ONE QUEEN CO LTD v. CHAN SIU LAN AND ANOTHER

1989, No. A716

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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D E C I S I O N

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1. The applications coming before me this morning can only be described as unusual. The plaintiff relies on an Agreement for a Lease dated the 2nd December 1986. I shall call it "the said Agreement". By the said Agreement, as the intending landlord and registered owner of the premises in suit, the 1st defendant agreed to grant to the plaintiff a three years' lease to commence on a date to be ascertained in accordance with the provisions thereof. The 2nd defendant was the existing tenant of the suit premises whose interest would expire on the 15th December 1988. After the 15th December 1988 the 2nd defendant closed the suit premises allegedly for accounting purpose. The closure was claimed by the 2nd defendant to be for only one day. Commencing from the 16th December last year, the 2nd defendant held over. There is no evidence of any agreement reached or bargain struck between the 1st defendant and the 2nd defendant for the occupation of the suit premises by the latter after the 15th December.

2. Under the said Agreement, the 1st defendant had certain obligations to perform. Clause 6 of the said Agreement reads as follows:-

"(a) It is the mutual understanding of both parties that the existing Tenant may continue to hold over the said premises after the expiration of the existing Agreement PROVIDED however that the Intending Landlord shall procure the eviction of the existing Tenant from the said premises on or after the 16th day of December, 1988.

(b) The Intending Landlord shall not at any time before the 31st March, 1989(or 30th June 1989 if extended by the Intending Tenant under Clause 6 hereof) and during the subsistence of this Agreement let out the said premises to any other party other (sic) than the Intending Tenant save and except the holding over of the said premises by the existing Tenant."

3. Since the l6th September 1988, the 1st Defendant has refused to take steps to have the 2nd defendant evicted from the suit premises. The plaintiff claims against the 1st defendant for specific performance of the said agreement, an order that the 1st defendant do take all reasonable steps to have the 2nd defendant evicted from the suit premises, and an injunction restraining the 1st defendant from letting or granting any interest in the suit premises to any other parties than the plaintiff. The plaintiff also seeks damages in lieu of or in addition to specific performance against the 1st defendant

4. As against the 2nd defendant, the plaintiff seeks a declaration that its interest in the suit premises takes priority over whatever interest vested in the 2nd defendant. It is also alleged against the 2nd defendant that it should pay damages for procuring the breach of the said Agreement by the 1st defendant.

5. Against both defendants, there is a claim of conspiracy on the alleged overt acts set out in paragraph 13 of the Amended Statement of Claim. They are as follows:-

"(a) the 1st Defendant by allowing the 2nd Defendant to remain in possession of the said premises and taking no steps towards evicting the 2nd Defendant; and

(b) the 2nd Defendant by remaining in possession of the said premises well knowing the Plaintiff's interest in the said premises under the said Agreement."

6. The plaintiff seeks, under 0. 14 as well as 0. 29, partial judgment and an injunction against the 1st defendant. In essence, the 1st defendant is being pressed to take eviction proceedings against the 2nd defendant and presumably prosecute the same with diligence. The 1st defendant is also being sought to be prevented from parting with any interest in the suit premises to persons other than the plaintiff.

7. The 1st defendant resists the plaintiff`s applications. She asks from the court under O. 18, r. 19 to have certain paragraphs of the Amended Statement of Claim struck out. They are paragraphs 5, 10, 12, 13, 14, 15 and prayers I and III.

8. As far as the plaintiff is concerned its claim against the 1st defendant is straight forward. The plaintiff relies on paragraph 6 (a) of the said Agreement which I have earlier set out seriatim. Relying on the alleged overt acts pleaded in paragraph 13 of the Amended Statement of Claim, the plaintiff raises a charge of conspiracy against both defendants with consequential relief. I shall deal with the conspiracy allegation first.

9. There is no assertion that the 1st defendant has entered into any agreement with the 2nd defendant for its holding over after the 15th December 1988. The holding over of the 2nd defendant could be with or without the consent or agreement of the 1st defendant. If the 2nd defendant had determined to hold over unlawfully against the 1st defendant, inaction on the part of the 1st defendant would not have removed the unlawful element in the occupation of the 2nd defendant. It is not alleged that the 2nd defendant would not have held over after the expiry of his own tenancy without the consent or agreement of the 1st defendant. There is no allegation of the granting of a licence or permission. Therefore "by allowing the 2nd defendant to remain in possession of the suit premises as alleged is not necessarily an overt act in conspiracy. Taking no steps towards evicting the 2nd defendant is also not necessarily such an overt act. That the 2nd defendant held over, with alleged knowledge of the plaintiff's interest cannot be evidence of an overt act in the alleged conspiracy. The conspiracy charge against both defendants must, therefore, fail and paragraphs 12, 13, 14, 15 and prayers III should be struck out as the 1st defendant has requested.

10. Finally, I come to the summons of the plaintiff for partial judgment and injunction. Taking the prayer for injunction first, there is no evidence or allegation that the 1st defendant intends to do or has evinced any intention of doing any of the acts sought to be prohibited in paragraph 2 of the plaintiff's summons. Insofar as it is a prayer for an injunction against the 1st defendant restraining her from pursuing any of the matters set out, in that paragraph, it is wholly unsupported by any, allegation and unsubstantiated by any evidence of threatened unlawful acts on her part. The prayer for injunction therefore cannot succeed.

11. The remaining matter is a claim for partial judgment against the 1st defendant. The 1st defendant levels a double-barrel attack at the said Agreement. First, it is claimed that the said Agreement provides no certain date for commencement. That contention can be disposed of briefly. Clause 1 of the said agreement provides that the grant from the 1st defendant to the plaintiff is to be for a term of three years commencing from a date to be ascertained in the manner as described in Clause 2(b) thereof. Clause 2(b) provides for the lease to commence on the delivery of vacant possession, and vacant possession is to be delivered up by the 1st defendant to the plaintiff pursuant to Clause 4 upon the execution of the lease. The lease is to be executed under Clause 2(a) at any time within seven days after a written notification from the 1st defendant to the plaintiff to the effect that all the terms and conditions set out in Clause 5 of the said Agreement have been duly fulfilled or compiled with Clause 5 of the said Agreement provides, inter alia, that it is to be subject to vacant possession of the suit premises being obtained by the 1st defendant from the existing tenant before the 31st March 1989 or such later date as agreed by the plaintiff under Clause 8. Clause 8 caters for the eventuality of failure of the 1st defendant to serve notice of completion on the plaintiff on or before the 31st March 1989 with an option to the plaintiff to grant an extention for such notice to be served for execution until the end of June 1989. The plaintiff's option must be exercised by a notice to the 1st defendant given before the end of April.

12. What is so strange is that the proviso to Clause 5(a) enables the 1st defendant to determine whether or not vacant possession is obtained for the purpose of the said Agreement, and her determination "shall be final and conclusive"

13. Clause 9 of the said agreement is an extraordinary clause and it reads:-

"In the event that the Intending Landlord fails to give to the Intending Tenant written notice as provided in Clause 2(a) hereof on or before 30th June 1989, the parties shall be released from this Agreement without any claim or compensation against each other but the sum of HR$150,000.00 shall be forthwith refunded to the Intending Tenant without any interest thereon."

14. Clause 9 does suggest that when the time of 30th June 1989 finally comes it shall be open to the 1st defendant to excuse herself from her contractual obligations with immunity.

15. But the totality of the said Agreement obviously hinges upon the eviction of the 2nd defendant and the 1st defendant's agreement to do so.

16. Paragrpah 2 of the Recital recites the occupation of the 2nd defendant as the existing tenant. Clause 6(a) clearly envisages the possibility of the existing tenant, the 2nd defendant holding over after the expiration of its tenancy. The word "may" does not sanction an otherwise unlawful holding over. Clause 6(a) is awkwardly phrased, but it is reasonably clear that the 1st defendant has, as the intending landlord under the said Agreement, bound herself to procure the eviction of the 2nd defendant as the existing tenant on or after the 16th Deceraber 1988. Such an intention is unobscure. At the expiration of the lease of the 2nd defendant, the 1st defendant must use her best endeavours to have the 2nd defendant evicted, and in the meantime, pending the attempted eviction of the 2nd defendant, the 1st defendant is not to let out the suit premises to any party other than the plaintiff. See paragraph 6(b). Courts are inclined to uphold a bargain. If the 1st defendant had performed her obligation under Clause 6(a) of the said Agreement the intending lease to the plaintiff for three years could have been ascertainable subject to the possibility of the 1st defendant's inability to have the 2nd defendant successfully evicted and subject to the possibility of the 1st defendant invoking other provisions in the said Agreement for her benefit. But those are events for subsequent consideration. A date could be ascertained under the provisions of the said Agreement creating a possibly defeasible interest, and the agreement is not null and void and of no legal effect.

17. It was also contended on behalf of the 1st defendant that the provisions of the said Agreement would enable the 1st defendant to breach his contractual obligations with immunity. Solicitor, Mr Lau, for the 1st defendant refers me to various clauses, such as Clauses 1, 2 (a), 5(a), 6(a), 6(b), 8 and 9 of the said Agreement. The object of the exercise was to demonstrate that the said Agreement may not be legally enforceable, and is therefore not a legally enforceable document. The very fact that a party to a document may possibly avoid or evade his contractual obligations with immunity is no ground for suggesting that the agreement itself is unenforceable. That is precisely the situation in the instant case. It may very well be argued that the 1st defendant's obligation to have a three years lease granted to the plaintiff under the provisions of the said Agreement are open to avoidance or evasion, but it would be a far cry from submitting that the said Agreement itself is not legally enforceable and hence the claim of the plaintiff against the 1st defendant is frivolous, vexatious or an abuse of court process.

18. I disagree with the submissions so advanced on behalf of the 1st defendant by Mr Lau. The claim of the plaintiff for partial judgment against the 1st defendant in paragraph l of the plaintiff's summons must be acceded to. Bargains struck by parties in a document entered into with the assistance of solicitors the parties must abide by. The Courts do not, as a rule, favour a construction against validity. Having duly discharged and performed contractual obligations by one party or another, whether any of the parties to the said Agreement nay later avoid or evade contractual obligations would be a matter for future consideration.

19. In the circumstances, I would allow the plaintiff on paragraph 1 of the summons filed on 4th March 1989 against the 1st defendant, that is to say the 1st defendant be ordered to forthwith take all reasonable steps including, but not limiting to the issuing of legal proceedings for evicting the 2nd defendant from the suit premises.

20. I propose to award costs of to-day's hearing as to 4/5ths to the plaintiff and l/5 to the 1st defendant with both summonses and time occupied by the submissions on both summonses taken together.

(Further submissions)

21. The suggestion as to costs was not disagreed with by counsel and solicitor. Mr Chain invites me to disallow the 1st defendant's additional affirmation filed for the plaintiff's summons against the 1st defendant or for the 1st defendant's summons to strike out against the plaintiff. It may be argued that the sane affirmation may serve all the purposes under both summonses, but the summonses are separate and it would be tidier, at least, to have an individual affirmation filed under each of the summonses. Whether or not it was a matter of necessity, it was certainly a prudent course to take by the legal advisers of the 1st defendant. For such practical reasons, I would not be prepared to disallow costs of one of the two affirmations filed on behalf of the 1st defendant. Therefore I order that orders made as in my decision with the costs 4/5ths to the plaintiff and 1/5 to the 1st defendant for the whole tilde spent in submissions and arguments for and on both summonses.