Far East Land Holdings Ltd v. Empire Asian Ltd

HCA 1246/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1246 OF 2010

_________________________

BETWEEN

_________________________

Before : Deputy High Court Judge Au-Yeung in Chambers

Date of Hearing : 11 August 2011

Date of Judgment : 12 August 2011

--------------------------

DECISION

--------------------------

1.This is an appeal against a Master’s decision whereby the learned Master dismissed the Defendant’s 2^nd application for stay of execution of a writ of possession and relief against forfeiture of a tenancy.

THE FACTS

2.The tenancy was originally for 3 years until 6 August 2012.  Rent was payable in advance on the 7^th day of each month.  The tenancy provides for re-entry by the landlord should the rent remain unpaid for 15 days after it becomes payable. 

3.On 16 September 2010, the Plaintiff landlord obtained default judgment against the Defendant tenant for failure to pay rent.  The order for possession provided for relief against forfeiture under section 21F(3) of the High Court Ordinance provided the Defendant paid all arrears of rent, mesne profits and costs within 7 days of service of the order on it.

4.All dues were paid only by 3 December 2010.  The rent for November and December 2010 were paid within 15 days of the due date.  The Plaintiff nevertheless proceeded to issue a writ of possession on 5 January 2011.

5.In the Defendant’s 1^st application for relief against forfeiture, Master Levy ordered that there be a stay of execution on condition, among others, that the Defendant shall pay rent to the Plaintiff on or before the 7^th day of each month until expiry of the tenancy agreement. Should the Defendant default in performing the condition, the stay of execution shall be immediately removed and the Plaintiff shall be at liberty forthwith to issue or proceed with execution.  There is no dispute that by the time of the hearing before Master Levy the Defendant was up to date as regards rental payment.

6.The rent for March was paid in accordance with the Order of Master Levy.  That for April was not paid until 11 April 2011 but it was accepted by the Plaintiff.  The Defendant even paid 4 days’ interest for the late payment.

7.Despite that, the Plaintiff proceeded to issue execution for possession of the subject property.  A notice to occupier to quit was issued by the bailiff to the Defendant on 6 May 2011.

8.The Plaintiff then issued a debit note for rent for May.  This was settled by the Defendant on 9 May (7 May being a Saturday).

9.The Defendant took out the present summons on 17 May 2011 seeking a stay of execution and relief against forfeiture for a 2^nd time.

10.It is not in dispute that Master Levy has revived the tenancy agreement by her order.  However, one of the conditions she imposed was breached and the Plaintiff was undoubtedly entitled to levy execution.

11.The Plaintiff opposes the summons on the ground that the Defendant has demonstrated an intention not to comply with Master Levy’s order and there had been a history of past defaults after the default judgment.

12.The Defendant submits that it was an oversight and not willful default, and that the Plaintiff has waived the right to forfeiture by acceptance of the rent for April 4 days after the due date.

JURISDICTION TO GRANT RELIEF AGAINST FORFEITURE FOR A SECOND TIME

13.There is no dispute that the Court has jurisdiction to do so under section 21F(1A) of the High Court Ordinance provided good cause is shown by the tenant.

14.In any case the Court retains equitable jurisdiction to grant relief against forfeiture for non-payment of rent even if section 21F does not apply.   In the eyes of equity, the proviso for re-entry was merely a “security” for the rent.  Equity is in the “constant course” of relieving against forfeiture where the tenant pays the rent and all expenses.  Save in exceptional circumstances the function of the court is to grant relief when all that is due for rent and costs has been paid up: Mui Lai Sze v. Hau Chi Fai [2005] 2 HKC 367, at para 25, 28, CA.  Exceptional circumstances are those like using the leased premises as a brothel.

15.Relief against forfeiture can be granted even though a writ of possession has been issued: section 21F(4) and (9) High Court Ordinance.

INTENTIONAL BREACH OF MASTER LEVY’S ORDER OR OVERSIGHT?

16.According to the Defendant, in early April, the person handling the Plaintiff’s rental payment was out of town for business.  She authorized one Mr Wong to sign a cheque for the rental payment to the Plaintiff.  However, Mr Wong was engaged in other business and was merely able to attend the Defendant’s office to sign the cheque in the late afternoon on 8 April which was a Friday.  As there was no banking transaction on Saturday, the Defendant paid the rent on Monday, the 11^th.

17.I am satisfied that there was a slip on the part of the Defendant and that there was no intention to flout Master Levy’s order.

18.Ms Leung for the Plaintiff refers to the repudiation of the tenancy, late payments of arrears of rent and mesne profits and bounced cheques under the default judgment.   Those in my view were forgone conclusions.  The Court in exercising its discretion, whether under section 21F or the equitable jurisdiction, pays no regard to previous defaults: Gill v. Lewis [1956] 2 QB 1, especially since those defaults were before Master Levy’s order.

WAIVER OF THE RIGHT TO FORFEITURE

19.It is trite law that acceptance of rent by the landlord after he has notice that the right to forfeit has arisen amounts to an unequivocal affirmation of the continued existence of the tenancy and thus a waiver of the right to forfeit.  The subjective intention of the landlord is irrelevant.

“It is not necessary that the landlord should intend to waive the right to forfeit. If, objectively, his act recognizes the continued existence of the tenancy, a waiver will result irrespective of his intention. Thus the acceptance of rent because of a clerical error will amount to a waiver, as will the receipt of rent ‘without prejudice’, or under protest. It is a question of fact whether money is tendered and accepted as rent, but once it has been decided that money was tendered and accepted as rent, the question whether the right to forfeit has been waived is a question of law: Woodfall on Landlord and Tennant, loose-leaf Vol.1, at para 17.095; Central Estates (Belgravia) Ltd v. Woolgar (No 2), [1972] 1 WLR 1048 at pages 1054 G-H, 1056D.

20.In the present case, not only had the Plaintiff accepted the rent for April (which covered the period up to 6 May) but it had also purported to charge interest therefor, which it was not entitled to under the tenancy agreement.  However, the Defendant had paid the interest without objection and the Plaintiff had accepted the same.  Such acceptance was clearly inconsistent with an intention to obtain immediate possession.

21.Where there is a breach of covenant which is committed once for all (an example being failure to pay rent), waiver of the right to forfeit for the breach precludes the landlord from ever forfeiting for that breach.  Woodfall on Landlord and Tennant, loose-leaf Vol.1,at para 17.105.

FINDINGS

22.On either ground, i.e. unintentional slip or waiver of the right to forfeiture, good cause has been shown.

“… where on all equitable grounds a period of limitation ought in fairness to be extended and its extension will do no more than apply the principle that the condition of re-entry is nothing more than security for the rent, there is no reason why equity should not lend its aid notwithstanding the original order.” Chandless-Chandless v. Nicholson [1942] 2 KB 321, at page 325.

I exercise my discretion to grant relief to the Defendant.

23.Ms Leung for the Plaintiff expresses concern that if relief is granted, there might be similar applications in future and that would cause injustice to the Plaintiff.  That of course has to be dealt with when the circumstances arise.  However, the Defendant should be well advised that having applied twice for forfeiture, it is unlikely to receive much sympathy from the Court were it to fall into default again.  Indulgence is not unlimited.  It should be mindful of the words of Lord Greene MR in Chandless-Chandless v. Nicholson [1942] 2 KB 321at page 324-5.

“Lessees must not think for one moment that they are entitled to be slack or casual about the performance of terms. If they are so and then endeavour to get further indulgence from the court, the court will know how to deal with them …”

CONCLUSION

24.I allow the appeal and order as follows:

(i)   There be a stay of execution of the writ of possession dated 5January 2011 on condition that the Defendant shall pay monthly rent on or before[1] the 7^th day of each month from 7 September until expiry of the tenancy agreement; and

(ii)   If by 19 August 2011, the Defendant pays to the Plaintiff,  any and all the rent in arrears, the Defendant is granted relief against forfeiture and it shall hold the tenancy of the subject premises according to the lease without any new lease.

25.As for costs, Mr Lam concedes that the Defendant is seeking indulgence and thus should bear costs for the proceedings below, but he asks for the costs of the appeal.  I agree with him.  However, the costs sought are excessive bearing in mind the lack of complexity.  I therefore reduce the hourly rate and the time charged.  Costs of this appeal are summarily assessed at $30,000 payable by the Plaintiff.

26.I thank counsel for their assistance.

Ms Pauline Leung instructed by Messrs Chow, Griffiths & Chan for the Plaintiff

Mr Keith Lam instructed by Messrs Tung, Ng, Tse & Heung for the Defendant