DYNAMIC WISE TRADING LTD v. CHUNG CHI KWONG

DCCJ167/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 167 OF 2004

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D E C I S I O N

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1.  This is an application for leave to appeal against the judgment granted by me in favour of the Plaintiff on 2 June 2010. It took nearly a year for the actual hearing for leave to appeal to come before the Court and I am given to understand that the delay was caused by the legal aid application on the part of the Defendant.

2.  The facts of the present case have been fully set out in my judgment dated 2 June 2010 (“the Judgment”) and I do not want to repeat the same here.  In short, the Plaintiff was a tenant of a business premises in Causeway Bay (“the Premises”).  He sublet the Premises to a sub-tenant (“the Sub-Tenant”).  The Sub-Tenant defaulted in the payment of rent and the Plaintiff brought an application in the Lands Tribunal against the Sub-Tenant for the possession of the Premises and payment of the arrears of rent and mesne profit.  The Lands Tribunal granted judgment in favour of the Plaintiff on 8 July 2003. 

3.  The Defendant was the guarantor of the Sub-Tenant for the payment of rent under the said sub-tenancy agreement (“the Sub-Tenancy Agreement”).  In 2004, the Plaintiff commenced the present action against the Defendant to claim for, inter alia, outstanding balance of arrears of the rent and mesne profit under the order of the Lands Tribunal and loss of the rental income for the unexpired portion of the Sub-Tenancy Agreement. 

4.  Mr Yip appears on behalf of the Defendant in this application, and he was also the counsel for the Defendant at the trial.  At the commencement of the trial, Mr Yip agreed the quantum of the Plaintiff’s claim in the sum of $175,869.50.  He also confirmed that the Court was only required to deal with the two issues listed out in the Judgment.  Because of the limited issues involved in the dispute, both parties just relied on the evidence contained in the affirmations filed in the earlier Order 14 application without calling the witnesses to give oral testimony at the trial.  

5.  I ruled in favour of the Defendant on the first issue listed out in the Judgment and so there is no appeal in respect of the same. 

6.  The second issue relates to the principle of res judicata.  In short, the Defendant complained that the Plaintiff had not included a claim for common law damages arising from the repudiation of the Sub-Tenancy Agreement in the Lands Tribunal proceedings and, as a result, the Plaintiff was barred to make a subsequent claim for common law damages against the Sub-Tenant.  As the right against the Sub-Tenant had extinguished, the Plaintiff was not entitled to make a claim for indemnity against the guarantor.

7.  In the Judgment, I have already held that the Lands Tribunal had no jurisdiction to entertain a claim for common law damages arising from repudiation of a tenancy agreement back in 2003, and that was why section 8 of the Lands Tribunal Ordinance, Cap.17 (“the LTO”), was amended in 2008 to confer jurisdiction on the Lands Tribunal to entertain such kind of claim.  If the Lands Tribunal had jurisdiction back in 2003 to entertain such claim, why did the LTO need to be amended in 2008?  Mr Yip cannot provide me with a satisfactory answer.  Hence, it was right for the Plaintiff not to include such claim in the Lands Tribunal proceedings in 2003 and there was no abuse of process for the Plaintiff to bring a subsequent claim against the Defendant. 

8.  Mr Yip also relied on section 127A of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 (“LTCO”), and argued that the said provision conferred jurisdiction on the Lands Tribunal to hear a claim for common law remedy even prior to 2008 for Part V premises, which mainly include commercial premises as the subject property in the present case.  However, the section clearly specifies that the Lands Tribunal can only determine any dispute which arises under Part V of the LTCO.  Part V mainly deals with notice to quit and determination of a tenancy for Part V premises and it contains no provision relating to a claim for common law damages.  In my judgment, it is obvious that section 127A does not confer a general jurisdiction on the Lands Tribunal to hear all matters relating to Part V premises.  Again, Mr Yip cannot provide the Court with any cogent reason as to why such statutory interpretation is incorrect.

9.  In this intended appeal, Mr Yip submits that I was wrong in the aforesaid statutory interpretation and the Lands Tribunal did have jurisdiction to entertain a claim for common law damages arising from repudiation of a tenancy agreement back in 2003, at least in respect of claims relating to Part V premises.  I agree that, as a matter of general principle, if the intended appeal involves issues of law and complicated statutory interpretation, then leave to appeal should be granted as the appellate court may take a different view with that of the lower court. However, based on my aforesaid analysis, the issue of statutory interpretation involved in the present case is a simple one.  In my judgment, it is also clear that section 127A cannot assist the Defendant’s case and so no leave to appeal should be granted. 

10.  Further, assuming that I was wrong in the said statutory interpretation, it was certainly a moot point back in 2003 as to whether the Lands Tribunal had jurisdiction to entertain a claim for damages arising from repudiation of a tenancy agreement.  In such case, the Plaintiff should not be criticized for not bringing such a claim in the Lands Tribunal and there was no abuse of process in the present case.  In other words, there is simply no room for the application of the principle of res judicata in the wider sense. 

11.  In this intended appeal, Mr Yip also seeks to raise a new point which has not been argued at the trial.  The argument runs like this.  The Sub-Tenant was in default of only 2 months of rent before the Plaintiff took out the proceedings in the Lands Tribunal.  As a default of 2 months of rent was not a breach serious enough to evince an intention to repudiate the Sub-Tenancy Agreement, there was no repudiation on the part of the Sub-Tenant.  However, the Plaintiff terminated the Sub-Tenancy Agreement by bringing the proceedings in the Lands Tribunal and so the Plaintiff is not entitled to claim for any damages arising from the repudiation of the Sub-Tenancy Agreement. 

12.  There is a short answer to this ground of appeal.  Whether there was a breach serious enough to evince an intention to repudiate the Sub-Tenancy Agreement is a question of fact which needs to be investigated at the trial.  By confining the issues of the present case to the two listed out in the Judgment, the Defendant was not challenging the Defendant’s case about the repudiation of the Sub-Tenancy Agreement on the part of the Sub-Tenant.  Further, the Defendant has not expressly raised such issue in the pleading.  This would have had a serious impact on the conduct of the case.  As the Plaintiff was not aware that repudiation was an issue, the Plaintiff was not calling any evidence at the trial to rebut such argument on the part of the Defendant. 

13.  Such argument is also inconsistent with the Defendant’s stance at the trial.  The Defendant’s argument at the trial was simply one of res judicata.  The Defendant argued that the Plaintiff should have included the claim for damages arising from the repudiation of Sub-Tenancy Agreement in the Lands Tribunal proceedings.  By not including such claim in the Lands Tribunal proceedings, the Plaintiff was barred from making a subsequent claim.  The Defendant also agreed the quantum of the Plaintiff’s claim at the trial which included the claim for damages arising from the repudiation of the Sub-Tenancy Agreement.  Hence, the Defendant’s new argument is inconsistent with his stance at the trial.

14.  In support of his argument, Mr Yip also seeks to rely on an alleged finding of facts contained in paragraph 27 of the Judgment that there was no repudiation on the part of the Sub-Tenant.  However, such argument is also untenable. Firstly, what I said in paragraph 27 was obiter dicta and so, strictly speaking, these observations were not relevant to the final determination of the Plaintiff’s claim.  Secondly, I had not made a finding about the repudiation of the Sub-Tenancy Agreement in paragraph 27 of the Judgment.  What I said was that a default of 2 months of rent might or might not have constituted repudiation by the Sub-Tenant.  As repudiation was not a foregone conclusion at the time when the Plaintiff made the Lands Tribunal application, the Plaintiff’s decision not to include the claim for common law damages could not be criticized.  Hence, there was no such finding of fact as alleged by Mr Yip.

15.  Mr Cheng, counsel for the Plaintiff, also refers me to various documents to show that there is ample evidence supporting the repudiation of the Sub-Tenancy Agreement on the part of the Sub-Tenant. However, in view of my analysis above, it is not necessary for me to deal with such argument. 

16.  Hence, it is not open for the Defendant to rely in the appeal of an argument or basis which has not been pleaded or relied on at the trial.  There is no reasonable prospect of success in the Defendant’s intended grounds of appeal and I therefore refuse the application for leave to appeal.