CRIC MOTOR WORKS LTD v. SECRETARY FOR JUSTICE

HCA4540/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4540 OF 2003

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J U D G M E N T

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1. The plaintiff entered into a tenancy agreement with the HKSAR Government, care of the Government Property Agency ("GPA"), for the leasing of the premises of D1, E1 and portion of D3 in the Departure Hall of the Passenger Terminal at the former Kai Tak Airport. The tenancy agreement dated 14 June 2000 was entered into pursuant to an offer letter from GPA to the plaintiff dated 21 October 1999 which was accepted by the plaintiff. The term of the tenancy was from 8 November 1999 to 30 June 2002 with an option to be exercised by the plaintiff as tenant to renew for another term of two years. The renewed tenancy was, however, to contain a break clause to the effect that the defendant as landlord shall have power to terminate the renewed tenancy and re-enter the premises if the same shall be required for redevelopment (clause (4)(h)).

2. It is significant that on 28 March 2002 the defendant and the plaintiff executed a Deed of Surrender. By the Deed the plaintiff surrendered the premises under the tenancy agreement and delivered up vacant possession of the same to the defendant. The plaintiff alleges that at the time of the negotiations for renewal of the tenancy they were also negotiating for an additional area, namely E2 to be included. Because of this, the plaintiff alleges that they were required to sign the Deed of Surrender and a new tenancy. There is no doubt, however, that the plaintiff did execute the Deed and signed a new tenancy for the lease of premises. The premises were all of the premises under the old tenancy plus an additional E2 area. This, in my view, constituted a new tenancy of different premises and not the same premises under the old tenancy agreement.

3. The new tenancy agreement was dated 28 March 2002 and was for the period from 1 April 2002 to 31 December 2003. The plaintiff also alleges that at the time of negotiations for the renewal of the term, it was informed that the redevelopment of the site was set for 1 January 2004. Hence, the term of the new tenancy was to expire on 31 December 2003.

4. The plaintiff complains that in or about September 2003 it learnt that the Government was not going to demolish the building on 1 January 2004. Hence, it is alleged that it was entitled to exercise the option to renew under the old tenancy for the full two-year term rather than for a shorter period. As Ms Gwilt has submitted, the plaintiff seeks an interlocutory injunction to permit it to remain on the premises until 1 April 2004.

5. Mr Poon Yiu Tung of the GPA, in his affirmation made on 29 December 2003 at paragraph 13, makes it plain that it was only on 4 November 2003 that he received a memorandum from a Mr Yau as Project Manager/Kowloon of the Territory Development Department which informed him that the Shatin-to-Central Link rail depot construction programme would be postponed for three months. As a result, the concerned contract start date would be revised from early January 2004 to April 2004. And he stated categorically that this was the first time ever that GPA received confirmation that the said construction programme would be postponed. He further stated categorically that as at 28 March 2002, GPA had no knowledge whatsoever that this construction programme would be postponed. There is no suggestion by the plaintiff that as at 28 March 2002 there was any suggestion that the construction programme would be postponed. So the evidence shows that it is only recently that GPA received confirmation that the construction programme would be postponed to April 2004. There is no evidence before me to show that it will be further delayed beyond that time.

6. Ms Gwilt submitted that there was a serious issue to be tried and that the balance of convenience favoured the grant of an interlocutory injunction. It is important, in my view, to bear in mind that the plaintiff seeks to, inter alia, remain in the premises until April 2004. The statement of claim has been served but the time for serving the defence has not yet expired. It is highly unlikely, in my view, that the trial of this action could come on before the period for which the interlocutory injunction is sought expires. I see no reasonable prospect of any trial coming on before April 2004. If an interlocutory injunction is granted it will effectively be determinative of the rights of the parties to the action. That being so, it is not enough, in my view, to decide merely that there is a serious issue to be tried.

7. In Lansing Linde Ltd v. Kerr [1991] 1 WLR 251, it was held, inter alia, that in determining whether or not on the balance of convenience to grant an interlocutory injunction the judge below had properly taken account of the plaintiff's prospects of success in the substantive trial having regard to the fact that it would not be possible to hold the trial before the period for which the plaintiff claimed to be entitled to an injunction had expired, or substantially expired, and that in those circumstances it was not enough to decide merely that there was a serious issue to be tried.

8. The matter was succinctly put by Staughton LJ at page 258 where he said :

" If it will not be possible to hold a trial before the period for which the plaintiff claims to be entitled to an injunction has expired, or substantially expired, it seems to me that justice requires some consideration as to whether the plaintiff would be likely to succeed at a trial. In those circumstances it is not enough to decide merely that there is a serious issue to be tried."

And at the same page he also said :

" So if an injunction had been granted by the judge, or is now granted, the likely effect would be to decide the dispute against the defendant for good and all. In those circumstances justice requires, in my opinion, some assessment of the merits and more than merely serious issue to be tried."

9. It is, therefore, necessary, in my view, to make some assessment of the merits of the case and it is not enough to show merely a serious issue to be tried.

10. It was submitted on behalf of the plaintiff that the plaintiff believed that since the redevelopment of the premises was now scheduled to April 2004, it would be entitled to exercise their right to renew the tenancy until the end of March 2004. But this ignores the reality of the situation. It is clear on the evidence that the plaintiff did execute the Deed and entered into a new tenancy on 28 March 2002. As I have said, by the Deed the premises under the old tenancy were surrendered and vacant possession was given to the defendant. And a new tenancy was then entered into for different premises as it included the additional E2. It is common ground that at the time of the new tenancy in March 2002 it was anticipated that redevelopment of the building would take place on 1 January 2004. It cannot be seriously suggested, therefore, that any representation in March 2002 to the effect that redevelopment would take place on 1 January 2004 was false at the time it was made.

11. As from 28 March 2002, the plaintiff well knew that the new tenancy agreement was due to expire by the effluxion of time on 31 December 2003. GPA had twice sent reminders for vacant possession to be delivered up by 31 December to the plaintiff. This was done on 7 April 2003 and 28 August 2003.

12. Ms Gwilt, however, has referred me to the letter in Chinese from the Territory Development Department dated 29 October 2003 exhibited as WMTM-3 to the affirmation of Mr Wong. The relevant part of that letter has been translated as follows :

" GPA is reviewing commencement of works and will decide whether or not to accept individual tenant's application for extension of short term tenancy."

There is no suggestion there at all that GPA would grant any extension to any tenant.

13. Ms Gwilt submitted that GPA was silent from October 2003 to December 2003 thereby creating a legitimate expectation that the tenant's application for short term extension would be accepted. On the evidence before me I am unable to accept the submission that GPA did anything to lead the plaintiff to believe that short term tenancy would be granted.

14. In my view, the prospects of success at trial overwhelmingly favour the defendant.

15. As to the other factors in the balance of convenience, the plaintiff submits that it has been left in an extremely awkward situation. They have not planned for relocation of their business premises as, it is alleged, that they were led to believe that the lease would be renewed. However, on the evidence there is nothing to suggest that they were so led to believe.

16. It was submitted that it is impossible to lease over 8,000 sq. m. of suitable space, renovate and relocate to new premises as well as relocating over 400 cars at short notice. However, the situation that the plaintiff finds itself in is, in my view, of its own making. They were reminded in April and August 2003 to deliver up vacant possession under the new tenancy agreement. Yet they appeared to have done nothing to relocate.

17. I am also unable to accept that damages would not be an adequate remedy to the plaintiff. They are after all seeking to remain at the premises until 1 April 2004. This is for a short period and I fail to see why damages would not be an adequate remedy. The defendant certainly will be in a position to pay any damages.

18. I go on to consider that even if damages would not be an adequate remedy to the plaintiff, the evidence before me shows that the plaintiff is not in a financial position to pay any damages to the defendant. The plaintiff is a limited company with a paid-up capital of $10,000. There is no evidence of any significant assets before me of the plaintiff. The evidence shows clearly that the plaintiff has been in arrears of rent since January 2003 whereby a sum of over $7,000,000 plus interest is owing. Also, since November 2002 another sum of over $500,000 in respect of another area within the building is still owing by the plaintiff to the defendant. I appreciate that the plaintiff has filed a counterclaim in other proceedings where the defendant has sued them for arrears of rent. The fact remains that the arrears have not been paid and there is no evidence to show that the plaintiff is in a financial position to pay them.

19. Taking into account all the matters in the balance of convenience including the prospects of success, it seems to me that the balance of convenience is overwhelmingly in favour of the defendant. In the circumstances, I dismiss the application.