New G Mei Uk Restaurant (a firm) v. Tin Kwok Keung and Another

DCCJ17386/1998

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 17386 OF 1998

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J U D G M E N T

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1. The Plaintiff, Miss Lai Yin-king, trading as the New G Mei Uk Restaurant, who was the tenant of a café serving quick meals and drinks from premises at Shop 12, Ground Floor, Full View Garden Commercial Centre, 18 Siu Sai Wan Road, Chai Wan, sues the 1st Defendant, her landlord, for the return of the tenancy deposit in the sum of $112,000 and "for further or other relief as the court deems fit", which has not been further elaborated on before or during the course of the trial.

2. There is also a counterclaim by the 1st Defendant which purports to claim arrears of rent in the sum of $86,749, which although a perfectly sensible claim as a matter of pleading, has not been supported by any evidence, the landlord contenting himself not to give evidence, nor to call any witnesses.

3. By amendment of the Statement of Claim, the Plaintiff also sues the 2nd Defendants who are a firm of solicitors for the same amount of $112,000 and for an indemnity in the event that the Plaintiff is adjudged to owe the 1st Defendant any amount of the arrears of rent claimed in the 1st Defendant's counterclaim.

4. There is also a claim for damages which has not been particularised nor, as will emerge presently, has it been supported by any evidence.

5. This matter, therefore, is not without interest! I should start by indicating the background to the claim and how the Plaintiff suggests that the Defendants are respectively liable on the pleaded cases against them.

6. Shop 12, the Plaintiff's café, shares a common frontage with Shop 13, 13A and 13C, which for the sake of brevity I shall refer to as Shop 13, which was in the ownership of a separate landlord, Grand Quality Development Limited ("GQDL") and let to the Plaintiff's sister, Ms Lai Yin-kam. These premises were also operated as a café/restaurant.

7. The layout of these adjoining units is well illustrated in a sketch plan at page 40 of the witness statements' portion of the Trial Bundle. Some important features need to be observed about the access arrangements to these two premises. From the street, which is at the bottom of the sketch plan, access to both premises can only be obtained through Shop 12. The reason for that is that the front elevation of Shop 13 comprises a low wall above which there are substantial windows.

8. The court has not been well served by the photographs which the respective solicitors have put into the Bundles, many of which are bad photocopies, but at page 12 of the tenancy documents' section of the Bundle, the top photograph shows part of the interior of Shop 13 looking at the front portion of the premises. There is the low wall and the windows above it.

9. Returning to the plan, there is a rear door to 13 which can be used by customers wishing to use either café but is largely used by tradesmen for deliveries. Both establishments comprise an open-plan area, there being no physical division between the two, but equally there were quite separate tenancies of 12 and 13 with different landlords and different tenants.

10. There has been something of a dispute in the trial as to whether these sisters operated the two premises as one business and as one food outlet. Now that I have heard the evidence which has come from the Plaintiff and from her sister, Lai Yin-kam, I am satisfied that although these were separate business operations, there was a very high degree of co-operation between the two. They had separate kitchens and different menus but a customer from 12 could sit at a table in 13 and eat his food. They kept separate accounts, although a customer could pay for food purchased at 12 at the 13 cash till and then there would be an accounting between the two at the end of the working day. They also employed separate staff. And so, whilst there might well be a blurring of the separate identities of the restaurants from a customer's point of view due to the physical layout of the two premises and the close co-operation between the two, there can be no doubt of the separateness of the these two premises in terms of ownership and of the two distinct tenancies granted to different tenants by the respective landlords.

11. That, therefore is the background. I now turn to the events which give rise to the action.

12. I will set out the facts as I find them. There are, in fact, very few factual disputes to be resolved in a case where perhaps more thought could have been given to the state of each of the parties evidence before coming to trial.

13. The tenant of 13 was in serious arrears of rent exceeding $200,000 and the landlord of those premises, GQDL, sought the advice of the 2nd Defendants as to how best to obtain possession and payment of the arrears. The tenancy of 13 contained the usual forfeiture clause allowing the landlord to re-enter into possession in the event of arrears of rent.

14. Arrears of this magnitude meant that the clause became available to the landlord as a potential remedy. An alternative course, which although slower and perhaps more cumbersome, would be to come to court and ask for possession.

15. The 2nd Defendant's principal is Mr Stephen Finley who has given evidence with a view to explaining his firm's involvement. Having seen the seriousness of the arrears, he recommended exercising the right to re-enter under the forfeiture clause which is a well-established remedy but one fraught with potential complications.

16. Upon taking instructions, he realised that the layout of the premises was such that there were separate tenancies and that his clients, GQDL, did not own and were not the landlords of 12. He was also instructed that 12 and 13 were operated as one business and that the tenant of 12 (the Plaintiff) was also in arrears. He also learned that the only access to 13 was through 12.

17. His advice, and I get all this from his evidence before me, was that as there were two separate tenants, his client should obtain the consent of the landlord of 12 to enter 12 in order to effectively re-enter 13 and to retake possession. The landlord of 13 was therefore required to shut out the tenant of 12. How this was done will appear from some other photographs which I must refer to in a moment.

18. The 2nd Defendant's predecessors as solicitors for GQDL sent a letter dated 4 August 1998 (page 16 of the witness statements Bundle) requiring payment of the arrears by 11 August and threatening proceedings to recover possession if the payment was not made.

19. On the following day, the 2nd Defendants were instructed in place of the previous solicitors (see page 17). They wrote a letter dated 5 August, curiously referring to the tenant's "abject failure to even acknowledge receipt" of the letter of the 4th. I say curiously, given the fact that the letter of 4 August had been sent by post and therefore had probably not even been received on 5 August. Be that as it may, the letter required payment within three days (8 August), the previous solicitors having required payment by 11 August and it was indicated that proceedings would be instituted for recovery of arrears and for possession. Neither letter had the desired effect. Payment was not made.

20. At page 45, there is an unexecuted authorisation from the 1st Defendant on his correspondence paper purportedly authorising GQDL to enter Shop 12 with a view to taking possession of Shop 13. I say purportedly because whilst it may be that this was the intention of the document, it is so inadequately worded that it does not have that effect. It is in these terms:

"To Whom It May Concern

Re Shops 13, 13A, 13C, Ground Floor, Full View Garden, Chai Wan, Hong Kong

I, Tin Kwok-keung, James, owner of Shop No. 12, Ground Floor, Full View Garden, Chai Wan, Hong Kong, hereby authorise Grand Quality Development Limited, the owner of Shops 13, 13A and 13C, Ground Floor, Full View Garden, Chai Wan, Hong Kong, enter into possession of the aforesaid premises on 12 August 1998. Dated 11 August 1998, it is by order of... " [and then there is a blank]

As I say, it is written on the 1st Defendant's correspondence paper.

21. As it stands, it cannot be understood as providing authority to go over 12 to get to 13.

22. Further, where the owner of 12 (the 1st Defendant) had created a tenancy in favour of the Plaintiff, he would not have had authority to allow entry in this way over his tenant's demised area.

23. Mr Finley has suggested that because he believed that the tenant of 12 was also in arrears, that tenancy had become a tenancy at will and therefore it could be determined at will by the landlord, and so it was not necessary to get the tenant's consent. The landlord's was sufficient in the circumstances.

24. Wisely, in my view, Mr Thomson for the 2nd Defendant, did not press this way of putting the matter in his final speech.

25. But even if all of this were correct, where the "authority" has not been executed and there is no other evidence of permission having been given by the 1st Defendant for GQDL to do this, what was done to obtain possession of 13 by changing the locks of the roller shutters at 12, must amount to a trespass against 12 by GQDL by itself and/or its agents on its behalf.

26. What was done, as best as can be divined from the sparsest of direct evidence is this:-

Mr Finley, who is on his own account is prepared to advise peaceable re-entry into possession by a landlord in the exercise of the right to do so conferred by a forfeiture clause in a lease such as this one between GQDL and the tenant of 13, on this occasion advised that this should be done. But there is simply no direct evidence as to how this was achieved. Mr Finley was not present when this happened.

27. I have not heard from any person who was present when possession was taken. There are photographs. Members of the 2nd Defendant's staff were present as well as a locksmith who, I presume, changed the locks. Mr Lam Cheung-shing, who is a member of the 2nd Defendant's staff was present, but he was unavailable to come to court to give evidence and no application was made to admit his witness statement as evidence. By all accounts, this occurred at about 2 am on 12 August. I have photographs showing what occurred. Some show members of the 2nd Defendant's staff present.

28. Mr Finley has been at pains to explain that they were there only to witness the taking of possession and to advise GQDL staff. He also instructed his staff that in the unlikely event of resistance by the tenants (unlikely because this was done at 2 am), his staff would advise GQDL's people to withdraw.

29. Because of the paucity of direct evidence, I cannot - nor can Mr Finley - say who was present and who did what to effect repossession.

30. All I am able to say is that the locks were changed and shortly after this occurred, the management office at Full View Garden telephoned Miss Lai Yin-kam to tell her what had happened. She has given evidence and says that she hurried down to see what had happened. She found that the locks had been changed and that a notice had been posted outside the premises providing information as to the retaking of possession of No. 13 and directing enquiries to the 2nd Defendant's offices. She called the police there and then but was told by them that they could not help because this was a civil matter.

31. The next day, on legal advice, she broke the locks, got in and took out cash and documents. The 2nd Defendant's representatives were there. They allowed her in and then changed the locks again.

32. About a week later, Miss Lai Yim-king, who as a partner of the Plaintiff firm was the tenant of No. 12, was also allowed to take out more of her possessions. But before that, Miss Lai Yim-king, had sought advice from her solicitors. They advised her that her landlord's behaviour amounted to a repudiation of the lease.

33. A letter was written by them to the 2nd Defendants, on 13 August 1998 on the basis that they were acting for the 1st Defendant as landlord of No. 12. That letter is at page 6 of the documents portion of the Trial Bundle. It proceeds on the erroneous basis that the 2nd Defendants were solicitors for the 1st Defendant and that the repossession was done on behalf of the 1st Defendant. Such re-entry was said to constitute a repudiation of the lease by the 1st Defendant which was now being accepted by the Plaintiff who demanded repayment of the deposit of $112,000.

34. These are the essential facts which give rise to the action between these parties. I must now decide on the evidence, such as it is, where as a matter of law their respective pleaded cases take them.

35. Firstly, the claim by the Plaintiff against the 1st Defendant. It proceeds on the basis that the repossession on the night of 11/12 August was done on behalf of the 1st Defendant or at least with his knowledge and consent. There simply is no evidence that this is so.

36. There is no doubt that the 2nd Defendants were acting for GQDL in respect of No. 13. I am persuaded that on a balance of probabilities, that the 1st Defendant knew of GQDL's intention to re-enter No. 13 and, inevitably, via the entrance to No. 12. I say that because the draft consent at page 45 was done on the 1st Defendant's correspondence paper. But there is no evidence that such authority was eventually forthcoming. The consent was never signed and I have already drawn attention to the reason why, as a matter of drafting, it could not have had the effect of being a valid consent even if it had been signed.

37. Once it cannot be shown that these acts of repossession were done on behalf of or with the consent of the 1st Defendant, the whole basis of the Plaintiff's claim against the 1st Defendant must go and accordingly, the claim against the 1st Defendant must fail.

38. There must, therefore, be judgment to the 1st Defendant against the Plaintiff on the claim.

39. I now turn to the 1st Defendant's counterclaim for arrears of rent. Miss Lai has given evidence that there were no arrears and that agreement had been reached with the 1st Defendant to reduce the rent from $28,000 per month to $25,000 per month.

40. This has been disputed on behalf of the 1st Defendant in cross-examination, but 1st Defendant, for reasons best known to himself, has declined to give evidence.

41. The counterclaim is unsupported by any evidence and it must therefore stand dismissed. There must be judgment to the Plaintiff on the counterclaim.

42. I will now make an order nisi as to costs between these two parties as follows.

The Plaintiff will pay the 1st Defendant's costs on the claim and the 1st Defendant must pay the Plaintiff's costs on the counterclaim. These costs are to be taxed in the usual way on a party and party basis. There will also be certificate for counsel for the Plaintiff.

43. I had considered whether it might be sufficient to say that there should be no order for costs on the claim and the counterclaim because the subject matter of each is connected to the other, but they stand as separate actions and where both have failed, the successful party is entitled to an order for costs. I hope that good sense will now prevail and that this matter can be agreed between the parties' respective solicitors so as to avoid further argument and expense on taxation of costs.

44. This then leaves over the issue of the Plaintiff's action against the 2nd Defendant. I have already found as a fact that the 2nd Defendant was the solicitor for GQDL and not for the 1st Defendant. The case on the Plaintiff's behalf is pleaded on the basis that the 2nd Defendant was acting for the 1st Defendant. That plea must fail. The evidence is all one way that the 2nd Defendant was GQDL's solicitor.

45. Alternatively, (see paragraph 12 of the amended Statement of Claim (page 26 of the Pleadings Bundle)) the 2nd Defendant committed an act of trespass by entering the premises at 12 without the 1st Defendant's consent. This plea requires serious consideration, but what is the evidence?

46. Such evidence as there is comes from Miss Lai Yim-kam who attended the premises on the night of the 11/12 August and from Mr Finley who directed the repossession by giving his staff their instructions. Mr Finley says that his staff were merely witnesses and there to advise GQDL and the locksmith as to the taking of possession. If there was a trespass because there was no proper authority or lawful right to seal the door to 12, then that trespass was one committed by GQDL and it is that company which should have been sued and not their solicitors the 2nd Defendants.

47. Mr Thomson has drawn my attention to the position of a solicitor in such circumstances by referring to the case of Morris v Salberg [1889] 22 QBD 614, but the facts of that case are far removed from these to be of any real assistance.

48. I am afraid the answer is this, that the real point here is that there is no evidence which the Plaintiff has called to show that the unlawful entry was done by the 2nd Defendants. The burden is on the Plaintiff and that burden has not been carried.

49. This has been a wholly unnecessary action against a firm of solicitors, about whose conduct I shall have more to say on the issue of costs, when the obvious candidate for an action in trespass was GQDL. The action must therefore fail for want of evidence that the staff of the 2nd Defendant committed any act of trespass.

50. Normally, that would result in the 2nd Defendants being entitled to their costs. On this occasion, although they have succeeded, I am of the view that they have conducted themselves in such an ill-advised manner so as to deprive themselves of their costs.

51. The just order here as between them and the Plaintiff is no order as to costs. This too will be an order nisi. They will also have certificate for counsel.

52. I propose to make an order of no order for costs, because the 2nd Defendants should have realised that this exercise in repossession was fraught with difficulties and risk. It involved sealing off No. 12 in order to repossess No. 13. Mr Finley realised this. He advised that the landlord of 12 should be approached and consent should be obtained from him. It was not, and a defective form of consent remained unexecuted.

53. Secondly, I am far from persuaded that this authority was sufficient. There was still a subsisting tenancy at No. 12. The point concerning a tenancy at will is simply not arguable on his, nor on his client's behalf. At that stage, the landlord at No. 12 had taken no steps to take possession of No. 12. This point simply cannot avail him.

54. Whilst I appreciate that the Plaintiff has failed and the usual order would be one in favour of the successful defendant, the 2nd Defendants have brought much of this on themselves by failing to sufficiently appreciate the untenable situation facing the landlord of No. 13 (their client) in seeking to retake those premises with an existing tenant at No. 12 who was continuing to trade from those premises.

55. I have no doubt that the on the current state of the evidence, that had the Plaintiff sued GQDL for trespass, it would have had no answer to that claim and that equally, GQDL would have had compelling grounds for seeking an indemnity from the 2nd Defendants based on the nature of the advice that was given to it by the 2nd Defendants.

56. Before I leave this and by way of postscript, I am bound to say that none of these parties can come out of this litigation with any credit. No proper thought has been given to the appropriate party to be sued and the nature of the evidence called has been inconclusive or non-existent.

57. This all amounts to a complete waste of time and money by all three parties and I desire to say so.