TALFORD GROUP LTD. v. SINOBEST INTERNATIONAL LTD.

HCA004253A/1999

HCA4253/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4253 OF 1999

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BETWEEN
	TALFORD GROUP LIMITED	Plaintiff
	AND
	SINOBEST INTERNATIONAL LIMITED	Defendant

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Coram: Hon Cheung J in Chambers

Date of Hearing: 27 September 2000

Date of Judgment: 27 September 2000

 

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J U D G M E N T

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Security for costs

1. This is the plaintiff's appeal against the decision of the master ordering the plaintiff to pay security for costs in the sum of $500,000. The basis of the defendant's application was made under section 357 of the Companies Ordinance.

Evidence of impecuniosity

2. The plaintiff is a limited company and has an authorized share capital of HK$10,000. It has an issued share capital of $2. The defendant had obtained judgment in its counterclaim against the plaintiff in the sum of $792,740.30. The defendant was entitled to levy execution on $492,740.30 while the execution for the balance of the judgment in the sum of $300,000 is stayed. The plaintiff did not pay any of the judgment sum. The defendant managed to garnishee $189,332.39 from the plaintiff's account with a bank. This sum is used to reduce the partial judgment, leaving a balance of $303,409.91 with interest. The plaintiff's balance sheet as of 30 November 1999 showed that it has suffered loss in excess of $6 million. It is clear from the evidence disclosed so far that there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if the defendant is successful in its defence.

The plaintiff's case

3. The plaintiff stated that its financial difficulty was caused by the defendant and that it has a good case against the defendant. It also said that the order for security will stifle its claim. The plaintiff's claim against the defendant is as follows : the defendant is the landlord and the plaintiff the tenant of an office premises. There was leakage of water in the curtain wall of the premises during heavy rain which caused the plaintiff to suffer loss in the sum of $1.5 million. This includes loss of use of the premises, both partially and wholly, for a substantial period of time. From June 1997 to October 1998, there were 13 months of loss of use of one-quarter of the premises and four months for the loss of the whole of the premises. The other items of damages are in respect of the renovation fees and damages to the assets of the plaintiff. The plaintiff also seeks loss of profit.

Issues to be tried

4. In my view, this is not a case where the plaintiff could show that the strength of its case is so overwhelming and that the defendant has no defence to the action. The issues turn on, among other things, the construction of the terms of the tenancy agreement and whether the leakage caused disruption to the operation of the plaintiff for such a substantial period of time as alleged. In the affirmation, the defendant stated that when the caretakers delivered the dispatches to the premises of the plaintiff, they noticed that the office was operating in a normal way. The defence further pleaded that the plaintiff had prevented the defendant from entering the premises to deal with the complaints. There is no evidence at this stage of the costs of the renovation claimed by the plaintiff. As to the damages to the furniture in the sum of $286,880, even if, for the purpose of argument, the plaintiff may succeed in recovering this sum, it seems this amount is covered by the defendant's judgment of $300,000 which is now stayed.

Discretion in ordering security

5. Clearly from a review of the matter, the liability of the defendant is a hotly contested issue. In my view, since the issue of liability is in serious dispute, the plaintiff has not established that its impecuniosity is caused by the conduct of the defendant. As to the argument that the order for security will stifle the claim, it is not enough for the plaintiff to show that it is impecunious, but it must also demonstrate that there are no other sources to provide for the security. There is nothing to suggest that the discretion should not be exercised in ordering security.

Conclusion

6. In my view, the master's decision is correct. Having regard to the fact that this case will probably last for three days and that substantial costs had already been incurred in interlocutory applications, namely the Order 14 application and the appeal against that decision, the sum of $500,000 is appropriate. Accordingly, the appeal is dismissed.

 

 

 

Representation:

Mr Raymond Chung of Messrs K.C. Ho & Fong, for the Plaintiff

Mr B.K. Ho, instructed by Messrs Liu Chan & Lam, for the Defendant

 

HCA004253/1999

HCA 4253/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4253 OF 1999

____________

BETWEEN
	TALFORD GROUP LIMITED	Plaintiff
	AND
	SINOBEST INTERNATIONAL LIMITED	Defendant

____________

Coram: Hon Yeung J in Chambers

Date of Hearing: 13 January 2000

Date of Reasons for Decision: 13 January 2000

 

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REASONS FOR DECISION

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1. On 24 October 1999 Master Jones granted judgment in favour of the Defendant against the Plaintiff on its counterclaim for possession of the premises known as the 7th Floor, CNAC Group Building, No. 10 Queen's Road Central, Hong Kong and the sum of $792,740.30 being arrears of rent and/or mesne profit, rates, management and air conditioning fees, interest and reinstatement expenses. Master Jones also ordered a stay of execution of part of the judgment sum, namely $300,000.00 pending the trial of the action. The Plaintiff now appeals against the order of Master Jones.

2. The Defendant is the registered owner of the suit premises. By a tenancy agreement dated 14 March 1997, the Defendant let the suit premises to the Plaintiff for a period of 3 years commencing from 15 March 1997.

3. The Plaintiff purported to deliver vacant possession of the suit premises to the Defendant on or about 15 May 1999 without the payment of the rent, management and air conditioning fee since 1 November 1998. The Plaintiff also failed to pay the rates as from 1 January 1999.

4. It is the Plaintiff's case that the suit premises was not fit for occupation or use by reason of the seepage of rainwater from the curtain wall.

5. Apparently, the Plaintiff had made complaint about such defects shortly after taking possession of the premises in June 1997.

6. The Plaintiff seeks to rely on Clause 6 of the Tenancy Agreement which provides:

"Should the property or part thereof be rendered unfit for use and occupation by any cause not attributable to the negligence or default of the tenant, the rent or part thereof proportionate to the damage suffered by the property shall abate and cease to be payable until the property shall have been again rendered fit for occupation and, if already paid, shall be refunded by the landlord to the tenant without interest until the property shall again be rendered fit for habitation and use."

7. The Plaintiff suggests that the water seepage was due to the unauthorised construction of the curtain wall and or extension of the floor area.

8. The Plaintiff thus claims against the Defendant for the repayment of rent, management fee and air conditioning charges, rates set out in the present pleadings from 1 July 1998 as well as renovation cost, damage to furniture, fitting and equipment and loss of profit.

9. At the commencement of today's hearing, Mr So, on behalf of the Plaintiff, seeks to amend the Statement of Claim by a reduction in the amount of the claim. The court refuse to deal with that aspect because it is not relevant to the issues before the court today.

10. The Defendant, on the other hand, relies on Clause 3 of the Tenancy Agreement that the Plaintiff must pay the rent without any set off or deduction whatsoever. The Defendant in its Defence and Counterclaim suggests that the Plaintiff had failed and or refused to allow the Defendant or its agent to enter the suit premises to deal with the complaint raised by the Plaintiff.

11. Despite the wording of Clause 3(1) of the Tenancy Agreement, I am persuaded that if the suit premises or part thereof was indeed unfit for use and occupation, the Defendant would not be liable to pay the rent or at least part of it. That conclusion is inescapable in the light of the clear wordings of Clause 6 of the Tenancy Agreement.

12. But the assertion by the Plaintiff that the premises was unfit for occupation and use was a bare assertion and unsupported by any independent evidence. Indeed, as the court have observed in the course of counsel's submission that the Plaintiff's conduct was quite inconsistent with such an assertion.

13. As Mr Ho on behalf of the Defendant contends, if the premises or part of the premises had been rendered unfit for use or habitation, there are expressed mechanisms under Clause 6 for the Plaintiff to bring an end of the Tenancy Agreement. The Plaintiff, on the evidence, had not taken such a step.

14. The evidence adduced by the Plaintiff suggested that the complaint was confined to water leakage and it could not have affected the entire premises as such. It could presumably only affect the suit premises during a limited period and not the entire period in question.

15. On the evidence before this court, the Plaintiff had not taken any step to put forward any suggestion as to how much of the premises had been rendered unfit for use or occupation and how much of the rent ought to be abated in accordance with Clause 6 of the Tenancy Agreement. Indeed, it appears not in dispute that for commercial reason or otherwise, the Plaintiff continued to occupy the suit premises until May 1999, despite the suggestion that the water seepage problem began as early as June 1997 and that it was getting more serious in or about July 1998.

16. The Plaintiff may well be entitled to damages arising out of the defect of the curtain wall of the suit premises on the allegation that there was a breach of the covenant of repair and this aspect of the case can only be properly sorted out at the trial. In my view, there is no valid basis for the Plaintiff to invoke Clause 6 of the Tenancy Agreement and claims to be entitled not to pay any rent for the affected period.

17. I have considered the entire background of this case, as well as counsel's submission, I am persuaded that the Plaintiff's case on this aspect of this case is incredible and cannot possibly succeed.

18. The outstanding management fee, rates and ancillary expenses were of course paid and/or incurred by the Defendant on behalf of the Plaintiff. The Plaintiff must be liable for such expenses as long as it was in occupation of the suit premises and Mr So, on behalf of the Plaintiff, seems to have conceded on this aspect although he submit that the Plaintiff is entitled to set off the damages against such expenses.

19. As I have said, the Plaintiff may have a valid claim for loss or damages arising out of the alleged breach of covenant to repair and or covenant of quiet enjoyment but Clause 3 expressly prohibits the Plaintiff from setting off such claim against the rent payable under the tenancy agreement. The Plaintiff may have an arguable case on its claim but its liability to pay for the rent and the ancillary expenses, in my view, cannot be doubt and cannot be challenged.

20. I am also not persuaded that there is any valid basis to override the effect of Clause 3 in allowing a setting off of the claimed damages against the rent payable under the Tenancy Agreement in question.

21. In my view, Master Jones was right in ordering summary judgment against the Plaintiff in respect of the counterclaim by the Defendant.

22. There is undisputed evidence that at least at some stage there was in fact water seepage problem affecting the suit premises. There is indication that as a result of such water seepage, the Plaintiff did suffer some inconvenience and/or loss, although the precise nature and extent of the loss and damages in question can only be ascertained at the trial. There is, in my view, valid basis for the learned master to order the stay of execution of part of the judgment sum to the extent of $300,000.

23. In an appeal of this nature, the court should only alter the decision of a master if there is no valid basis upon which the master could have made the order as he did. In my view, there was in fact valid basis for the learned master to come to the conclusion as he did and there is no basis for me to interfere with his decision.

24. In the circumstances, the appeal has to be dismissed and I so order.

 

 

 

Representation:

Mr Victor W T So, instructed by Messrs Donald Yap, Cheng & Kong for the Plaintiff/Appellant

Mr B K Ho, instructed by Messrs Liu, Chan & Lam, for the Defendant/Respondent