Ho Shiu-kwong v. Au-yeung Leung t/a Sze Sek Ladies Shoes and Another

CACV000028/1970

IN THE SUPREME COURT OF HONG KONG

APPELLATE JURISDICTION

CIVIL APPEAL NO. 28 OF 1970

(On appeal from O.J. Action No. 113/69)

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Coram: Full Court (Hon. Blair-Kerr, Mills-Owens and McMullin, JJ.)

Date of Judgment: 22 February 1971

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JUDGMENT

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Blair-Kerr J. :-

1. This action was commenced in January 1969. In the statement of claim endorsed upon the writ the plaintiff alleged that the defendants were trespassing upon certain lands of which he, the plaintiff, was the registered owner; and he claimed (1) an order for ejectment of the defendants and for possession of the land; (2) an injunction restraining the defendants from entering or remaining upon the land and (3) damages for trespass.

2. The defendants entered an appearance. The plaintiff then took out a summons under O.14 r.1 giving notice of his intention to apply for final judgment on the ground that the defendants had no defence to his claim. The 2nd defendants filed an affirmation in which it was alleged that they were occupying the premises under a monthly tenancy, the rent being $700 per month; and that, with the knowledge of the plaintiff's attorney, they had sub-let part of the premises to the 1st defendant.

3. Order 14 r.4(3) states that, upon the hearing of a summons under 0.14:

"The court may give a defendant .......................................................... leave to defend........................either unconditionally or on such terms ............................... as it thinks fit."

The learned editors of the Supreme Court Practice 1970 say in a note on this rule at p.132:-

".......... the discretionary powers given by rule 4(3) are very wide ............... The more usual terms are to require the defendant to bring into court within a specified time a sum representing the whole or part of the claim, and in default leave to the plaintiff to sign final judgment for such sum."

Occasionally, judges take the more cautious line of ordering that, upon any default on the part of a defendant in regard to the terms imposed by the order, the plaintiff may "apply to a judge for leave to enter" final judgment. However, it appears that the more usual form of order is that, upon the defendant's default, the plaintiff may enter final judgment. The order does not normally require the plaintiff to give the defendant any prior warning.

4. When the Order 14 summons in this case came before Mr. Justice Huggins on 1st March 1969, the parties, through their legal advisers, requested the learned judge to make a consent order granting the defendants conditional leave to defend the action. The order, as drawn up and filed, reads as follows:-

"Upon hearing counsel for the plaintiff and the solicitors for the 1st and 2nd defendants and by consent, IT IS ORDERED that unless the 2nd defendants pay the sum of $1,400 as part damages for trespass or as rent for the months of February and March 1969 (as the case may be) into the Court within 14 days from the date hereof and the further sum of $700 per month as part damages for trespass or as rent (as the case may be) into Court on the 1st day of each and every month until the determination of this action the plaintiff may enter final judgment against the 2nd defendants as claimed in the writ of summons herein. And it is ordered that if the said sums are so paid, both the 1st and 2nd defendants may defend the action .........."

5. The 2nd defendants did not comply with these conditions. The following payments were made into Court:-

6. It appears that the plaintiff waived the various defaults on the part of the 2nd defendants in respect of the period March 1969 to February 1970. However, on 16th May 1970, his solicitors entered final judgment because no payments into court had been made in respect of March, April and May 1970. The order, which was duly drawn up, signed by the Assistant Registrar, and entered in the records of the Court, reads:-

"It is this day adjudged that the 2nd defendants be ejected from and do give possession of the land described in the writ of summons ............... It is further adjudged that the 2nd defendants ......... are perpetually restrained from entering or remaining in or upon the aforesaid land .............. And it is further adjudged that the 2nd defendants do pay damages for trespass to be assessed by the Registrar and costs of this action to be taxed."

7. At 9.50 a.m. on 18th May (i.e. 2 days after judgment had been entered) the plaintiff's solicitors received from the solicitors (Lau & Co.) who were then acting for the defendants, a copy of a letter dated 15th May, the original of which was addressed to the Registrar, Supreme Court. The letter indicated that the defendants had paid into court $1,400, presumably in respect of March and April; and the natural inference was that this payment into court had been made on 15th May (i.e. one day before the plaintiff entered judgment). Indeed, Mr. Hu, counsel for the defendants, was at pains to point this out to the court; and he saw fit to describe the plaintiff's conduct as "unconscionable".

8. I have checked the records of the court and I find that although Lau & Co.'s letter is dated 15th May, the letter together with the cheque for $1,400 was delivered to the Supreme Court by hand at 10.02 a.m. on 18th May, i.e. 12 minutes after the copy letter had been delivered to the plaintiff's solicitors and 2 days after judgment had been entered by the plaintiff.

9. On 1st June 1970, the plaintiff's solicitors received a copy of a letter from the defendants' then solicitors which indicated that $700 had been paid into court, presumably in respect of May; and on 3rd June 1970, the plaintiff's solicitors received a copy of another letter indicating that $700 had been paid, presumably in respect of June 1970.

10. No doubt counsel for the defendants was misled by the fact that the letter received by his solicitors on 18th May was dated 15th May. But it now appears to be abundantly clear that when judgment was entered by the plaintiff on 16th May the defendants were 3 months in arrears with their payments into court. Far from the plaintiff's conduct being "unconscionable", it would appear that the defendants had become aware of the fact that judgment had been entered against them, and that they were endeavouring to "put their house in order" before making an application to court for relief.

11. On 1st June 1970, they took out a summons by which they gave notice of their intention to apply for the following orders:-

12. The summons came on for hearing before Mr. Commissioner Morley-John on 22nd June 1970. The summons was defective in two respects. The payment of $1,400 referred to in paragraph I was made on 18th May (not on the 14th May); and this payment was in respect of March and April 1970 (not in respect of April and May).

13. According to the summons, the application for relief was made under O.3 r.5, O.14 r.10, and O.19 r.9. Order 19 deals with default in pleadings; and, as I understood Mr. Hu's submission, the application to the Commissioner was made partly under r.9 of this Order because, in counsel's submission, the 2nd defendants' failure to pay into court in accordance with the terms of the consent order of the 1st March 1969, should be regarded by the court as analogous to failure on the part of a defendant to file a defence within the time prescribed by the rules; and that, somehow or other, this gave the 2nd defendants a right to apply under O.19 r.9 to have the judgment of 16th May 1970 set aside.

14. I confess that I was quite unable to understand the logic of this submission; and, in my view, the application to the Commissioner, in so far as it was made under O.19 r.9, was completely misconceived.

15. As regards O.14 r.10, this simply states that if, upon the hearing of an application for summary judgment under 0.14, a tenant has had judgment for possession given against him on the ground of forfeiture for non-payment of rent, he shall have the same right to apply for relief as if the judgment had been given after trial.

16. Again, I confess I am quite unable to understand how this gives the 2nd defendants the right to apply to have the judgment of 16th May 1970 set aside. In their affidavit showing cause why summary judgment should not be given against them, the 2nd defendants denied that they were trespassers and alleged that they were tenants. This issue of fact was not resolved upon the hearing of the 0.14 summons. There was no "judgment for possession ......... on the ground of forfeiture for non-payment of rent." The parties themselves agreed that the defendants should be given leave to defend the action provided the defendants complied with certain conditions. The defendants agreed that, if they failed to comply with those conditions, the plaintiff would be entitled to enter final judgment as claimed without any further application for leave so to do. At the request of both parties, this agreement was made an order of court; and judgment was entered against the 2nd defendants because they were in breach of the conditions of the agreement, or in breach of the terms of the order of court, whichever way one likes to look at the matter.

17. The Commissioner appears to have accepted that. But he also appears to have accepted Mr. Hu's submission that the defendants were, somehow or other, in the same position as a tenant against whom judgment for possession had been given on the ground of forfeiture for non-payment of rent. In other words, it appears that the took the view that the court should assume that the defendants were tenants, and not trespassers; that forfeiture of the tenancy was the effect of the judgment of 16th May; and that relief should be given to the defendants although there had been no trial of the issues involved in the action. Accordingly, the Commissioner found himself in the position of being forced to extend the time within which the payments into court under the consent order might be made; and he set aside the judgment entered on 16th May 1970, despite the fact that it was a concluded judgment of the court which had been duly passed and entered.

18. The plaintiff appealed against the Commissioner's order. On 22nd February 1971 this Court allowed the appeal indicating that we would record our reasons for so doing.

19. The order of 1st March 1969, being a consent order, what the defendants were saying in effect was this: We consent to judgment being entered against us if we fail to comply with the conditions to which we have agreed. There is no suggestion of fraud or mistake in this case; and, ordinarily, a consent order cannot be extended or altered except by consent (vide Australasian Automatic Weighing Machine Co. v. Walter⁽¹⁾). But, in any event, no application was made by the defendants to Mr. Justice Huggins to vary the consent order of 1st March, 1969, which he could certainly have done by consent of the parties. Default having been made, the plaintiff was perfectly entitled to enter judgment on 16th May, 1970. That judgment was a final concluded judgment of the court - a judgment by consent; and when such a judgment has been passed and entered, the court cannot set it aside, except in a fresh action brought for that purpose (vide Ainsworth v. Wilding⁽²⁾).

20. In my view, the Commissioner had no jurisdiction to entertain the defendants' application. He erred in applying the principles of equitable relief against forfeiture for non-payment of rent. In the absence of some rule conferring a power comparable to the power conferred by, say, O.13 r.9 or O.19 r.9, he had no power to set aside a concluded judgment of the court which had been duly passed and entered. Consequently, he had no power to extend the time within which the 2nd defendants might make payments into court.

21. For these reasons this Court allowed the appeal with costs here and in the court below.

22. We also ordered payment out to the plaintiff's solicitors of all sums which had been paid into court by the defendants.

23. Finally, counsel for the plaintiff requested the court to record that in accepting these sums, his client should not be taken as agreeing that $700 per month was the measure of damages suffered; that the plaintiff's case throughout had been that the defendants were trespassers, and that evidence relating to the actual value of the land would be given to the Registrar to enable him to assess the proper measure of damages.

Representation:

B. Liu instructed by Messrs. Remedios & Yanne for the Plaintiff.

H. Hu instructed by Messrs. P.H. Sin & Co. for the 2nd Defendants.

(1) (1891) W.N. p.170.

(2) (1896) 1 Ch. p.673.

IN THE SUPREME COURT OF HONG KONG

APPELLATE JURISDICTION

CIVIL APPEAL NO. 28 OF 1970

(On appeal from O.J. Action No. 113/69)

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Coram: Full Court (Hon. Blair-Kerr, Mills-Owens and McMullin, JJ.)

Date of Judgment:

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JUDGMENT

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Mills-Owens J.:

24. I agree. One of the arguments for the respondents was that the equitable rule that time is not of the essence of the contract should be applied to the consent order, on the basis that, although the agreement of the parties upon the terms on which the defendants should have conditional leave to defend was embodied in an order of the Court, nevertheless such agreement remained, as it was before it was embodied in the order, a contract - to which, therefore, all the incidents of a contract were applicable; Mr. Hu relied, in this respect, upon the judgment of Chitty J. in Conolan v. Leyland ((1884) 27 Ch. 632, at p.638) to the effect -

"It was clear that a contract may be embodied in an order ......... for, as was said in Wentworth v. Bullen (9 B. & C. 840, 850), the contract of the parties embodied in the consent order was not less a contract, and subject to the incidents of a contract, because there was superadded the command of a Judge."

No doubt this is so, but does it follow that the equitable rule referred to above applied in the circumstances of this case? Clearly not. The rule is of strictly limited application. The Courts have never assumed a general power to vary time limits fixed by the parties themselves in their contract, on some basis of doing equity. In Stickney v. Keeble ((1915) A.C. 386), Lord Parker defined the limits of the equitable rule, saying, at p.416:-

"It should be observed, too, that it was only for the purposes of granting specific performance that equity in this class of case interfered with the remedy at law."

Later, at p.417, he referred to section 25(7) of the Judicature Act, 1873 (reproduced in our Laws as section 8 of the Law Amendment (Miscellaneous Provisions) Ordinance (Cap.23), to the effect:-

"Stipulations in contracts as to time or otherwise which would not before the passing of this Act have been deemed to be or have become of the essence of such contracts in a Court of Equity, shall receive in all Courts the same construction and effect as they would have heretofore received in equity."

Lord Parker went on to say:-

"The section cannot in my opinion mean that the rules as to time laid down by Courts of Equity in certain cases, for certain purposes, and under certain circumstances only, shall be applied generally and without inquiry whether the particular case, purpose, or circumstances are such that equity would have applied the rules. If since the Judicature Acts the Court is asked to disregard a stipulation as to time in an action for common law relief, and it be established that equity would not under the then existing circumstances have prior to the Act granted specific performance or restrained the action, the section can, in my opinion, have no application, otherwise the stipulation in question would not, as provided in the section, receive the same effect as it would prior to the Act have received in equity."

25. My Lord has also given other conclusive reasons for allowing the appeal, with which I entirely agree. Ainsworth v. Wilding ((1896) 1 Ch.673) is clear authority for the proposition that a judgment based on the consent of the parties, being a judgment which has been passed and entered, cannot be set aside by motion or summons in the action. There, Wilding asserted that there was a mistake in that he and the opposite party understood the order, to which they had consented, differently. As Lindley L.J. said in the subsequent related proceedings of Wilding v. Sanderson ((1897) 2 Ch.534, at 549):-

"The mistake which had been made in drawing up the order then became apparent, and it cannot be truly said to have been discovered by Wilding at any earlier date. As soon as he discovered it he set to work to have it corrected. His first attempt was wrong in form, and was unsuccessful: see Ainsworth v. Wilding. But on March 19, 1896, he commenced the present action to have the order of November 23, 1894, rectified, or set aside, on the ground of mistake."

In the present case, no allegation of mistake, or of fraud, is made. The judgment was regularly entered and perfected pursuant to the agreement of the parties and in entire consonance therewith.

26. It is suggested, in some way, that the effect was to bring about a forfeiture, against which the respondents may claim relief. What forfeiture? The claim was against the respondents as trespassers; they claimed to be tenants; the consent order did not conclude that issue but gave leave to defend conditionally upon payment of monthly sums as 'rent or damages (as the case may be)'. The argument must be that the effect of the order was to bring about a forfeiture of a tenancy, an assumed tenancy, for non-payment of rent. But the appellant never admitted that there was a tenancy; the issue was left open for the trial. The respondents consented to judgment in the event of their default in performance of the conditions upon which, according to their agreement, they were admitted to defend. I can perceive no basis upon which they can re-open the matter of the judgment. At one point it was suggested by counsel for the respondents that the appellant acted unconscionably in entering judgment; the facts lend no support whatsoever to any such suggestion. A plea of hardship is of no assistance to the respondents; that, again, is an equitable principle of strictly limited application having no relevance to the circumstances of this case. It was the duty of the respondents to abide by the terms to which they had agreed and they have no one to blame but themselves for their default and the consequences thereof.

27. Mr. Hu relied also upon the interesting case of Chandless-Chandless v. Nicholson ((1942) 2 All E.R. 315, where an order for relief against forfeiture had been made but one of the terms upon which relief was ordered was not carried out. The Court of Appeal (Lord Greene M.R. and Lord Clauson) held that notwithstanding the omission of the words "liberty to apply," his order for relief against forfeiture was one in respect of which the court retained jurisdiction to extend the time if it were just and equitable that the extension should be granted, for otherwise the order would have the same vicious effect as the condition of re-entry against which relief was to be given. It is apparent from the judgment, however, that the Court was first at pains to ascertain that the order was not a consent order. Further, the case can have no application to the present case, which is not concerned with any order granting relief against forfeiture.

28. In conclusion I would like to add that there is obviously some merit in providing, in orders giving conditional leave to defend in possession cases, that on default the plaintiff 'may apply to enter judgment', rather than providing that the plaintiff 'may enter judgment' - in that this would meet cases of hardship arising out of accidental default.

McMullin, J.:

29. I am in full agreement with the opinions expressed in the judgments which have been delivered and there is nothing that I would wish to add.

Representation:

B. Liu instructed by Messrs. Remedios & Yanne for the Plaintiff.

H. Hu instructed by Messrs. P. H. Sin & Co. for the 2nd Defendants.