ACTION RICH INVESTMENT LTD v. MIDLAND CORPORATE LEASING (XXXIV) LTD

HCA 171/2020

[2020] HKCFI 550

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 171 OF 2020

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DECISION

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1.  The plaintiff (“P”) is seeking an inter partes interlocutory injunction to evict the defendant (“D”) from Shop 25, G/F., Grandway Garden, 16 Mei Tin Road, 15 & 35 Tsuen Nam Road, Shatin (“the Property”) on an urgent basis. Having considered the nature of the application, I have given leave to P to issue the writ of summons and the inter partes summons (“the Summons”) during the General Adjourned Period (“GAP”).

2.  Originally, the substantive hearing of the Summons was fixed on 23 March 2020.  Due to the extension of GAP, that hearing could not proceed as scheduled.  The Court has directed that the Summons be determined on paper without an oral hearing.  Both parties have provided me full written submissions, and I am grateful for that.

THE DISPUTE

3.  The dispute between P and D falls within a narrow compass.  P is the owner of the Property.  P and D signed a tenancy agreement (“the TA”) on or about 2 November 2016, by which P agreed to lease and D agreed to rent the Property from 1 March 2017 to 29 February 2020 at the monthly rent of HK$570,000.  Clause 3(m) of Schedule II to the TA contains an option of renewal (“the Option”), which is as follows:

“雙方同意租客於本租約期滿時，有優先權續租壹年(option to renew)，續約租金為港幣陸拾萬元正(HK$600,000.00)，一切其他條款與本租約期内之租賃條款相同，但租客必須於本租約期滿前給予業主不少於叁個月之書面通知。”

4.  P’s case is that D did not exercise the Option at any time on or before 30 November 2019, and hence the option has lapsed.  On or about 30 December 2019, P signed a tenancy agreement (“the New TA”) with Centaline Property Agency Limited (“the New Tenant”), by which P has let the Property to the New Tenant for a term of 2 years (1 March 2020 to 28 February 2022) with a monthly rent of HK$515,000 for the 1^st year and HK$530,000 for the 2^nd year.  However, D refused to deliver vacant possession of the Property to P after 29 February 2020, causing P unable to perform the New TA.  The New Tenant is urging P to deliver possession of the Property to them forthwith, and the New Tenant is considering to sue P. Against this background, P has to commence these proceedings and to seek an injunction on an urgent basis to recover possession of the Property from D.

5.  D’s case is that P is estopped from denying that the Option has been validly exercised.  As a result, D is entitled to stay in the Property for one more year starting from 1 March 2020.  D is relying upon estoppel by representation and estoppel by convention[1].

6.  The crux of the matter is whether there is an estoppel by representation or an estoppel by convention operating against P as claimed by D.  The burden of proving these estoppels is on D.

THE PRINCIPLES

7.  The general principles concerning interlocutory injunctions are trite.  A useful summary of those principles can be found in Wah Nam Holdings Co Ltd v Excel Noble Development Ltd^[2]:-

(1)  whether there is a serious question to be tried;

(2)  if so, whether, if the plaintiff were to succeed in obtaining a permanent injunction at trial, it could adequately be compensated by an award of damages in respect of any loss which it might suffer by reason of the defendant continuing to act unrestrained pending the trial;

(3)  if not, whether the defendant would be adequately protected by the plaintiff’s cross-undertaking in damages should it be later found that the plaintiff should not have been granted an interlocutory injunction; and

(4)  if there is doubt as to the adequacy of the respective remedies of damages, where the balance of convenience lies.

8.  A serious question to be tried is not a very steep hurdle.  As long as there is a serious issue, it matters not whether the plaintiff’s chance of success at trial are 90% or 20%.  All that has to be shown is that the plaintiff has prospects of success which, in substance and reality, exists^[3].

9.  In respect of an interlocutory mandatory injunction, the party seeking the injunction has to demonstrate a high degree of assurance that it will succeed at trial^[4]. However, “this is only generally the court's approach.  Where it is shown, as an exception to this general approach, that the case is one in which the withholding of an interlocutory mandatory injunction would in fact carry a greater risk of injustice than granting it even though the court does not feel the ‘high degree of assurance’ as aforesaid, it would be right to grant an interlocutory mandatory injunction.”^[5]

HIGH DEGREE OF ASSURANCE

10.  I am of the view that the injunction sought by P has a mandatory element, ie requiring D to forthwith deliver vacant possession of the Property to P.  That being the case, in considering P’s application, I have to consider whether there is a high degree of assurance that P would succeed at the trial.

11.  In the circumstances of this case, it is indisputable that:

(1)  P is the owner of the Property;

(2)  the term of the TA has expired on 29 February 2020;

(3)  D now is not arguing that D has validly exercised the Option by any written notice in accordance with Clause 3(m) of Schedule II to the TA; and

(4)  D has no right to stay in the Property after 29 February 2020 unless the estoppels claimed by D are proved.

12.  Thus, in considering whether there is a high degree of assurance that P would succeed at the trial, I have to examine the strength of the estoppel defence put forward by D.  Since there would be a trial in these proceedings in the near future, I would refrain from making detailed comments on the merits of the parties’ respective cases in this decision.  I would only say that based upon the materials now before the Court, D has not put forward a strong case on either estoppel by representation or estoppel by convention.

(1)  In respect of estoppel by representation, an essential element is a clear and unequivocal representation of fact made by the representor[6].  Having considered the Whatsapp exchanges between P’s representative Mr Tse (“Tse”) and D’s representative Mr Lam (“Lam”) at the material times (including the transcripts of the audio messages in those Whatsapp exchanges), I do not see a clear and unequivocal representation of fact made by P in those exchanges that P regarded that the Option had been duly exercised by D.  There is no contemporaneous documentary evidence in support of the D’s claim.

(2)  In respect of estoppel by convention, there must be a common assumption upon which the parties entered into a transaction or legal relationship[7].  I also do not see any contemporaneous documentary evidence showing that common assumption.

(3)  In the absence of the aforesaid contemporaneous documentary evidence, D has not put forward a strong case on either estoppel by representation or estoppel by convention.

13.  For the sake of completeness, I have also considered an argument raised by D’s solicitors in the correspondence at an earlier time, ie that the written notice required under the TA for the valid exercise of the Option has been given by Lam to Tse through Whatsapp messages. With respect, I do not see such a notice in those messages.

14.  On the basis of the materials now before me, I am of the view that there is a high degree of assurance that P would succeed at the trial.

15.  Even if I were wrong on the above, and even if I had held that P has no more than an arguable case, for the reasons set out in [16] – [20] below, I would still grant the injunction to P.

WITHHOLDING INJUNCTION CARRYING A GREATER RISK OF INJUSTICE

16.  Although D is a company in the Midland Realty Group, D itself is a separate legal entity with a paid up capital of HK$1 only. There is no evidence showing that D itself has any valuable asset.

17.  On the other hand, P is a company with substantial assets.  P is the owner of the Property.  I note that the Property is subject to a mortgage.  However, even putting aside the Property, P’s assets are still substantial.

(1)  As shown in P’s audited accounts, P had a net asset value of over HK$200 million as at 31 March 2019.

(2)  The cash balance in P’s bank account as at 31 January 2020 was over HK$4.6 million.

(3)  Under the New TA, P would receive rental income of HK$515,000 each month.

18.  If no injunction is granted, P would not be able to recover possession of the Property from D and would not be able to perform the New TA.  In this scenario, it is highly probable that P has to pay compensation to the New Tenant, for P has breached the New TA.  Subsequently, if P succeeds at the trial, it is highly unlikely that D would be able to compensate the losses suffered by P in the absence of an injunction pending trial.

19.  Conversely, if the injunction sought by P is granted but D succeeds at the trial, P would be able to compensate the losses suffered by D as a result of the injunction.  If D cannot continue its business at the Property, D would suffer losses.  However, these losses are monetary losses which can be compensated by damages.  Given that P is a substantial company and the trial in these proceedings will take place soon (see below), there is little doubt that P would be able to pay the monetary compensation to D, if D is the ultimate winner in these proceedings.

20.  In view of the above, withholding the injunction sought by P would carry a greater risk of injustice than granting it.  In these circumstances, it would be right to grant the injunction to P.

SPEEDY TRIAL

21.  Bearing in mind that the renewed term under the Option is only one year, ie from 1 March 2020 to 28 February 2021, it would be in the interest of the justice to resolve the dispute in these proceedings as soon as practicable.  With this in mind, the Court has written to the parties on 20 March 2020 to propose to have the trial in June 2020.  I have set out some provisional directions concerning speedy trial in that letter.  Both P and D have no objection to having a speedy trial in these proceedings.  In these circumstances, I would now make the provisional directions set out in that letter as formal directions of the Court.  Due to the extension of GAP, I would add this: If any document ought to be filed by a party to the Court on or before a certain date under those directions but that date is within GAP, the party should provide the document to the Court through the designated no-reply email by the same deadline.  Thereafter, that document should properly be filed to the Court for record within 14 days after the reopening of the Registry of the Court.

22.  Since I have directed a speedy trial, the timetable laid down in those directions have to be strictly observed. Extension of time would only be given in exceptional circumstances.

DISPOSITION

23.  I allow P’s application.  I would allow D to have a few days to make arrangements and to hand over the Property to P.  I order that D do deliver vacant possession of the Property to P by noon on 31 March 2020.  I further order that D, whether by itself, its officers, servants or agents or otherwise howsoever, be restrained from remaining or using the Property at any time after noon on 31 March 2020 until the conclusion of the trial herein or until a further order made by this Court.

24.  P has succeeded in obtaining the interlocutory injunction sought in the Summons.  However, it is not yet known which party would ultimately succeed in the trial.  In my view, the appropriate costs order in these circumstances is that costs of the Summons be P’s costs in the cause. Since submissions in relation to the Summons are prepared within a very short period of time, I would grant a certificate for 2 counsel.

25.  Lastly, it remains for me to thank counsel for the assistance provided to the Court.