GREAT CITY HOLDINGS LTD v. TO CHUN HUNG

HCA 47/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 47 OF 2009

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BETWEEN

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D E C I S I O N

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1.  The plaintiff is the government lessee of certain land in Tai Po in the New Territories. The government lease prescribed the user as agricultural. The plaintiff entered into a tenancy agreement with the defendant dated 15 February 2008, which commenced on 1 February 2008 at a monthly rental of $40,000. The tenancy prescribed the user as farmland.

2.  The defendant used the land as a barbecue site and that was contrary to both the government lease and the tenancy. The plaintiff was prosecuted for breach of government lease by reason of this and was fined $30,000. The plaintiff now claims the defendant for this sum as the plaintiff’s loss caused by the defendant’s breach of the tenancy.

3.  The defendant has also failed to pay rent since 1 April 2008. The plaintiff therefore claims arrears of rent and vacant possession of the land in the statement of claim.

4.  The defendant has filed a defence and counter-claim. He pleaded that his nephew, a Mr Chu, who was the plaintiff’s agent, had represented to him in about March 2006 that the plaintiff’s land was occupied by tenants and sub-tenants who used it as a barbecue field. Mr Chu further said that the plaintiff wanted the defendant’s assistance to recover possession of the land from these tenants and sub-tenants. If the defendant could succeed in this task, the plaintiff would allow the defendant to occupy the land and use it free of rental for 5 years as a barbecue site.

5.  Relying on Chu’s representation, the defendant then spent time, effort and money to obtain, and successfully obtained, vacant possession of land for the plaintiff. Since then the defendant had been occupying the land and generating profits. The defendant therefore alleged a proprietary estoppel and argued that the plaintiff is estopped from denying the defendant’s right to occupy and use the land for 5 years from March 2006 free of rental.

6.  The defendant further pleaded that in about May 2006, Chu saw that the defendant had a profitable operation. Chu therefore asked the defendant to pay the plaintiff a deposit of $140,000 and a monthly rental of $10,000 which the defendant paid on a without prejudice basis.

7.  In about February 2008, Chu represented to the defendant that the plaintiff wanted to apply to the Town Planning Board for a barbecue licence and required a written tenancy agreement to show to the board. The defendant therefore signed the tenancy dated 15 February 2008 with the plaintiff pursuant to this representation. The tenancy was therefore a sham document and not intended to take effect, but only for the purpose of being shown to the Town Planning Board.

8.  The defendant further pleaded that the tenancy should be rescinded because of the fraudulent representation of the plaintiff through Chu. The defendant further counterclaimed for damages for interference with his use of the land by the plaintiff through Chu since November 2008.

9.  The plaintiff, in a reply and defence of the counterclaim, pleaded that it bought the land in March 2006 with vacant possession. The land was then let to one Silver Moon Limited from 13 June 2006 to 31 December 2007 with Chu and another person surnamed Siu as guarantors. After the expiry of that tenancy, Chu introduced the defendant to the plaintiff in the beginning of 2008. The parties then entered into the tenancy dated 15 February 2008. The defendant paid $40,000 rental deposit and $70,000 as rental for February and part of March 2008. The defendant also gave the plaintiff post dated cheques to cover the future rental.

10.  The plaintiff did not present the cheques for April and May 2008 for payment, but the remaining cheques were dishonoured upon presentation. The plaintiff also denied any agency relationship with Chu. The plaintiff also denied of having ever applied to the Town Planning Board for a barbecue licence.

11.  The plaintiff then issued a summons on 5 March 2009 for summary judgment. The summons sought the amount claimed in the statement of claim with interest. However, it did not include the relief of vacant possession.

12.  The application was supported by an affirmation of the plaintiff’s general manager, Mr Chan. He repeated the statement of claim and the reply. He denied the defendant’s allegations as summarised above. He also did not mention the prayer for vacant possession in his affirmation. He made two more affirmations elaborating on the matters mentioned in the plaintiff’s pleadings.

13.  The defendant made an affirmation to oppose the application for summary judgment. He said there were in March 2006 sub-tenants on the land. He spent time, efforts and money to negotiate for vacant possession to be given by these sub-tenants. There were in particular a Mr Lin, who was operating a farm, and a Mr Wong, who was operating a barbecue field. He paid $30,000 to Lin and $50,000 to Wong in cash for their departure. He also spent about $183,000 to lay a concrete foundation on the land and established a barbecue business there.

14.  He said he would not have done anything to recover the land or to spend the money but for Chu’s representation. He agreed that he had paid Chu some money, but he said that was just because he had run the barbecue business successfully and hence acceded to Chu’s request for payment on a without prejudice basis.

15.  On 30 April 2009, the plaintiff took out a further summons for interim payment of rental from the defendant from 1 April 2008 onwards. The summons was also supported by an affirmation by Mr Chan who produced and relied on the tenancy of 15 February 2008 and two letters of demand. On 29 May 2009 the plaintiff took out a further summons for interim payment but on account of the defendant’s use and occupation of the land.

16.  The defendants also made an affirmation to oppose the application for interim payment. He referred to the plaintiff’s delay in presenting his cheques purportedly for rental payment of $40,000 per month. He said the plaintiff only presented the cheque for the June payment on 16 December 2008 and the cheques for the subsequent months up to December 2008 on 31 December 2008. He therefore denied the genuineness of the tenancy dated 12 February 2008. But he did not deny the giving of these cheques or explain why he gave them to the plaintiff.

17.  He also produced some business registration documents to show that Chu’s sister, his elder brother and another person had been doing a barbecue business on the land since March 2006. He said he and Chu were in fact interested in this business.

18.  Mr Chan of the plaintiff also made an affirmation to reply to the defendant. He said the cheques were not duly presented because the defendant had made requests through Chu for the plaintiff’s indulgence on the ground of shortage of money. Mr Chan then gave the defendant indulgence. But he presented the cheques in December 2008 for payment on legal advice in preparation for proceedings to recover the land.

19.  Mr Chu also made an affirmation to confirm the genuineness the tenancy of 15 February 2008 and the defendant’s request to the plaintiff not to present the cheques for payment on the ground that the defendant was short of money.

20.  The application for interim payment was allowed by Master J Wong on 20 July 2009. The Master found the defendant’s allegation that the defendant was given 5 years rent-free use and occupation of the land in return for evicting tenants and sub-tenants unbelievable. He also found that the plaintiff’s case was well supported by contemporaneous documents but the defendant’s case was full of bare assertions. The defendant also had no proper explanation for the payments made by him and the dishonoured cheques he tendered to the plaintiff.

21.  The defendant’s appealed against the Master’s decision on interim payment was dismissed by Reyes J, but I am told that nothing has been recovered by the plaintiff despite the interim payment order. Restraint proceedings also resulted in nothing.

22.  The application for summary judgment was heard by Master Levy on 11 November 2009. The Master not only gave judgment for payments of all sums claimed with interest; she also allowed an amendment to the summons by adding a prayer for vacant possession and gave judgment to the plaintiff for vacant possession as well.

23.  The defendant appealed. Counsel for the defendant referred me to paragraph 14/1/6 of Hong Kong Civil Procedure 2009. It says that there should be an affidavit to verify the amendment to be served sufficiently long in advance to enable the respondent to appreciate the nature of the amended case and to meet it with evidence. If time does not permit this to be done, then the applicant must seek leave to amend and apply for an adjournment of the hearing so as to give the respondent sufficient time to prepare his case on the evidence and to meet the amended case. Counsel said this was not done when this case was before Master Levy.

24.  I note that the plaintiff so far has not explained why it did not include the prayer for vacant possession in the summons for summary judgment. However, the grounds and evidence that have been adduced for judgment for the payments are also sufficient grounds and evidence for judgment for vacant possession. In the circumstances of this case, if the defendant has not established a case to warrant leave to defend the claim for payments, I cannot see how he can defend the claim for vacant possession.

25.  I note the good sense in the discussion in Hong Kong Civil Procedure 2009 as referred to above, but in this case I can really see no prejudice to the defendant in not being given an opportunity to file further evidence to resist the claim for vacant possession. He has been given proper opportunities to spell out his case and to adduce evidence to support it. His case was disbelieved by Master J Wong. I agree with the grounds of the Master.

26.  Regarding the commencement of the barbecue business on the lot since March 2006, I think that business might well have been done pursuant to the tenancy given by the plaintiff to Silver Moon Limited, in which the defendant’s nephew, Chu was also interested. This fact alone would not justify leave for the defendant to defend either the claims for payment or the claim for vacant possession. Furthermore, Master Levy’s judgment was given 12 days ago. So far the defendant has not said a word on what further evidence he would like to give to resist the claim for vacant possession.

27.  In these circumstances I see no injustice in the granting of summary judgment for vacant possession by Master Levy. I dismiss the appeal with costs against the defendant.

(Discussion re costs)

28.  Overall I am happy to give 3 hours for all work in the appeal and I assess the sum at $15,000 to be payable forthwith.