HOBMAN CO LTD v. NAM HOI BUS SERVICES CO LTD

DCCJ3176/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3176 OF 2015

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DECISION

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INTRODUCTION

1.  The plaintiff applies for summary judgment against the defendant for vacant possession of the land known as part of the Remaining Portion of Lot No 305 in Demarcation District No 12, Tai Po, New Territories, Hong Kong (“the Land”).  The other reliefs pleaded in the statement of claim remains ongoing. The plaintiff’s summons for summary judgment was filed on 16^th May 2016 at a stage where pleadings have been closed and the plaintiff has filed its witness statement.

THE PLAINTIFF’S CLAIM

2.  The plaintiff is the registered owner of the Land, including other parcels of land in Tung Tsz, Tai Po.  The defendant is a company incorporated in Hong Kong and was one of 30 occupiers of the plaintiff’s land in Tung Tsz.  Pursuant to a licence agreement dated 5 January 2015, the plaintiff granted the defendant the right to use the Land for a period of one year from 1 June 2014 until 31 May 2015 at a licence fee agreed at  $2,000 per month, save and except $1.00 from 1 June 2014 to 31 October 2014 (“the Licence Agreement”).  

3.  The plaintiff has no intention to renew the licence agreement with the defendant upon its expiry.  On 13 April 2015, the plaintiff issued a reminder to the defendant that the Licence Agreement was due to expire on 31 May 2015.  On 1 June 2015, the defendant did not deliver vacant possession to the plaintiff.  On 7 June 2015, the plaintiff issued a 2^nd notice to the defendant to demand vacant possession.  The plaintiff granted indulgence to the defendant to vacate the Land by 7 June 2015.

4.  The defendant failed to vacate the Land on 7 June 2015.  The plaintiff commenced this action on 10 July 2015.

5.  The plaintiff claimed the defendant made further payment of rent to the plaintiff by depositing sums of monies to the plaintiff’s bank account without notifying the plaintiff until September 2015.  No further payment was made since September 2015 when the plaintiff closed its bank account.

THE DEFENCE

6.  The defendant pleaded in paragraphs 6(a)(i) – (v) and (b) of the defence that a periodic licence agreement has been created. The defendant said, sometime in May 2015, a representative of the plaintiff made a representation to the defendant that as long as the defendant pays a monthly rent of $2,000, the defendant will be allowed to continue to the exclusive use of the Land.  The defendant paid the licence fee from June 2015 to September 2015. A periodic tenancy therefore came into being after the expiry of the Licence Agreement. 

7.  The defendant further pleaded in paragraph 6(c) – (d) that the plaintiff is estopped to issue writ of summons at time when the periodic licence agreement is in force. The plaintiff has waived its rights of the licence agreement when accepting rent and after the issuance of the writ of summons.  The plaintiff is estopped from seeking vacant possession.

8.  The defendant pleaded the plaintiff should be estopped by its conduct, or by its representation.

THE APPLICABLE PRINCIPLES

9.  The proper approach for application for summary judgment has been summarized by DHCJ B Chu (as she then was) in Pacific Harbor Advisors PTE v Winson Federal Ltd, HCA 1257/2013 (unreported, 1 August 2014):-

“(i) Once the plaintiff shows a prima facie case, the burden shifts to the defendant to demonstrate why judgment should not be entered.

(ii) A defendant must show that his assertions are believable and that there is a fair possibility of reasonable grounds that a bona fide defence exists.

(iii) Whether a defendant’s assertions are believable should be tested against contemporaneous documents and other pertinent circumstances.

(iv) Judgment should be granted if the defence put forward is “frivolous and practically moonshine”.”

ANALYSIS

10.  It is undisputable that a prima facie case can be established. The plaintiff is the registered owner of the Land, it has a right for vacant possession after the expiry of the Licence Agreement.

Periodic lease

11.  Not only the defendant’s allegation has not been particularized in its defence, the defendant’s allegation goes directly against the contemporaneous documents.  The defendant accepts the plaintiff has issued a reminder on 13 April 2015 and a final notice to quit was issued by the plaintiff on 1 June 2015. What followed was the commencement of this action on 10 July 2015.  There is an absence of believable evidence that it protested against the said two notices. The plaintiff was not required to take the steps as mentioned should it has had in mind a continuation of tenancy, be it renewal or a periodic tenancy.  

12.  The plaintiff maintained and issued statement of accounts to record the fees paid and payable by the defendant.  No demand was made to the defendant for payment of licence fee beyond the last instalment payable for the period of 1 May 2015 - 31 May 2015, only that the defendant deposited monies for the purported licence fees in July 2015 - September 2015 without notifying the plaintiff. Be it a potential dispute of fact, the defendant’s defence of paying rent duly is defeated by its failure to produce rental receipts issued by the plaintiff.

Automatic renewal of the Licence Agreement

13.  Alternatively, the defendant alleged sometime in November 2014, Wong Chi Wai, the plaintiff’s representative, had made a representation to Wong Chi Man, the director of the defendant, that the Licence Agreement “shall be renewed automatically in an annual basis and the defendant shall continue to maintain the lease of the Land”.  The defendant said it has made enquires with the plaintiff’s representative about the renewal of the Licence Agreement and the plaintiff had demanded rent for July and August 2015.

14.  A defence of option to renew to resist a summary judgment application was rejected in Best Honour Investment & Development Ltd v Best Sonic Ltd (HCA 478 of 2006, unreported, 20 June 2006), Reyes J held at paragraphs 14 - 16,

“14. By Conveyancing and Property Ordinance (Cap.219) (CPO) ss.3, 5 and 6 all interests in land created orally and not evidenced by writing take effect solely as interests at will. This would be so whether or not consideration has been given for the interest asserted. The occupier claiming a legal entitlement based on a parol interest may thus be evicted from the land at any time by a titleholder.

15. It is true that CPO s.6(2) allows the creation of parol leases for terms not exceeding 3 years. But such leases must take effect in possession.

16. That is plainly not the interest being asserted by Best Sonic. A lease “takes effect in possession” if it gives a present right to possession. A lease that will commence in the future would not fall under CPO s.6(2). The allegation here is that in October 2002 Ruby Way simply undertook that, in the future, Best Sonic would be entitled to an extension of the 2002 or later leases up to March 2008. That assurance by Ruby Way does not even amount to a lease.”

15.  A promise to renew on an annual basis which has been plainly rejected in law as a valid defence. Even though it is arguable that the defendant has paid rent to the plaintiff from June 2015 to August 2015, the alleged renewed licence agreement must have been terminated by way of non payment of rent since September 2015.

16.  It is also a pleaded as a defence that the plaintiff’s cause of action has not been accrued at time when the defendant had made deposits of alleged licence fees from July 2015 to September 2015. As at the issuance of the plaintiff’s summons, the defendant has already defaulted in payment of rent of the alleged renewed licence agreement. The defendant’s argument is unpersuasive.

17.  The defendant’s final attempt to shape the defence of automatic renewal of licence in form of promissory estoppel, in reliance of the representation of renewal on an annual basis, the plaintiff is estopped from obtaining vacant possession.  To tide up the loose ends, the defendant must demonstrate reliance and detriment.  Albeit the defendant has paid licence fees for a period of three months, the defendant has failed to put forward believable evidence that it has suffered any detriment in this regard which renders the plaintiff unconscionable to resile from the promise.

Dealings with Yip Chi Keung

18.  The defendant provided background information in Wong Chi Man’s affirmation that the defendant has entered into a tenancy agreement for the Land with Yip Chi Keung, a village head.  The tenancy agreement commenced from 17 November 2010 until Wheelok Properties (Hong Kong) Limited (the parent company of the plaintiff) resume the Land for development.  In short, the duration of the tenancy agreement overlapped with the Licence Agreement. Monthly rent was agreed at $7,000.  Yip Chi Keung procured the defendant to enter into the Licence Agreement (made in form of separate agreement from the said tenancy).  Yip Chi Keung agreed with the defendant for concession of rent at $5,000 thereafter because of the rental payment of $2,000 in the Licence Agreement.

19.  Be it there were such a “tenancy agreement” with Yip, it is unhelpful to establish there is some reason that the plaintiff’s claim should proceed to trial.  The reason being, Yip is not the registered owner of the Land, the “tenancy agreement” has no bearing in the Licence Agreement with the plaintiff. The dealings between the defendant and Yip were irrelevant.  By entering into the Licence Agreement, the defendant must come with knowledge that the “tenancy agreement” with Yip was questionable, or the defendant should not have signed the Licence Agreement with the plaintiff.

20.  More importantly, the dealings were not pleaded in the defence but were deposed in the affirmation of Wong Chi Man.  It is unhelpful to the defendant in resisting the plaintiff’s application for summary judgment.

Conclusion

21.  With the foregoing reasons, I am satisfied this is a suitable case for granting summary judgment for vacant possession of the Land to the plaintiff.  I do not see there existed a bona fide defence or triable issues in the defence, nor there are reasons that the plaintiff’s claim for vacant possession ought to proceed for trial.

Costs

22.  The plaintiff submits the costs of this application should be awarded on an indemnity basis because as expressly stipulated in clause 5 of the Licence Agreement, legal costs should be assessed on an indemnity basis.  I hold a different view after a careful reading of clause 5 because the legal costs incurred should be limited to costs relating to “outstanding licence fees, other outstanding charges and damages”[1], it does not relate to application for vacant possession. In this regard, costs should follow the event save indemnity costs shall not be awarded in this application.

23.  I therefore make the following orders:-

(i) Final judgment be entered for the plaintiff that the defendant shall deliver vacant possession of the land known as “Remaining Portion of Lot No 305 in Demarcation District No 12, Tai Po, New Territories, Hong Kong” to the plaintiff.

(ii) The defendant do pay the costs of the plaintiff’s summons filed on 16 May 2016, with certificate for counsel, to be taxed if not agreed.