Lai Kwok-wah and Others Trading As Goodwill Restaurant v. Sylvia Seto and Another
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CACV000104/1978 Landlord and tenant - subletting of part of demised premises - Order 14 - head-lease forfeited for non-payment of rent - sub-tenant applying for relief - sub-tenant not entitled to unconditional leave to defend - whether leave should be granted on conditions related to terms of head-lease or on conditions related to terms of sub-lease.
----------------- Coram: Huggins and Pickering, JJ. A., and McMullin, J. Date of Judgment: 16 July 1979 ----------------- JUDGMENT ----------------- Huggins, J.A.: 1. The judge in chambers allowed an appeal by the 2nd Defendants against an order of the Registrar giving leave to the Plaintiffs to enter final judgment for possession and mesne profits. The 2nd Defendants were sub-tenants of the 1st Defendant of part of land demised to the 1st Defendant. The Plaintiffs had entered judgment in default of appearance against the 1st Defendant, the action being based upon a right of re-entry for non-payment of rent reserved in the 1st Defendant's agreement for a lease. When the Plaintiffs sought to execute upon their judgment the 2nd Defendants applied to the court to be joined as defendants. Upon their being joined an express order was made staying execution until further order, although a stay of execution automatically came into force by virtue of 0.13 r.5 of the Rules of the Supreme Court. The Plaintiffs then applied for summary judgment against the 2nd Defendants. The 2nd Defendants contested the Plaintiffs' right to forfeit the head-tenancy and, in the alternative, counterclaimed for relief from forfeiture. The judge in chambers granted leave to defend on condition that the 2nd Defendants paid to the Plaintiffs' solicitors within twenty-one days a sum equal to the arrears of rent which would be payable under the head-tenancy agreement up to the date of the order and thereafter on the first day of each month a sum equal to the rent which would be payable under the head-tenancy agreement. 2. Before us it has been argued that the learned judge was wrong to impose any condition at all upon the grant of leave to defend and, in the alternative, that it was wrong to impose any condition that the 2nd Defendants should pay more than they would be liable to pay by virtue of their sub-tenancy agreement. 3. In my judgment the learned judge was clearly right not to give unconditional leave to defend. It was not contended before us that there was any live issue as to the Plaintiffs' right to forfeit the head-tenancy: what Mr. Cheung submitted was that the 2nd Defendants were entitled to unconditional leave to defend on the sole ground that they had pleaded a counterclaim for relief. He did not cite to us any case where it had been held that a counterclaim for relief against forfeiture ought to be treated as a complete defence to a claim for possession in accordance with the principle stated by Cotton, L.J. in Zoedone Co. v Barrett (1882) 26 S.J. 657 and such a case seems to me to be distinguishable from all the cases cited in the Supreme Court Practice where that principle has been applied. The 2nd Defendants are seeking discretionary equitable relief against head-landlords whose only fault is alleged to be that they have enforced their legitimate contractual rights. Clearly leave to defend should not be granted save upon terms which will afford the landlords a proper measure of protection. Even if the 2nd Defendants are successful upon their counterclaim, it is conceded that they will be liable to pay to the Plaintiffs at least the rent which they would have been liable to pay to the 1st Defendant under the sub-tenancy agreement. If they are unsuccessful, they will have to pay mesne profits, but it is argued that such mesne profits might be assessed at a figure lower than that of the rent reserved by the head-tenancy agreement. That is a remote possibility which would arise only if there were a fall in market rents substantially below those obtaining when the rent was fixed and, in my view, it does not compare with the certain damage to the Plaintiffs if they are deprived not only of the enjoyment of their land but also of the use of the rent or mesne profits to which they must be entitled. 4. Mr. Chang submits that the judge was right to base the payments required under the conditions not upon the sums payable by the 2nd Defendants to the 1st Defendant for the shop they were granted by the sub-tenancy agreement but upon the sums payable by the 1st Defendant to the Plaintiffs for the two shops it was granted by the head-tenancy agreement. Counsel points out that in Hong Kong we have no equivalent of s. 146(4) of the Law of Property Act 1925 and that consequently relief can be granted to an under-lessee only by reinstating the head-lease, for, as Romer, L.J. said in Bendall v McWhirter 1952 2 Q.B. 466, 487
That, Mr. Chang submits, is why upon a claim by an under-lessee for relief after forfeiture of the head-lease the head-lessee is usually a necessary party:
There, of course, the head-lessee had no privity of contract with the under-lessee who claimed relief, but the material point is that there had to be a renewal of the forfeited lease. This accords with the view expressed by B.S. McElney at (1971) 1 H.K.L.J. 42, where he says:
It is no longer so in England, since the court there now has statutory power to make a vesting order which will not affect the head-lessee. Great reliance is placed upon Webber v Smith (1689) 2 Vern. 103, which was cited with approval by Lord Denning, M.R. in Belgravia Insurance Co. Ltd. v Meah 1964 1 Q.B. 436, 444. In the old case there were one hundred sub-tenants under one hundred sub-leases. The head-lease was forfeited for breach of a covenant to repair. Six of the sub-tenants claimed relief against the head-landlord and joined the head-lessee as a party. The court held that it could not decree an apportionment of the head rent, nor grant relief to the claimants save on terms that they pay the whole of the head rent in arrear and perform the covenant to repair in the head-lease. (Nevertheless it was said that the claimants might compel the rest of the sub-tenants to contribute.) In the later case the applicant's counsel expressly stated that, if granted relief, the applicant was prepared to be put on terms as to repairs and made directly liable to the landlord, but there the applicant was the assignee of the whole of the demised house. 5. The basis of the decisions just cited was that where relief is granted the landlord should be put back into the position that he was in before. That was also the basis of Chatham Empire Theatre (1955) Ltd. v Ultrans Ltd. 1961 1 W.L.R. 817, but it was held that under s. 146 of the Law of Property Act 1925 the court could in its discretion limit the protection given to the landlord and require a sub-tenant to pay only that part of the head rent and premium which was apportionable to the sub-tenant's part of the premises. I think it is clear that the power to apportion the rent, which was denied in Webber v Smith, was within the discretion conferred by s. 146. Salmon, J. was apparently not referred to Webber v Smith and was certainly not purporting to depart from it: everyone must have recognized that the statute had made that authority no longer relevant in England. Equally, as it seems to me, Chatham Empire Theatre (1955) Ltd. v Ultrans Ltd. gives no guidance as to the old law, which is still applicable in Hong Kong. 6. I fully appreciate that this was an application under 0. 14 but where the law is clear the court should not flinch from reaching a final conclusion upon it: Cow v Casey 1949 1 K.B. 474. For my part I am not persuaded that the 2nd Defendants have shown an arguable case that Webber v Smith ought not to be followed. 7. I am, therefore, in no doubt that the judge was right to make it a condition of granting leave to defend that the 2nd Defendants should, each month until judgment in the action, pay to the Plaintiffs' solicitors a sum equal to the rent which would have been payable under the head-tenancy agreement. However, there is a further consideration arising in relation to the arrears outstanding when the 2nd Defendants were joined as parties to the action. I have no doubt that, if relief is granted, it must be on condition that those arrears also are paid, but, if relief is not granted, the 2nd Defendants should not be called upon to pay the arrears. Ought they to be required to produce the money now? It may be said that the Plaintiffs are entitled to see the colour of the 2nd Defendants' money at this stage, because it would be unfair if, the Plaintiffs having been kept out of possession for many months, relief were granted on conditions which the 2nd Defendants were then unable to fulfil. On the other hand, it can be said that the 2nd Defendants ought not to be barred from the seat of judgment if they are unable to produce the money now, although they might be able to do so if and when judgment upon the counterclaim was given in their favour. There must inevitably be an element of rough justice in such matters. It does not appear that these opposing arguments were clearly advanced before the judge or that they were in his mind. Had I been hearing the summons at first instance I think I would have limited the conditions for leave to defend to payment for the present use and occupation of the premises demised under the head-tenancy agreement. My main difficulty has been to decide whether it would be right to interfere with the judge's exercise of his discretion. With some hesitation I have come to the conclusion that it would. 8. Then it is said that in any event the Plaintiffs ought to give credit for the security deposit of $225,000 which was paid to them by the head-tenant on or before the signing of the head-tenancy agreement. In relation to this deposit the agreement provided:
It is unnecessary to decide at this stage whether the Plaintiffs would be able to retain the whole of the deposit regardless of the extent of any damage actually incurred as a result of breaches of the terms and conditions of the agreement, but, sine it is necessary for the grant of relief that the head-tenancy be reinstated, I think that if the deposit had been repaid upon forfeiture of the head-tenancy it would be a necessary consequence of the reinstatement that the security be once more deposited. Therefore the Appellants cannot insist on setting off the deposit against the current rent and arrears. 9. For the reasons I have given I would allow the appeal but only to the extent of deleting the condition relating to the payment of the mesne landlord's arrears. 16th July 1979.
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----------------- Coram: Huggins and Pickering, JJ.A., and McMullin, J. Date of Judgment: 16th July, 1979. ----------------- JUDGMENT ----------------- Pickering, J.A.: 10. It seems to me, with respect, that the view taken by the learned judge is the view which might or might not prevail at the end of the day. But we are not at the end of the day. We are still in the forenoon. 11. It is, I think, important to keep in mind the capacity in which the parties appeared in the Court below. They were not before the Court primarily as Head Landlords and Sub-lessees but as Plaintiffs and Defendants. Neither capacity can be wholly obscured but at the stage of Order 14 proceedings when the question for the Court is whether leave should be given to defend it is the latter capacity which ought to prevail leaving for later consideration the essentially landlord and tenant issue of possible relief from forfeiture and the terms of such relief unless they are clear beyond a peradventure. As it seems to me it is at least arguable that those eventual terms may not go so far as to require the Appellants to be responsible for the whole of the rental reserved under the head lease and if that be in fact arguable it would be harsh to impose precisely that disputed term as a condition of being allowed to approach the judgment seat at all. I agree that this is one of those cases in which the counterclaim ought to be treated as a defence. 12. The contrary view involves a finding brevi manu that the only terms upon which the appellants could possibly obtain relief from forfeiture would be upon assuming responsibility for the whole of the rental reserved under the head lease. There is authority for that view in the old case of Webber and Smith(1) which was approved by Lord Denning M.R. in Belgravia Insurance Co. Ltd. v. Meah(2). A contrary result was arrived at in Chatham Empire Theatre (1955) Ltd. v. Ultrans and Others(3) where the sub-lessee obtained relief against forfeiture on terms that it paid only such part of the arrears of rent as was attributable to that portion of the property sub-let to it. It is to be observed that Webber and Smith was decided exclusively under the Court's inherent equitable powers whilst in Chatham, where the landlord received a more limited protection and the sub-tenant more liberal terms, the Court was acting under section 146(4) of the Law of Property Act 1925. The precursor of that sub-section was Section 4 of the Conveyancing and Law of Property Act, 1892. Thus it can be seen that as early as the last century the stringency of the position adopted in Webber and Smith was ameliorated by statute and the Courts endowed with a wider discretion than they had apparently hitherto regarded as being available to them. 13. In Hong Kong we have no corresponding statutory provision. Does it therefore follow that the courts in Hong Kong are bound in this matter by the principle of Webber and Smith? If so, there is nothing to argue but for my part I would hesitate, without the fullest argument, to say that a case decided in England in 1689 is necessarily the last word in every circumstance in the conditions of modern Hong Kong. 14. Whilst it may be that as a result of the hearing the appellants will be offered relief from forfeiture only upon the terms laid down by the learned judge as conditions for leave to defend, or upon very similar terms yet that is a matter to be determined after full argument at the hearing when the issue will be forfeiture or relief therefrom and if the latter, upon what terms. In the meantime we are concerned with leave to defend or no such leave and whilst it may be true that the Respondent/Plaintiffs are guiltless, so also are the Appellant/2nd Defendants against whom there is no allegation of failure to comply with the terms of their sub-lease. Both are victims of the original first Defendants who are no longer a party to these proceedings. 15. I would allow the appeal to the extent of setting aside that part of the judge's order which laid down conditions for leave to defend. Since however it would be no hardship to the Appellants to continue to pay the rent reserved under their sub-lease, since they have expressed a willingness to do so and since such payment would to some extent secure the Respondents, I would substitute for the original conditions of leave to defend a condition that the Appellants pay into Court within twenty-one days of this Order the sum of $297,000 being the equivalent of the rental payable under their sub-lease at $27,000 p.m. for the months of August 1978 to June 1979 inclusive and thereafter the further sum of $27,000 on the first day of each succeeding month commencing on 1st July, 1979. Representation: O.V. Cheung, Q.C. and Miss H.C. Wong (Lau, Chan & Ko) for Appellants. D. Chang (Philip K.H. Wong & Co.) for Respondents. (1) 23 E.R. 676. (2) (1963) 3 W.L.R. 1033. (3) 1961 1 W.L.R. 817.
----------------- Coram: Huggins and Pickering, JJ .A. and McMullin, J. Date of Judgment: 16 July 1979 ----------------- JUDGMENT ----------------- McMullin, J.: 16. The appellants in this case, the five named second defendants in the action, together carry on business under the style of the Goodwill Restaurant on the Ground Floor of New Lucky House, Kowloon. The respondents (plaintiffs in the action) are the registered owner of that property together with shop premises immediately above that property on the mezzanine floor of the same building. The property consisting of these two business premises was leased in 1977 to the first defendants Fung Kwong Enterprises Ltd. Fung Kwong sublet the ground floor premises to the second defendants (appellants). Fung Kwong was at that time in arrears with its rent and the plaintiffs re-entered by writ on the 17th of June 1978 to which Fung Kwong Ltd. made no appearance and subsequently suffered judgment to be entered against it on the 3rd of July. On the 12th of July the present appellants obtained an order to be joined as second defendants in the action; the writ was consequentially amended and the amended writ was re-issued on the 27th of September 1978 and served upon the second defendants. The plaintiffs then applied under Order 14 for summary judgment against the second defendants. That application was heard upon the 25th of October by the Registrar. It was strenuously opposed by the second defendants but leave to defend was refused and judgment was entered in favour of the plaintiffs. The second defendants then appealed to the judge in chambers and on the 6th of December 1978 in a considered judgment Cons, J. reversed the decision of the Registrar and gave the second defendants leave to defend. Leave was, however, given upon terms as follows:
The second defendants, that is to say, were obliged as a condition for being permitted to defend, to find a sum equivalent to the entire arrears of rent owed by the first defendants to the plaintiffs and were further obliged to pay thenceforward to the solicitors for the plaintiffs a sum equivalent to the rent for the whole premises and not merely that part which they occupied at a rent of some $27,000. It is from this latter part of the learned judge's order that the second defendants now appeal. 17. Mr. Cheung for the appellants relies upon the well-known principles governing the grant of leave to defend which are set forth in the frequently cited passages from the Annual Practice in which the decided cases dealing with this matter are conveniently gathered (see page 141 of the Annual Practice 1979). His clients, counsel says, have shown an undisputably good ground of defence to the plaintiffs' claim and therefore they are entitled to unconditional leave to defend. To this Mr. Chang for the plaintiffs replies that insofar as the defence tendered by the second defendants consists in a simple denial of the allegations made in the statement of claim against the first defendants the second defendants are not raising a triable issue at all but are simply putting the plaintiffs to the proof of their case against the first defendants. The substance of the second defendants' claim, counsel points out, is contained in the counterclaim, conjoined with the defence, in which relief against the forfeiture of the lease is claimed by the second defendants as lawful sub-tenants of the first defendants. Alternatively, Mr. Chang says, there can be no defence to the action inasmuch as it is a claim for mesne profits and since relief will only be granted upon condition of payment by the second defendants of something in the way of mesne profits the only question in issue is what that sum should be. For my own part I am satisfied that this is one of the cases in which the counterclaim ought to be treated as a defence (Annual Practice 1979 page 143). It is not now contended, as it was before the Registrar in the first instance, that a sub-lessee is not entitled to relief against forfeiture at all. Mr. Chang does not now, before us, rely upon the decision in Burt v. Gray(1). That case was considered by Cons, J. who, for reasons which seem perfectly acceptable to me, declined to follow it. It was not referred to by the learned Master of the Rolls in Belgravia Insurance Co. Ltd. v. Meah(2) upon which Mr. Chang does rely. Indeed the principle of Burt v. Gray(1) (that a sub-lessee is not entitled to relief against forfeiture) would seem to be wholly at adds with the confident statement of principle which appears at page 1039 of the report in the Belgravia case. Following upon a historical survey by the learned judge of the jurisdiction in the courts to grant such relief, and having dealt with the way in which statutes in the 18th and 19th centuries had affected the old powers of the Courts of Chancery to grant such relief, he concludes this part of his judgment with the words:
He was however dealing with a case in which the sub-lessee was in possession of the whole of the premises. What was principally argued before us was, in effect, the terms upon which relief against forfeiture ought to be granted. The case has not yet come to that point. It is not denied that if relief is granted it will have to be on terms, but that will be a matter for the trial judge. I think Mr. Cheung was right when he contended that the learned judge in chambers in imposing these conditions for leave to defend had in a sense prejudged the issue which he was sending forward for trial. In order to sustain the conditions imposed by the learned judge in chambers Mr. Chang has relied (as did the learned judge) on the decision in Webber v. Smith(3) approved as it was by the learned Master of the Rolls in Belgravia Insurance Co. Ltd. v. Meah. That was a case in which relief against forfeiture was granted to six out of a hundred sub-tenants upon terms, amongst others, that they should pay the whole of the rent in arrears upon the property held by all sub-lessees. Mr. Cheung set over against that the decision in Chathem Empire Theatre (1955) Ltd. v. Ultrans & Others(4) a clear authority to the contrary effect inasmuch as the sub-lessee was granted relief against forfeiture of the lessee's interest on terms that it paid only that part of the arrears which was attributable to the property sublet to it. In each of these cases the defendant's case had advanced to the stage of trial and the question before court in each case was whether relief ought to be granted and if so upon what terms. In other words the courts were not, in those cases, concerned with the question, arising under Order 14, as to whether leave to defend ought to be given and if so upon what terms. The competing merits of these decisions will, as it seems to me, be a matter for the trial judge to consider. He will also have to consider the incidental matters argued before us in relation to those decisions such as for example the question whether the absence in Hong Kong of statutory provisions such as exist in England in section 146(4) of the Law of Property Act 1925 affects the width of the discretion exercised by judges in the Chancery Division from time immemorial to grant such relief. The equitable powers, that is to say, which were invoked in older cases such as Webber v. Smith(3) and which are presumably secured to the judges of the High Court in Hong Kong by virtue of the provisions of section 12 of the Supreme Court Ordinance. On this I believe there is much more that may be said and in that regard I think it may be helpful if I indicate the reasons which have caused me to doubt the efficacy of the argument from Webber v. Smith. 18. The argument has been that it can make no difference that the plaintiff applied for judgment under Order 14; on the principle of Webber v. Smith, it is said, any eventual relief against forfeiture must inevitably be on terms of payment by the defendants of the full arrears by way of mesne profits. Therefore, it is said, the same considerations should move the court in granting leave to defend as must move it in granting relief against forfeiture. It is a strong argument but it has two possible weaknesses which should make the court hesitate to uphold so stringent an order. In the first place relief may conceivably not be granted at all; indeed, that is no doubt the primary hope of the plaintiffs. If that should be the result it would seem wholly unlikely that the court's order for mesne profits would include the $315,000 of arrears ascribable to the default of the immediate tenant; one would think that that order must necessarily be restricted to such loss as has accrued to the plaintiffs as a result of the second defendants' intervention in the suit. If that is the proper view of the matter it would be wholly unjust to immobilize so large a fund out of the defendants' assets at this stage. It has not been argued that second defendants are unlikely to be able to meet that claim in the event of their obtaining relief. 19. In the second place, it may be asked whether it is quite certain that the principle of Webber v. Smith(3) must automatically be applied should the defendants succeed. In addition to what has been said by the learned Justice of Appeal in this case (whose doubts on the answer to that question I echo) I would add on my own part the following considerations. A hard line has been drawn by Mr. Chang, in a strongly persuasive address, between the Webber v. Smith position: Equity will not apportion the rent, and the statutory changes to the law in England culminating in section 146(4) of the Law of Property Act 1925. He argues that the change has been in the direction of giving a wider discretion to the court consequent upon the abolition of the necessity to bring in the head tenant and revive the head tenancy where relief is being granted. Mr. Cheung proposes the opposite view viz. : that the statutory provisions should be regarded as having the effect of limiting rather than extending the old wide powers of the equitable jurisdiction. I have some difficulty in following that except that it might perhaps be said that the legislation in England has caused the curious power to resurrect a tenancy, against the wish of a delinquent and unwilling tenant, to atrophy. However that may be, what does seem to me to be at least uncertain is that the equitable discretion to impose conditions on the grant of relief is limited quite so absolutely as Mr. Chang would have it. Admittedly, in Belgravia Insurance Co. Ltd. v. Meah(2), Lord Denning M.R. tracing the history of this right to relief from the earliest days of the Court of Chancery through the various statutory developments in the 18th and 19th centuries, says (page 1039):
It is important to note, however, that in that case he was concerned with a sub-lessee of the whole and not a part only of the premises. Immediately thereafter he turns to consider the effect of section 146(4) of the law of Property Act on the older position and he says:
Thus while he approves the Webber v. Smith(3) principle he does not suggest that it has been modified by the Act of 1925 so as to permit apportionment in such a case. It was of course not necessary for him to do so in the circumstances he was then concerned with and, further, and no doubt for the same reason, the decision of Salmon J. in the Chathem Empire Theatre case(4) was not discussed. In the latter case, involving a claim for relief by a sub-tenant of part of premises, Webber v. Smith was not considered but a modern decision to the same effect, London Bridge Buildings Co. v. Thompson(5). was considered and was not followed. Although he specifically referred to the very wide discretion given to him by section 146(4) in making his order Salmon J. nowhere suggests that a power so to apportion has been newly created by that section. On the contrary in declining to follow Joyce J. in the London Bridge Building Co. case he interprets the latter's refusal to order less than payment of full arrears by the subtenant as following no general principle of Equity but as deciding the matter on the special facts before him. Salmon J. evidently regarded the discretion conferred upon the court in 1903 by section 4 of the Conveyancing and Law of Property Act 1892 (with which Joyce J. was concerned) as in no way narrower than his own under section 146 of the 1926 Act. As to section 4 of the Act of 1892, both Lord Denning M.R. and Russell L.J., in Belgravia Insurance Co. v. Meah(2). point out that the effect of section 4 of the Act was to make available to sub-lessee the right to relief first granted to lessees by section 14 of the Conveyancing Act of 1881 in cases of breach of covenant other than the covenant to pay rent. Further, both those learned judges take the view that the effect of section 146 of the Act of 1925 as regards rent-breach cases was simply to consolidate the law in their regard by statutory recognition of the decision in Gray v. Bonsall(6) in which it was held that the procedural advantages secured by section 4 of the Act of 1892 to applicants for relief in non rent-breach cases were available also to those who applied for relief against forfeiture for non-payment of rent. In other words, it was no longer necessary to revive the lessee's interest or even to make him a party. The terms on which relief would be granted remained as fully at the discretion of the court as they had always been. Lord Denning M.R. (at page 1039) sums the matter up in this way:
And at page 1041 Russell L.J. had this to say:
20. For these reasons I have come to the view that what I have called the competing merits of Webber v. Smith(3) and Chathem Empire Theatre (1955) Ltd.(4) remain to be argued in the light of Hong Kong conditions and the particular circumstances of this case. I do not think that the argument can simply be foreclosed in the plaintiffs' favour at this stage on the ground that the legislative differences between this jurisdiction and that of the English courts relating to relief from forfeiture affords an insuperable obstacle to the appellants' contention. Like Pickering, J.A. I hesitate to believe that an English decision now not far from three hundred years old is to be taken as declaring the limits of the court's equitable discretion for contemporary Hong Kong. I differ from him only insofar as I have ventured to suggest that the statutory interventions affecting the situation in England have not necessarily amplified the discretion of the old Court of Chancery as to terms imposable upon the grant of relief to under-lessees in rent-breach cases. 21. I am sensible of the force of the argument put forward by Mr. Chang under the provisions of Order 13 rules 4 and 5 of the Rules of the Supreme Court, the effect of which, he maintains, will be to keep the plaintiffs from recovering possession even of that part of the premises which has been vacated by the first defendants until a final disposal of the action against the second defendants. It may well be that in the absence of such powers as are conferred upon the courts by statute in England directly to vest the term forfeited by the lessee (or part thereof) in his sub-lessee, on granting relief against forfeiture to that sub-lessee, the effect will be a revival of the forfeited term as between the superior landlord and his tenant which may be to the wish of neither of them. The acknowledged need to join the immediate lessee as a party in such proceedings would seem, as Mr. Chang says, to be occasioned by the necessity to continue his term in force in order to support the court's order in favour of the sub-lessee. I do not, however, think that that consideration is sufficient to dispose of the right of the second defendants to obtain leave to defend upon conditions which will reflect the extent of their unavoidable obligations should they succeed to the full in their defence. It is because it is conceded that they cannot obtain relief on lesser terms than payment of full arrears for the part of the premises occupied by them that I do not think it would be just to order unconditional leave albeit the counterclaim is technically a valid defence to the claim. Finally, it should be remarked that any hardship which may thus arise will, to some extent, have been the fruit of the plaintiffs' own decision inasmuch as we are informed - indeed there is correspondence before us to this effect - that the second defendants, shortly prior to the hearing before the Registrar, offered to take up the tenancy of the whole premises upon the same terms as to rent viz. $45,000 per month payable in advance, which offer was refused by the plaintiffs. For these reasons I would allow the appeal and order that the second defendants be given leave to defend upon the conditions stated in the judgment of Pickering J.A. Note: Further argument addressed to the court following the delivery of judgment disclosed that the appellants have already paid $315,000 pursuant to the order of the judge in chambers and that they have, since that order, paid $45,000 every month - all these moneys being paid to the solicitors for the respondents. It was also agreed that fourteen months was the true period for calculation of arrears. The court having considered the arguments of counsel on this matter and also their submissions as to costs made the following order:
Representation: Oswald Cheung Q.C., and Miss H.C. Wong instructed by (Lau, Chan & Ko) for the appellants. Denis Chang, instructed by (Philip H.K. Wong & Co.) for the respondents. (1) (1891) 2 Q.B. 98. (2) (1963) 3 W.L.R. 1003. (3) 23 E.R. 676. (4) (1961) 1 W.L.R. 817. (5) (1903) 89 L.J. 50. (6) (1904) 1 K.B. 601. |