BEST HONOUR INVESTMENT & DEVELOPMENT LTD v. BEST SONIC LTD

HCA4391/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4391 OF 2002

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J U D G M E N T

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1. This is an appeal by the defendant from an Order 14 judgment entered by the Master in favour of the plaintiff, a landlord, against the tenant for non-payment of rent, for forfeiture of the deposit under the lease and for repossession of the premises.

2. The defence that had been raised by the tenant consists mainly of allegations of breaches of what we have called the 4th Lease entered into on 3 March 2001 between the previous landlord who I will call "the Assignor" and the tenant for a term of three years at the monthly rent of $188,000 per month.

3. The complaint of the defendant tenant is that under the 4th Lease there had been a breach by the Assignor to repair the premises which resulted in an alleged loss to the tenant of $3.9 million and the contention of the defendant is that this gives rise to the right of the tenant not to pay the rent to the present landlord, plaintiff, who took over as owner by assignment on 16 October 2002.

4. Prior to the plaintiff becoming owner, the Assignor had agreed to reduce the monthly rent under the 4th Lease from $188,000 to $94,000 and that is recorded in the Confirmation Letter of 29 June 2002 which can be found at page 77 of the bundle.

5. The position was, in fact, complicated by the tenant starting a High Court Action under HCA4412/2002 on 21 November 2002. In that action commenced on 21 November 2002, the tenant claimed as plaintiff in that action against the present plaintiff damages for the breaches under the 4th Lease committed by the Assignor. That cause of action was struck out by Master Bharwaney on 21 January 2003 on the ground that the claim disclosed no reasonable cause of action. There was no appeal from that order. Therefore, it seems to me, quite clearly that the point that Mr Au for the defendant is seeking to argue today is res judicata and that it is not open to either the Master or to me to hear re-litigation on the point as the question at issue had been decided already between the same two parties in relation to the same subject matter, even though this is an action in the present proceedings whereby the plaintiff is suing for rent. So res judicata is the first ground or the first basis for the court to conclude that the point contended by Mr Au cannot be entertained or succeed.

6. If I am wrong about the res judicata point, then in any event it seems to me quite clear that having regard to the careful decision in the judgment of Duncliffe and another v. Caerfelin Properties Ltd [1989] 27 EG 89 on the very point that has to be decided today that there is no arguable defence. It is contended by Mr Au that Re King should be considered the proper correct principle. Re King is on a totally different situation where the consideration is given to the equivalent of our section 31 and not on the proper construction of section 32. The conclusion of Duncliffe is that an assignee landlord is not burdened with the liability of breaches committed by the assignor previous landlord and that principle so decided is totally applicable to our case. So on that second ground the defence also fails.

7. The fall-back position of Mr Au in his desperate defence is to say that if past breaches by the previous landlord cannot be considered then there had been breach of the covenant to repair after the plaintiff had become the new owner and the allegation is that there was, in November 2002, a disrepair to the premises which led to the ceiling concrete coming down and notice was given to the management company. But notice to the management company is not written notice under clause 3(c) of the 4th Lease required to be given by the tenant to the landlord and, until the written notice is given and 14 days has elapsed after the written notice, the landlord is not considered to be in breach of the obligation to repair.

8. I see no basis therefore for the defendant to contend that there had been a breach by the landlord of the obligation to repair. There is an attempt to allege waiver but I think it just simply does not run. I therefore conclude that there is no defence to the claim. The appeal by the defendant must fail. The appeal is dismissed with costs and the possession of premises should be returned by the defendant to the landlord plaintiff as soon as possible.