MING CHIK PROPERTY INVESTMENT CO LTD v. GOOD TEAM INVESTMENT LTD AND ANOTHER

HCA 2182/2017

[2018] HKCFI 157

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2182 OF 2017

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D E C I S I O N

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1.  There are 2 applications before the court:

(a) D2’s summons for striking out the statement of claim and dismissing the claim; and

(b) The plaintiff’s summons for an order for inspection and examination of the subject premises.

THE BACKGROUND

2.  The plaintiff is the registered owner of the premises at Shop No 121 on the 2^nd Floor (Level 4), Kwai Chung Plaza, Nos 7-11 Kwai Foo Road, Kwai Chung, New Territories.

3.  The plaintiff alleges that water has been leaking from the ceiling of its Shop.  The water was suspected to have originated from Shop No 304 in the floor above (Level 5), of which D1 is the owner.  The plaintiff sues the defendants in nuisance and negligence.

4.  By a tenancy agreement dated 25 February 2016 (“the Tenancy Agreement”), D1 has leased Shop 304 to Active Top Limited (“the Tenant”).  The Tenant shared Shop 304 with Yoshinoya (KCP) Limited (“KCP”) for carrying on the business under the name of “Yoshinoya 吉野家” (“the Restaurant”).  The business registration certificate shows KCP to be the operator of the Restaurant.

5.  D2’s case is that it is the parent company of KCP.  D2 is not the landlord, occupier or tenant of Shop 304, nor operator of the Restaurant.  The plaintiff has sued the wrong party and the claim ought to be struck out. Further, not being the person in possession of Shop 304, an order cannot be made against D2 under the inspection summons.

6.  The plaintiff’s stance is that D2 was and is in control of Shop 304 and that one Mr Ng had admitted in meetings and solicitors’ correspondence that D2 was in control of Shop 304.  The plaintiff suggests that the inspection summons be adjourned pending addition of KCP and the Tenant as parties.

7.  D2 disputes the existence of any admission and objects to the plaintiff’s reliance on without prejudice correspondence.

THE STRIKING OUT SUMMONS

8.  The issues under this summons are:

(1) Whether D2 was and is in control of Shop 304;

(2) Whether the correspondence was without prejudice in nature such that the plaintiff cannot rely on it．

Legal principles

9.  The principles for striking out are well-established.  It is only in plain and obvious cases that the court should strike out any pleading under Order 18, rule 19.  The expression “frivolous or vexatious” includes proceedings which are an abuse of the process.  A proceeding is frivolous when it is not capable of reasoned argument, without foundation or substance, which is bound to fail, or on its face manifestly misconceived.  A proceeding is vexatious when it is oppressive and/or lacks bona fides.  Hong Kong Civil Procedure 2018, Vol 1, §18/19/7.

10.  It is an abuse of process to start a case without solid foundation hoping that something will turn up in the course of the proceedings, e.g. discovery or cross examination: Simply Power Ltd v Billy Chua & ors, HCA 2452/2013, 22 January 2015, §47, per Recorder Pow SC.

11.  There should be no trial on affidavits.  Disputed facts are to be taken in favour of the party whose pleading is sought to be struck out.  Where the legal viability of a case is fact-sensitive, an order for striking out should not be made.  The mere fact that the case is weak and not likely to succeed is no ground for striking it out: Hong Kong Civil Procedure 2018, Vol 1, §18/19/4.

The pleaded case and proposed amendments

12.  The case will not be struck out if it can be amended.  I have therefore also considered the proposed amendments to the statement of claim (“pasoc”).

13.  The plaintiff’s case against D2 has undergone changes.  I shall refer to the following items as “pleas”:

(a) §3 of the statement of claim (“soc”): D2 was and is in exclusive use and occupation of Shop 304; operating a restaurant there;

(b) §10 soc: D2 has caused, permitted or suffered nuisance to be caused to the plaintiff and failed to abate upon having notice of the escape of water from Shop 304;

(c) §11 of soc: D2 was negligent in, amongst others, causing alteration to be made to the structure and drainage system of Shop 304.

(d) §§3&3a of pasoc: D2 exercised “a substantial degree of control over the business of [KCP] and the operation of the Restaurant with the knowledge that [KCP] would rely upon the knowledge and resources of D2 to ensure that Shop 304 was in good and proper condition and repair.”

(e) §9 of Mr Chong’s submission: wrongdoer of nuisance who authorized the carrying out of certain activity at Shop 304 which precipitated in the nuisance, irrespective of whether D2 was in occupation.

(f) Oral submission: not suing D2 as parent company but as person in occupation either by being a person causing the leakage or principal of the person operating business at Shop 304.

14.  Plea (a) is unsustainable in view of the business registration certificate and the Tenancy Agreement.  If the plaintiff had done a business registration search, it would have found out who was operating the Restaurant.  Failure to do so may result in the claim being struck out with costs on indemnity basis: Technicon Engineering Ltd v Chan Lee Kwok Trading as Lewa & Company, DCCJ 607/2007, 28 December 2007, §4, per HH Judge Mimmie Chan (as she then was).

15.  Plea (b) does not plead what D2 has done to cause the water leakage.

16.  Plea (c) does not plead any duty of care owed by D2 to the plaintiff.

17.  Plea (d) remains the sole basis of the plaintiff’s claim which I shall analyze under Issue (1).

18.  Plea (e) appears only in Mr Chong’s submission, unsupported by even an averment from the plaintiff.  It is not maintainable.  There are no particulars of wrongdoing or authority.

19.  Plea (f) is not maintainable as there are no particulars as to how D2 caused the leakage and the principal/agency relationship is not pleaded.

Issue (1): Whether D2 was and is in control of Shop 304

20.  Plea (d) has 2 limbs.  Limb (i) is D2’s substantial degree of control; and limb (ii) is knowledge of KCP’s reliance.

21.  As for limb (i), liability attaches to the wrongdoer in nuisance by virtue of his control and not his occupation of the land: Clerk & Lindsell on Torts, 21^st ed, §20-70.

22.  The plaintiff’s case on “control” under limb (i) can be summarized as follows:

23.  Firstly, there was a meeting on 1 November 2016 between the plaintiff and a Mr Ng, an employee of D2.  Mr Ng said that he was the restaurant manager of Shop 304 and that restaurants operated by D2 included the one at Shop 304. Mr Ng informed the plaintiff that taking remedial work to abate water seepage from Shop 304 would require the instruction of D2.

24.  Secondly, the plaintiff had a series of pre-action meetings with, amongst others, Mr Ng and other staff members within D2’s group of companies to try and resolve the water leakage problem.  A Vicky Cheng (employee of Hung’s Food Group and not D2) stated that D2 would decide the plaintiff’s request for the plaintiff’s inspection of the kitchen of Shop 304.  Vicky Cheng later sent an email to the plaintiff permitting the plaintiff to inspect Shop 304 on 6 February 2017 informing that the plaintiff could approach “our Shop-in-Charge”.

25.  Thirdly, in the pre-action correspondence of the plaintiff and the building manager on the one hand and D2 on the other, D2 never mentioned KCP and never denied that it was the tenant or occupier of Shop 304. Instead, in the correspondence, D2’s solicitors referred to Shop 304 as “our client’s premises”.

26.  According to Mr Chong, counsel for the plaintiff, apparently, D2 has been in control and management of the activities in Shop 304 and this is proved by D2’s ability to determine:

(a) whether the plaintiff would be permitted to enter the kitchen of Shop 304;

(b) whether the shop manager at Shop 304 should allow or refuse entry by the plaintiff into Shop 304; and

(c) the terms upon which the activities undertaken at Shop 304 might be stopped to facilitate inspection of the kitchen at Shop 304.

27.  To this, Mr Chau, counsel for D2, submits that Mr Ng was the only staff member of D2 within a group of companies who happened to be at the Restaurant on one occasion.  There was no suggestion that Mr Ng did anything apart from attending the meetings for the Restaurant.  It remained the case that the plaintiff has not done anything to ascertain D2’s role in the operation of the Restaurant.  It is far-fetched to say that D2 was in control in such circumstances.  If the plaintiff is correct, the plaintiff could have virtually sued any company in D2’s group.

28.  I agree with Mr Chau.  I note the plaintiff’s evidence that water leakage had reduced since 6 June 2017 after a drainage pipe in the kitchen of Shop 304 underwent repair.  This, coupled with paragraph 23 above and Mr Ng’s attendance at meetings, formed the net case of “control” under limb (i). Mr Ng’s reference to D2’s instructions in paragraph 23 may be viewed as an “admission” of control, admissibility of which is under challenge.

29.  As for limb (ii), there is simply nothing that could point to D2’s “knowledge” or KCP’s “reliance” on D2.

Issue (2): Whether the correspondence was without prejudice in nature such that the plaintiff cannot rely on it

30.  Communication between parties with a view to settling their dispute is generally inadmissible without the consent of both sides.  The law was set out in Standard Chartered Bank (HK) Ltd v Ma Lit Kin Cary HCA 62/2006, unreported, 22 January 2007, Reyes J, at §47:

“(1) For a claim of ‘without prejudice’ privilege to succeed, the party claiming it must show that the communication was made:

(a) in a bona fide attempt to settle a dispute between the parties; and

(b) with the intention that, if negotiations failed, the communication could not be disclosed without the consent of the party making the communication.

(2) In establishing that there was a bona fide attempt to settle a dispute, the party seeking to assert privilege must show that, at the time of his communication:

(a) a dispute existed between the parties in respect of which legal proceedings had commenced or were contemplated; and,

(b) the communication was made in an attempt to further negotiations to settle that dispute.

(3) The mere fact that a communication concerns a dispute between the parties is not sufficient to confer privilege.

(4) The communication need not be expressed to be ‘without prejudice’ if it is clear from the surrounding circumstances that the parties were generally seeking to compromise their dispute.

(5) But there is an exception to the ‘without prejudice’ privilege. This exception applies where the exclusion of the evidence would act as a cloak for perjury or other ‘unambiguous impropriety’. This exception should only apply in the clearest of cases, since otherwise it could undermine the ‘without prejudice’ privilege altogether.”

31.  The chronology was as follows:

(a) In May 2016, the plaintiff and the management office have given notice of water leakage to D2 and demanded for remedial work. The dispute has arisen since.

(b) On 1 November 2016, the plaintiff lodged a complaint about water seepage to the restaurant manager of Shop 304.  That was the context in which the events in paragraph 23 above took place;

(c) On 25 January 2017, a meeting was held at Shop 304 involving the plaintiff, its expert, D2 and the building management;

(d) On 31 March 2017, William Sin & So acting for the plaintiff sent the 1^st pre-action letter to D2; and

(e) On 19 September 2017, the writ of summons was issued.

32.  The meetings and correspondence in this case were plainly made with a view to reaching an amicable solution to the water leakage problem.  The plaintiff should not be permitted to rely on the “admission” in paragraph 23 and the matters set out in paragraph 24 above.  Nor should D2 be blamed for its position as stated in paragraph 25 above.

33.  Whilst not disputing the without prejudice principles, Mr Chong submits that public policy consideration only covers negotiation genuinely aimed at reaching a settlement in the dispute between the parties: Gross Fortune International Ltd v Set Win International Ltd, CACV 192/1999, §§12-13, Ribeiro J (as he then was).  Communication with a view to ascertaining the identity of the wrongdoer fell outside those principles, so he submits.

34.  With respect, I disagree with Mr Chong. Most often, the source of water leakage and hence identity of the wrongdoer are most difficult to establish. Once these are established, remedial work can proceed.  Public policy plainly encourages neighbours to maintain harmony and assist each other in resolving the matter.  Accordingly, without prejudice principles apply to the correspondence in this case, including those matters in paragraph 26 above.

35.  That aside, the plaintiff threatened to seek a court order for inspection and purported to make arrangements for inspection in the correspondence.  It could not be said that the communication was not with an aim to settlement.

36.  Mr Chong also submits that without prejudice communication would be admissible in a striking out application which would shed light on the merits of the striking out: Family Housing Association (Manchester) Ltd v Michael Hyde & Partners (a firm) [1993] 1 WLR 354.

37.  With respect, that was a misreading of the authority.  An exception to the without prejudice rule applies where a party only relies on the fact that without prejudice communication was made as opposed to the truth of the contents eg for the purpose of refuting an allegation for want of prosecution: Family Housing, at p 360F-361D; or the issue is whether settlement formed reasonable mitigation of damage: Muller v Linsley & anor [1996] 1 PNLR 74, p 79D-80C.  Here, Mr Chong is relying on the truth of the contents.

38.  I agree with Mr Chau that the plaintiff’s suggestion is illogical.  There is no reason why a claim should not be struck out if it is arguable only by virtue of without prejudice evidence that will inevitably be excluded at the trial.

39.  Accordingly, I agree with Mr Chau that the communication between the plaintiff and D2/its solicitors (including the “admission” in paragraph 23) should not be admissible.

40.  In summary, taken at its highest, the plaintiff’s net case of control against D2 is not only weak but simply frivolous for lack of foundation.  Its continuance is an abuse of process.

THE INSPECTION AND EXAMINATION SUMMONS

41.  Order 29, rule 2 of the Rules of the High Court provides that the court may make an order for the inspection of property “in the possession of a party to the cause or matter”.

42.  Possession means physical or legal possession: Simba-Toys (Hong Kong) Ltd v Fullmore Corporation Ltd, HCA 1599/2008, 20 February 2009, at §19, DHCJ A Chow (as he then was).

43.  Given the analyses above, the plaintiff simply fails to plead or establish that D2 (not being the landlord, tenant or operator of the Restaurant) is in possession of Shop 304.  In §3 of pasoc, the plaintiff even proposed to delete the plea that D2 was in occupation of Shop 304.

44.  The pre-condition in Order 29, rule 2 is not satisfied.  The summons must be dismissed. 

45.  Mr Chong suggests that the summons should be adjourned pending addition of parties, presumably the Tenant and KCP. 

46.  With respect, I fail to see how adding a party who is in possession might improve the case against D2 who is not.  In any case, the summons to add parties has not even been issued. I therefore decline to adjourn the inspection summons.

47.  Mr Chau has kindly pointed out that the Tenant and KCP indicated that they would fully cooperate in the intended investigation by the Food and Environmental Hygiene Department and a consultant Modern Testing.  The court hopes that this kind of amicable attitude can prevail in cases of water leakage and in fact in all kinds of cases, so that disputes can effectively be solved with minimum costs.

CONCLUSION

48.  The soc is struck out and the claim is dismissed.  I make an order nisi that the plaintiff should bear costs of D2’s summons.

49.  The plaintiff’s inspection summons is dismissed.  On a nisi basis, I order costs to follow the event so that the plaintiff shall bear D2’s costs.

50.  The costs shall be summarily assessed on 12 February 2018 on the papers without the need for attendance.  D2 shall file and serve its statement of costs by 2 February 2018.  The plaintiff shall file and serve its grounds in opposition by 9 February 2018.

51.  I thank counsel for their assistance.