WILLY FINE LTD. v. JANYET INVESTMENT LTD.

HCA4430/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4430 OF 2001

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D E C I S I O N

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1. This is an appeal against the Registrar's Order made on 23 September 2002 on the summons for direction taken out by the defendant.

Background

2. The plaintiff is the tenant of a lease granted by the defendant in respect of three floors of business premises in Yuen Long, New Territories. The lease is for eight years expiring on 10 August 2003 and the current monthly rent is HK$325,000 exclusive of rates. The plaintiff has operated a restaurant and karaoke business on the premises.

3. The Writ herein was issued on 10 October 2001. In it, the plaintiff claims for rescission of the lease and damages for fraudulent misrepresentation. The misrepresentation complained of was in respect of the food lifts serving the premises and was said to have been made in October 1994. The damages claimed is no less than HK$34,000,000.

4. The defendant denies the allegations of misrepresentation and counterclaims for possession of the premises and for arrears of rent, rates and management fees in the amount of HK$898,729 together with mesne profits at the monthly rate of HK$325,000.

5. By way of Reply and Defence to Counterclaim, the plaintiff seeks to set-off the amount counterclaimed against the damages claimed.

6. Pleadings were closed in early January 2002, the Reply and Defence to Counterclaim having been filed on 20 December 2001. In May and June 2002, the defendant applied for and obtained orders for specific discovery and further and better particulars of the Statement of Claim. No summons for direction was filed by the plaintiff, however. The defendant eventually took out the summons for direction on 4 September 2002.

The appeal

7. By its Notice of Appeal as amended, the defendant seeks to vary two of the directions made by the Registrar, namely, to reduce the time for the exchange of witness statements from 60 days to 42 days, and to expedite the trial herein so that the trial can take place before the expiration of the lease on 10 August 2003.

8. The reason for the plaintiff's appeal, put simply, is this. It is not in dispute that the plaintiff has since September 2001 been occupying the premises without paying the rent, rates and management fees. The arrears up-to-date is in the sum of HK$4,400,000 and will exceed HK$7,700,000 by August 2003 when the lease expires. By contrast, the plaintiff's claim of damages of over HK$34,000,000 is inclusive of loss of business income at the daily rate of $15,000 commencing September 2001. In view of the fact that the warning from the Building Authority in relation to the food lifts is alleged to have been first given in September 1998, and that the defendant had issued Notice of demand for rent in October 2002, the defendant says that the timing of the Writ is more than coincidental. The defendant fears that if this action is not concluded before the lease expires, there is a real risk that the plaintiff will cease to be a going concern, whereupon the defendant will be left with an empty judgment on the counterclaim. This is particularly so when the paid up capital of the plaintiff is only HK$10,000.

9. The defendant also, on legal advice, takes the view that an application for interim payment is unlikely to succeed. Although it is considering applying for interim possession order, it is felt that the arguments involved are less than straightforward. The defendant therefore says that its fear is unlikely to be alleviated by interim or interlocutory relief. Accordingly, the defendant contends that an expedition of the action is paramount to avoid the prejudice and injustice that arise out of the plaintiff's continuous use of the premises without payment.

Reasons for decision

10. In my view, the defendant's concern is not unjustified. As the submissions of Mr Au for the plaintiff shows, the plaintiff is likely to continue occupying the premises, despite the complaint that it cannot operate the steak house business and can only run a karaoke on the premises, and also notwithstanding that it has claimed for rescission of the lease. A speedy resolution of the action is required in the interests of administration of justice.

11. It is also to be noted that the plaintiff has failed to issue the summons for direction and there is a delay of some nine months. But for this, discovery and exchange of evidence would have been completed by now and the action would be ready for trial. It is therefore understandable for the defendant to turn to the Court for directions to expedite the action. I am of the view that this is an appropriate case for the Court to intervene and to expedite the process leading to the trial of the action.

12. Mr Au does not agree to the relief sought by the defendant on this appeal. He submits that 60 days should be given for the exchange of witness statements in that time should be given for the statements to be properly prepared. There can be no doubt that parties should be afforded time to properly prepare witness statements. The question that this appeal poses is whether it is necessary to afford the parties 60 days to prepare the statements.

13. In this case, the factual issues are not complicated. The litigation was initiated by the plaintiff. There has been some nine months since the close of pleadings. I see no reason why the witness statements cannot be completed within 42 days, the same duration of time for exchange of the expert statements.

14. As to the direction that the trial should take place before court summer vacation in 2003, I do not consider it appropriate to make an order in that form at this stage of the proceeding when the preparatory steps have not yet been accomplished. It will however be appropriate to designate a date for hearing the setting down application so that the parties can take that as a milestone and work to ensure that the interlocutory and preparatory steps are accomplished by that date.

Conclusion

15. The appeal is therefore allowed. The order of the Registrar is varied to the extent that :

(a) The time for the exchange of signed witness statements as to fact be reduced from 60 days to 42 days from 23 September 2002; and

(b) The application for setting down the action be listed before the Listing Master on 13 November 2002 at 2:30 p.m.

16. There is no reason why the rule of costs follow event should not apply. Accordingly, the plaintiff is to pay the defendant the costs of the appeal in any event as prayed for in the Notice of Appeal.