occupation/use of the Shops.  Further, Ps had never authorised or consented to CC letting out the Shops to D1 or by D1 to D2. 

30. In the course of the present proceedings, Hung became aware D2 had vacated the Shops, so when he visited on/about 7 August 2015 he found they were vacant and a removal notice stating “NEW SHOP was moved to G07” and 4 advertising notices each stating “短租散貨 [mobile telephone number]” were posted on the external parts of the Shops.  On 18 August 2015, Ps’ solicitors wrote to D2’s solicitors to enquire whether D2 had moved out from the Shops, and if so, to ask for D2’s explanation as to (a) when it moved out, (b) whether it had delivered vacant possession of the Shops to D1, and (c) whether the formal tenancy agreement dated 2 August 2014 between D1 and D2 referred to in paragraph 34 below (“2/8/14 Agt”) had been terminated.

31. On 19 August 2015, D2’s solicitors replied by asking Ps to “provide reasons for how those matters being relevant to [Ps’] claim.  Without any proper explanation regarding your request, we are instructed not to answer your questions”.  Hung claimed this was unreasonable since D2 must have known Ps as owners of the Shops were seeking vacant possession thereof in the present proceedings.

32. To preserve the status quo and prevent unauthorised persons from further letting out or renting the Shops, on 21 August 2015 Hung accompanied the clerk of Ps’ solicitors to post up notices on the external parts of the Shops to warn against unauthorised letting/renting of the Shops, and to give notice that the Shops were the subject of the present proceedings. 

IV.  D2’s AFFIDAVIT EVIDENCE

33. Lam said D2 (a retail company that sold imported daily necessities) was/is the sub-tenant of the Shops.  At/about end of June 2014, the 1^st Agency approached/told Lam D1 intended to let out shops at the Plaza and to enquire whether he was interested in renting some for retail purpose so as to expand D2’s business by setting up a branch in the Tsuen Wan district.  Lam was further informed D1 was not the owner or head landlord but a tenant of the Shops, but “she was allowed and willing to sub-let the [Shops]” or, to put it in another way, at all material times both D1 and her husband Mr Kwok Lit Mo Ken (chairman of the Incorporated Owners of the Plaza) were authorised by the landlord(s) of the shop units at the Plaza to let out or sub-let such shop units on their behalf.  Lam claimed the 1^st Agency’s staff assured him “a written authorization was given to [D1] by the landlord to sub-let the [Shops].  Due to the aforesaid assurance, [Lam] therefore did not bother to check both the said written authorization and the identity of the actual landlord”. 

34. Lam said that on 2 July 2014, in the presence of the 1^st Agency’s Ms Chan, D1 and Lam (for D2) made the provisional 2/7/14 Agt in respect of the tenancy of the Shops whereby D1 granted to D2 a 2-year tenancy from 3 August 2014 to 2 August 2016 at a monthly rent of $26,000 with payment of 2-month rental deposit of $52,000.  On 2 August 2014, D1 and Lam (for D2) signed the formal 2/8/14 Agt which contained similar terms save that under clause 20 thereof D2 was not allowed to sub-let the Shops and he was obliged to pay the rent into Mr Kwok’s bank account with Hang Seng Bank Limited.  Lam claimed that as a result D2 became the sub-tenant of the Shops as from 3 August 2014, and it started to carry on its retail business thereat.

35. Lam said in/about middle or end of March 2015 Hung turned up at the Shops to identify himself and to tell D2’s shop manager Ms Chiu he was the actual landlord.  He asked Ms Chiu and D2 to leave as they were not entitled to occupy the Shops.  In mid-April 2015, Ps’ solicitors sent to D2 the 13/4/15 D2 Letter that alleged D2 had trespassed on the Shops without their consent, and threatened to commence legal action if D2 failed to deliver vacant possession. At the end of April or beginning of May 2015, in a telephone call made via the 1^st Agency’s Ms Chan, Hung asked Lam to sign a new tenancy agreement with him for the Shops, and he urged Lam to pay rent to him directly and not to Mr Kwok.  Lam declined because D2 having signed the 2/8/14 Agt with D1 was contractually obliged to pay rent to D1/Mr Kwok, and D2 could only sign a new tenancy agreement with Hung (or Ps) after expiry of the 2/8/14 Agt. 

36. In May 2015, Ps commenced the present proceedings against Ds for trespass on the Shops.  Lam discovered from the OS and Hung 1^st Aff that Ps purchased the Shops from CC as confirmor/vendor.  Upon review of the SPAs, Lam discovered that by Clauses 5 and 6 CC undertook to Ps that upon completion of the sale of the Shops it would pay to Ps the Total Monthly Sum as monthly rental return until expiry of the CPA Agt (ie on/before 2 August 2016). 

37. Lam requested for a copy of the principal tenancy agreement between CC and D1, which he received from D1 on/about 4 June 2015 (“Undated CC/D1 Tenancy Agt”).  Such undated agreement provided that CC acted as landlord to grant a tenancy of the Shops (without mention of any other shop units of the Plaza) to D1 as tenant for 2 years from 3 August 2014 to 2 August 2016 at a monthly rent of $26,000.  Although clause 2 of the Undated CC/D1 Tenancy Agt provided D1 was not allowed to grant any sub-tenancy, it was stated in the “remarks” that the Shops could be sub-let.

38. Lam said CC was Ps’ agent under the SPAs and it was duly authorised to let out the Shops to D1.  Further, due to the prior written consent given by CC, D1 was legally entitled to grant sub-tenancy to D2, so D2 was/is legally entitled to use/occupy the Shops and Ps were/are bound by dealings that CC made on their behalf.  Still further, Lam’s impression of the Correspondence was that CC’s alleged default in paying the rental return to Ps caused them to commence the present litigation, but such principal-agent dispute would not affect D2’s entitlement to remain in possession of the Shops under the 2/8/14 Agt since CC as Ps’ agent had given prior written consent to the principal tenant D1 to sub-let the Shops.

39. Lam believed Ps misquoted the letter dated 19 August 2015 by D2’s solicitors to Ps’ solicitors.  By such letter, D2’s solicitors advised they would answer Ps’ enquiries if Ps would provide them with their reasons for such enquiries and their explanations on the relevance of such enquiries to their claim, but Ps failed to provide any reason/explanation before filing the Notice.

40. Lam said D1 and D2 mutually agreed for D2 “…… not to exercise the last year of the tenancy, and [D2] has already handed back the [Shops] and keys to the [Shops] to [D1] in August 2015”.  D2 claimed it was/is not liable to Ps for trespassing on the Shops as alleged or at all, and the affidavit evidence demonstrated “a sufficiently credible foundation which the inference of [Ps] are bound by their agent’s dealing with the third party may be drawn in full trial”.  Lam said this was a complicated case with triable issues and serious legal/factual disputes that ought to be tried, and D2 had a good or bona fide defence to Ps’ claims which should not be disposed of summarily against both D1 and D2 without a full trial.  Lam urged this court to dismiss Ps’ application for summary disposal of the present proceedings and to grant unconditional leave to defend to D2.

V.  Ps’ RESPONSE

41. Hung said D2 knew at the time of signing the 2/7/14 and 2/8/14 Agts its landlord D1 was not the owner of the Shops.  Although it was unclear whether or not Lam was told D1 was a “tenant” of the Shops, it was clear at that time D2 refused/failed to take reasonable steps to clarify/ensure D1 was indeed a “tenant” of the Shops and she had the authority of Ps as rightful owners to let out or sub-let the Shops.  Ps did not know Mr Kwok and/or D1, and they had not authorised or consented to Mr Kwok or D1 to let out the Shops to D2.

42. Hung did not know whether Mr Kwok whom Dickie had referred to and to whom Hung had spoken was the same Mr Kwok referred to in the Lam 1^st Aff.  But the Mr Kwok with whom Hung had a conversation never showed him the documents that allegedly conferred authority upon D1 to let out the Shops, and Lam also had not seen the written authorisation given to Mr Kwok (or D1) to let out or sub-let the Shops to D2.

43. Hung said Ps did not ask the 1^st Agency’s Ms Chan to approach D2 for signing a new tenancy agreement.  Instead, in/about late April or early May 2015, Ms Chan telephoned Hung to ask if Ps were willing to directly sign a tenancy agreement with D2, and Hung told Ms Chan Ps had no objection.  Hung said this meant Ms Chan knew Ps as owner intended to repossess the Shops as they had been let out without Ps’ authority/consent.  Later, Ms Chan reported to Hung by telephone D2 did not agree to sign a new tenancy agreement with Ps.

44. Hung said until the Lam 1^st Aff Ps were not aware of the Undated CC/D1 Tenancy Agt which could not per se evidence that CC was Ps’ agent as alleged or that D1 was authorised to grant any sub-tenancy to D2.  Anyway, Ps had not consented for CC to sign the Undated CC/D1 Tenancy Agt, and Hung could not understand why by the Undated CC/D1 Tenancy Agt (which required D1 to pay a monthly “rent” of $26,000 to CC) CC would “authorise” D1 to “sub-let” the Shops to D2 at the same monthly rent, which arrangement Hung claimed was devoid of common sense. 

45. Hung said D2’s allegation that CC was/is at all material times Ps’ agent could not be supported by the Correspondence, which clearly conveyed to Ps the impression that the Shops were no longer subject to any tenancy as from 2 August 2014.  D2’s unilateral allegation that CC did “let out” the Shops to D1 for 2 years commencing on 3 August 2014 was unbelievable, and Ds had no legal basis to remain at the Shops.  Hung said D2 should pursue its rights against D1 for wrongfully inducing it to enter into the 2/8/14 Agt.

VI.  D1’s AFFIRMATION EVIDENCE

46. D1 claimed she was a lawful tenant and not an unlawful occupier of the Shops.  D1 exhibited a copy of the tenancy agreement dated 2 July 2014 between CC as landlord and D1 as tenant for the G01-G07 Shops for 2 years from 3 August 2014 to 2 August 2016 at a monthly rent of $50,000 with 2-month rental deposit of $100,000 (“2/7/14 CC/D1 Tenancy Agt”).  Clause 3 of the 2/7/14 CC/D1 Tenancy Agt provided “[D1] shall not assign, transfer, sub-let or part with possession of the Premises [ie including the Shops] or any part thereof to any other person.  This tenancy agreement shall be personal to the Tenant named herein [ie D1]”.

47. D1 claimed she was a lawful tenant because (a) the 2/7/14 CC/ D1 Tenancy Agt was signed and the keys to the Shops were collected via Mr Ho Wing Shing (“Mr Ho”) of 萬威地產 (“2^nd Agency”), and (b) she complied with the tenant’s obligation to pay half month’s rent as commission to the 2^nd Agency.  At that time, Mr Ho told D1 (i) CC was the predecessor-in-title in respect of the Shops, (ii) CC and Ps (as current owners) had a sale and purchase agreement with a rental return agreement, and (iii) CC’s Mr Wong was Ps’ agent.  Mr Ho assured D1 that CC would pay rent to Ps because CC’s Mr Wong had placed all rental return with a solicitors’ firm for such purpose, which representation matched the Rental Return Agts in the SPAs.  On signing the 2/7/14 CC/D1 Tenancy Agt, Mr Ho showed (but did not give) D1 the land search records to prove CC’s Mr Wong was the predecessor-in-title of the Shops.  In any event, Ps never provided proof that Hung was the only person who could collect rent and/or CC’s Mr Wong was not his agent, so it was Ps’ negligence that led to the present dispute.

48. D1 said at first she planned to carry on business at the Shops, but after she took possession she decided to let out the Shops.  It was fortunate that D2 decided to rent the Shops, so D1 did not suffer loss except for commission paid for the 2 tenancy agreements with CC and D2 respectively.  D1 said she paid rent to CC’s Mr Wong until 22 May 2015 and complied with the terms of the 2/7/14 CC/D1 Tenancy Agt and performed the tenant’s obligations thereunder.  In May/June 2015, D1 asked CC for early termination of the tenancy and for repayment of the rental deposit but CC ignored her, so after 22 May 2015 she ceased to pay rent to CC. 

49. D1 exhibited copies of the following documents issued to her:

(a) Mr Ho’s handwritten receipt dated 2 July 2014 for the preliminary rental deposit of $50,000 for renting the Shops and Shops Nos G05 and G06 of the Plaza and for the commission of $20,000;

(b) Mr Ho’s handwritten receipt dated 15 July 2014 for the 2-month rental deposit of $100,000 for renting the G01-G07 Shops (including the Shops);

(c) CC’s formal receipt dated 15 July 2014 for the rental deposit of $100,000 for renting the G01-07 Shops (including the Shops);

(d) various rental receipts issued by CC for the period from September 2014 to April 2015 for the monthly rent of $50,000 for the G01-G07 Shops;

(e) rental receipt dated 12 May 2015 issued by CC stating that “兹收到2015年4月23日至2015年5月22日有關G01-G04[Plaza]地鋪租金HK$20,000.0 另於2015年5月23日起有關租金出租方同意減為每月HK$17,000，直至租約完成”.

50. D1 claimed that since Ps did not agree for Ds to carry on business at the Shops, “應該在收回單位住時發現[Ds]的存在，而又留下了租客在內，這是好奇怪”.  Ps should immediately clarify with CC’s Mr Wong since the latter continued to pay rent to Ps until January 2015, and Ps’ failure to do so showed they were negligent.

51. D1 said since Ps received rent she paid to CC for the Shops from 2 August 2014 to January 2015 without any dispute, Ps had already acknowledged D1’s existence and the tenancy agreement between CC and D1.  Ps only complained when they failed to receive rent thereafter, but such dispute (which did not concern D1) was caused by CC’s failure continue to pay rent to Ps.

52. D1 said Hung liaised with her on 21 March 2015 through the 1^st Agency’s Ms Chan, and Hung also met D1 and her husband at the 1^st Agency’s premises.  Hung told them Ps were the owners of the Shops, and he further told D1’s husband “只要有租金收到，就不會介意誰在內經營”, which representation could be corroborated by D1’s husband and the 1^st Agency. D1 said such representation showed Ps had acknowledged the tenancy situation, ie other persons would occupy the Shops to carry on business thereat, so Ds’ possession of the Shops for carrying on business was lawful.  Further, D1 claimed Ps were negligent in meeting up with her only on 21 March 2015, which caused her to pay rent to CC’s Mr Wong up till 22 May 2015.  Still further, due to the 2/7/14 CC/D1 Tenancy Agt with CC’s Mr Wong, “[D1]不能夠在法庭未處理前將租金轉交[Ps]，所以在這方面[D1]也不需要[負]上疏忽責任”.

53. D1 said on the same day (ie 21 March 2015) she contacted CC’s Mr Wong and the 2^nd Agency’s Mr Ho, and was assured CC would pay rent to Ps soon so she could ignore Ps so long as she continued to pay rent on time and complied with the terms of the 2/7/14 CC/D1 Tenancy Agt.  So D1 continued with her contractual obligations to pay rent to CC’s Mr Wong, and there was no negligence on her part.

54. After D1 received the court documents in the present proceedings, she worked with D2 to put the sub-tenancy to a close by ceasing further decoration work to the Shops and arranging early delivery up of possession, so on 31 July 2015 D2 delivered possession of the Shops to D1, and she notified CC’s Mr Wong to repossess the Shops, but he avoided her.  D1 claimed she had done her best to reduce/resolve the dispute, and Ps should claim against CC and not against her.

VII.  SUMMARY DISPOSAL: LEGAL PRINCIPLES

55. Ms Law and Mr Ko had no dispute over the applicable principles for summary disposal under Order 28 of the RHC, which I have summarised in paragraphs 53-62 of my judgment in King Wong Development Limited v Yat Fat Limited & ors,[1] and which I do not propose to repeat here.  In a nutshell, the court has power under Order 28 rule 4(1) of the RHC to dispose of an originating summons summarily if it is satisfied that no triable issues of fact are raised.  But if there are genuine and/or substantial factual disputes that cannot be resolved on affidavit evidence, the court has the power to (a) give directions for evidence to be taken orally, including cross-examination of the deponent under Order 28 rule 4(3) of the RHC,[2] or (b) order that the proceedings continue as if the cause or matter had been begun by writ under Order 28 rule 8 of the RHC.[3] The onus was on the applicant to show it will be just and convenient to make the order.[4]

56. The plaintiff must first justify his entitlement to relief, but once this is prima facie demonstrated on the affidavit evidence, the burden falls on the defendant to show he has a defence to the claim.  So, there is little practical difference between an application for summary judgment in originating summonses and an application for summary judgment under Order 14 of the RHC.[5]

57. But where the defendant’s liability to the plaintiff is established (eg where the defence raised is unbelievable or the defendant’s evidence discloses no triable issue or bona fide defence) and there are no triable issues of fact, summary disposal is permissible under Order 28 rule 4(1) of the RHC.[6] What the court has to consider is whether the just, expeditious and economical disposal of the proceedings can best be secured by hearing the summons on oral evidence or mainly on oral evidence.[7]

58. As regards factual disputes, when faced with conflicting affirmations from the parties, the court would not take the assertions in the affidavits on their face value in isolation and jump to the conclusion that there is a triable issue without first taking the assertions in the affidavits in the context of so much of the background as was either undisputed or beyond reasonable dispute and considering whether they are believable.  “In an originating summons procedure, it is only when the court is satisfied after having undertaken that exercise that factual disputes could not be resolved on affidavit evidence that oral evidence or trial should be considered.”[8]

59. Mr Ko referred to Wong Chow Hoi Sze Elsie v Crowne Wine Cellars Limited & anor[9] in which an appeal against summary judgment granted by a master under Order 14 of the RHC was allowed and unconditional leave to defend was granted to the defendant.  I am persuaded this case is merely an illustration of the usual principles under Order 14 of the RHC (and does not detract from the principles discussed above in relation to Order 28 of the RHC).  After all, each case must turn on its own facts and circumstances.

VIII.  DISCUSSION

60. There was no dispute as to the basic facts on the affidavit/affirmation evidence, ie (a) Ps were the registered, legal and beneficial owners of the Shops, (b) the Shops were presently vacant and not physically occupied by any person/entity, (c) D2 had delivered possession of the Shops to D1 (but not to Ps) in August 2015, (d) D1 was in possession of the Shops (albeit vacant) and had not delivered possession thereof to either CC or Ps, (e) Ds had not paid rent, fees, mesne profits or occupation rent for the Shops to CC since 22 May 2015, and (f) CC had not paid any rental return or Total Monthly Sum (or part thereof) for the Shops since 6 January 2015.

(a)  Ps’ prima facie case

61. Even though Ps were not in actual possession or physical control of the Shops, they as owners had title superior to Ds and were prima facie entitled to possession against trespassers.  Ps effected entry and acquired lawful possession of the Shops by bringing the present proceedings against Ds (if they were trespassers) to claim for vacant possession of the Shops, and such entry by Ps would put an end to any precarious possession Ds might have had notwithstanding they or either of them remained in occupation after the entry.[10] D1 (if she was a trespasser) was liable to deliver up vacant possession of the Shops to P, and D2 (if it was a trespasser) was previously in unlawful use/occupation of the Shops.  Therefore, if Ds were trespassers, Ps plainly had locus standi to sue them for recovery of vacant possession of the Shops and for mesne profits for their use/occupation thereof until delivery up of vacant possession to Ps.  But were D1 and/or D2 trespassers?

62. It is true a landlord cannot bring trespass because by creation of a tenancy he parts with possession of land or the right to possess the land until the tenancy comes to an end.  The landlord’s interest is in the reversion, and as reversioner he had no immediate right to possess land.[11] Hence, Ds would have a valid defence to Ps’ claim if they could prove their status as lawful tenant or lawful sub-tenant of the Shops.

63. To start, there were again certain undisputed matters: (a) Ds did not know Ps and/or Hung at all, (b) Ds did not directly deal with CC, (c) prior to the commencement of the present proceedings Ds were not shown any document (save for land search records of the Shops that Mr Ho showed to D1) in relation to any alleged agency relationship between Ps and CC and/or any alleged principal tenancy relationship between CC/Ps and D1.

64. Ps denied they had ever authorised CC to enter into any tenancy with D1 and/or D1 to enter into the sub-tenancy with D2.  On such basis, Ps as owners of the Shops were prima facie entitled to the reliefs in terms of the OS/Notice.  The next question was whether Ds’ affidavit/affirmation evidence (when considered against the context/background that is undisputed or beyond reasonable dispute) was believable, and if it was, whether Ds or either of them had an arguable defence in law to the application. 

65. Since Ds did not dispute the basic factual background that supported Ps’ claim for trespass but raised the matter of lawful principal tenancy and lawful sub-tenancy as defence, it fell on them (and Mr Ko did not disagree) to put forward a credible/believable case on such matters to establish an arguable defence or triable issue.  I shall before focus on the following issues: (a) whether CC attempted to let out the Shops to D1, (b) if so, whether Ps authorised CC to enter into the principal tenancy with D1, (c) whether D1 sub-let the Shops to D2, and (d) if so, whether D1 was authorised to enter into the sub-tenancy with D2.

(b) Volume of materials

66. In my view, the volume of materials and the issues in question fell within a narrow compass.  The affidavits/affirmations were few in number, the background facts were largely not in dispute, and there was little disagreement on the relevant legal principles.  I am persuaded the volume of materials itself would not prevent summary disposal in the present proceedings.

(c)  Alleged principal tenancy with D1

67. Ds’ defence was that Ps as landlord through its agent CC had granted a tenancy in favour of D1 as tenant (ie the Undated CC/D1 Tenancy Agt according to D2 or the 2/7/14 CC/D1 Tenancy Agt according to D1), and during the currency of such principal tenancy Ps had no immediate right to possession in respect of the Shops and therefore could not maintain any claim for trespass against D1 as lawful principal tenant in lawful occupation of the Shops.  For the discussion below, I put aside for the moment the question of CC’s agency/authority in entering into the alleged principal tenancy with D1.

68. In my view, the very existence of the Undated CC/D1 Tenancy Agt (which D2 said was obtained from D1) and the 2/7/14 CC/D1 Tenancy Agt (which D1 exhibited to the Yau Aff), which were wholly different but covered inter alia the same tenanted premises (ie the Shops), the same tenancy period (from 3 August 2014 to 2 August 2016) and the same parties (CC as landlord and D1 as tenant), cast serious doubt as  Ds’ claim of a lawful principal tenancy granted by CC as Ps’ agent to D1, especially when such significant anomalies had not been explained at all.  No credible/ believable explanation was put forward by either D1 or D2, and D1 (who did not refer to the Undated CC/D1 Tenancy Agt at all in the Yau Aff) did not even say whether she signed the Undated CC/D1 Tenancy Agt.  In short, D1 did not corroborate Lam’s evidence in relation to the Undated CC/D1 Tenancy Agt nor did she explain the provenance of the same.

69. The 2/7/14 CC/D1 Tenancy Agt produced by D1 was stamped and admissible before this court.  The Undated CC/D1 Tenancy Agt produced by D2 was not stamped, and there was no offered undertaking to stamp out of time pursuant to the proviso in section 15(1) of the Stamp Duty Ordinance Cap 117, so such agreement was inadmissible by reason of such section.[12] But Lam gave affidavit evidence as to the existence of the Undated CC/D1 Tenancy Agt and its terms, including the tenancy period (from 3 August 2014 to 2 August 2016), the monthly rental payable ($26,000/month) and the conflict between clause 2 thereof that prohibited any sub-tenancy and the “remarks” that provided the Shops could be sub-let.[13] Mr Ko, citing Leung Hing Chow v Kuan Heng Choi,[14] suggested such affidavit evidence was admissible.  But the Court of Appeal in Chow Sau Hei v Ho Keung Yuen & ors[15] referred to the English Court of Appeal’s decision of McGuane v Welch which upheld the view that secondary evidence of unstamped documents is inadmissible.[16] It is unnecessary for me to decide in this Judgment which approach is correct for I shall assume Lam’s affidavit evidence on the terms of the Undated CC/D1 Tenancy Agt was admissible evidence for the purpose of Ps’ present application.  On such assumed basis, although I agree with Mr Ko there was affirmation evidence as to the alleged existence of Undated CC/D1 Tenancy Agt, I also agree with Ms Law the date of creation of such alleged agreement was unknown (since D1 made no reference to it in the Yau Aff, and Lam said he only received a copy from D1 on/about 4 June 2015).

70. There was no dispute that neither the Undated CC/D1 Tenancy Agt nor the 2/7/14 CC/D1 Tenancy Agt expressly stated CC made such principal tenancy agreement on behalf of Ps as landlord.  But as pointed out above, there were material differences between them, the most obvious of which were as follows:

(a) the former was undated, but the latter was dated 2 July 2014;

(b) the tenanted premises under the former were the Shops, but those under the latter were G01-G07 Shops (including the Shops);

(c) the monthly rent for the Shops under the former was $26,000, but the monthly rent for the G01-G07 Shops (including the Shops) was $50,000 (with no apportionment for the Shops);

(d) the former’s clause 2 prohibited any sub-tenancy whilst “remarks” therein stated the Shops could be sub-let, but the latter’s clause 3 prohibited any sub-letting;

(e) the former was unstamped, but the later was stamped. 

71. The Undated CC/D1 Tenancy Agt and 2/7/14 CC/D1 Tenancy Agt raised even more questions that were left unanswered by Ds, which further undermined Ds’ contentions. 

72. For the Undated CC/D1 Tenancy Agt, there was no explanation why the monthly rent of $26,000 payable thereunder was significantly less than the Total Monthly Sum of $52,500 payable pursuant to the Rental Return Agts under Clause 5 (at least up to 2 August 2014 if the CPA Agt was not renewed).  Even on Ds’ case, why would Ps authorise CC to enter into a tenancy agreement for the Shops for a monthly rent that was less than half of the Total Monthly Sum? In my view, the principal tenancy arrangement purportedly made by way of the Undated CC/D1 Tenancy Agt defied commercial sense/reality, especially when the 2/7/14 Agt and 2/8/14 Agt allegedly created a sub-tenancy for the same monthly rent.

73. For the 2/7/14 CC/D1 Tenancy Agt, although on its face it was dated 2 July 2014, it was stamped more than a year later on 26 October 2015 (ie 2 days before the Yau Aff).  But be that as it may, the 2/7/14 CC/D1 Tenancy Agt again raised unanswered questions.  First, the 2/7/14 CC/D1 Tenancy Agt covered the G01-G07 Shops, but there was no evidence Ps were the owners of Shops Nos G05 to G07 of the Plaza, so they could hardly have authorised CC to sign such agreement on behalf of owners of those shops.  Secondly, the monthly rent of $50,000 (without obligation to pay for government rent and rates) thereunder compared unfavourably with the monthly rent of $68,000 (with obligation to pay government rent and rates) under the CPA Agt.  Thirdly, as explained in paragraph 49(e) above, the portion of monthly rent attributable to the Shops for the period from 23 April to 22 May 2015 was $20,000 and as from 23 May 2015 it was further reduced to $17,000, which was different from the monthly rent of $26,000 payable in respect of the Shops under the Undated CC/D1 Tenancy Agt.  Fourthly, in the Yau Aff D1 time and again referred to CC’s Mr Wong as her point of contact for the principal tenancy in respect of the Shops between CC and herself, but she did not identify or give the full name and/or contact details of Mr Wong. 

74. In my view, neither D1 nor D2 gave any believable or credible explanation for the above matters, and the alleged principal tenancy between CC (allegedly as Ps’ agent) and D1 for the Shops was riddled with unexplained anomalies.  In my view, Ds’ case in this respect is incredible and unbelievable, and it defied commercial sense/reality.

(d)  Alleged sub-tenancy with D2

75. Ds’ defence in relation to D2 was this: D2 was the lawful sub-tenant of D1 as known to Ps via CC, so during such sub-tenancy (under the 2/7/14 Agt and 2/8/14 Agt as between D1 as landlord and D2 as tenant) Ps had no immediate right of possession in respect of the Shops and could not maintain any claim for trespass against D2 as sub-tenant in lawful occupation thereof. 

76. D2 claimed the 2/7/14 Agt was a provisional tenancy agreement whereby D1 agreed to grant to D2 a 2-year sub-tenancy for the Shops from 3 August 2014 to 2 August 2016 at a monthly rent of $26,000, and the 2/8/14 Agt was a formal tenancy agreement with similar terms save that D2 had to pay the rent into Mr Kwok’s bank account and was not allowed to sub-let the Shops.  Lam claimed the 1^st Agency told him D1 as principal tenant of the Shops “was allowed and willing to sub-let the [Shops]” or D1 and/or her husband were authorised by the landlord(s) of the shop units at the Plaza to let out or sub-let such shop units on their behalf, and as a result of such assurance he did not check the written authorisation which the 1^st Agency said the head landlord gave to D1 for sub-letting the Shops and/or the identity of the head landlord.

77. D1 claimed that in July/August 2014 she had the right to sub-let the Shops to D2, but this was belied by the affidavit/affirmation evidence.  D1’s only allusion to such alleged right was what Hung allegedly told her husband at the meeting on 21 March 2015 at the 1^st Agency’s premises, ie “只要有租金收到，就不會介意誰在內經營”.  But there was no evidence she was so authorised back in July/August 2014.  Indeed, D1 in the Yau Aff did not mention the written authorisation Ps allegedly gave her for sub-letting the Shops (which, according to Lam, was what the 1^st Agency told him), and the 2/7/14 CC/D1 Tenancy Agt expressly prohibited D1 from parting with possession or sub-letting the Shops.  At best, there was conflicting provisions in the Undated CC/D1 Tenancy Agt that provided for prohibition against sub-letting (clause 2 therein) and permission for sub-letting (“remarks” therein), but this would not avail Ds because neither D1 nor D2 relied on the Undated CC/D1 Tenancy Agt for entering into the 2/7/14 Agt and/or 2/8/14 Agt.  D1 did not refer to the Undated CC/D1 Tenancy Agt at all, and Lam said D2 only requested for and was supplied a copy thereof after the commencement of the present proceedings.  Since D1 relied on the 2/7/14 CC/D1 Tenancy Agt which prohibited sub-letting, D2 was an unlawful sub-tenant in wrongful occupation of the Shops vis-à-vis Ps (even if Ps authorised CC to grant the principal tenancy to D1).  For reasons explained in Part VIII(c) above, D2’s reliance on the Undated CC/D1 Tenancy Agt did not provide any credible/believable basis for its defence.

(e)  Summary on the alleged tenancies

78. In assessing the above matters to see whether there are triable issues, the court will consider the inherent probability of the defence without going into a mini-trial on affidavits.[17] But the court will not take the alleged defence on its face value, but will test it against the evidence disclosed in the affidavits including matters such as contemporaneous documents and/or whether the alleged defence is inconsistent with the defence put forward by the co-defendant.  It is for the defendant to put forward a triable issue or arguable defence, and “‘[a] desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to a sufficient reason for refusing to enter judgment for the plaintiff.  You do not get leave to defend by putting forward a case that is all surmise and Micawberism’ (per Megarry V.-C.  in Lady Anne Tennant v.  Associated Newspapers Group Ltd [1979] F.S.R.  298)”.[18] In my view, Ds were quite unable to put forward a credible or believable case of lawful principal tenancy and/or sub-tenancy in respect of the Shops, and I am not persuaded they have raised any arguable defence or triable issue in this respect.

(f)  CC’s role

79. Ms Law submitted the nemo dat rule, ie the legal rule that “no one gives what he does not have”, applied to the present case.  She argued that since Ps never authorised or appointed CC to act as their agent to handle tenancy matters in relation to the Shops, CC had no authority to enter into the Undated CC/D1 Tenancy Agt and/or 2/7/14 CC/D1 Tenancy Agt with D1, and D1 was not authorised to sub-let the Shops to D2, so Ds were trespassers and in wrongful occupation of the Shops vis-à-vis Ps.  On the other hand, Ds argued CC was Ps’ authorised agent, and the principal tenancy granted to D1 and the sub-tenancy granted to D2 were binding on Ps. 

80. For this discussion, I shall assume that CC entered into the principal tenancy agreement with D1, and D1 entered into the sub-tenancy agreement with D2.  And before I turn to the question of CC’s authority (if any), the anterior question to be asked is whether CC entered into the principal tenancy agreement as principal or as agent.  Although Lam claimed D1 did so as agent for Ps, a careful study of the Yau Aff raised doubt on this.  D1 said Mr Ho told her that in respect of the Rental Return Agts in the SPAs between Ps and CC, CC’s Mr Wong was Ps’ “委託人”, but the whole tenor of the Yau Aff was that she dealt with CC as principal.  Interestingly, D1 claimed “由於本人和[CC]王生有一份合約,本人不能夠在法庭未處理前將租金轉交[Ps],所以在這方面本人也不需要付上疏忽責任”.  D1’s written submissions also claimed that “…… [CC]和[Ps]有租務關係” and “[CC]和[Ps]是租客業主關係, [D1]亦向[CC]承租”, which plainly suggested that D1 regarded CC to have acted as principal in its tenancy dealings with her.  Further, if it was D1’s case that CC was no more than Ps’ agent in dealing with her on tenancy matters in respect of the Shops, there was no plausible reason why she could not pay rent and/or deal with the principal (being the true landlord) on tenancy matters when so demanded by the principal.  D1’s insistence on dealing with CC and not Ps on the basis she had a contract with CC plainly suggested that she regarded CC as principal and not Ps’ agent, in which case the nemo dat rule would apply.

81. But Mr Ko submitted D2’s defence rested on Ps having granted “actual authority” to CC to enter into the principal tenancy agreement with D1, so I shall turn to this aspect.

(g)  Actual authority

82. Where an agent is appointed by express agreement, the appointment must be by the principal or by someone else with authority (actual or apparent) to act for him.  An agent may be appointed in formal words (eg by a power of attorney or a specific letter), but a grant of authority may be informal.  In all situations, the substance of the matter is more important than the form.[19]

83. Where there is an express agreement, whether contractual or not, between principal and agent, this will constitute the relationship of principal and agent and the assent of both parties will be contained in it.[20] Where express authority is not clear, the court will interpret it.  It was suggested in Chitty on Contracts that “where the authority is conferred in ambiguous terms, acts done by an agent in good faith upon a reasonable interpretation of the instructions will usually be regarded as authorised”.[21] But with modern communications it may be possible to obtain clarification, and an agent may not act reasonably if he does not do so.[22]

84. Actual authority is inter alia the authority which the principal has given the agent wholly or in part by means of words or writing (ie express authority).  Although founded in the principal’s assent, the conferral of authority is adjudged objectively:

“An ‘actual’ authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties. To this agreement the contractor is a stranger: he may be totally ignorant of the existence of any authority on the part of the agent. Nevertheless, if the agent does enter into a contract pursuant to the ‘actual’ authority, it does create contractual rights and liabilities between the principal and the contractor.”[23]

85. The general rule is that a principal is bound by, and entitled to the benefit of, the contract of his agent made on his behalf within the scope of such agent’s actual authority.  This is so whether the agent at the time of acting named or identified his principal or merely indicated that he was acting for a principal but did not identify him.  It is also true where the agent at that time gave no indication that he was acting for a principal at all.  However, the unidentified or undisclosed principal may give rise to disputes as to the subjective intention of the agent which may affect the question for whom he was acting (if at all).[24] With these principles in mind, I turn to the present circumstances.

86. Mr Ko submitted Ps (as principals) and CC (as agent) entered into an agency agreement via the SPAs even though they were “a bit ambiguous” about the agency relationship, and a careful study of Clause 5 showed CC was not only a confirmor/vendor in the sale and purchase transaction but was also appointed as Ps’ agent “to grant tenancy on [Ps’] behalf”.  Mr Ko accepted the wording in Clause 5 did not spell out clearly CC was Ps’ agent and/or the limits of CC’s authority, but he argued this court should not limit its interpretation of CC’s agency/authority by viewing “the ambiguous terms alone” and should also objectively consider the parties’ conduct to see whether an irresistible inference could be drawn that CC was Ps’ agent. 

87. Since Mr Ko relied on Clause 5 as a starting point, I should begin from there to see if it was “a bit ambiguous” when viewed against the contextual background.  It must not be forgotten that the SPAs were prepared or approved by solicitors, which leads one to wonder about the suggested ambiguity. The undisputed background was that (a) by the PASP FV agreed to sell various properties including the Shops to CC, (b) by the SPAs CC agreed to sell the Shops to Ps, (c) by Clause 7 and Schedule 7 Ps’ purchase of the Shops was subject to and with the benefit of the CPA Agt, and (d) by the CPA Agt FV let out the G01-G07 Shops (including the Shops) to CPA for 2 years (3 August 2012 to 2 August 2014) for a monthly rent of $68,000 with option to renew for another 2 years (3 August 2014 to 2 August 2016).  These undisputed basic facts were the raison d’tere for the Rental Return Agts in Clause 5.  Since Ps only purchased the Shops and the CPA Agt covered more properties than the Shops, such tenancy agreement could not be transferred to Ps.  Instead, CC as the confirmor/vendor who agreed to sell the Shops to Ps under the SPAs had to give undertaking/assurance to pay Ps the rental return in respect of the Shops that were sold subject to and with the benefit of the CPA Agt, and provision had to be made for apportionment of the rental return that was attributable to the Shops. 

88. It was against such undisputed contextual background that one would interpret Clause 5.  On either plain or even purposive reading of Clause 5, several matters were quite obvious:

(a) CC undertook to pay P the rental return for the Shops in the Total Monthly Sum of $52,500 “直至租約完結為止(即2016 年8月2日或之前)”. Although this sentence in Clause 5 referred to “租約”, there can be no doubt it referred to the CPA Agt because (i) it referred to the date of 2 August 2016 as the latest possible date for the end of the tenancy which coincided with the expiry of the tenancy term upon exercising the option to renew under the CPA Agt, and (ii) on reading Clauses 5 and 6 that referred to “代表買方向現存之租客(即“Centaline Property Agency Limited (中原地產代理有限公司)”)” and “現存之租約”.

(b) Much play was made on the reference in Clause 5 to the date of 2 August 2016, but I see nothing untoward or sinister in such date.  When the SPAs were made in April 2013, it was still an open question whether CPA would exercise the option to renew the tenancy for another 2 years, so CPA’s tenancy potentially could end (i) upon expiry at 2 August 2014 without renewal, (ii) upon expiry at 2 August 2016 with renewal, or (iii) upon other grounds for early determination as provided for in the CPA Agt.  That was why Clause 5 referred to “即2016年8月2日或之前” (my emphasis), but the governing consideration was “直至租約完結”.  On this basis, CC was only bound to pay rental return in the Total Monthly Sum up to the end of the CPA Agt.

(c) CC undertook to deposit the rental return into the bank account of Wong & Co and to authorise Wong & Co to pay such rent and rental return to Ps by solicitors’ cheque, but upon completion of the sale and purchase of the Shops Ps had to give written authorisation for Wong & Co to collect monthly rent from the existing tenant CPA and to deposit the same into Wong & Co’s bank account.  In my view, CC’s undertaking was limited to collecting rent from existing tenant CPA, to deposit such rent into Wong & Co’s bank account, and to pay out the rental return to Ps.  I am unable to read from the terms of Clause 5 (which I find to be unambiguous) any wide-ranging authority given to CC to enter into any fresh tenancy of the Shops with any third party upon any terms whatsoever. 

89. In my view, it could not be reasonably contended that upon such provision CC had authority to deal with the Shops when the CPA Agt came to an end.  This was borne out by 2 provisions in the SPAs and the terms of the CPA Agt.  First, clause 2(z) of the CPA Agt provided CPA should yield up to the landlord (ie Ps as the new landlords) inter alia the Shops at the expiration or sooner determination of the tenancy.  Ps therefore expected they would recover possession of the Shops upon termination of such tenancy.  Secondly, Clause 7 provided that upon completion of the sale and purchase of the Shops CC would account and transfer to Ps all rental deposits or any balance thereof held by CC as landlord of the Shops with Ps’ acknowledgment to CPA of the amount of rental deposits and an undertaking to return to the same to CPA upon the expiration or sooner determination of the tenancy term.  Plainly, Ps as the new landlords retained unto themselves the performance of landlord’s obligations under the CPA Agt, and it could not be said that Ps had given a general authority to CC to deal with tenancy matters in respect of the Shops.  Thirdly, Clause 6 provided CC undertook that within 14 days upon determination of the CPA Agt “賣方必須將該單位之間格還原予買方並加裝來去水設施” (my emphasis).  This plainly showed CC knew the Shops would revert to Ps upon termination of the CPA Agt. 

90. In my view, the aforesaid analysis and indeed the plain terms of the SPAs and CPA Agt belied Mr Ko’s suggestions that (a) it could be strongly inferred that CC was acting as Ps’ agent “to grant tenancy of the [Shops] to others and collect the monthly rental on [Ps’] behalf”, which Mr Ko argued meant Clause 5 gave CC a continuous duty to act as Ps’ agent to let the Shops to tenants and collect the monthly rent for Ps, and (b) the only sensible explanation for CC as confirmor/vendor to undertake to pay the rental return to Ps was because Clause 5 was “an instruction with actual authority given to [CC] to make binding tenancy contract(s) with others and to sign tenancy contract(s) on [Ps] behalf with the tenant(s)”.

91. But Mr Ko submitted I would view the matter differently if I were to consider (a) the fact that CC honoured its undertaking under Clause 5 to collect rent from CPA and to pay the Total Monthly Sum to Ps from 7 June 2013 to 6 January 2015, and (b) the contents of the Correspondence in which Clause 5 played centre-stage.  Mr Ko argued that the only sensible justification for Ps’ demands in the Correspondence against CC for the Total Monthly Sum under the Rental Return Agts was because CC was Ps’ agent to grant tenancy and collect monthly rent for Ps, or to put it differently, CC’s undertaking to pay the Total Monthly Sum to Ps pursuant to the Rental Return Agts under Clause 5 was predicated upon CC acting on Ps’ behalf “to grant tenancy at a defined rate and collect the monthly rental from the tenant(s).  Otherwise, [CC] needed not to make any promise regarding the monthly rental return to [Ps] at all”. 

92. Mr Ko further submitted it was self-contradictory for the Hung 2^nd Aff to assert the Shops were not subject to any tenancy since 2 August 2014 (which could not explain why Ps still collected rental return from CC after 2 August 2014 or why they demanded for the Total Monthly Sum when CC refused/failed to pay the same after 6 January 2015) and for the Hung 1^st Aff to assert CC paid Ps a total monthly rental return of $52,500 from 7 June 2013 up to 6 January 2015.  Mr Ko argued Ps tailored misleading information to rationalise their claim, and the only sensible explanation was that CC was Ps’ agent “to lease out the [Shops] and collect rentals on [Ps’] behalf”.

93. I disagree.  In my view, the Correspondence did not demonstrate any express grant of actual authority to CC to handle tenancy matters of the Shops whether before or after 2 August 2014.  The starting point was Hung’s explanation in the Hung 1^st Aff that given the Rental Return Agts in Clause 5 and CC’s continued payment of the Total Monthly Sum from 7 June 2013 to 6 January 2015, Ps did not make enquiries as to status of CPA’s tenancy insofar as it affected the Shops.  It was obvious that by reason of the continued payment of the Total Monthly Sum after 2 August 2014 Ps assumed the CPA Agt was renewed, and hence they demanded for continued payment until 2 August 2016.  However, they were informed by Wong & Co that in fact CPA did not exercise the option to renew under the CPA Agt.  This explained why Hung at first said Ps demanded for Total Monthly Sum under Clause 5 and later said the Shops were not subject to any tenancy after 2 August 2014.

94. In fact, the whole crux of the dispute in the Correspondence turned on whether or not the CPA Agt was renewed and not on whether CC granted any tenancy in respect of the Shops to some other third party.  This sat well with the Rental Return Agts which again turned on whether CPA’s tenancy ended on 2 August 2016 (if renewed) or earlier (if not renewed).  The Correspondence by Wong & Co (and it must be remembered that they were solicitors for CC whom Ds claimed was the agent authorised by Ps) made plain CC’s stance that after the CPA Agt expired on 2 August 2014 Ps were no longer entitled to payment of any rental return under Clause 5, and CC went so far as to threaten a claim for restitution of the Total Monthly Return paid after 2 August 2014 as overpayment.  CC (with whom D1 had dealings via the 2^nd Agency’s Mr Ho) could not have viewed itself as Ps’ agent to grant tenancy in respect of the Shops for an agent could hardly attempt to claw back from the principal rental return arising from the letting of the principal’s properties.  Quite clearly, both Ps (as alleged principal) and CC (as alleged agent) both did not recognise the alleged agency relationship.

95. I agree with Ms Law that the question whether the CPA Agt was renewed or not was a red herring.  As far as Ps were concerned, if it were renewed, then CPA (and not D1 and/or D2) should still be in situ as tenant, but if it was not renewed, then vacant possession should be delivered to Ps.  I further agree with Ms Law that I need not (and I do not) speculate whether CC and/or others might have made misrepresentations to mislead D1 into entering into the principal tenancy in respect of the Shops or whether it was CC’s motive to cover up such dealings with D1 by continuing with payment of the Total Monthly Sum to Ps after 2 August 2014.  There was no suggestion that Ps knew about D1/D2 and their alleged tenancies or knew what CC claimed to be “overpayment” to Ps was rental from D1/D2.

96. In my view, there was no arguable or triable basis to demonstrate Ps granted actual authority to CC to let out the Shops to third parties (including D1) other than CPA under the CPA Agt or to generally handle tenancy matters in respect of the Shops other than to collect and pay to Ps the rental return in respect of the CPA Agt under the Rental Return Agts as explained above.  I find it was clear that (a) CC never had actual authority to let out the Shops on Ps’ behalf, and (b) it did not attempt to do so as Ps’ agent.

(h)  Apparent authority

97. Mr Ko did not rely on the contention that CC had apparent authority to let out the Shops to D1 and for D1 to sub-let to D2.  But in deference to the submissions made by Ms Law on the topic which she did in fairness to D2 who was without legal representation, I shall deal with the matter briefly.

98. Where a person, by words or conduct, represents or permits to be represented that another person has authority to act on his behalf, he is bound by the acts of that other person with respect to anyone dealing with him as an agent on the faith of such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no such actual authority.[25] Thus, the notion of apparent authority is essentially confined to the relationship between the principal and third party, ie the principal under it may be bound by unauthorised acts of the agent. 

99. In Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (No 2),[26] the Court of Final Appeal referred to the oft-cited passage in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd[27] that identified the 4 conditions which have to be satisfied before a third party can enforce a contract against a company entered into by a purported agent with no actual authority.  Those conditions are:[28]

“(1) that a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced was made to the contractor;

(2) that such representation was made by a person or persons who had “actual” authority to manage the business of the company either generally or in respect of those matters to which the contract relates;

(3) that he (the contractor) was induced by such representation to enter into the contract, that is, that he in fact relied upon it; and

(4) that under its memorandum or articles of association the company was not deprived of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to enter into a contract of that kind to the agent.”

100. It is clear there must be a representation between the principal and third party as to the authority of the agent.  “This seems to occur in three main ways.  It may be express (whether orally or in writing); or implied from a course of dealing [at least where it can be inferred that the principal must have become aware of the earlier transactions]; or it may be made by ‘permitting the agent to act in some way in the conduct of the principal’s business with other persons’.  ”[29]

101. Further, the evidence used to justify an assertion of authority in an agent must be adequate, which carries the further implication that reliance on that evidence must have been reasonable: “[T]he starting point is that the principal must be shown to have made a representation, which the third party could and did reasonably rely on, that the agent had the necessary authority”.[30]

102. As regards whether an agent could clothe himself with apparent authority, Lord Neuberger of Abbotsbury NPJ had the following to say in Thanakharn Kasikorn Thai Chamkat (Mahachon),

“64. At any rate at first sight, it would appear to require exceptional facts before such an argument could have any chance of success. After all, apparent authority is based on a representation (normally implied) as between the alleged principal and the third party as to the authority of the alleged agent, and if the third party could rely on some statement by the alleged agent, made without the authority of the principal, it would seem precious close to pulling up oneself by one’s own bootstraps.

65. Support for the notion that an agent who has no apparent authority cannot clothe himself with such authority by his own unauthorised words may be found in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd, p.504, ……

……

67. We have been referred to three English cases on this topic. The first is Armagas Ltd v Mundogas SA (The Ocean Frost) [1986] AC 717, in the Court of Appeal and House of Lords. The second and third are decisions of the Court of Appeal, Egyptian International Foreign Trade Co v Soplex Wholesale Supplies Ltd (The Raffaella) [1985] 2 Lloyd’s Rep 36 (decided after the Court of Appeal’s decision, but before that of the House of Lords in The Ocean Frost) and First Energy (UK) Ltd v Hungarian International Bank Ltd [1993] 2 Lloyd’s Rep 194.

68. The effect of those decisions appears to be that, at least in the Courts of England and Wales, it is very unlikely that a third party could establish apparent authority on the part of an alleged agent by relying on the agent’s own unauthorised statement to clothe the agent with authority. The judgment of Goff LJ and the speech of Lord Keith of Kinkel in The Ocean Frost, pp.730H-732F and 777C-778D indicate great scepticism as to the notion that an agent could clothe himself with authority in this way. Having said at p.777D that there might be “very rare and unusual” circumstances in which this might happen, Lord Keith continued at 779D-G:

Robert Goff LJ said of the trial judge’s view in this case, ante, pp 730H-731C:

the effect of the judge’s conclusion was that, although [the alleged agent] did not have ostensible authority to enter into the contract, he did have ostensible authority to tell [the third party] that he had obtained actual authority to do so. This is, on its face, a most surprising conclusion. It results in an extraordinary distinction between (1) a case where an agent, having no ostensible authority to enter into the relevant contract, wrongly asserts that he is invested with actual authority to do so, in which event the principal is not bound; and (2) a case where an agent, having no ostensible authority, wrongly asserts after negotiations that he has gone back to his principal and obtained actual authority, in which event the principal is bound. As a matter of common sense, this is most unlikely to be the law.

I respectfully agree. It must be a most unusual and peculiar case where an agent who is known to have no general authority to enter into transactions of a certain type can by reason of circumstances created by the principal reasonably be believed to have specific authority to enter into a particular transaction of that type.

……

70. …… In my view, the law is as stated by Lord Keith in the passages I have quoted from his speech in The Ocean Frost, but it is right to add that I find it very hard indeed to conceive of any circumstances in which an alleged agent, who does not have actual or apparent authority to bind the principal, can nevertheless acquire apparent authority to do so, simply by representing to the third party that he has such authority.

71. It is worth adding that, as was explained in the two cases just referred to, before any representation by the agent could be relied on to assist the contention that he had apparent authority, the court would have to be satisfied that the principal had given the alleged agent apparent authority to make the representation in question. Furthermore, any such representation would have to be “clear and unequivocal”, …… and what is clear and unequivocal must be judged by reference to the practical realities of the particular case …… Otherwise, apparent authority could not be established on the back of the statement as a matter of principle.”

103. Here, D1 did not know Ps personally and had not met Hung before.  D1 was only told by the 2^nd Agency’s Mr Ho (and not even by CC’s Mr Wong) that CC was the predecessor-in-title in respect of the Shops (which was in fact inaccurate as CC was never the assignee or registered owner of the Shops).  D1 claimed she was shown the land search records of the Shops, but contrary to what D1 said such records would have demonstrated CC was not the previous owner of the Shops.  More importantly, such land search records would not contain any representation that CC was Ps’ agent. 

104. Likewise, D2 did not know Ps personally and had not met Hung before.  In June 2014, D2 was told by the 1^st Agency’s Ms Chan (and not by Ps or CC) that D1 was not the actual landowner but the principal tenant of the Shops, and that D1 and her husband Mr Kwok were allegedly authorised by the actual landowner to let out or sub-letthe Shops pursuant to a “written authorisation” which D2 did not ask for and had not seen.  D2 conceded it did not even know, check or enquire as to the identity of the owner of the Shops.

105. But there was no evidence from either D1 or D2 as to any holding out by Ps that CC was their agent to enter into tenancy agreement with D1 to make her the principal tenant in respect of the Shops.  If there were any representations, they were made by the estate agents Ms Chan and Mr Ho and not even by CC directly.  There was insufficient evidence that CC claimed bootstrap authority, but even if it did (in the sense that Ms Chan and Mr Ho made the above representations for CC), it could not be said that the representation was “clear and unequivocal” or the situation fell into the “very rare and unusual circumstances” in which this might happen.  Further, none of the Undated CC/D1 Tenancy Agt, 2/7/14 CC/D1 Tenancy Agt, 2/7/14 Agt, 2/8/14 Agt and/or the rental receipts produced by D1 gave any indication that CC was Ps’ agent.  In my view, there was no arguable or triable basis for contending Ps granted apparent authority to CC to deal with tenancy matters in respect of the Shops.

(i)  Scope of authority

106. In light of the aforesaid, it is unnecessary for me to deal with the question of the scope of CC’s authority.  But in deference to Mr Ko’s arguments, I shall deal with this briefly. 

107. Mr Ko suggested a principal was bound by disposition of property made by his agent within the scope of such agent’s actual or apparent authority or which are ratified.[31] He drew on a number of cases concerning dispositions of landed property by agents that illustrated the Brocklesby principle[32] as applied by Farwell J in Rimmer v Webster.[33] The principle is that:

“The authority which the owner has given can only be limited by the indicia of property which he has given; the particular authority proved or admitted is necessary in order to make the case one to which the principles of agency apply at all; but when the owner is found to have given the vendor or borrower the means of representing himself as the beneficial owner, the case forms one of actual authority apparently equivalent to absolute ownership, and involving the right to deal with the property as owner, and any limitations on this generality must be proved to have been brought to the knowledge of the purchaser or mortgagee.”

Shortly stated, where an owner of property gives all the indicia of title to another person with the intention that he should deal with the property, the principles of agency apply, and any limit which he has imposed on his agent’s dealing cannot be enforced against an innocent purchaser or mortgagee from the agent, who has no notice of the limit.[34]

108. Mr Ko argued that (a) by Clause 5 CC acquired actual authority to grant tenancy of the Shops on Ps’ behalf, (b) neither the SPAs nor the affidavit/affirmation evidence showed CC’s authority was limited, so it had full authority to deal with the Shops including to hold itself out as landlord, to let out the Shops to others and to allow the tenant to sub-let to others, (c) Ps never brought the attention of D1/others to any need for CC to seek Ps’ prior consent or to give Ps prior notice before granting any tenancy to D1 and/or before D1 could sub-let to D2, (d) so irrespective whether CC was in breach of its duties as  agent vis-à-vis Ps, by operation of the Brocklesby principle Ps were bound by CC’s dealings with D1 and others. 

109. In my view, there is no merit to such argument.  First and foremost, I am at a loss to understand the relevance of the Brocklesby principle to the present situation which did not concern any disposition of property, especially when Mr Ko rightly conceded there was no evidence that Ps as owner of the Shops clothed CC with any “indicia of title”.  CC’s possession of the Shops and/or keys thereto (presumably after 2 August 2014 when CPA decided not to renew the tenancy) were not indicia of title.  After all, a trespasser may also have possession and keys of the property in question.  Secondly, I have rejected any arguable or triable basis for the contention in (a) above.  Thirdly, as Ms Law submitted, Ps had no duty to tell the world that CC had limited authority when it was clear that under Clause 5 its duty was confined to collecting rent from the existing tenant CPA and paying the rental return to Ps until the existing tenancy by CPA came to an end, and especially when CC was not even a registered owner of the Shops.  

(j)  Meeting on 21 March 2015

110. D1 claimed that at the meeting on 21 March 2015 at the 1^st Agency’s premises, Hung told D1 and her husband that Ps were the owners of the Shops, and he further told D1’s husband “只要有租金收到，就不會介意誰在內經營”. D1 suggested that Hung’s representation meant Ps had acknowledged the tenancy situation at the Shops, ie persons other than CPA would become tenants to occupy the Shops to carry on business thereat.  In my view, such alleged representation could not be elevated to authority given to CC to enter into tenancies with a third party in respect of the Shops.  Whilst it might be the case that Ps were more concerned that the Shops should generate rental income rather than with the particular identity of the tenant willing to pay rent, it did not mean Ps would tolerate or allow persons/entities when they did not authorise to occupy the Shops.  Indeed, Lam claimed that in April/May 2015 Hung asked D2 to sign a new tenancy agreement with Ps for the Shops and to pay rent directly to Ps.  On the other hand, Hung said it was D2 who approached him for a direct tenancy agreement between Ps and D2 to which he had no objection, but in the end D2 declined to sign a new tenancy agreement with Ps.  On either version, it was clear that even though Ps did not mind having D2 as direct tenant they expected its status as tenant to be properly regularised by way of a tenancy agreement.  Likewise, the 26/3/15 D1 Letter suggested Ps were open to alternative arrangements for possession/letting of the Shops be returned to Ps, but this did not detract from Ps’ primary stance in such demand letter that D1 should cease the letting of the Shops to D2 and to deliver possession of the Shops to P.  There is no merit to this argument.

(k)  Summary

111. In my view, Ds’ purported defence based on agency is neither believable nor credible, and the factual basis in the affidavit/affirmation evidence adduced by Ds was insufficient to raise any arguable defence of agency as a matter of law.  Taking Ds’ case to the highest, even if D1 and/or D2 had been misled to entering into the principal tenancy and sub-tenancy and paid rent under such tenancies, their misfortune was not Ps’ fault for Ps had not clothed CC with actual or apparent authority.  Ps were not bound by their tenancy and/or sub-tenancy, and D1 and D2 had no arguable defence against Ps’ claim.  There is no triable issue of fact or law.  Whether D2’s proper recourse lied against D1 and/or whether D1’s proper recourse lied against CC is not a matter I need be concerned with for the present purpose. 

IX.  CONCLUSION

112. I therefore grant the following order:

(a) there be judgment on liability against D1 and D2 for damages being mesne profits to be assessed;

(b) D1 shall deliver vacant possession of G01-G02 to P1 within 7 days from the date of this order;

(c) D2 shall deliver vacant possession of G03-G04 to P2 within 7 days from the date of this order;

(d) the assessment of damages shall be heard and tried before a master in open court.

Although I have refrained from making an order for possession against D2, this was because D2 had delivered possession of the Shops to D1 after commencement of the present proceedings.  I hasten to make clear that when the OS was issued, it was proper for Ps to seek such relief against D2 as well since D2 was then in actual occupation of the Shops.

113. Although Ms Law asked this court to give consequential case management directions for obtaining/adducing expert surveyor evidence on “market rental of the suit properties”, I find the parties should give more thought on this case management matter.  First, the directions as proposed by Ms Law envisaged separate experts for all parties.  I believe there is much room to consider single joint expert given the nature of the expert evidence to be sought, which would save time and costs.  Secondly, since D1 was unrepresented, it was unclear whether she would retain any surveyor expert.  This should be explored and catered for before the directions were made.  Thirdly, the proposed directions gave no guidance as to the scope of the expert evidence.  Although I assume it would be open market rental on vacant possession basis, it was unclear what would be the proper date(s) or time period for which opinion evidence on such market rental would be required.  One also had to consider the impact of Ps’ receipt of the Total Monthly Sum up to 6 January 2015. 

114. I therefore order and direct that Ps shall within 21 days from today apply on inter partes basis to the master for consequential directions on the further conduct of the assessment of damages with half hour reserved.  All parties shall be ready to address the master hearing such application on the matters referred to above.

115. There is no reason why costs should not follow event.  I grant a costs order nisi that D1 and D2 shall pay Ps’ costs of OS on the question of liability and on the claims for vacant possession of the Shops (including all costs reserved if any) to be taxed if not agreed.

116. My clerk will inform D1 that if she so requires, a court translator will be arranged to verbally translate this Judgment into the punti language for her at the High Court Building at a mutually convenient date and time.