WAI LUEN INVESTMENT CO. LTD. v. GOLDEN PALACE BALLROOM

1991 No. A978

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

___________

________________

______________

J U D G M E N T

______________

1. This is a defendat's appeal against an Order of Master Cannon dated 9th October 1991 whereby she gave summary judgment for possession of the premises situated at 28 Bute Street being a portion of the first floor, Hang Tung Building in Kowloon (the premises).

2. By a written tenancy agreement dated 23th January 1989, the plaintiffs agreed to let the premises to the defendant for a term of two years from lst February 1989 until 31st January 1991 at a monthly rental of $95,000 exclusive of rates, payable monthly in advance on the first day of each month.

3. By a Notice of Termination dated 26th July 1990, served on the defendant, the plaintiffs terminated the tenancy and requested the defendant to quit and deliver up possession of the premises on 31st January 1991.

4. The defendant alleges that in early October 1991 a representative of the landlord's agent informed the defendant orally that the plaintiffs were prepared to grant a new 2-year tenancy with a 30% increase on the old rental.

5. The defendant further alleges that on the strength of this oral agreement, they spent approximately $500,000.00 on decorating the premises.

6. At the end of November 1990, the defendant alleged that Hang Lung, the plaintiffs' agent, informed the defendant that they wished to withdraw from the agreement for a new 2-year tenancy. Meetings then took plaxe between the parties.

7. On December 6 1990, Hang Lung wrote a letter in English to the defendant stating that the plaintiffs were not prepared to grant a new 2-year tenancy, but were prepared to permit the defendant to remain in occupation for 3 months, i.e. until April 30 1991. The terms upon which they were prepared to permit this were that;

(1) The defendant would consent to judgment for possession and mesne profits at the rate of $115,000.00 per month.

(2) There will be a stay of execution until 30th April 1991 conditional upon punctual payment of mesne profits and other outgoings.

8. In order to achieve this end, Hang Lung stated in this letter that, a writ would be issued shortly but that the action would be settled on these agreed terms.

9. Mr. Mau of the defendant signed this letter as confirming acceptance of this offer.

10. A writ was indeed issued and the plaintiff's solicitors prepared the necessary consent summons to give effect to the agreement contained in the letter of 6th December. This consent summons was dated 25th February 1991 and the return day was 12th March 1991 The plaintiff's solicitors and Mr. Mau for the defendant countersigned the said consent summons.

11. Before the return day, the defendant went to see a solicitor and as a result of this, the defendant withrew their consent and no order was made by the court on 12th March 1991.

12. Earlier, on 11th February 1991, the plaintiffs haddemanded the sum of $115,000.00 as mesne profits.and on the 19th February this sum was, paid by the defendant and a receipt issued. Further sums of $115,000 00 were demanded as mesne profits and paid.

13. On 14th March 1991, the defendant wrote to Hang Lung about the court hearing on 12th March 1991 and said:

"Regarding the matter of court hearing, it was a total misunderstanding. Our Ballroom's primary intention was to request your company to approve a new tenancy for two years. For the (matter) between the solicitors, I really did not understand what the content said. It caused my disrespect to your company. I hereby write to apologize. Please forgive me."

14. Mr. Chain for the plaintiffs makes a strong point that this letter was written after, on the defendant's own case, they had been made aware of having been misled by the plaintiffs' agent, and yet there is nothing in this letter of a verbal agreement for 2 years at $123,000.00 per month.

15. Miss Chih who appeared for the defendant expressly abandoned any allegatio that by accepting $115,000.00 the plaintiffs had created a new tenancy at that rental. Mr. Chain had submitted, correctly in my judgment, that this was unarguable in the light of Clark v. Grant [1949] 1 AER 768, and in the light of the demands and receipts.

16. So the defendant's case rests fairly and squarely on the alleged oral argument in October 1990.

17. Some suggestion was made that the defence of non est factum could apply because the defendant could not understand English, but I find this to be unsustainable as a matter of law. What was meant by this argument was that I should not attach too much weight to documents adverse to the defendant's case on the grounds that they could not understand English. This clearly goes only to weight.

18. Applying the test in Murjani v. Bank of India [1990] 1 HKLR 589, I have to ask myself whether the defendant has satisfied me that there is a fair or reasonable possibility of the defendant having a real or bona fide defence. This threshold onus is on the defendant. Further, a mere assertion in an affidavit of a given situation which is to be the basis of a defence does not of itself provide leave to defend.

19. I must say that I view the defendant's case with a good measure of suspicion. Had it not been for one factor I would not have had the slightest hesitation in dismissingthis appeal.

20. This one matter which has made me pause for thought is the fact that the defendants say that on the strength of the oral agreement, they expended approximately $500,000.00 on the premises which they would not have done had they known that they were going to leave in April 1991. Mr. Chain accepts that I have to take these reoeipts at face value and cannot challenge their authenticity at the stage. However, he goes on to point out the various dates of the receipt of payment for these works, and then submits that the order for the works or the works themselves could easily have been given or done before the October agreement but in the anticipation that, like in the past, a renewal would be agreed. Further he submits that some of. these works might have been essential work which would have had to be carried out even on the basis of the defendant remaining in occupation only until April 1991.

21. There is, of course, much force in these points and in the further point made by Mr. Chain, that the defendants in their affirmations have not condescended to sufficient particulars about these works, their nature, the date of contract, the date of the works, etc.

22. However, having given this matter very careful consideration, I am just persuaded that the issue of the expenditure of this large sum of money allegedly on the strength of an oral agreement requires to be investigated at trial. It may well come to naught, but I am not prepared to shut the defendant out from arguing that there was such an oral agreement and that this expenditure was incurred on the strength of this agreement and would not have been incurred otherwise.

23. I, therefore, propose to allow this appeal and give the defendant leave to defend this action on condition that they pay to the plaintiffs on the first day of each month the monthly rental of $123,000.00, and that when called upon to do so, they punctually pay the other outgoings which under the tenancy agreement dated 23rd January 1989 they had agreed to pay.

24. Having discussed the question of costs with counsel at the conclusion of the argument, I propose to make an order that the costs of the Order 14 Proceedings, including this appeal, be in cause.

25. In the event that I allowed this appeal, Mr. Chain invited me to make directions for the trial of this action so as to achieve a quick hearing. He said that the issue was a simple one and that most, if not all, of the relevant documents had already been exhibited to affirmations. Miss Chih left the matter to me.

26. I, therefore, propose to make the following directions for the future conduct of this action in an endeavour to achieve as early a hearing date as is possible.

1. Defence (and counterclaim if any) to be filed within 3 days of the handing down of this judgment.

2. Reply and defence to counterclaim (if any) to be-fil-ed 5 days thereafter.

3. Within 2 weeks of handing down of this judgment both parties to exchange list of documents.

4. That there be inspection 7 days after the exchange of list of documents.

5. This action be set down for trial after the expiration of three months from the date of handing down this judgment. Trial to be by judge alone. Three days to be reserved.

6. Six weeks after this action has been set down for trial, the parties do exchange proofs of evidence of all witnesses whom they intend to call. No witness shall be called to give evidence whose statement has not been served as aforesaid without the consent of the trial judge. The trial judge to rule whether proofs of evidence should stand as examination-in-chief (unless agreed by the parties).