Kung Wai Ying v. Attorney General

Case No.HCA 3327/1973

Court

High Court CFI

Date—

Judge—

Case Document

100%Judiciary

HCA003327/1973

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 3327 OF 1973

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BETWEEN
	KUNG WAI YING	Plaintiff
	and
	THE ATTORNEY GENERAL	Defendant

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Coram: Li, J. (In Chambers)

Date of Judgment: 4th January, 1974

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JUDGMENT

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1. This is an appeal from the Registrar's decision dismissing the defendant's application to strike out the plaintiff's action on the ground that it discloses no cause of action and, alternatively, that it is vexatious, frivolous and an abuse of process.

2. The facts of the case are as follows: On the 2nd of April, 1970 the plaintiff obtained a grant to a piece of land from the Crown under certain conditions, one of which was to build a super-structure to the value of $50,000 on or before the 1st of April, 1973. The plaintiff submitted plans for an 8-storey building and arranged for financial support of this project. The plan was approved in August 1971 by the Building Office. But by that time the bank which was supposed to give financial support to this project withdrew its support. Meetings therefore followed between the plaintiff's representative and one Mr. Dixon, an estate survey or in the Yuen Long District Office, between April and July 1972. In one of these meetings Mr. Dixon suggested that the plaintiff could build a 2-storey building in substitution for the 8-storey building and that the plans would be approved in 28 days. (Pausing at this stage I may observe that such a representation turned out to be incorrect although it may well have been an innocent mis-representation.) The plaintiff submitted plans for approval on the 25th of September, 1972 and such plans were not approved until the 9th of April, 1973. By this time the period for which the covenant to build was to be observed had expired. As a result the Crown re-entered under the Crown Rights (Re-entry & Vesting Remedies) Ordinance on the 15th of June, 1973. The plaintiff issued a writ against the Crown in the name of the Attorney General to ask for a declaration that she is entitled in equity to relief against such forfeiture and for an order to vacate the Memorial of Re-entry registered in the District Office in relation to that lot of land. The Attorney General, the defendant, entered a conditional appearance and then applied to the learned Registrar on the 19th of December, 1973 to strike out the plaintiff's action for disclosing no cause of action and for being vexatious, frivolous and an abuse of the process. The learned Registrar dismissed the application. Hence this appeal.

3. Before me, learned counsel for the defendant advances several propositions in support of the contention that the plaintiff has no cuase of action and that if there is any cause of action - if at all - the action must fail. For this reason it is further contended that the action is frivolous, vexatious and an abuse of the process.

4. The reasons, if I understand learned counsel for the defendant correctly, are these: First, the Crown chooses to re-enter under the previsions of the Crown Rights (Re-entry & Vesting Remedies) Ordinance and has not come to court to ask for possession. As such there is no room for the plaintiff to ask for equitable relief. Secondly, the re-entry was done in accordance with proper procedure and the steps taken were all correct; the Crown was only asserting its rights. Thirdly, relief from forfeiture is open to the plaintiff only if the forfeiture is based on a breach of covenant to pay rent. (The Law Property Act 1925, which provides for relief from forfeiture on the ground of breach or other covenants, is not applicable to Hong Kong.) Fourthly, Mr. Dixon's representation is not binding upon the Crown. Fifthly, all the conditions and covenants in the conditions of grant are conditions precedent and there has been no fulfillment of such conditions. There was no grant and there was no lease. For this reason, it is not appropriate for the plaintiff to come to court to ask for relief from forfeiture of a lease. Lastly, but not the least, that the Crown Rights (Re-entry & Vesting Remedies) Ordinance provides for a remedy to the plaintiff, namely that it is for him to petition the Governor to grant him relief against the vesting notice.

5. I shall deal with those reasons that can be easily disposed of.

6. The argument that the right for an application to the Supreme Court for relief against forfeiture is gone once the Crown chooses to re-enter under the provisions of the Ordinance is obviously to my mind untenable. Section 8, subsection 2, paragraph (b) provides as fellows:

"(2) Subject to subsections (3) and (4), where a vesting notice has been registered under section 7 in the Land Office, the former owner of a relevant interest which is the subject of the vesting notice may -

	(a)	...............................................................................................
	(b)	apply to the Supreme Court in its equitable jurisdiction for relief against the vesting -

	(i)	if he disputes the right of the Crown to proceed under section 7; or
	(ii)	if the circumstances are such that he would have been entitled to apply for relief against re-entry had the lesser been a private party and exercised his right of re-entry."

Having regard to the plain language of this subsection I am of the opinion that such a right is provided for by the Ordinance in express language. The fact that the Crown chooses to re-enter under the provisions of this Ordinance is plainly stated at the beginning of subsection 2 of Section 8. For this reason I say that the plaintiff is entitled to apply to the Supreme Court for relief as a further alternative to petitioning the Governor. This is abundantly clear in view of the provisions of subsection 4 of Section 8 of the same Ordinance. This subsection provides that:

"(4) A petition to the Governor under paragraph (a) of subsection (1) or paragraph (a) of subsection (2) shall be a bar to any subsequent application to the Supreme Court under paragraph (b) of subsection (1) or paragraph (b) of subsection 2."

Nor do I feel that the alternative remedy of petitioning the Governor should be a reason to bar any application to the Supreme Court, unless the plaintiff has already petitioned the Governor.

7. Yet another point which I can dispose of fairly quickly is the contention that the covenants are all conditions precedent and as there is no fulfillment or compliance with such covenant therefore there has been no lease and as such there is nothing for which the plaintiff can apply for relief against forfeiture. Learned counsel for the plaintiff has directed my attention to the case of Barton Thompson & Co. Ltd. v. Stapling Machines Co. in 1966 Chancery, page 499. This is a case for the hiring of machines and it was contended that the plaintiff had failed to comply with certain conditions and covenants. It was held in that case that:

"... although relief against forfeiture was normally only granted in the case of a lease of land, it was not plain and obvious as a matter of law that the court could not in certain circumstances, even in the absence of unconscionable behaviour, grant relief against forfeiture in the case of a lease of chattels, and, accordingly, the plaintiffs should be allowed to argue their case if it was maintainable on other grounds."

Furthermore, the condition of grant - no matter what one calls it - is very similar to an agreement of a lease. If that is the case then obviously there is good reason for the plaintiff to apply for relief against forfeiture.

8. As to the contention that Mr. Dixon's representation is not binding on the Crown, I must observe that Mr. Dixon, if what is alleged is true, was a servant of the Crown and also an officer dealing in land matters in the New Territories. His representation that the plans would be approved within 28 days might be a correct statement of fact and law as it then stood. Unfortunately a disaster intervened necessitation the Legislature to suspend the provisions of a certain Section of the Building Ordinance. As a result the Building Office was not obliged to indicate its approval or rejection of any building plan within 28 days. Thus I say that whatever happened, however innocent that representation might have been, it was still a mis-representation - or a representation which was changed by subsequent events through no fault of the plaintiff.

9. The only thing that is left for me to consider is whether equitable relief is open to the plaintiff in cases of breach of covenant other than a covenant to pay rent. It is quite correct to say that the relief provided for by provisions of the Law Property Act 1925 do not apply to Hong Kong. It is also true that there are two schools of thought as to the circumstances under which equitable relief may be granted. My attention has been directed to the case of Cheung So Yin-kay v. Cheung Biu in 1970 Hong Kong Law Reports, page 383 in which Mr. Justice Briggs, as he then was, in his judgment, said this:

"	The plaintiff claims forfeiture of the lease. However, the defendant asks for relief against forfeiture invoking the equitable jurisdiction of the court. This was sought in a counterclaim, a procedure favoured by the Full Court in Ta Sheng Plastic Goods Co. Ltd. v. Green Island Cement Co.
"	The question is whether the court here in Hong Kong has jurisdiction to grant relief from forfeiture for the breach of a covenant in a lease other than a covenant to pay rent or a covenant to insure. The latter is conferred specifically by section 5 of the Law of Property Amendment Ordinance (Cap. 24).
"	This branch of the law has been extensively developed in England by various statutes which do not apply in Hong Kong. Apart from statute law the authorities clearly show that the only instances where relief would be given in cases where there is a breach of a covenant other than a covenant to pay rent, are cases where the breach was due to some accident, surprise or mistake."

Thus, even in the case where there is some allegation of accident, surprise or mistake, the court of equity may grant relief in breaches of covenant other than the covenant to pay rent.

10. The case of LI Sui-yuet v. The Attorney General was decided on other grounds. That was a case where the plaintiff had committed a breach of covenant and petitioned the Governor for relief against re-entry. The re-entry notice was revoked subject to certain conditions to be fulfilled and complied with by the plaintiff. The plaintiff committed a further breach in not complying with the conditions. It was held that because the conditions had not been fulfilled the revocation would stand and as such there had never been any relief from the re-entry because there had been no compliance with the conditions. That case has no bearing upon the grounds upon which the court will give relief where there is a breach of other covenants.

11. Perhaps the classic case is that of Hill v. Barclay in which Lord Eldon took the very strict line that equitable relief against forfeiture would only be given in cases where the breach of covenant is one of non-payment of rent. But on the other side of the argument is the case of Sanders v. Pope where Lord Erskine applied a much more liberal attitude.

12. These cases and the line of cases following the two schools of thought have been carefully considered in the recent case of Shiloh Spinners Ltd. v. Harding in 1973 I All England, page 90. Mr. Litton, counsel for the plaintiff, has directed my attention to the Judgment of the House of Lords in England. To begin with, I might observe that this is a unanimous judgment on the point and history as to when equitable relief should be given. Lord Wilberforce, in his judgment said this - and I will not apologise for quoting him at length:

"	There cannot be any doubt that from the earliest times courts of equity have asserted the right to relieve against the forfeiture of property. The jurisdiction has not been confined to any particular type of case. The commonest instances concerned mortgages, giving rise to the equity of redemption, and leases, which commonly contained re-entry clauses; but other instances are found in relation to copyholds, or where the forfeiture was in the nature of a penalty. Although the principle is well established, there has undoubtedly been some fluctuation of authority as to the self-limitation to be imposed or accepted on this power. There has not been much difficulty as regards two heads of jurisdiction. First, where it is possible to state that the object of the transaction and of the insertion of the right to forfeit is essentially to secure the payment of money, equity has been willing to relieve on terms that the payment is made with interest, if appropriate, and also costs (Peachy v. Duke of Somerset and cases there cited). Yet even this head of relief has not been uncontested: Lord Eldon LC in his well known judgment in Hill v. Barclay expressed his suspicion of it as a valid principle, pointing out, in an argument which surely has much force, that there may be cases where to oblige acceptance of a stipulated sum of money even with interest, at a date when receipt has lost its usefulness, might represent an unjust variation of what had been contracted for (see also Reynolds v. Pitt). Secondly there were the heads of fraud, accident, mistake or surprise always a ground for equity's intervention, the inclusion of which entailed the exclusion of mere inadvertence and a fortiori of wilful defaults.
	Outside of these there remained a debatable area in which were included obligations in leases such as to repair and analogous obligations concerning the condition of property, and covenants to insure or not to assign. As to covenants to repair and cases of waste, cases can be quoted before the 19th century in which relief was granted (see Webber v. Smith and Nash v. Earl of Derby). There were hostile pronouncements. In Wadman v. Caloraft both Sir William Grant MR and Lord Eldon LC are found stating it to be clear that relief cannot be given against the breach of other covenants - i.e. than covenants to pay rent.
	It was soon after that the critical divide or supposed divide occurred, between the liberal view of Lord Erskine LC in Sanders v. Pope and the strict view of Lord Eldon LC in Hill v. Barcla. The latter case came to be followed as the true canon; the former was poorly regarded in Lincoln's Inn, but it is important to observe where the difference lay. This was not, as I understand it, in any disagreement as to the field in which relief might be granted for both cases seem to have accepted that, in principle, relief from forfeiture might be granted when the covenant was to lay out a sum of money on property: but rather on whether equity would relieve against a wilful breach."

13. The present case is one of laying out money on property. Further on his Lordship has this to say:

"	The suggestion that relief could not be granted against forfeiture for breach of other covenants was not one that followed from either case: relief was so granted in Bargont v. Thomson. Equally in Barrow v. Isaac & Son, a case of a covenant against under-letting without consent, a high water mark of the strict doctrine, the emphasis is not so much on the nature of the breach which may or may not be relieved against, but on the argument that it is enough to show that compensation can be given; .......
	'..... it was soon recognised that there would be great difficulty in estimating the proper amount of compensation; and, since the decision of Lord Eldon in Hill v. Barclay, it has always been held that equity would not relieve, merely on the ground that it could give compensation, upon breach of any covenant in a lease except the covenant for payment of rent.'"

At page 103, Lord Simon has this to say:

"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. Isaacs & 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 trail 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 weight 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 on jurisdiction."

Mrs. Jackson-Lipkin, counsel for the defendant, has urged me to disregard the English authorities on the grounds that they have no application to Hong Kong because we have not the statutory provisions to provide for the relief that may be granted in England. However, I must observe that these authorities referred to by the learned Law Lords were authorities considered before any statutory provision for additional remedies was introduced in England. The two passages in the judgment of their Lordship are considerations of English law as it stood before the introduction of other statutory remedies in England.

14. I am further invited to consider the conduct of the plaintiff that there was wilful default and delay in this matter. However, at this stage I am only concerned whether the plaintiff may or may not have a cause of action. If all the allegations in the statement of claim are as stated it appears that misunderstandings and unexpected events were causes for the delay. Had there been no landslide in the summer of 1972 there would have been no suspension of the provisions in the Building Ordinance and, second, plans submitted in September 1972 would have been approved within 28 days. That would have left the plaintiff time to develop the property in compliance with the covenant.

15. Having regard to Shiloh's case and the judgment of the House of Lords, I am of the opinion that the 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. The criterion whether such relief will be granted at all is based on the circumstances which have been partly listed in Lord Simon's judgment.

16. At this stage it is premature to decide for myself whether the conduct of the plaintiff is such that she should be denied relief. This is within the province of the trial judge. All I have to decide is that the court has jurisdiction and is entitled to look at the conduct of the parties to see whether there has been wilful default on the part of the plaintiff or whether such re-entry is too harsh treatment to the plaintiff as such and whether the defendant would be unfairly prejudiced if relief were granted. Once I resolve that the court has jurisdiction I cannot say that the plaintiff has no cause of action at this stage.

17. Having considered the balance of the two issues I am of the opinion that this application should be dismissed. I find that I am unable at this stage to say that the plaintiff has clearly no cause of action. Once I have decided that question I cannot say in my conscience that the action is frivolous, vexatious or an abuse of the process. Accordingly, the appeal must be dismissed with costs.

	(Simon F.S. Li)
	Puisne Judge.

Representation: