Man Fu Wan v. Tam Wah Hung
Read the full judgment text of HCA 1418/2002 on BabelCite. This High Court CFI judgment was delivered on 27 February 2003.
1. This is an appeal by the Defendant against the decision of Master Levy given on 24 October 2002 giving final summary judgment against the Defendant for possession of certain land, arrears of rent in the sum of $360,000 with interest thereon at judgment rate from the date of the writ and also mesne profit at a rate of $110,000 per month from 1 May 2002 to date of delivery of vacant possession of the land. At the end of the hearing before me on 4 February 2003, I gave my decision that the appea
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HCA001418/2002 HCA 1418/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1418 OF 2002 ____________
____________ Coram: Mr Recorder Edward Chan, S.C. in Chambers Date of Hearing: 4 February 2003 Date of Decision: 27 February 2003 __________________________ REASONS FOR DECISION __________________________ 1.This is an appeal by the Defendant against the decision of Master Levy given on 24 October 2002 giving final summary judgment against the Defendant for possession of certain land, arrears of rent in the sum of $360,000 with interest thereon at judgment rate from the date of the writ and also mesne profit at a rate of $110,000 per month from 1 May 2002 to date of delivery of vacant possession of the land. At the end of the hearing before me on 4 February 2003, I gave my decision that the appeal should be allowed to the extent that conditional leave to defend should be given. The condition to be imposed was that the Defendant was to pay the amount of $110,000 per month to the Plaintiff on the first day of each calendar month commencing on 1 March 2003 until judgment in this action or until further order. I also told the parties that I would give the reasons for my decision and also my order on cost later and I do so now. 2.This action arose out of an action to recover possession of certain land. The land in question is Lot Nos. 2809 R.P., 2811, 2812, 2813, 2818, 2819, 2820, 2821, 2822, 2826, 2810, 2814, 2815, 2816, 2817, 2823, 2824, 2825, 2829, 2830, 2831, 2832, 2840, 2846, and 2847 all in Demarcation District No. 102, Yuen Long, New Territories (herein after referred to as the "land"). The writ was issued on 16 April 2002 with a statement of claim endorsed. At that stage, the statement of claim pleaded that the Defendant was a monthly tenant of the Plaintiff in respect of the land under an oral tenancy since 1 May 1996. Under the tenancy, the Defendant was liable to pay rent at the rate of $140,000 per month. Since about January 2002, the rent was reduced to $110,000 per month. The Defendant defaulted in the payment of rent and the Plaintiff was entitled to forfeit the tenancy and did so by the service of the writ. The Statement of Claim had been amended on 15 July 2002 and yet again on 8 August 2002. It was not clear as to what amendments had been effected on each occasion as the copy of the Re-amended Statement available to me is not properly coloured. However, it is quite clear that as a result of the amendments, the Plaintiff claimed that the rent payable since 1 May 1996 was $130,000 per month, as from 1 April 1998, the rent payable was $140,000 per month, and as from January 2002, the rent payable was $110,000 per month. The Defendant failed to pay the rent for April 2001 and also for the months of April and May 2002. Hence, there was a total sum of $360,000 due and owing to the Plaintiff as arrears of rent by the time of the writ. The Plaintiff sought to forfeit the tenancy by the service of the writ. In the alternative, the Plaintiff pleaded that the Defendant had evinced an intention not to be bound by the monthly tenancy and the oral agreement made in January 2002 reducing the rent to $110,000 per month and the Plaintiff accepted the Defendant's repudiation by the issue and service of the writ. 3.It is important to note that since the issue of the Order 14 summons, the Plaintiff through its solicitors indicated on affirmation that the Plaintiff would not seek possession of lot 2919 in DD102. This was apparently because the Plaintiff's solicitor was unable to obtain a land search to prove the identity of the registered owner of this lot. When the master gave judgment for possession to the Plaintiff this lot was omitted. I do not see why this concession is necessary as the Defendant was not setting up a right of any 3rd party or himself in rival to the Plaintiff's right to possess if the Plaintiff was right in his contention that the tenancy was terminated. This point has not beeen debated before me. In any event, since there is this concession, if any judgment for possession was to be entered against the Defendant for breach of the condition to defend, I would only direct that judgment for possession be entered for the land excluding this lot 2819 of DD 102, unless the Plaintiff has obtained leave to withdraw the concession. 4.On the part of the Defendant, there was no dispute that the rent for the months of April 2001 and April and May 2002 had not been paid. There was likewise no dispute on the amount of rent payable in respect of each period of time. However in the Defendant's first affirmation, it was contended that in 1990, there was an oral agreement between the Plaintiff and him that the Plaintiff would allow "me [the Defendant] to use the land as long as his possession would not be challenged and as long as there was no government intervention. There are (sic) no clear term as the Plaintiff had no idea how the arrangement would stand. There was the understanding that I would pay rent for using the Lots but no other details were agreed". The Defendant said he thus paid rent to the Plaintiff for using the land. He gradually spent money to improve the land to make it suitable for parking of motor vehicles. He also took possession of some nearly land to be used in conjunction with the land for the operation of his business "New Chung Kong Cargo Lorry Park". 5.The Defendant also gave reasons for his withholding the payment of rent in paragraphs 10 to 13 of his first affirmation. He said :
6.The above was the material part of the evidence put in by the Defendant before the Master. Since judgment was given by the Master, on 22 January 2003 the Defendant filed his 3rd affirmation, which sought to beef up the circumstances of his first entering into possession of the land and also the events leading to the Defendant's decision to withhold the payment of the rent. The affirmation was filed without leave but since the Plaintiff did not raise any objection to the filing or use of this affirmation, I allow the Defendant to refer to this affirmation as well. 7.By his 3rd affirmation, the Defendant sought to say that the oral agreement he had with the Plaintiff was made sometime in 1991 and the oral terms he reached with the Plaintiff were :
8.The Defendant also produced a written tenancy agreement dated 25 April 1992 under which the Plaintiff would let Lots 2810 and 2814 in DD 102 to the Defendant for a term of 4 years commencing on 1 May 1992 to 30 April 1996 at a monthly rent of $93,000 payable in advance before the 5th day of each calendar month. There was also a provision in this written agreement that after 2 years, the rent would be increased to $130,000 per month. The Defendant alleged that when he was asked by the Plaintiff to sign the agreement he asked the Plaintiff the purpose for signing such an agreement. He was told by the Plaintiff that the purpose was to show the signed agreement to the Plaintiff's partners and the members of the Man family and that the provision of a 4-years term was solely for the purpose of fixing the rent for that period. The Defendant also claimed that the Plaintiff had assured him that the Plaintiff would continue to let the land to the Defendant as long as the possession of the Plaintiff and some of the members of the Man family would not be challenged and as long as there was no government intervention or resumption. The Defendant also claimed that the Plaintiff had assured him that the provision about rates in the written agreement was included by mistake and that there was no rates payable in respect of the land. The Defendant said that he signed the agreement in reliance of these representations made by the Plaintiff. 9.The Defendant also beefed up his case on the circumstances and reasons for his not paying the rent for April and May 2002. He referred to the incident of his ex-employee causing death to a person in a gang fight and also to his confrontation by members of the Man family in March 2002 deposed to in his first affirmation. He said that after the incident, he received many complaints from his customers that they were threatened by an unknown person not to park their container trucks in the land and in the Defendant's container trailer park next door. In paragraphs 22 and 23 of his 3rd affirmation, he said:
10.However although the Defendant produced the 4 year tenancy agreement and claimed that the Defendant had since the expiration of the term also remained in possession of the land paying a monthly rent, his counsel told me that the Defendant's primary case was that the Defendant was not a monthly tenant. Instead the Defendant's primary case was that the Defendant was a licensee of the land but the Defendant's occupation of the land was protected by a proprietary estoppel arising out of the Plaintiff promise or representation that the Plaintiff would allow the Defendant to use the land as long as the Plaintiff's own possession of the land was not challenged or there was no government intervention or resumption and that in reliance of that the Defendant had spent some $1.88 million to make the land suitable for a container park (hereinafter called the said proprietary estoppel). In the alternative, the Defendant claimed that since the expiration of the 4 year tenancy, there was an automatic right to renew the 4 year term in perpetuity subject only to the right to terminate the tenancy when the Plaintiff's own possession of the land was challenged or there was government intervention or resumption. Hence at any time since the termination of the original 4 years term, the Defendant would be enjoying a 4 years term tenancy but the Defendant conceded that the tenancy could be at a different rent. It is claimed that an alternative effect of the proprietary estoppel was to give rise to this 4-yearly perpetually renewable tenancy. Yet the next alternative for the Defendant's contention was that after the 4 year term, the Defendant became a 4-yearly tenant but without the protection of the proprietary estoppel. A further alternative was that the Defendant was a 2-yearly tenant but with the protection of the proprietary estoppel. A final alternative was that the Defendant was a 2-yearly tenant without the protection of the proprietary estoppel. The reason for the Defendant's counsel's contending that the Defendant was a 2-yearly tenant was that the history of the letting showed that the rent for the land was revised once every two years. 11.The Defendant's counsel contended that since this was an application by the Plaintiff for summary judgment, it was for the Plaintiff to make good the allegation in his statement of claim. Since the Plaintiff had pleaded a case of monthly tenancy, the Defendant's counsel would contend that if there was a triable issue as to whether the Defendant was in fact a monthly tenant, then unconditional leave to defend must be given to the Defendant. This would be so even though whether the Defendant was a monthly tenant, a licencee or a 4-yearly or 2-yearly tenant, there must be a right to terminate the licence or tenancy in the event of non payment of the licence fee or rent. In fact the Defendant's counsel was extremely reluctant to disclose the Defendant's case on the nature of the Defendant's occupation even when asked by the bench and it is not without repeated requests from the bench that the Defendant's counsel finally came up with the various alternative contentions set out above. 12.I have no doubt at all that on the evidence available, the Defendant was clearly a monthly tenant after the 4 years term had expired. The monthly tenancy came into being by the Defendant's holding over paying a monthly rent. The Defendant in his affirmations referred to the monthly payments he made for the occupation of the land as rent. He was given possession of the land and he did enjoy possession of the land by operating a vehicle parking lot on it. There was never any suggestion that he was a mere licencee or that the Plaintiff still retained any right to use or occupy the land during the course when the Defendant was let into occupation. Hence in my view, there was no triable issue on whether the Defendant was a tenant or a licencee. Despite the ingenuity of the Defendant's counsel, I am of the clear view that the various alternative contentions that the Defendant was 4-yearly or 2-yearly tenant was simply not arguable. At any rate, I could not see how an issue as to whether the Defendant was a licencee, a monthly tenant, a 4-yearly tenant or a 2-yearly tenant could give rise to any triable issue so as to warrant any leave to defend to be given on the facts of this particular case. 13.As I have pointed out the Plaintiff's original case was that the Defendant's right to occupy the land was terminated upon the forfeiture of the tenancy. However in the application before me, it was made clear that the Plaintiff did not seek to obtain summary judgment on account of his right to forfeit the tenancy for non payment of rent. Apparently this was because the Plaintiff had not given any formal demand for rent as required by the common law as a pre-requisite for forfeiture. However the Plaintiff contended that the Defendant's non payment of the rent would give rise to a repudiatory breach of the tenancy agreement and the Plaintiff had the right to accept the repudiation and to terminate the tenancy agreement. In the pleading, it was said that the repudiation was accepted by the service of the writ. However this is clearly wrong. At the time of the service of the writ, the Plaintiff's only claim was for the determination of the tenancy by forfeiture. The acceptance of the repudiation only came at the time of the re-amendment to the Statement of Claim and the acceptance was communicated by the service of the re-amended Statement of Claim. There is thus a technical error in the Re-amended Statement of Claim. This point was not taken by the Defendant's counsel, and I would be quite prepared to give the Plaintiff leave to amend to rectify this defect if the need to do so arises. 14.I would like to point out that although a lot of effort had been spent by the Defendant in his affirmations and by his counsel in his submission on the issue of proprietary estoppel, I do not think that this issue was relevant for the purpose of the hearing before me at all. This is because it could not be contended and it has not been contended that if (a) the doctrine of repudiation does apply to tenancies as a matter of law, and (b) if a tenancy may be repudiated by the non payment of rent as a matter of law, and (c) the Defendant's conduct here did amount to a repudiation, then the alleged proprietary estoppel would have the effect of preventing the Plaintiff from accepting the repudiation to terminate the tenancy agreement. 15.As to whether the doctrine of repudiation would apply to tenancies, counsel for the Defendant's submitted that the matter was still open to doubt. The position in England would appear to be that in Total Oil Great Britain Ltd v Thompson Garages (Biggin Hill) Ltd [1972] 1 QB 318, the English Court of Appeal held that a lease was not capable of determination by repudiation and acceptance. The decision was not followed in Hussein v Hehlman [1972] 2 EGLR 87 on the ground that the House of Lords had held that even the doctrine of frustration would apply to leases (of National Freight Carriers v Panalpina [1981] AC 685) and that the House of Lords decision in United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 showed that the law of landlord and tenant was essentially the law of contract with certain special requirements. Thus the House of Lords held that the stipulation as to time in rent review clauses were generally not of essence applying the normal contractual rule. Hence there was no reason for the contractual doctrine of repudiation not to be applicable to tenancies. In fact text book editors like Hill & Redman's Law of Landlord and Tenant also took the view that there was no reason why the doctrine of repudiation should not apply to tenancies. (see Hill & Redman's Law of Landlord and Tenant para [9423]). 16.Counsel for the Defendant also pointed out that in Hong Kong, although there was a series of first instance decisions recognizing that the normal contractual doctrine of repudiation would apply to tenancies (see Hop Woo Cheung Enterprises Ltd v Intergroup Industries Ltd [1982] HKC 436, Chan Annie v Lau Wai Kwong & others trading as Kiu Kwong Watch Case Manufactory [1984] HKC 231, Silver Source Development Ltd v Time Century Ltd [1992] HKC 366, United Assets Company Ltd v Fordyear International Property Ltd & others (HCA 7957 of 1998 & HCA 10464 of 1998), & Sano Screen Manufacturers Ltd. & others v J & R Bossine Trading Ltd [2000] 3 HKC 216), the proposition has not actually been properly tested in the Court of Appeal. He submitted that since there was no Court of Appeal decision on the point, I was free to depart from the long list of first instance judgments or at least his client should be allowed to test the validity of the proposition. In this respect, he submitted that although the decision of Bonny Ace Ltd v Elanby Nominees Ltd (CACV 285 of 2000) was a decision of the Court of Appeal, what the Court of Appeal was concerned with was merely on whether a landlord ought to be allowed to amend his statement of claim to allege inter alia repudiatory breach on the part of the tenant and entitlement to accept the repudiation on the part of the landlord. Hence the decision of the Court of Appeal would merely indicate that it was properly arguable that the doctrine of repudiation may be applicable to tenancies, and the decision did not amount to a positive affirmation that the doctrine of repudiation did apply to tenancies. Although the Defendant's counsel was right in pointing out the context of the decision of Bonny Ace Ltd case, I am of the view that the Court of Appeal's decision in that case must necessarily mean that the Court of Appeal would recognize that the doctrine may be applicable to tenancies. This is because if as a matter of law the doctrine of repudiation could not apply to tenancies, then the allegation of repudiation and entitlement to accept repudiation was not maintainable in law and the amendment should not be allowed. In fact, it is to be observed that in many cases, important legal propositions were laid down in actions for striking out and the courts were simply deciding that the legal propositions involved were viable without deciding whether on the facts of the case the plaintiff would succeed or not. The well known case in tort, Donoghue v Stevenson [1932] AC 526, is a very well known example. 17.Accordingly I am of the view that the doctrine of repudiation would also apply to the case of a monthly tenancy. 18.The Defendant's counsel also contended that in any case, it was arguable whether the mere non payment of rent by a tenant could ever amount to repudiation of the contract of tenancy as a matter of law. He pointed out that in most cases where the Court held that the tenant had repudiated the tenancy, the tenant's conduct was such that it indicated that the tenant would not like to continue to have possession of the demised premises any more. He drew my attention to the decision Well Century Holding Limited v Leung Kam Yu (HCA 1368 of 2001) where Deputy Judge Woolley said:
He further submitted that there were cogent reasons for saying that the non payment of rent could not amount in law to repudiation because to allow a landlord to accept a repudiation in the form of non payment of rent would in fact (a) take away the Court's power to grant relief against forfeiture, and (b) deprive the tenant of the protection given to him in law that before a landlord could forfeit for non payment of rent, there must be a formal demand for rent. In any case, he submitted that as in the case of Well Century Holding Limited v Leung Kam Yu before Deputy Judge Woolley, there must be a trial to decide whether the Defendant's non payment of rent would amount to repudiation or not. 19.I am of the view that the fact that a landlord has a right to forfeit the tenancy for non payment of rent could not mean that the non payment of rent could never amount to a repudiation, in as much as in the case of an ordinary contract, the fact that there was a contractual right to terminate the contract upon certain breach of certain terms of the contract could not mean that a breach of those terms could never amount to a repudiation of the contract. In the case of forfeiture, the question is whether all the necessary conditions for the exercise of that right have been satisfied. In the case of repudiation, the question is whether the conducts of the party in breach is such that it could be said that he has evinced an intention not to be bound by the contract. In the case of a tenancy, the most valuable right of the landlord is the collection of rent and the payment of rent is a fundamental obligation on the part of the tenant. In the circumstances, I do not agree that in law there could be a proposition that the non payment of rent could not amount to a repudiation of a tenancy. 20.The question is thus whether the conduct of the Defendant in this case was a clear repudiation of the tenancy such that there was no triable issue on the issue of repudiation. On the part of the Plaintiff, it was contended that the conduct of the Defendant was not just the non payment of the rent. The default of the Defendant was not an accidental omission but was a deliberate decision not to make any payment of rent. This is supported by the admission made by the Defendant in paragraph 22 of his 3rd affirmation when he said "I told him I would stop paying rent to him and his Man family unless he stopped sending people to my container trailer parks to disturb my customers". The Plaintiff contended that he had never sent any one to disturb the Defendant's customers, and the way that the Defendant's presented his evidence on such disturbance would indicate that the Defendant's story was not believable at all. Hence the Defendant was merely making use of lame excuses to deliberate withhold the payment of rent. 21.Counsel for the Defendant on the other hand submitted that the Defendant's version was creditable. He submitted that the disturbance to the Defendant's customers would amount to a breach of the implied covenant of quiet enjoyment in the tenancy and he was thus entitled to damages and the damages may be use as a set off against of the rent. 22.It is important to note that as a matter of law, the covenant of quiet enjoyment is broken "by acts of the landlord or someone claiming under him which substantially interferes with the title to or possession of the demised premises or the ordinary and lawful enjoyment of those premises by the tenant" (see Hill & Redman's Law of Landlord and Tenant para [6842]). The sort of disturbance to the Defendant's customers would probably not amount to any breach of an implied covenant of quiet enjoyment but would be within the perimeter of breach of the implied covenant of not to derogate from the grant. Although the Defendant has mis-identified the type of covenant relied upon, I do not think that I should decline to grant leave to defend on this account. I think the greatest difficulty in the Defendant's way is that whether it be a breach of implied covenant of quiet enjoyment or not to derogate from the grant, the Defendant has to show that the act of the disturbances was the acts of the Plaintiff (the landlord) or someone claiming under the Plaintiff. In this respect, the Defendant's evidence was so weak that I would consider it as shadowy. It is to be noted that in the first affirmation of the Defendant, he drew a clear distinction between the Plaintiff and the Man family. He referred to pressure being brought on him by the Man's family only. The person who was supposed to have threatened his customers was not identified and there was never any report of such incident to the police or any other authorities. I accept that in his 3rd affirmation, he tried to beef up his case by alleging in paragraph 21 thereof that:
However there was never any basis disclosed as to why he should make such allegation and certainly he has never explained why such allegation against the Plaintiff was not made in his first affirmation. Furthermore although the Defendant claimed that there were many such instances of threats and that the threats to his customers continued until 24 October 2002, the date of the possession order by the Master, he failed to give the particulars of any single occasion when such threats was supposed to have taken place. Counsel for the Defendant submitted that
the inference must be that the Plaintiff had sent people to make those threats because no one else would have an interest to do so. The difficulty in this contention was that even on the Defendant's case, his relationship with the Plaintiff was a very good one and the relationship only deteriorated since the incident of the killing involving his ex-employee. Yet it has never been alleged that the Plaintiff demanded to terminate the tenancy. Furthermore even if there were any evidence to support counsel's suggestion that there was no one demanding money from the Defendant, there was nothing to suggest that the Plaintiff had any added motive to terminate the tenancy. The alleged acts of the Plaintiff re-letting the land to someone else only took place after the possession order and there was no reason why the Plaintiff should not re-let the land. 23.I fully appreciate that it is not my function in an Order 14 application to conduct a trial on affirmations and I have not attempted to do so. However in view of the way the evidence emerged and the lack of particularity in the allegation, I would consider that the defence is shadowy. In any case, the Defendant's alleged loss arising from the disturbance did not justify the complete withholding of the payment of rent. Accordingly, I am of the view that the Defendant ought to be given only conditional leave to defend conditional upon the payment of a monthly sum equivalent to the amount of the rent pending the trial of this action. 24.In relation to the cost order, I am of the view that when the Master heard the application, the Defendant's evidence was such that he made no allegation that the alleged disturbance was caused at least in part by the Plaintiff. His allegation then would not amount to any defence. Accordingly the Master was right in coming to the decision as he did. Although in the light of the further evidence, I have come to a view different from that of the Master, I am of the view that it was entirely the Defendant's fault in not putting the evidence before the Master, shadowy as it was. Hence I would not disturb the Master's order on cost. As to the cost of the appeal before me, I will make the usual order that if the Defendant should comply with the condition, then the cost of the appeal is to be cost in the cause of the action, and upon the Defendant's failure to comply with the conditions, then not only is the Plaintiff entitled to judgment in restoration of the Master's order, the Plaintiff is also entitled to the cost of this appeal and the cost of the action.
Representation: Mr Louis Chan & Kenneth Wong instructed by Messrs Wong & Poon, for the Plaintiff Mr E C Mumford, SC instructed by Messrs Chan & Tsu, for the Defendant |
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