Lo (or Lam) Shiu Chun v. Ho Sau Chun

DCCJ005191/1978

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

ACTION NO. 5191 OF 1978

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Coram: Judge Hooper, D.J. in Court.

Date of Judgment: 6 April 1979

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RULING

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1. In this action the Plaintiff claimed possession of premises from the Defendant his tenant, for breach of 3 covenants in the lease. The first was a covenant that the Defendant must punctually discharge in advance the rent, rates and maintenance fees at the current rate of $762.50 per month. The second covenant was one not to sublet or part with possession of any part of the premises rented to the Defendant by the Plaintiff. The third covenant was a covenant not to store or permit to be stored in the said premises any dangerous drugs or offensive goods in contravention of the Laws of Hong Kong. No defence was filed and judgment was given for the Plaintiff in default of defence on the 9th January, 1979 under Rule 22 of the District Court Civil Procedure (General) Rules, Cap. 336. The Defendant has now applied to be relieved from forfeiture and that all further proceedings in this action be stayed upon such terms as to the payment of rent and costs as the Court may think fit. It is this last application with which I am now concerned.

2. The Defendant, a woman, has in support of her application filed an affirmation in which she has deposed to the fact that there was no express covenant in the tenancy against subletting and that she had no knowledge that any such covenant was implied by law. She admits that the payment of rent since 1976 has sometimes been in arrears but states that if the Court grants her relief from forfeiture she would ensure that her common law husband CHAU Kim-fung, who has taken over responsibility for all acts and decisions in connection with the tenancy and the payment of rent on her behalf, would pay the rent punctually in future.

3. So far as the presence of dangerous drugs on the premises were concerned she denied that she had any knowledge of these and deposed to the fact that she was not in actual residence at the premises during the 12 months from August 75 to August 76, which would cover the period when the dangerous drugs were found by the police in the premises.

4. Her common law husband CHAU Kim-fung has also made an affirmation in support of the Defendant's application. He deposed to the fact that he has lived with the Applicant since 1970 and since then has been responsible for payment of the rent and all matters relating to the tenancy generally. He claimed that he had no knowledge of a covenant against subletting. He admitted that the premises were sublet in 1975 for a period of 12 months until August 1976 but that the sub-tenant vacated the premises in August 1976 after police proceedings had been brought against him in respect of the possession of dangerous drugs. He claimed that he had no knowledge of the presence of dangerous drugs on the premises and confirmed that neither he nor the Applicant were living on the premises at the time. He pointed out that although the Plaintiff clearly had knowledge of that subletting and although the Plaintiff did unsuccessfully take proceedings against the Applicant under S. 38(2) of the Dangerous Drugs Ordinance Cap. 134, no proceedings for possession were commenced against her in respect of the breach of the covenant against subletting.

5. He confirmed that after August 1976 both the Applicant and himself with their 3 children aged 7, 5 and 2 respectively have lived continually on the premises. He admits that since November 1976 there had been occasions when part, but never the whole of the premises, had been sublet, but that was only on an informal basis and all sublettings ceased over 6 months ago. He maintained that had he known at the time that by subletting the premises or part of them the Applicant was in breach of a covenant of the tenancy, he would not have permitted the sublettings.

6. So far as the non-punctual payments of the rent was concerned he maintained that payment of the rent between 1970 and 1976 was always paid although not punctually, but that no objection was taken by the landlord. The rent would often be in arrears for 1, 2 or 3 months and, as no objection was taken to the manner of such payment, he got into the habit of paying rent in arrears. Indeed he was erroneously under the impression that he was allowed by law a 3 month period of grace for paying the rent and he retained that erroneous belief until he took legal advice on the 17th January, 1979. He reiterated that the delay in payment of rent was due to his mistaken belief as to the time for payment and to his thoughlessness, but that prior to 1976 the landlord had never objected to the rent being paid in arrears. Further he was prepared to pay the rent into Court and he reiterated that there are now no sub-tenants on the premises. Furthermore he undertakes to ensure to the best of his endeavours that the rent would in future always be paid punctually.

7. It is not disputed that the premises formed part of a new building within the meaning of S. 3(1)(a) of the Landlord and Tenant (Consolidation) Ordinance Cap. 7. Neither is it disputed that the premises were let to the Defendant by the Plaintiff for domestic purposes and that the rents inclusive of rates and maintenance fees had been increased to the figures stated by the Plaintiff in his Particulars of Claim.

8. It is pleaded in para. 3 of the Particulars of Claim that the rent was due in advance on the 1st day of each calendar month. This is admitted by the Applicant in para. 2 of her affirmation in support of the present application. There would thus be an implied covenant to pay rent on the due date by virtue of S. 52(3) of the Landlord and Tenant (Consolidation) Ordinance and also an implied condition for forfeiture for non-payment within 15 days of the due date. The Plaintiff could also invoke S. 53(2)(e) where the Defendant had sublet without his written consent after the 14th December, 1973.

9. So far as the breach of covenant in respect of the storage of dangerous drugs is concerned, there were facts set out in the Particulars of Claim which appear to indicate that the Applicant had no knowledge of those dangerous drugs. That in itself would appear to indicate that the Applicant did not store or permit to be stored in the said premises any dangerous drugs.

10. The learned Judge who entered judgment in default of defence has not given any reasons for his decision, but I think that in the absence of a defence he was entitled to enter judgment for breach of the covenant to pay rent by due date, and for breach of the covenant against unlawful subletting.

11. In view of the fact that the Plaintiff had brought his action to enforce a right of re-entry or forfeiture on other grounds than for non-payment of rent, it would appear from the proviso to S. 69(1) of the District Court Ordinance that the Court cannot grant relief against forfeiture under this section.

12. Mr. Radcliffe for the Defendant does not rely upon any statutory provision, but upon equitable principles. He relies upon the decision of Mr. Justice Li in the case of KUNG Wai-ying and The Attorney General 1974 Hong Kong Law Reports, page 1 where the learned Judge held:-

"That, having regard to the decision of the House of Lords in the case of Shiloh Spinners Ltd. v. Harding, (1973) 1 All E.R. 90 and the authorities quoted therein, the Supreme Court has jurisdiction to grant, in appropriate cases, equitable relief against forfeiture on the ground of breach of covenant other than a covenant to pay rent."

He states that if the Supreme Court has jurisdiction then the District Court also has jurisdiction.

13. Mr. Wong for the Plaintiff has referred to the two Hong Kong authorities, first CHEUNG SO Yin-kay and CHEUNG Biu 1970 Hong Kong Law Reports, page 383 where Mr. Justice Briggs (as he then was ) held:-

"That apart from statute Law, the only instances where relief will be given in cases where there is a breach of covenant other than a covenant to pay rent, are cases where the breach was due to some accident, surprise or mistake."

The second case he has referred to is the case of KUNG Wai-ying v. The Attorney General, which is the decision of Mr. Justice Li referred to above. He has argued that the two cases are not irreconcilable in that the decision of Mr. Justice Briggs was not in the grey area, whereas the decision of Mr. Justice Li was circumscribed by the fact that it related to a covenant which entails the laying out of money on property. He submits that the Law of England, apart from the statutory provisions, is set out in para. 394 of Hill and Redmans Law of Landlord and Tenant 16th Edition at page 379. The passage reads-

"Covenants against assignment - Prior to January 1, 1926, relief could not be granted against forfeiture in respect of breaches of covenants or conditions against assigning, underletting, or parting with the possession or disposing of the land demised (a) ..........."

He then refers to the note (a) on page 380 which commences with the heading "Relief can only be obtained for breaches since January 1, 1926." He argues that this is a post Shiloh edition and that the decision in Shiloh was not cited as in any way affecting the pre-law of Property Act position which is the position in Hong Kong.

14. Though there is some weight in Mr. Wong's argument, having regard to the passages which he has cited, there appears to have been in recent years a swing away from the stricter attitude towards equity's jurisdiction to relieve against forfeiture. In his Judgment, Mr. Justice Li has referred to passages in the Judgments of Lord Wilberforce and Lord Simon in which they discussed the older authorities and their present attitude towards them. He quoted the following paragraph from the Judgment of Lord Simon at page 103:-

"With reference to the fifth question-whether this is a case where a court of equity might grant relief against exercise of the right of entry - I agree that Sanders v. Pope and Hill v. Barclay are not in themselves inconsistent authorities; nevertheless, they seem to me to be the respective culminations of a more liberal and a stricter attitude towards equity's jurisdiction to relieve against forfeiture. Lord Eldon LC's inclination, with its emphasis on strict respect for contractual rights and obligations, was more congenial to the following age, and came to be followed. Barrow v. Isacs & Son was a natural consequence; and I am bound to say that it seems to me to demonstrate an abnegation of equity, and to show that the trial from Hill v. Barclay leads into a juristic desert. Since what was said by Lord Cairns LC in Hughes v. Metropolitan Railway Co. was Obiter, and merely reflects the acceptance then generally current none of the authorities binds your Lordships. The last 100 years have seen many examples of relaxation of the stance of regarding contractual rights and obligations as sacrosanct and exclusive of other considerations: although these examples do not compel equity to follow - certainly not to the extent of overturning established authorities - they do at least invite a more liberal and extensively based attitude on the part of courts which are not bound by those authorities. I would therefore myself hold that equity has an unlimited and unfettered jurisdiction to relieve against contractual forfeitures and penalties. What have sometimes been regarded as fetters to the jurisdiction are, in my view, more properly to be seen as considerations which the court will weigh in deciding how to exercise an unfettered jurisdiction (of. Blunt v. Blunt and Kara v. Kara and Holman). Prominent but not exclusive among such considerations is the desirability that contractual promises should be observed and contractual rights respected, and even more the undesirability of the law appearing to condone flagrant and contemptuous disregard of obligations. Other such considerations are how far it is reasonable to require a party who is prima facie entitled to invoke a forfeiture or penalty clause to accept alternative relief (e.g. money payment or re-instatement of premises) and how far vindication of contractual rights would be grossly excessive and harsh having regard to the damage done to the promise and the moral culpability of the promisor. (I do not intend this as an exhaustive list.) It is these internal considerations which may limit the cases where courts of equity will relieve against forfeiture, rather than any external confine or jurisdiction."

15. This passage would certainly seem to indicate that there are no fetters upon the jurisdiction of equity to intervene and grant relief. On the strength of the Shiloh decision Mr. Justice Li has decided in KUNG Wai-ying's case that the Court would have such jurisdiction in a case where there had been a breach of a building covenant. He clearly took the view that the Supreme Court of Hong Kong has jurisdiction to grant equitable relief against forfeiture on the ground of a breach of covenant other than a covenant to pay rent.

16. In the case of SUNG Hing-chuen and CHING Chui KDC Action No. 7810 of 1977 Judge Bewley appeared to have no doubt that he had jurisdiction to entertain an application for relief against forfeiture in respect of a breach of a covenant as to user, though he exercised his discretion by refusing to grant relief and by ordering possession under S. 53 Part II of Landlord and Tenant (Consolidation) Ordinance, Cap. 7. I respectfully agree with his approach.

17. It is my Judgment that the District Court does have jurisdiction to entertain an application for relief against forfeiture in respect of a breach of covenant other than a covenant to pay rent and that the criterion whether such relief should be granted at all should be based on the considerations which have been referred to in the Judgment of Lord Simon in Shiloh's case. The Courts have frequently granted relief under 69 of The District Court Ordinance in cases where there has been a protected tenancy under Part II Cap. 7 and I can see no reason why equitable relief should be excluded, certainly there has been no submission that equitable relief should be excluded in this type of case where a tenancy is enjoying protection.

18. The question arises whether I should exercise my discretion and grant relief in the present case. It is a well-known equitable principle that he who seeks equity must do equity or that he who comes into a court of equity must come with clean hands. A tenant seeking relief from forfeiture should not be entitled to such relief if he or she has been guilty of flagrant and contemptuous disregard of the tenant's obligations.

19. It has been admitted in this case that since November 1976 there have been occasions when sub-tenancies of part of the demised premises occurred and it cannot be denied that these were in breach of the tenancy agreement and the statutory provisions of Cap. 7. Furthermore even Mr. Radcliffe for the Defendant had to admit that the Defendant had an appalling respect of the late payment of rent. It is clear on the facts that the Defendant despite repeated requests and demands had defaulted in paying 4 months rent, rates and maintenance fees for the months of February, March, April and May 1978, and that it was only when the Plaintiff commenced Victoria District Court Action No. 2401 of 1978 on the 31st May, 1978 that the Defendant paid up the arrears up to the end of June 1978. It is clear that in July and August 1978 the Defendant again failed to pay the rent, rates and maintenance fees on due date and despite a demand letter from the Plaintiff's solicitors Messrs. Johnson, Stokes and Master dated the 26th August, 1978 the Defendant still failed to pay the arrears of $1,525. It is clear that on the 26th September, 1978 the Plaintiff commenced Distraint Action No. 533 of 1978 at the Victoria District Court for arrears of rent in respect of the months of July, August and September, 1978 and that as a result of this action on the 10th November, 1978 the Defendant made payment in the Court in respect of the rent for the months of July, August and September, 1978. It is clear also that the Defendant again defaulted in paying rent on due date in respect of the months of October and November 1978 despite the requests and demands of the Plaintiff's solicitors. There has been no suggestion that the Defendant was short of funds. As on the previous occasions she is now prepared to pay after Court action. Furthermore her common law husband's averment that he believed he had a period of three months grace for paying rent just cannot be accepted in view of the history of events this last year.

20. In all the circumstances I do not think that this is a proper case for the exercise of my discretion in favour of the Defendant, and I accordingly rule that the application for relief is dismissed with costs.