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New Castle Investments Ltd v Yuan Yiqiang

Judgment Cited authorities 5 Cited in Precedent Map Related
Vincent
Judgment Date16 November 2020
Neutral Citation[2020] HKCA 931
Year2020
Judgement NumberCACV47/2020
Subject MatterCivil Appeal
CourtCourt of Appeal (Hong Kong)
CACV46/2020 NEW CASTLE INVESTMENTS LTD v. FOO WAI LOK

CACV 46/2020,
CACV 47/2020
and CACV 399/2020
(Heard together)

[2020] HKCA 931

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 46 OF 2020

(ON APPEAL FROM HCB 6077/2018)

_________________________

BETWEEN
NEW CASTLE INVESTMENTS LIMITED
(新港投資有限公司)		 Petitioner
and
FOO WAI LOK (符偉樂) Debtor

_________________________

AND

CIVIL APPEAL NO 47 OF 2020

(ON APPEAL FROM HCB 7480/2018)

_________________________

BETWEEN
NEW CASTLE INVESTMENTS LIMITED
(新港投資有限公司)		 Petitioner
and
YUAN YIQIANG (袁毅强) Debtor

_________________________

AND

CIVIL APPEAL NO 399 OF 2020

(ON APPEAL FROM HCA 1632/2018)

_________________________

BETWEEN
NEW CASTLE INVESTMENTS LIMITED
(新港投資有限公司)		 Plaintiff
and
WFC HOLDING LIMITED 1st Defendant
YUAN YIQIANG (袁毅强) 2nd Defendant
FOO WAI LOK (符偉樂) 3rd Defendant

_________________________

(HEARD TOGETHER)
Before: Hon Lam VP, Barma and Au JJA in Court
Date of Hearing: 7 October 2020
Date of Judgment: 7 October 2020
Date of Reasons for Judgment: 16 November 2020

________________________

REASONS FOR JUDGMENT

________________________

Hon Lam VP (giving the Reasons for Judgment of the Court):

1. At the hearing on 7 October 2020, this Court allowed the appeals in CACVs 46 and 47/2020 and made bankruptcy orders against Mr Yuan and Mr Foo (“the Debtors”). By this judgment, we give the reasons for these determinations.

2. This Court also dismissed the notice of motion of 16 September 2020 in CACV 399/2020 seeking leave to appeal to the Court of Final Appeal in respect of the Court’s judgment of 20 August 2020 (reasons for which were handed down on 8 September 2020 [2020] HKCA 755). By this judgment, we also give reasons for the refusal of leave to appeal to the Court of Final Appeal.

3. CACVs 46 and 47/2020 were brought by the petitioner (New Castle Investments Limited, the judgment creditor in HCA 1632/2018) in HCB 6077/2018 (against Mr Foo) and HCB 7480/2018 (against Mr Yuan) in respect of the judgments of Au-yeung J (“the Judge”) of 22 January 2020. By these judgments, the Judge set aside the bankruptcy order previously made against Mr Yuan and dismissed the petition against Mr Foo. Both petitions were presented on the basis of the respective statutory demands issued against the Debtors on 14 September 2018. The statutory demands were in turn issued on the basis of a default judgment of 7 September 2018 (“the Default Judgment”) entered against the Debtors in HCA 1632/2018.

4. The petitioner was the plaintiff in HCA 1632/2018 in whose favour the default judgment was entered. The petition in HCB 6077/2018 was presented on 24 October 2018 against Mr Foo whilst the petition in HCB 7480/2018 was presented on 28 December 2018 against Mr Yuan. A bankruptcy order was previously made by the Judge against Mr Yuan on 25 November 2019, which she set aside on 22 January 2020.

5. The Default Judgment was set aside by a master on 16 September 2019 on terms. On appeal by the defendants (including Mr Yuan and Mr Foo), the conditions imposed by the master were set aside by Linda Chan J. On further appeal by the plaintiff (viz New Castle, the petitioner in the bankruptcy proceedings) in CACV 399/2020, the Court of Appeal (Lam VP and Barma JA) restored the Default Judgment.

6. The factual background and the litigation history in respect of the underlying disputes giving rise to the petitions and these appeals were set out in the judgment of 8 September 2020 [2020] HKCA 755 at [1] to [13] and we shall not repeat the same here.

7. In CACV 47/2020 (the bankruptcy appeal relating to Mr Yuan), Mr Tommy Cheung (who did not appear below nor in the substantive appeal in CACV 399/2020, but was instructed by the same firm of solicitors who represented Mr Yuan and Mr Foo in that appeal) sought to have these appeals adjourned pending the determination of the application for leave to appeal to the Court of Final Appeal in CACV 399/2020.

8. Mr Foo, who appeared in person in CACV 46/2020, adopted the same stance.

9. In light of that, this Court indicated at the hearing to the parties that we were minded to address the Notice of Motion in CACV 399/2020 (in respect of this appeal, Mr Cheung represented all the defendants including Mr Yuan and Mr Foo). Counsel consented to such course being taken.

CACV 399 of 2020 application for leave to appeal to the Court of Final Appeal

10. We shall therefore address the refusal of leave to appeal in CACV 399/2020 first.

11. Mr Cheung did not dispute the construction given to Clause 5.03 by the Court of Appeal in CACV 399/2020. In the oral submission before us, counsel confined himself to one argument in seeking leave to appeal to the Court of Final Appeal which was formulated as a point of great general and public importance in the Notice of Motion as follows:

“ 1. The question involved in the intended appeal is one, which by reason of its great general and public importance, ought to be submitted to the Court of Final Appeal for decision pursuant to section 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance (Cap 484) (“HKCFAO”). The question is as follows (the “Question”):

‘ Whether, upon a landlord’s final election to terminate or forfeit a tenancy by serving proceedings on the tenant, the landlord has an implied obligation under the tenancy to reduce the landlord’s monetary claim (for, e.g., outstanding rent, damages, monetary compensation, etc.) against the tenant by the amount of the tenant’s deposit paid to the landlord, so that the landlord and the tenant can achieve, inter alia, a clean break as finally elected by the landlord.’

The Defendants’ position is that the Question should be answered in the affirmative, in that such implied obligation is generally implied in all tenancies (the “Implied Obligation”), and the Plaintiff has contravened the Implied Obligation.”

12. The essence of Mr Cheung’s submission was that there was an implied term (which was implied by law from the relationship of landlord and tenant) that upon the election by a landlord to terminate a tenancy, the landlord must immediately apply the deposit towards the reduction of arrears of rent so that a clean break would be achieved. Such implied term, counsel said, arose from the true nature of a deposit and it was a term which could not be overridden by the express terms of the tenancy agreement.

13. Mr Cheung relied on the following authorities to support his argument. In Geys v Societe Generale, London Branch [2013] 1 AC 523 at [55] to [56], Lady Hale JSC (as she then was) distinguished between two different kinds of implied terms. The first kind was a term implied into a particular contract where it is necessary to give business efficacy to the very contract in question. Mr Cheung submitted that the implied term he advocated fell within the second category alluded to by Lady Hale.

14. At [55], Her Ladyship explained the second kind of implied term as follows:

“ … Second, there are those terms which are implied into a class of contractual relationship, such as that between landlord and tenant or between employer and employee, where the parties may have left a good deal unsaid, but the courts have implied the term as a necessary incident of the relationship concerned, unless the parties have expressly excluded it…” (our emphasis)

15. The case of Geys concerned a contract of employment and the other parts of the judgment shed no light on the landlord and tenant relationship.

16. It is however clear from the judgment of Lady Hale quoted above that even in the context of the second kind of implied term, with its rationale based on parties leaving a good deal unsaid, such implied term cannot contradict an express term.

17. For the overriding effect of such implied term, Mr Cheung relied upon a judgment on derogation from grant. In Gloucester Place Music Limited v Simon Le Bon [2016] EWHC 3091 (Ch), Arnold J cited a judgment of Neuberger J (as he then was) in Platt v London Underground Ltd [2001] 2 EGLR 121 at 122 for the law concerning the doctrine of derogation from grant. In particular, Mr Cheung drew our attention to the following part...

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