Implication of rental assignment on locus of landlord to recover rent clarified

In Jadespring Ltd v. Rise Top Asset Management Ltd and Another [2025] HKCFI 2310, the Court of First Instance allowed an appeal to set aside a stay order for a summary judgment granted for rent arrears. DLA Piper represented the landlord, succeeding in obtaining summary judgment against the tenant for a sum of over HKD10 million with cost on indemnity basis. The DLA Piper team was led by Harris Chan (Partner), assisted by KC Tai (Of Counsel) and Rita Chow (Senior Associate).

Background

The plaintiff claimed against the defendants for rent and fees in arrears for two premises which are owed by the plaintiff as the registered owner and landlord. Summary judgment was granted for the rent arrears as sought by the plaintiff together with interest. However, the Master alongside made an order for the execution of judgment to be stayed until the final disposal of the plaintiff's remaining claims and the defendants' counterclaim. The plaintiff appealed to set aside the stay order made by the Master on the basis that the plaintiff should not be deprived of the unpaid rent entitled merely because the defendants' counterclaim was yet to be determined. During the hearing of the appeals, the defendants no longer relied on their counterclaim and the basis of the Stay Order was no longer maintained by the defendants. Instead, the defendants contended that there is a triable defence on new points which are to be ruled on by way of a hearing de novo ("from the beginning"), namely: -

1. The plaintiff has no locus standi (capacity to bring action) to sue as the plaintiff has entered into a rental assignment, which assigns all of his rights, title, interest and benefit to the bank, including the right to bring a claim.
2. The rental assignment gives rise to an equitable assignment so that the plaintiff can only sue on the tenancy agreements if (1) the bank is joined as a party to these proceedings and if the bank expressly declines to make a claim, the plaintiff being the assignor can sue, or (2) the plaintiff can sue in an expressly pleaded representative capacity as trustee and with the consent of the bank

The defendant has also raised defence of equitable set-off regarding certain deposits made by the defendant. However, the analysis in this article will only focus on the locus challenge.

The decision

The Court rejected both grounds of defence raised by the defendants and allowed the plaintiff's appeal to execute the summary judgment for rent arrears claimed.

The Court first looked at the Defence and Counterclaim and noted that the locus challenge was never raised nor pleaded by the defendant. It appears to the Court to be an afterthought engaged only at the appellate stage as an attempt to resist the appeals. The Court held that an issue concerning the locus of the plaintiff to make a claim should be raised "at the earliest opportunity" as it promises sufficient time for the plaintiff to be alerted and take steps to deal with the challenge in a proper manner. Otherwise, it will be unfair to the plaintiff as he or she is not given adequate opportunity to deal with the issue.

The Court also rejected the defendants' submissions, holding that:-

1. The principle that an equitable assignor cannot sue in his own name is only a general rule. It is not mandatory to require a joinder of the assignee in every litigation involving an equitable assignment. This rule may not apply in situations where the notice of the assignment is not actually given to the debtor as there is no risk of a further claim by the assignee.
2. Where there is a clause in the rental assignment stipulating that the assignor must obtain the assignee's consent to take or omit taking actions which may alter or impair the lease, or affect the rights created by the lease, the scope of the clause should be construed in context. In this case, instituting proceedings for rent arrears falls outside of the scope of the clause since this will amount to enforcing the terms of the tenancy agreement, which actually protects the rights and interests of the assignee.
3. To overcome the issue concerned with the capacity of an assignee to take legal action, a straightforward method is to amend the Writ of Summons and Amended Statement of Claim so that the plaintiff can commence actions as trustee and/or agent for and on behalf of the assignee pursuant to the rental assignment.

Key takeaway

The Court's judgement in Jadespring Ltd v. Rise Top Asset Management Ltd and Another [2025] HKCFI 2310 is a welcomed decision which makes good practical sense.

In particular, the Court's clarification that the failure to join the assignee does not render the proceedings a nullity is an important one. By taking into account the context of the equitable assignment and its explicit terms, this reduces the practical redundancy associated with making a claim for monies if an assignor must obtain the assignee's consent before commencing an action.

This case also serves as a reminder that, subject to the exact terms of the rental assignment, a landlord may want to specify his or her capacity to sue as trustee and/or agent for and on behalf of the assignor to preempt any potential challenge by the tenant.

For the full judgment, please see: Jadespring Ltd v. Rise Top Asset Management Ltd and Another (30/05/2025, HCA2039/2023) [2025] HKCFI 2310.