CHINA KING PROPERTIES LTD v. THE OCCUPIERS OF THE SAID LAND AND ANOTHER

HCMP1020/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1020 OF 2002

D E C I S I O N

Introduction

1.  This is an appeal against an order by Master Lung made on 3 June 2005 which required the 2nd defendant, which is the appellant herein, to pay into court interim payments of firstly $960,000 within 28 days therefrom and secondly $20,000 per month on the 1st day of each and every calendar month commencing 1 July 2005.  The master’s order further provided that in default of payment, judgment would be entered on the plaintiff’s claim and the defence and counterclaim be struck out.  No payment was made, and judgment was entered on 20 July 2005.

Background

2.  The plaintiff issued an originating summons under Order 113 on 18 March 2002 for possession of certain lots in Tai Po, the New Territories.  The defendant as named was the occupier of those lots.  The originating summons was supported by an affirmation of one Mr Chan Tang-mo filed on 18 March 2002.  The 2nd defendant appeared in the proceedings by a notice to act filed by its solicitors on 26 March 2002. 

3.  The 2nd defendant’s case is that it had been granted a tenancy over the plaintiff’s lots.  The 2nd defendant filed an affirmation made by one Mr Lin Tak-fat on 6 May 2002 to oppose the plaintiff’s claim.  Mr Lin said that the tenancy was granted to the 2nd defendant by a representative of the plaintiff, Mr Ng King-chi. 

4.  The proceedings were continued on 16 July 2003 as if the cause had been begun by writ.  Pleadings were then filed by the parties.  The 2nd defendant also brought a counterclaim against the plaintiff and the said Mr Ng.

5.  On 24 January 2005, the plaintiff issued a summons for interim payment under Order 29, Rules 10, 12 and 13, and Order 27 for judgment on admission.

6.  On 3 June 2005, Master Lung made the order aforesaid.  The said sum of $960,000 was on account of rental at $20,000 per month from 1 July 2001 to 30 June 2005, and the further payment of $20,000 per month was on account of the monthly rental from 1 July 2005 onwards.

7.  The 2nd defendant accepts that even if it should succeed in defending the action, it would still be liable to pay such sums as its case is that there is a tenancy and it is obliged to pay rental under it.

The Appeal

8.  The 2nd defendant’s argument on appeal is that it has a set-off by its counterclaim for loss and damage caused by the unlawful harassment and illegal actions by the plaintiff which adversely affected the 2nd defendant’s operation on the lots.  The 2nd defendant operated a fish farm on the lots.  The first time the 2nd defendant referred to the harassment was in paragraph 8 of Mr Lin’s first affirmation made on 6 May 2002 which was used to oppose the plaintiff’s main application on 16 July 2003.  He said:

“

8.

On one day in November 2000, Mr Ng came to the land with several persons.  They wrongfully accused us of trespassing the adjoining land that had not been let to us.  They demanded for compensation at HK$200,000.00.  The matter was reported to the police.  As far as I know, the police arrested two persons that had present at the scene, excluding Mr Ng.  There is now produced as exhibit marked LTF-4, which is a copy of Mr Lo’s witness statement to the police on 6 November 2000.”

9.  Mr Lo Kwok-hung was the person referred to in the affirmation.  He was an employee of the 2nd defendant.  He reported the incident to the police and his statement to the police was produced as exhibit “LTF-4”.  He said in the statement that two groups of people went to the lots after 5 pm on 6 November 2000.  One group comprised of three persons.  They accused Lo of having done something to the adjacent lot and demanded compensation at $200,000.  He was told to call up a member of this group at 8 pm on the same day to reply to the demand.  He was also given a slip with the name and telephone number of this person on it.  The other group comprised of four to five persons which included Mr Ng.  They accused him of having damaged the adjacent land and demanded a proposal from him on how to deal with the damage.  He was also given a telephone number of one of them for the purpose of contact.  At the end, Mr Ng also reminded him to pay rent on time.  The groups then left the lots.

10.  Mr Lo immediately reported the matter to the police and that led to the arrest of two persons who had made the demands, but excluding Mr Ng.  But Mr Lo had not said a word in his statement to the police about any damage that these people had done to the fish farm business or anything on the lots. 

11.  After the plaintiff had issued the summons for interim payment, Mr Lin made a second affirmation to oppose the application.  He said:

“	15.	There is now shown to me and marked Exhibit “LTF-11” a copy of two photographs of plastic tanks made in the USA and the same were converted into the special method of cultivation mentioned above.  Altogether there were 36 plastic tanks with the diameter of 16 feet and 4 feet height.  Each tank could cultivate 2,000 catty and thus 720,000 catty [2,000 x 36 (tank)] could be cultivated.
	16.	It was the business plan of the 2nd Defendant to have the product of 2,000 catty of Fish per day.  The gross cost of the Fish per catty was HK$12 and the wholesale price was HK$18.  The gross profit was estimated HK$360,000 per month [HK$6 x 2,000 (catty) x 30 (days)].  The main customers would be Chinese restaurants like Maxim’s, Café de Coral and the Mario Group.  Mr Lo and his family have the wholesale connection in Aberdeen and thus the selling would not be a problem at all.
	18.	I crave leave to refer to the 1st Affirmation of Mr Lo and paragraphs 8 to 9 of my 1st Affirmation with exhibit “LTF-4” which provides that the 2nd Defendant was harassed, and damages has (sic) been caused.  It was found that the Fish died and the supplies of water and electricity were disconnected.  It is my verily belief that it was caused by the wrong doings of the gang engaged by the Plaintiff.  In such circumstance, the cultivation of the Fish could not be continued and the Land was idle from early 2001 to mid-2003.  The 2nd Defendant suffered a loss arising hereof.  There is now shown to me and marked exhibit “LTF-14” a record of expenditure.
	19.	As a result, the 2nd Defendant and I suffered damages and losses.  The 2nd Defendant raised banking facilities of HK$300,000 from the Bank of East Asia.  …  In order to tackle the losses and damages caused by the Plaintiff.  A restaurant operated by my Company was transferred in 2003 and there is now shown to me and marked exhibit “LTF-16” a copy of agreement.
	20.	In order to avoid further losses arising from the harassment caused by the Plaintiff, the 2nd Defendant has no alternative but to cease it (sic) operation of cultivation of the Fish.  The 2nd Defendant converted the Land to the farm for the visits of the students and Hong Kong citizens after the success of the 2nd Defendant in the Summons for Possession on 16th July 2003 as stated in paragraph 2 of this my 2nd Affirmation.  There is now shown to me and marked exhibit “LTF-17” a clipping of local magazine the operation of the farm by the 2nd Defendant dated 23 April 2003.
	21.	Currently, the operation of farm by the 2nd Defendant was by way of family business and it is operated by my wife, my son and me.  Despite the litigation, the harassments continue and in December 2004, several containers were intentioned (sic) to be placed at the entrance of the Land for blocking the entrance.  The gang admitted that they represented the Plaintiff.  Assistance of the police was resorted the containers were removed after the warning against the gang by the Police.  In view of the continued nuisances, the 2nd Defendant could not made (sic) reasonable investment in its operation of the Farm and thus the return was and is below reasonable standard.  The rough calculation of the gross profit of the 2nd Defendant in the Land by way of operation of the farm is about HK$40,000 to HK$50,000 per month only.  Comparing with the estimated gross profit (HK$360,000 per month) as mentioned in paragraph 10 of this 2nd Affirmation, it is obvious that the 2nd Defendant suffered loss of about HK$300,000 per month.  Needless to mention that the 2nd Defendant in the infrastructure and equipments for its original plan of cultivation of the Fish.”

12.  Mr Lin made a third affirmation on 1 June 2005 which was two days before the hearing before the master.  He said:

“	5.	As mentioned in my 2nd Affirmation, the 2nd Defendant had been harassed by the Plaintiff and Ng King Chi since late 2000.  In paragraph 18 of my 2nd Affirmation, I mention that cultivation of the Fish could not be continued and the Land was idle from early 2001 to mid-2003.  I would like to clarify that after repeated harassments as aforesaid, Mr Lo Kwok Hung left the 2nd Defendant.  I myself was not an expert in cultivation of the fish (Crystal Seadream), I could not find any other expert to take up the job of Mr Lo soon after he left.  In late 2000 and early 2001, the site improvement works of the 2nd defendant had almost completed.  At the time when there were harassments as aforesaid, the 2nd Defendant faced a dilemma - on the one hand, the involvement of the site improvement works of the 2nd defendant would be a total loss if the land was surrendered; one (sic) the other hand, the 2nd Defendant was requested by the Plaintiff through Mr Ng King Chi to pay an extra amount of HK$10,000.  The 2nd Defendant decided to pay HK$10,000 for the rental to show goodwill and I tried to contact Mr H L Siu (“Mr Siu”) of the Plaintiff to solve the problem.  …  Mr Siu’s attitude was friendly, he helped the 2nd Defendant resolve all the misunderstandings with the Plaintiff, he could be contacted by telephone whenever I called him by the office telephone number.
	6.	However, on or about June 2001, Mr Siu and Mr Ng King Chi went to the site together, Mr Ng scolded Mr Siu in my presence and said that Mr Siu could no longer handle the matters between the Plaintiff and the 2nd Defendant.  Since then, I could not contact Mr Siu anymore and when I left message to the office telephone number of the Plaintiff, it was Mr Ng who returned telephone calls to me and his manner was very unfriendly, he further threatened that legal proceedings would be instituted against the 2nd Defendant.  As the 2nd Defendant had invested a lot of money in the site improvement works, the 2nd Defendant would suffer damage in substantial amount as a result of the unreasonable acts on the part of the Plaintiff.  In that regard, the 2nd Defendant has no alternative but to cease the rental payment of HK$30,000 and determined to resolve all the disputes with the Plaintiff in court.
	7.	I also tried to find an alternative place for the operation of cultivation of the fish (Crystal Seadream).  I could not find an alternative place as the fish lives in such a special area as mentioned in my 2nd Affirmation.  In order to minimise the loss suffered by the 2nd Defendant, I had no alternative but to operate the cultivation of the fish at the minimum level of operation.  Though the 2nd Defendant could not fully utilise the site improvement works, the minimal level of operation prevented them from becoming a total loss.  At the material times, the 2nd Defendant was confident that they would win the litigation.  They anticipated that the litigation would be heard by the court in a year, hoped that the business of cultivation of fish could be revived again after the litigation was resolved.
	9.	Thus, the 2nd Defendant suffered substantial losses and damages arising from the wrongdoings of the Plaintiff.  I verily believe that the 2nd Defendant has a good case against the Plaintiff, the Plaintiff’s present application should be dismissed and these instant matters should be resolved by a speedy trial.”

13.  Assuming that the alleged conduct of the plaintiff was closely connected with the tenancy alleged by the 2nd defendant and it was equitable to allow the damages caused by such conduct to set-off the rental, I would still have to consider the nature, extent and veracity of the alleged loss and damage.  Save the bare statement by Mr Lin in paragraph 18 of his second affirmation, there is no evidence that anyone had done anything to the fish farm that had caused any loss or damage.  Mr Lo’s statement to the police further showed that those people who had come to the lots on 6 November 2000 had merely made demands on him and left.  The police statement showed that nobody had done anything as these people only went there to make demands and then gave Lo time to respond to the demands.

14.  Lin has made a vague allegation that the harassment had continued, but there were only particulars of two incidents, one in November 2000 as referred to in Lo’s police statement, and the other one in December 2004 as referred to in the second affirmation of Lin.  There was no further particulars or police statement on any other incident. 

15.  Lin further alleged that the harassment had resulted in the resignation of Mr Lo, the fish-farming expert, whose expertise the 2nd defendant could not replace, and thus caused further loss to the 2nd defendant.  But this only appeared in his third affirmation.  The allegation of loss and damage in the counterclaim thus appear very flimsy at this stage.

16.  It is thus wrong to simply allow the 2nd defendant defend this action without requiring it to provide security for either the rental or the damages for wrongful occupation that may be awarded against it.  I thus uphold the Master’s order which required payments to be made into court rather than to the plaintiff outright.

17.  Counsel for the defendant also suggested that the plaintiff is impecunious and cannot satisfy the master’s order, but there is not even an assertion of impecuniosity in the affirmations, not to mention the absence of any accounting documents of the 2nd defendant.  I therefore have no material to consider whether the master’s order should or should not be varied.  I thus dismiss the appeal with costs.