XCHRX VERDER AND & CO. (HONG KONG) LTD. v. BEST & BEST BUILDING MATERIALS LTD.

HCA 4489/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4489 OF 1999

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J U D G M E N T

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1. The Plaintiff is the registered owner of Yau Tong Marine Lot No. 21, holding it under Conditions of Sale entered into with the Government in 1959. These Conditions contain a restriction on use of the land for purposes "other than shipbuilding and/or as a sawmill and timberyard".

2. By this application, the Plaintiff seeks interlocutory judgment against the Defendant for damages to be assessed for trespass to that land. It also claims interlocutory judgment for an alleged breach of a contract it entered into with the Defendant on 11 November 1998 ("the November Agreement").

3. It is common ground that the Defendant entered into and occupied the land between 1 November 1998 and 17 May 1999, placing various materials on it for storage, such use of the land not being permitted by the Conditions of Sale.

4. It is common ground also that the Defendant approached the Plaintiff with a view to entering into a Licence Agreement permitting it to use the land for desired storage purposes; that the Defendant was aware of the restriction on user contained in the Conditions of Sale and of the need to obtain a temporary waiver of that restriction from the Government; and that the parties entered into the November Agreement.

5. By the November Agreement, the Plaintiff agreed to apply to the Government for a quarterly waiver of the restriction on user in order to permit the land to be used for "open storage of building materials ....... or such purpose which permits the intended user". The Defendant agreed to pay for the cost of getting such waiver and the parties agreed to enter into a Licence Agreement in the terms of an annexed draft if the waiver should be obtained within 6 months of 11 November 1998. The proposed Licence Agreement, which was to permit using the land "for the purpose specified in the Waiver Document", was to run concurrently with the term of the proposed waiver in consideration of a licence fee of $212,800 per month.

6. The questions arising are (a) whether the Defendant's occupation of the land between 1 November and 17 May constituted a trespass either for the whole or for part of the period in question, and (b) whether in failing to execute the draft Licence Agreement as envisaged by the November Agreement, the Defendant committed a breach of that Agreement.

7. As these questions arise in the context of an application for summary judgment, I have to determine whether, on the materials before me, there any triable issue arises in relation to these alternative causes of action.

Trespass

1 November 1998 to 11 November 1998

8. In relation to the period from 1 November 1998 to 10 November 1998, i.e., the period prior to the signing of the November Agreement, Mr Timothy Cheung, appearing for the Defendant, accepts that there is nothing he can say to justify his client's presence on the land. Accordingly, it is clear that the Plaintiff is entitled to damages for trespass for such period.

12 November 1998 to 19 February 1999

9. I turn then to consider the position in relation to trespass for the period between 12 November 1998 and 19 February 1999. At the beginning of that period, it is common ground that letters were written with a view to seeking the waiver. This led to the Government making an offer of a temporary waiver on 5 February 1999 which was open for acceptance no later than 19 February 1999.

10. The period under discussion therefore spans the signing of the November Agreement and the last date for accepting the Government's offer of waiver. The latter date also corresponds with the date provided for in the November Agreement as the last date by which the draft Licence Agreement annexed to the November Agreement had to be signed by the Defendant, assuming that the offer of waiver was in accordance therewith.

11. As I have previously stated, it is common ground that the Defendant was in occupation of the land during this period. The Plaintiff says that the Defendant went into such occupation surreptitiously and that the Plaintiff was not in fact aware of such use of its land until the Defendant's occupation was drawn to its attention by the DLO in about mid-December 1998. However, it is not in dispute that even after this came to light, the Plaintiff did not take any steps to evict the Defendant from the land. The Plaintiff puts its position in this way in the Amended Statement of Claim:

"In anticipation of the Government granting the Waiver commencing on 1 November 1998 and the Defendant entering into the Licence Agreement commencing on the same date but not in the meantime waiving any of its accrued powers, rights or remedies in respect of the Defendant's said trespass to the land and not otherwise, the Plaintiff had withheld from taking any legal actions against the Defendant."

12. The Defendant disputes the Plaintiff's version of events. It alleges that it has the defence of consent or acquiescence because it had orally been agreed with the Plaintiff that the Defendant should be allowed to use the land for its storage purposes as soon as the November Agreement was signed notwithstanding that this was prior to the Government's grant of the temporary waiver and prior to the parties signing the proposed Licence Agreement.

13. Miss Lisa Wong, who appears for the Plaintiff, invites me to hold that this alleged oral agreement is so inherently implausible and so incongruous with the Plaintiff's own conduct that it is wholly incredible and that, for the purposes of the trespass claim relating to this period, I should treat the present case as falling within the category of exceptional cases where summary judgment may be awarded notwithstanding a dispute of fact raised on the evidence.

14. In particular, Miss Wong contends that an oral agreement of the kind alleged is fundamentally inconsistent with what the parties had agreed to under the November Agreement. She argues that if they had intended that the Defendant should immediately be let into the Lot, they would hardly have been at pains to negotiate a proposed Licence Agreement which was co-terminous with the proposed waiver and so was not to take effect until and unless the waiver was granted. Miss Wong points moreover to the commercial improbability of the Plaintiff agreeing to let the Defendant onto the site without taking any payment, especially since various payments at the commencement of the licence were stipulated for under the November Agreement and the draft Licence Agreement. Miss Wong also points to the fact that in correspondence between solicitors, explicit allegations of trespass made by the Plaintiff's solicitors were not refuted by those acting for the Defendant.

15. In my judgment, while these are all cogent points and will not no doubt be given due weight at the trial, the evidence as a whole is not such as would justify me shutting the Defendant out at the present stage. The Defendant's version is not devoid of objective support since the evidence discloses that the arrangement between the parties was for the Defendant to be responsible for the costs of the waiver as from 1 November 1998 and that, under the Licence Agreement, licence fees should be payable as from that date. This gives some credence to the suggestion that what the parties had in mind was to allow the Defendant access to the site in advance of grant of the waiver and of signing the Licence Agreement, with the Defendant having thereafter to pay retrospectively for the occupation enjoyed in anticipation of the eventual Licence Agreement. Which version is the more acceptable is a matter which in my view, has to be decided at the trial.

16. I therefore give the Defendant unconditional leave to defend the trespass claim in relation to the period from 11 November 1998 to 19 February 1999 inclusive.

20 February 1999 to 17 May 1999

17. Miss Wong submits that whether or not any defence may be triable in relation to the earlier period, it became clear by 19 February 1999 at the latest that the parties were not going to enter into the Licence Agreement in accordance with the November Agreement and, accordingly, that there was no lawful basis upon which the Defendant could claim to be entitled to remain on the Lot. Indeed, she submits that since the Defendant had itself decided not to proceed with the draft Licence Agreement shortly after seeing the terms of the waiver offered by the Government on 5 February 1999 (if not earlier) the Defendant should have then taken steps to pack up and vacate the site and should have left by no later than 19 February, which was the last day by which the Licence Agreement had to be signed.

18. In my judgment, there is much force in that submission. It was the intention of both parties that the Defendant's occupation should be regularised and put on a lawful basis by the parties entering into the Licence Agreement in accordance with the November Agreement, after the waiver offer had been obtained. If after the waiver offer was received from the Government, the Defendant chose, for whatever reason, not to enter into the Licence Agreement, then it must have realised that the only anticipated basis for its continued lawful occupation of the site would disappear. Whether or not its refusal to sign the Licence Agreement was a breach of the November Agreement is not to the point. Even assuming that it was fully entitled to refuse to sign, the Defendant, after such refusal, became obliged to vacate the Lot, in default of which it attracted liability as a trespasser.

19. Mr Cheung accepts on behalf of his client that there is no triable defence against the trespass claim in respect of the latter portion of the period during which the Defendant occupied the site. However, he seeks to argue for the period of trespass should not be reckoned to begin until at least after the Writ was issued on 17 March 1999 and then adding some time to allow the Defendant a reasonable time to pack up and leave.

20. Mr Cheung also argues that after seeing the Government's offer, the Defendant repeatedly pressed the Plaintiff to seek modification of the offered terms, inter alia, as to user, indicating that the Defendant would be prepared to enter into the Licence Agreement on certain modified terms indicated. Mr Cheung accepts that the parties never reached agreement as to any variation of the November Agreement. However, he sought to argue that while the negotiations were taking place regarding the terms of the waiver, there was an implied licence for the Defendant to remain on the site in the hope that such negotiations would prove fruitful.

21. I see no basis for inferring any such implied licence. The negotiations, which made little progress, did not suspend the right of the Plaintiff to evict the Defendant. Indeed, by their letter dated 22 February 1999, the Plaintiff's solicitors recorded that the Defendant had been told at a meeting held on 15 February 1999 that even if the Plaintiff should agree to approach the Government for any changes, the Defendant was required to vacate the site by 19 February 1999. Whether or not the Defendant accepts that this is what was said at that meeting, it is clear that by the date of the solicitors' letter (receipt of which is not disputed) the Plaintiff had made clear its demand that the site had to be vacated notwithstanding any further or ongoing discussions.

22. If follows, in my judgment, that the Defendant has failed to disclose any triable defence against the trespass claim in relation to the whole of the period from 20 February 1999 to 17 May 1999 inclusive. I consider that the Defendant had been given ample "packing up" time and had no excuse for not being out of the site by, at the latest, 20 February.

Breach of the Agreement

23. As I have stated, 19 February 1999 passed without the Defendant signing the Licence Agreement annexed to the November Agreement. The Plaintiff contends that failure to sign was a breach of the November Agreement.

24. Mr Cheung argues that the Defendant has a triable defence in this regard or at least that there is good reason for the case to go to trial. His central contention is that the Defendant was entitled to refuse to sign the draft Licence Agreement because the terms of the waiver offer obtained by the Plaintiff from the Government, in particular its terms as to the types of user permitted by the waiver, differed substantially from what the Defendant was entitled to under the November Agreement, as affected by certain subsequent correspondence.

25. The waiver offer was obtained in the following manner :-

(1) On 15 September 1998, the Plaintiff wrote to the District Land Office stating that they wished to apply "for temporary waiver to permit open storage of building materials for non-dangerous goods on the captioned lot." The DLO apparently indicated in reply that such language was too wide and needed to be restricted. The Plaintiff says that it asked the Defendant to discuss user directly with the DLO. This is not disputed.

(2) On 22nd December 1998, the Defendant having discussed the matter with the DLO and having consulted its solicitors, such solicitors wrote to the Plaintiff's solicitors stating:

"In support of your client's present application for the waiver from the Government, we are instructed to confirm that our client shall use the above Lot for the purpose of open storage of (1) steel or iron, (2) mixed cement, (3) timber, and (4) bricks only. In the circumstances, please advise your client to make notice of the said usage purpose to the relevant authority for the present application of waiver."

(3) After receiving that letter, the Plaintiff wrote to the DLO on 24 December 1998 stating :-

" ....... we wish to advise that the storage shall only be restricted to (1) steel or iron, (2) packed mixed cement, (3) timber, and (4) bricks only." They asked for the application to be processed "soonest possible".

It will be noted that the proposed user is in terms identical to those set out in the letter of 22 December save for the addition of the word "packed" before the words "mixed cement."

(4) The DLO responded on 5 February 1999 with an offer of a temporary waiver which would permit user on the site involving "Open storage of non-dangerous goods (excluding storage of aggregates and sand)".

26. At the hearing, Mr Cheung argued that by excluding open storage of aggregates and sand on the site, the waiver had the effect of excluding the storage of "mixed cement" on the site which the Defendant had stipulated for in its abovementioned letter of 22 December. He also asserted, although this is not, in my view on analysis a relevant argument, that the exclusion of storage of aggregates and sand would not exclude the storage of "packed mixed cement", complaining that this made the Plaintiff's addition of the word "packed" in its letter of 24 December highly material. As I have said, I do not consider this latter point material. If, as a matter of construction, open storage of "mixed cement" on the site is not excluded by the Waiver's restriction against openly storing "aggregates and sand", then the alleged defence fails since the terms of the Waiver obtained are not inconsistent with the Defendant's contractual entitlement, whatever may be the position regarding "packed mixed cement".

27. Miss Wong submits that the comparison must be made between on the one hand, the Waiver Offer's terms and, on the other, the terms as to user put forward by the Defendant in its said letter of 22 December 1998 (and not against the broader wording of the November Agreement itself). I respectfully agree. On the evidence, it seems clear to me that the Defendant would be estopped from denying that it had limited the required user to the four categories of user set out in that letter. Mr Cheung did not submit otherwise.

28. However, Mr Cheung sought to persuade me that the words "aggregates" and "mixed cement" were technical terms which required expert evidence as to their meaning so that I should not now embark on any process of construction. With respect, I do not agree. As indicated in various versions of the Oxford English Dictionary which were referred to at the hearing, these are words which bear an ordinary meaning and are capable of being so construed. Moreover, the point of construction is a short one, well capable of being dealt with within the framework of an Order 14 application.

29. Accordingly, as a matter of construction, does the Waiver's exclusion of storing "aggregates and sand" on the site mean that the Defendant would have been prohibited from storing "mixed cement" thereon? In my opinion, the answer is clearly "No". The Shorter Oxford English Dictionary provides the following meanings for these respective nouns which appear to me to be appropriate to the context, namely: -

"Cement": "A powdered substance mixed with water and applied as a paste which hardens into a stony consistency for binding together stones or bricks and for forming floors, walls, etc.; especially a strong mortar of calcined lime and clay."

"Aggregate": "Sand, gravel, slag, or the like used in making concrete, etc."

"Sand": "Granular material consisting of small eroded fragments of (mainly siliceous) rocks, finer than gravel, forming the constituent of a beach, desert, or the bed of a river or sea and used for various purposes, as in smoothing stone, founding, or as an ingredient in mortar."

30. Accordingly, while it may not be clear what exactly the Defendant had in mind when it said in its letter of 22 December that it wanted to store "mixed cement" on the site, it seems amply clear to me that, on any view, "cement" is a substance quite different from "aggregates" or "sand", exhibiting quite different properties and put to quite distinct uses. Thus, in my judgment, the Waiver's exclusion of open storage of aggregates and sand on the site would not have precluded the storage of cement, whether mixed, packed or otherwise, on the site.

31. It follows that in my judgment, the Defendant has disclosed no triable defence in the Action for breach of the November Agreement and that the Plaintiff is entitled to interlocutory judgment thereon.

32. I therefore make the following Orders: -

1. That there be Judgment against the Defendant for damages to be assessed in favour of the Plaintiff in respect of:-

(i) the Plaintiff's claim for trespass by the Defendant to Yau Tong Marine Lot No. 21 during the periods (a) from 1 November 1998 to 10 November 1998 inclusive and (b) from 20 February 1999 to 17 May 1999 inclusive; and,

(ii) the Plaintiff's claim for breach of contract;

the Plaintiff to elect between the two remedies at the assessment of damages.

2. That the Defendant do have unconditional leave to defend in respect of the Plaintiff's claim for trespass as aforesaid during the period from 12 November 1998 to 19 February 1999.

33. Having heard counsel as to costs and directions, I further Order as follows:-

That the costs of the application be to the Plaintiff to be taxed if not agreed. That the Plaintiff have leave to re-amend the Statement of Claim to limit its claim to the outstanding trespass claim within 21 days of today's date, time to run during the Vacation. That the Defendant have leave to file an Amended Defence within 14 days thereafter. That the parties do file and exchange lists of documents within 14 days after service of the Amended Defence and that inspection do take place within 7 days thereafter. That the Action is thereafter to proceed in accordance with the Rules of the High Court. Liberty to apply.