LEUNG KIT CHU v. POON SAU KWAN

DCCJ2645/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2645 OF 2013

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DECISION

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1. By way of summons dated 21 August 2013 (“the defendant’s summons”), the defendant is applying to strike out the plaintiff’s Statement of Claim pursuant to Order 18, Rule 19 of the Rules of the District Court. By way of summons dated 18 October 2013 (“the plaintiff’s summons”), the plaintiff is applying for summary judgment or alternatively interim payment against the defendant pursuant to Order 14 and Order 29, Rule 10 of the Rules of the District Court.

2. Pursuant to Registrar Lui’s order made on 31 October 2013, the defendant’s summons and the plaintiff’s summons were adjourned to a date to be fixed for argument before a judge in chambers. The hearing before me is for this purpose.

3. As the defendant’s summons was taken out on an earlier date and might result in an entire disposal of the case, I will deal with the defendant’s summons before dealing with the plaintiff’s summons.

Statement of claim

4. According to the Writ of Summons endorsed with the Statement of Claim filed on 19 July 2013, by a Tenancy Agreement dated 1 January 2010 made between the plaintiff as landlord of the one part and the defendant as tenant of the other part (“the 1^st Tenancy Agreement”), the plaintiff let to the defendant Staircase Shop, 168 Shau Kei Wan Road, Hong Kong (“the Premises”) for commercial use only for a term of three years commencing from 1 January 2010 to 31 December 2012 at the rent of HK$1,800 per month payable in advance on 1^st day of each and every calendar month.

5. By an oral agreement made between the plaintiff as landlord of the one part and the defendant as tenant of the other part in or about December 2012 (“the 2^nd Tenancy Agreement”), it was agreed that the plaintiff would let the Premises to the defendant for commercial use on a monthly basis at the rent of HK$2,000 per month payable in advance on 1^st day of each and every calendar month.

6. By notice dated 22 May 2013 from the plaintiff’s solicitors to the defendant, the plaintiff gave the defendant due notice that the plaintiff would terminate the 2^nd Tenancy Agreement on 30 June 2013 and that the defendant should deliver possession of the Premises or before 30 June 2013.

7. The defendant failed and/or refused to deliver vacant possession of the Premises to the plaintiff.

8. The defendant also failed to pay rent to the plaintiff for the period from 1 January 2013 to 30 June 2013 for the total sum of HK$12,000 (i.e. HK$2,000 x 6 months).  After deducting the partial payment of HK$3,600 made by the defendant, the defendant still owes the plaintiff HK$8,400.

9. In this action, the plaintiff is claiming against the defendant for:-

(a) an order for vacant possession;

(b) arrears of rent in the sum of HK$8,400;

(c) mesne profits to be assessed and/or determined;

(d) further or alternatively, damages to be assessed and/or determined;

(e) interest;

(f) further and/or other relief; and

(g) costs of this action.

Defendant’s summons for striking out

10. By her summons filed on 21 August 2013, the defendant is asking for:-

(a) The whole of the Statement of Claim against the defendant be struck out on the grounds that:-

(i) it discloses no reasonable cause of action;

(ii) it is frivolous or vexatious;

(iii) it is an abuse of the process of the Court.

(b) The action against the defendant be dismissed; and

(c) The costs of application on indemnity basis to the defendant to be taxed if not agreed.

11. At the hearing, the defendant’s counsel made it clear that the defendant would only rely on the ground that the Statement of Claim discloses no reasonable cause of action.

12. The arguments advanced by the defendant’s counsel can be summarized as follows:-

(a) The Premises in question are a Staircase Shop located under the staircase of the building at 168 Shau Kei Wan Road, Hong Kong.  The Staircase Shop forms part of the common area of the building.  No undivided shares are attached to the Staircase Shop.  There is no diagram or plan to define what exactly constitutes the Premises in the DMC. The subject matter of any agreement that refers to the Premises is uncertain and unenforceable.

(b) The plaintiff is not the registered owner of any part of the building at 168 Shau Kei Wan Road.  The plaintiff is in no position to lease the Premises to the defendant.

(c) The defendant denies that there is any landlord and tenant relationship between the plaintiff and the defendant. Based on the previous written agreements between the plaintiff and Poon King Kwan (“the defendant’s brother”) for the periods from 1 September 1988 to 31 August 1989, 1 September 1989 to 31 August 1992, from 1 September 1992 to 30 August 1995, from 1 September 1995 to 30 August 1998 and from 1 September 1998 to 30 August 2001 and the written agreements between the plaintiff and the defendant for the periods from 1 September 2004 to 31 August 2007 and from 1 September 2007 to 31 August 2009, the fees paid by the defendant’s brother and the defendant to the plaintiff were for the purpose of electricity, maintenance and daily expenses of the common area of the building.  The defendant’s brother and the defendant would still have to pay the government rent.  As such, the plaintiff is estopped from claiming that she is the landlord of the Premises.

(d) The plaintiff relies on the 1^st Tenancy Agreement dated 1 January 2010 for the period from 1 January 2010 to 31 December 2012.  The defendant says that even if this agreement was enforceable, the same expired on 31 December 2012.  There are not any terms that confer on the plaintiff any right to collect money such as mesne profits from the defendant after the expiry date. 

Discussions on striking out application

13. As pointed out by counsel for the plaintiff, the principles on the fundamental guiding principles on the law of striking out can be found in paragraph 18/19/4 of Hong Kong Civil Procedure 2014:-

“Exercise of power under this rule

Striking out only in plain and obvious cases – It is only in plain and obvious cases that the court should exercise its summary powers to strike out the indorsement on any writ or any pleading under this rule.  There should be no trial upon affidavit.  Disputed facts were to be taken in favour of the party sought to be struck out.  Nor should the court decide difficult points of law in striking out proceedings. The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out.  If the court does not think the matter to be clear beyond doubt or if it fails to be satisfied that there is no reasonable cause of action or that the proceedings are frivolous or vexatious, then, there should be no striking out.  One must be careful not to drive a plaintiff from the judgment seat nor should the court decide difficult points of law …”

14. In relation to point (a) raised by the defendant, the defendant in her own affirmation filed on 21 August 2013 clearly identifies the Premises in issue as the Staircase Shop located under the staircase of the building at 168 Shau Kei Wan Road.  Putting aside the issue whether the plaintiff and the defendant has a landlord and tenant relationship for the time being, the plaintiff and defendant clearly know what the subject matter in dispute is.  Therefore, the defendant’s argument that the subject matter in any agreement is uncertain and unenforceable has no substance.  The fact that the Premises are part of the common area of the building and no undivided shares are attached to the Premises does not mean that the Premises cannot be the subject matter of any agreement between the plaintiff and the defendant.

15. As to point (b), the defendant is in effect saying that the plaintiff cannot lease the Premises to the defendant because the plaintiff is not the registered owner of any part of the building. In other words, the defendant is challenging the title of the plaintiff.  The case authorities cited by the plaintiff’s counsel including Industrial Properties (Barton Hill) Ltd & Others v Associated Electrical Industries Ltd [1977] 2 QB 580, National Westminster Bank v Hart [1983] 1 QB 773 and Tang Chi Ho v Wong Yuk Ha [1996] 1 HKC 525 support the principle that a tenant is estopped from disputing the landlord’s title. 

16. The plaintiff says that she has a landlord and tenant relationship with the defendant.  The defendant denies this.  The law of striking out is that any disputed facts should be taken in favour of the plaintiff.  When one works on this basis that the plaintiff is the landlord and the defendant is the tenant, the defendant is estopped from disputing the landlord’s title.  The defendant’s argument under point (b) is bad at law.

17. The defendant’s argument in (c) is that based on the previous written agreements between the plaintiff and the defendant’s brother and the written agreements between the plaintiff and the defendant entered before the 1^st Tenancy Agreement dated 1 January 2010, the plaintiff should be treated as a “fee collector” of electricity, maintenance fees and daily expenses of the common area.  The defendant was required to pay the government rent under those previous written agreements. As such, the plaintiff is estopped from claiming that she is the landlord.

18. The defendant’s argument in (c) shows that she is shifting away from the central issues.  The plaintiff’s case is that the 1^st Tenancy Agreement was entered into by the plaintiff and the defendant on 1 January 2010.  In this written 1^st Tenancy Agreement, the plaintiff is clearly described as the landlord and the defendant is described as the tenant.  After the 1^st Tenancy Agreement expired on 31 December 2012, this was followed by the 2^nd Tenancy Agreement which was made orally in December 2012 according to the plaintiff.  The defendant in her 2^nd affirmation filed on 30 October 2013 alleges that there had never been any tenancy agreements between the plaintiff and the defendant.  The central issues here are (i) whether there is any such 2^nd Tenancy Agreement and if so, (ii) whether the plaintiff and the defendant has a landlord and tenant relationship under the 2^nd Tenancy Agreement.  Taking the defendant’s argument in (c) to its highest and accepting that the plaintiff was only a “fee collector” under the previous written agreements, it does not follow that plaintiff is estopped from claiming that she is the landlord under the 1^st Tenancy Agreement and the 2^nd Tenancy Agreement.  The defendant’s argument in (c) is misconceived and defies logic.

19. I now deal with the defendant’s argument in (d) that even if the 1^st Tenancy Agreement existed, after its expiry on 31 December 2012, there are not any terms that confer on the plaintiff any right to collect money such as mesne profits from the defendant. 

20. The plaintiff’s claim is based on the 2^nd Tenancy Agreement.  As pointed out earlier, the defendant is disputing whether the 1^st Tenancy Agreement and the 2^nd Tenancy Agreement existed.  If this dispute of facts is resolved in favour of the plaintiff in accordance with the law of striking out, the 2^nd Tenancy Agreement is a monthly tenancy by reference to which the rent is fixed.  As stated at page 42 of Hong Kong Tenancy Law (5^th Edition) by Malcolm Merry:-

“It is usually easy to identify a fixed-term lease since it will invariably be in writing – a lease for a fixed term of more than three years must be created by deed or it will not be effective. Periodic tenancies though are often created informally and it will not always be so clear what was agreed concerning the term of the lease. Where the evidence is conflicting, a major factor in determining whether the lease was periodic or for a fixed term and, if periodic, the length of the period, is the period by reference to which the rent is fixed …”

21. Upon 1 month’s notice, the 2^nd Tenancy Agreement can be terminated.  By way of notice dated 22 May 2013, the 2^nd Tenancy Agreement would be terminated on 30 June 2013.  The defendant should pay rent for the period from 1 January 2013 to 30 June 2013 and mesne profits after 30 June 2013 until delivery of vacant possession.

22. Therefore, the defendant’s argument in (d) cannot be stand if the dispute of facts is resolved in favour of the plaintiff in accordance with the law of striking out. 

23. The defendant’s counsel relies on the judgment of Deputy District Judge S. T. Poon in King Royal Limited v Lam Kwan Yuk, DCCJ 4617 of 2002.  In that case, the learned Deputy Judge was dealing with a plaintiff which was claiming for vacant possession, arrear of rent, mesne profits and indemnity against the defendant pursuant to an alleged subletting agreement.  The learned Deputy Judge ruled that the arrangement between the plaintiff and the defendant was not a subletting agreement but a transfer of the whole of the plaintiff’s lease to the defendant.  Any payment to the plaintiff by the defendant was intended as payment of rent to the head landlord. 

24. With respect, I do not see how this case authority would assist the defendant in the present case.  The learned Deputy Judge briefly dealt with the allegations of res judicata, tenancy by estoppel and estoppel by convention raised in the Reply and Defence to Counterclaim in that case as he did not see there was much substance in the allegations.  In the present case, I have already indicated that there is no basis for the defendant to allege that the plaintiff is estopped from claiming as landlord.

25. The plaintiff’s case as it appears from the Statement of Claim is that the defendant as the tenant under the 2^nd Tenancy Agreement continues to stay after 30 June 2013 despite the plaintiff gave her notice to quit on 22 May 2013.  I fail to see how it can be described that the Statement of Claim discloses no reasonable cause of action.  Of course, whether the plaintiff can prove her case is another matter.  But this is not to be decided in an application for striking out.  The matters as pleaded in the Statement of Claim do constitute a reasonable cause of action.

26. The defendant’s application to strike out the Statement of Claim is without any merit and the same is dismissed.

Plaintiff’s summons for summary judgment & interim payment

27. Having dismissed the defendant’s application for striking out the Statement of Claim, I now turn to the plaintiff’s application for summary judgment and interim payment.

Plaintiff’s evidence

28. The plaintiff filed her 1^st affirmation on 19 September 2013 in opposition to the defendant’s application for striking out and her 2^nd affirmation on 18 October 2013 in support of her application for summary judgment.

29. According to the plaintiff’s evidence, she entered into exclusive possession and occupation of the Premises in or around 1987.  In 1988, she stared letting the Premises to the defendant’s brother.  The plaintiff has produced written agreements between herself and the defendant’s brother for the following periods:-

1 September 1988 to 31 August 1989;

1 September 1989 to 31 August 1992;

1 September 1992 to 30 August 1995;

1 September 1995 to 30 August 1998; and

1 September 1998 to 30 August 2001.

30. The Premises were let to the defendant’s brother until about 30 August 2001 when he told the plaintiff that he would no longer need the Premises.  The defendant’s brother also told the plaintiff that his sister ie the defendant would rent the Premises from the plaintiff.

31. From 1 September 2001 to 30 August 2009, the plaintiff and the defendant had entered into several written agreements for the use of the Premises.  Due to the lapse of time, the plaintiff is only able to produce written agreements for the following periods:-

1 September 2004 to 31 August 2007; and

1 September 2007 to 31 August 2009,

32. Subsequently, the plaintiff and the defendant entered into the 1^st Tenancy Agreement on 1 January 2010 by which the Premises were leased to the defendant by the plaintiff from 1 January 2010 to 31 December 2012 at the monthly rent of HK$1,800.  The plaintiff has produced the 1^st Tenancy Agreement as exhibit “LKC-4”.

33. Pursuant to the 1^st Tenancy Agreement, the defendant paid the monthly rental into the plaintiff’s account with Bank of East Asia Limited no. 015-526-10-14xxx-x (“Bank of East Asia Account”) and account with Bank of China (Hong Kong) Limited no. 0709191011xxxx (“Bank of China Account”).

34. In or around December 2012 when the 1^st Tenancy Agreement was about to expire, the plaintiff orally agreed to let the Premises to the defendant upon the same terms of the 1^st Tenancy Agreement except that there would not be any fixed term and the monthly rent would be raised to HK$2,000 ie the 2^nd Tenancy Agreement.  As such, the defendant became a monthly periodic tenant from 1 January 2013 onwards. 

35. The defendant continues to enjoy exclusive possession of the Premises but has failed to pay the monthly rent of HK$2,000 per month to the plaintiff except a partial payment in the sum of HK$3,600 on 6 February 2013 into the Bank of Asia Account.

36. By a letter dated 22 May 2013 from the plaintiff’s solicitors to the defendant, a notice to quit was served on the defendant and a demand for arrears of rent was made.  The defendant did not reply to the said letter.

37. A letter before action dated 3 July 2013 was sent by the plaintiff’s solicitors to the defendant and the Writ of Summons was issued on 19 July 2013．

Defendant’s evidence

38. The defendant filed her 1^st affirmation on 21 August 2013 in support of her application to strike out and her 2^nd affirmation on 30 October 2013 in opposition to the plaintiff’s application for summary judgment.  In her 1^st affirmation which consists of 6 paragraphs on 2 pages, the defendant alleges that the plaintiff has never been the registered owner of the building and has no locus standi to commence the action against the defendant as landlord of the Premises.  In her 2^nd affirmation which consists of 7 paragraphs on 2 pages, the defendant says that there had never been any tenancy agreements as alleged by the plaintiff.  This, according to the defendant, amounts to a triable issue and the plaintiff’s applications for summary judgment and interim payment should be dismissed.

Legal principles on application for summary judgment

39. The legal principles on application for summary judgment can be found in paragraph 14/4/9 of Hong Kong Civil Procedure 2014:-

“Leave to defend - unconditional leave - “It is appropriate to be reminded of the principles applicable to an O 14 application. They are well-known and in fact not disputed by the parties. The plaintiff (a defendant to the second defendant’s counterclaim) must show that there are triable issues. He has to satisfy the court that he has a ‘real or bona fide defence’” (see Ackner LJ in Banque de Paris et des pays-bas (Suisse) SA v Costa de Naray [1984] 1 Lloyd’s Rep. 21 at 23) or “a fair probability or reasonable grounds that a bona fide defence exists” (see Ma CJHC in Toy Major Trading Co Ltd v Plastic Toys Ltd [2007] 3 HKLRD 345). If he makes an allegation it must be credible or believable in the light of the evidence placed before the court. As Bokhary JA said in Re Safe Rich Industries Ltd ([1994] HKLY 183):-

‘The test at the summary stage is indeed as simple as whether the defendant’s assertions are believable. But it must be recognized - because failure to recognize it would create a debt-dodger’s charter – that whether the defendant’s assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as [is] either undisputed or beyond reasonable dispute.’ …

It is trite law that the mere assertion in an affidavit of a given situation does not, ipso facto, provide leave to defend, since the defendant must satisfy the court that he has a fair or reasonable probability of showing a real or bona fide defence, ie that his evidence is reasonably capable of belief (per Ackner LJ in Banques de Paris et des Pays-Bas (Suisse) SA v Costa de Naray [1984] 1 Lloyd’s Rep. 21 at 28; followed in Bhagwandas Kewalarm Murjani & Others v Bank of India [1990] 1 HKLR 586 at 588-589, and see also, Tandy/Rank Video & Another v Yee Hing Cassette Factory Ltd [1991] 1 HKC 136). After reviewing all the authorities, the English Court of Appeal has laid down a definitive ruling that if the evidence of the defendant is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence and judgment will be given to the plaintiff (National Westminster Bank Plc v Daniel [1993] WLR 1453; [1994] 1 All ER 156 applied in Ng Shou Chun v Hung Chun San [1994] 1 HKC 155 at 158), following the Banque de Paris case. “There is a difficulty because the court cannot resolve issues of fact on affidavits. However, there are some cases in which the defendant’s own case, although apparently it raises issues which, if found in his favour, would provide him with a defence, are so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that his defence is a sham”: per Mortimer JA in Manciple Ltd v Chan On Man [1995] 3 HKC 459 at 466. Two tests are appropriate, namely “Is what the defendant says credible?” and “Is there a fair or reasonable probability of the defendant having a real or bona fide defence?” Where an issue of fact is raised, the first question must be answered in the affirmative before considering the second.”

Discussions on summary judgment application

40. The defendant denies that she has ever entered into any tenancy agreement with the plaintiff.  But this bare denial is directly contradicted by the 1^st Tenancy Agreement which has been produced by the plaintiff as exhibit “LKC-4”.  This document was signed by the plaintiff and the defendant.  The plaintiff was described as the landlord and the defendant was described as the tenant.  The subject matter in the 1^st Tenancy Agreement was the lease of the Premises.  This relationship as landlord and the tenant was further evidenced by the monthly rent that was paid into the plaintiff’s Bank of East Asia Account and Bank of China Account. From the passbooks produced by the plaintiff, rent for the months of March, April, May, July, August, September, October, November 2010, September, October, November, December 2011 and May, August, September, October, November, December 2012 were deposited into the aforesaid accounts.

41. In light of the evidence, there should be no doubt that there was a landlord and tenant relationship between the plaintiff and the defendant from 1 January 2010 to 31 December 2012 based on the 1^st Tenancy Agreement.  The defendant is simply denying the undeniable.  Her evidence is incredible on this aspect.

42. The defendant does not dispute that she is still staying on the Premises up to now.  But there is no explanation as to why she can do so in the 2 affirmations filed by her.  The plaintiff’s explanation is simply that when the 1^st Tenancy Agreement was about to expire in December 2012, the plaintiff orally agreed to let the Premises on the same terms as the 1^st Tenancy Agreement at the monthly rent of HK$2,000 ie the 2^nd Tenancy Agreement.  In the absence of a clear explanation from the defendant, there is simply no evidence to contradict the plaintiff’s explanation.

43. In the letter dated 10 July 2013 from the defendant’s solicitors to the plaintiff’s solicitors, there is a vague allegation that the defendant “has been in actual possession with the requisite intention to possess of the said Property which exceeds the prescribed period …” This gives that impression that defendant would like raise an argument of adverse possession.  However, there is nothing in the defendant’s 2 affirmations to substantiate this.  As such, I do not regard the bare allegation in the letter issued by the defendant’s solicitors as sufficient for raising a triable issue.

44. In light of the quality of the plaintiff’s evidence which is unchallenged by the defendant except by way of a bare denial, I find that the 2^nd Tenancy Agreement which is a monthly periodic tenancy do exist and there is a landlord and tenant relationship between the plaintiff and the defendant.

45. I have already dealt with the defendant’s argument that the plaintiff is not the registered owner of the Premises and has no locus standi to claim as the landlord.  I have stated that the defendant is not entitled to dispute the plaintiff’s title as landlord. Here, I would only add that the plaintiff alleges that she entered into the exclusive possession of the Premises in about 1987 and has been occupying the same to the exclusion of others for over 25 years.  The plaintiff counsel suggests that the plaintiff might have a claim of adverse possession against the co-owners of the building pursuant to section 7 of the Limitation Ordinance (Cap. 347).  According to the case authority of Cheung Yat Fuk v Tang Tak Hong & Others [2004] 7 HKCFAR 70 cited by the plaintiff’s counsel, a squatter could acquire a possessory title to the land through his tenant’s occupation of the land.  Another case cited by the plaintiff’s counsel is Yeung Mau Cheung v Ka Ming Court, Castle Peak Road (IO) [2013] 4 HKLRD 211 which stands for the principle that one can claim adverse possession of the common parts of a building.  But for the present purpose, I do not need to decide the nature of the plaintiff’s title, if any. 

46. I also note the written agreements between the plaintiff and the defendant’s brother and the written agreements between the plaintiff and the defendant which were dated before the 1^st Tenancy Agreement and the 2^nd Tenancy Agreement.  For the purpose of deciding this application for summary judgment, I do not see the need to rule on the nature of those previous written agreements and the relationships of the parties under the same.

Conclusion

47. In conclusion, I find that the defendant’s denial of the 1^st Tenancy Agreement and the 2^nd Tenancy Agreement totally incredible and contradicted by contemporaneous documents.  The defendant’s occupation of the Premises from 1 January 2013 onwards was pursuant to the 2^nd Tenancy Agreement.  The 2^nd Tenancy Agreement was terminated on 30 June 2013 by way of a notice to quit dated 22 May 2013.  The defendant has failed to deliver vacant possession to the plaintiff and has failed to pay rent from 1 January 2013 to 30 June 2013 in the sum of HK$12,000 (ie HK$2,000 x 6 months) except a partial payment of HK$3,600 on 6 February 2013.

48. The defendant does not have any real or bona fide defence.  I order that final judgment as hereinafter provided be entered for the plaintiff against the defendant:-

(a) The defendant do deliver vacant possession of the premises known as the Staircase Shop, 168 Shau Kei Wan Road, Hong Kong to the plaintiff (“the Premises”);

(b) The defendant do pay the plaintiff arrears of rent for the period from 1 January 2013 to 30 June 2013 in the sum of HK$8,400;

(c) The defendant do pay the plaintiff mesne profits at the rate of HK$2,000 per month from 1 July 2013 to 31 January 2014 in the sum of HK$14,000;

(d) The defendant do pay the plaintiff mesne profits at the rate of HK$2,000 per month from 1 February 2014 to the date of delivery of vacant possession of the Premises to the plaintiff;

(e) Costs order nisi to be made absolute within 14 days that the defendant do pay the plaintiff the costs of and occasioned by the defendant’s summons taken out on 21 August 2013 and the costs of and occasioned by the plaintiff’s summons taken out on 18 October 2013 summarily assessed at HK$93,474;

(f) Costs order nisi to be made absolute within 14 days that the defendant do pay the plaintiff the costs of this action to be taxed if not agreed;

(g) Interest on the sums of HK$8,400 and HK$14,000 referred to respectively in paragraphs (b) and (c) at judgment rate from the date of the Writ of Summons until payment; and

(h) Interest on costs referred to respectively in paragraphs (e) and (f) at judgment rate from the date of judgment until payment.

49. As I have entered final judgment against the defendant, there is no need for me to deal with the plaintiff’s alternative application for interim payment.