Alwaysfull Industries Ltd v. Leung Lai Bing Peggy
Read the full judgment text of LDPD 286/2014 on BabelCite. This Lands Tribunal judgment was delivered on 4 July 2014.
1. The applicant is the registered owner of the property known as Flat B on 12/F and Car Port No. 14 on G/F of Kadoorie Avenue Mansion, No. 205-207 Prince Edward Road West, Kowloon (“the Suit Premises”). By a tenancy agreement dated 28June 2013 between the applicant and the respondent (“ the T/A”), the Suit Premises was leased to the respondent for a period of 2 years from 1August 2013 to 31 July 2015 at a monthly rent of $55,000 (page 79-83 of Bundle).
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LDPD 286/2014 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION APPLICATION NO. LDPD 286 OF 2014 _________________
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_________________ D E C I S I O N _________________ Undisputed or Indisputable Background 1.The applicant is the registered owner of the property known as Flat B on 12/F and Car Port No. 14 on G/F of Kadoorie Avenue Mansion, No. 205-207 Prince Edward Road West, Kowloon (“the Suit Premises”). By a tenancy agreement dated 28June 2013 between the applicant and the respondent (“ the T/A”), the Suit Premises was leased to the respondent for a period of 2 years from 1August 2013 to 31 July 2015 at a monthly rent of $55,000 (page 79-83 of Bundle). 2.The respondent and her family moved into the Suit Premises in late August 2013. Upon the complaint of the respondent of water leakage problem on the roof, the applicant had arranged for its own contractor to conduct repair work on the roof which commenced on 22 October 2013 (“the Repair Work”). Disputes arose during the carrying out of the Repair Work (details of the dispute is not relevant as far as the setting aside application is concerned save as to be mentioned as the background facts). 3.The respondent had not paid the rent since the month of November 2013. By a letter dated 13November 2013 (“13 Nov Letter”) (page 142-143 of Bundle) sent by Messrs. M. K. Lam & Co (“the R’s Solicitors”), the respondent alleged that the Repair Work had caused substantial cracks to the roof of the Suit Premises. The applicant denied the allegation by a return letter issued by its solicitors dated 26 November 2013 (“26 Nov Letter”) (page 145-147 of Bundle). In reply, the R’s Solicitors sent a letter dated 5 December 2013 (“5 Dec Letter”) (page 105 of Bundle). 4.On 11 February 2014, the applicant filed a Notice of Application (“Form 22”) at the Lands Tribunal against the respondent for a possession order on the ground of non-payment of rent (page 1-7 of Bundle). 5.According to the affidavit of service (page 26-40 of Bundle) prepared by Mr. Chan Wing Kai, a clerk of the applicant’s solicitors, the Form 22 was served at the following addresses in the means named :
6.The respondent has failed to file any Notice of Opposition with the Tribunal within the time specified in law. The applicant filed an application for judgment in default of opposition pursuant to Rule 15 of the Lands Tribunal Rules (“LTR”) on 14 March 2014 (page 8-16 of Bundle). 7.On 18 March 2014, this Tribunal made the following orders (“the Default Judgment”) :
8.On 27 March 2014, the respondent filed an interlocutory application with the Lands Tribunal asking for :
9.This is the hearing of the application by the respondent for the setting aside of the Default Judgment. Apart from alleging that the Default Judgment was a irregular judgment in the sense that the respondent had not received the Form 22 and the respondent also got a meritorious defence in this claim, the respondent is also challenging whether the applicant had discharged the burden to prove due service. 10.Both parties have filed affirmation evidence in connection with this application. At the hearing, the applicant asked for leave to file 2 further affirmations, one from the Director of the applicant Mrs. Lee (“Mrs. Lee”) and another from the contractor dealing with the Repair Work. Upon an indication from Ms. Toh, I read the supplemental affirmation of Mrs. Lee and treated it de bene esse for the purposes of the argument before me whilst the affirmation of the contractor had been ruled out. Due Service 11.Rule 15 of the LTR is the provision governing applications for orders in default where no notice of opposition has been filed by the respondent in an application for possession order and ancillary relief. R. 15(6) provided that:
12.Ms. Toh for the respondent submitted that the affirmation of service filed for and on behalf of the applicant had failed to show that “the letter has been properly addressed, prepaid and posted to the proper address of the person to be served and not returned by the post office” to be in line with the requirement under Para. 65/5/4 of Hong Kong Civil Procedure 2014. Given the content of the affirmation of service is incomplete by only stating the fact that the document was being sent by ordinary post to the respective addresses, the applicant had failed to adduce prima facie evidence that the Form 22 has been duly delivered in the ordinary course of postage. 13.The submission by Ms. Toh is an attack on the content of the affidavit of service filed upon service of the Form 22 by ordinary post. Order 10 rule 1(3)(b) of the Rules of High Court (“RHC”) which stipulated the requirement of an affidavit proving due service as follows :
14.However, the LTR has its own provision as far as affidavit of service is concerned. Under Rule 10 LTR, it says :
15.I am satisfied that the affirmation of service filed in this case by the applicant is in line with the requirement under Rule 10 of LTR and there is prima facie evidence to show that the Form 22 had been served on the respondent as required under Rule 15(6) LTR. The Law on Setting Aside a Default Judgment 16.There is no argument on the legal principles applicable to an application for setting aside a default judgment. In an application to set aside a default judgment, the test is whether the judgment is regular or irregular. If the judgment is irregular, the Hong Kong position is that such judgment is to be set aside as of right (Po Kwong Marble Factory Ltd v Wah Yee Decoration Co. Ltd. [1966] 4 HKC 157. If the judgment is regular, the merit of the defence needs to be examined and the defaulting party has to show that his case and the evidence adduced in support is potentially credible and carries some degree of conviction (Premier Fashion Wears Ltd v Lee Hing Chung [1994] 1 HKC 213, 219). 17.As in Bank of China (Hong Kong) Limited v Cheung King Fung [2007] 1 HKLRD 462, the Court of Appeal found that in an application to set aside default judgment, the burden was on the defaulting party to prove that the judgment was irregular. Whether such a burden of proof is discharged was a matter of evidence. 18.Hong Kong Civil Procedure 2014 (at para.13/9/5 at p.228) states inter alia as follows :
19.In Cheng Chi Lun v Ng Lai Ming Juliana HCA1611/2006, Mr Recorder Fok SC also said as follows :
Regular Judgment? 20.It is the contention of the respondent that the Default Judgment is an irregular judgment in the sense that the respondent had neither received the Form 22 through postage nor seen any Form 22 posted up at the entrance of the Suit Premises. She was only made aware of these proceedings when she called Mr. Eric Cheng (“Mr. Cheng”), the legal clerk of the R’s Solicitor on 18 March 2014 seeking legal advice on stamp duty matter. Service at the Suit Premises 21.The respondent said in the supporting affirmation that she and her family members had already moved out from the Suit Premises on 19 December 2013 and had never returned to the Suit Premises nor checked the letter box of the same. And the fact that the respondent had already moved out was within the knowledge of Mrs. Lee who agreed to an early termination of the T/A. Hence, the respondent had no notice of the Form 22 being sent by postage or by posting up at the Suit Premises. 22.Upon careful consideration of the affidavit evidence as well as submissions, I am satisfied that the respondent did not have notice of the Form 22 served at the Suit Premises. 23.According to the affirmation of Mr. Wong Kwong Hing (“Mr. Wong”), the building manager of Kadoorie Avenue Mansion, he noticed the removal of furniture and packed boxes out of the Suit Premises in mid to late December 2013 and had alerted Mrs. Lee of the same. The locks of the Suit Premises had been changed back to the original one in early January 2014 by a contractor engaged by the respondent. From the evidence of Mr. Wong adduced by the applicant, it is more likely than not that the respondent had moved out from the Suit Premises in December 2013 and there is nothing to rebut the fact that the respondent had never been back to the Suit Premises or the Kadoorie Avenue Mansion after December 2013. 24.In Hong Kong Civil Procedure 2014, para 10/1/13, it is stated clearly that:
25.Service of the Form 22 at the Suit Premises in February 2014, by whatever means, cannot be brought to the attention of the respondent since she was no longer residing there nor had she ever returned to the Suit Premises after December 2013. I am satisfied that the respondent had shown that the Form 22 addressed to the Suit Premises, by postage or by posting up, had not been brought to the attention of the respondent, hence the service of these proceedings at the Suit Premises cannot be an effective service. Service at the Business Address 26.The respondent is running a mahjong parlour at the Business Address which is near Temple Street, which according to the respondent, is an area comprised of complicated people and business. There were incidents where the fruits placed outside the Shop Premises for the purpose of worshipping were stolen and rubbish littered in front of the shop. There is no letter box affixed at the Business Address and the postman would simply leave the mail at the doorstep of the metal gate of the shop in the morning. For important mail such as utility bills, the postman would slip the letters under the metal gate. Thus, it is possible that mails might have been thrown away or stolen. 27.It is not in dispute that the applicant discovered the Business Address from a company search (page 107-114 of Bundle) which revealed that the respondent is the director and shareholder of the company which run the mahjong parlour. As stated in Hong Kong Civil Procedure 2014, “last known address may be interpreted to mean the address last known to the plaintiff from whatever source” (at para. 65/5/5). 28.I found the respondent’s contention that she did not receive the mail from this Business Address to be improbable. There is no evidence to show that mail sent to this particular address had been lost before. The only assertion by the respondent is about the loss of fruits. Fruits are at least consumable items and of value to a thief unlike letters. In any event, it is the evidence of the respondent that for important mail, the postman will insert the same under the metal gate. The Form 22 was being sent by the solicitors acting for the applicant by ordinary post. It must be put in an envelope of the solicitor firm. I think every layman in law will find a letter from a solicitor firm not an unimportant mail. Judging from the usual practice described by the respondent, it is more likely than not that the postman would have inserted the letter from the solicitors of the applicant through the metal gate to make sure that such would be received by the respondent. 29.I found the Form 22 served at the Business Address is likely to have been brought to her attention, hence the service on the Business Address is an effective service. Service at the Accountant’s Address 30.This is the address provided by the respondent and recorded in the T/A as her correspondence address. However, it is the respondent’s evidence in her affirmation (page 168 of Bundle) that she had no longer used the service of this accountant and any letters sent to this address would be collected and given to her about once every 2 or 3 months by her elder son who is still using the Accountant’s Address for his own company. 31.The respondent had supplied the Accountant’s Address as her correspondence address and by such conduct, she is holding out that she could be reached at this address. There is nothing in the respondent’s affirmation as to when she had ceased using the service of this accountant. And even if the respondent had ceased engaging the service of this accountant, it is the respondent’s case that she can still receive the mail sent to this accountant since her son will pass the mail to her. If the respondent said that she didn’t receive the Form 22 sent to this accountant, this will only occur if the accountant had not received the mail otherwise it must be delivered to the respondent via her son. No explanation is forthcoming from the respondent as to why the accountant had not received the Form 22 sent to the Accountant’s Address or why the Form 22 had not been forwarded to her via her son. The respondent’s evidence in this regard is unbelievable and cannot be accepted. 32.I found the Form 22 was properly served on the respondent at the Accountant’s Address which is an address provided by the respondent and the respondent should have notice of it. Service at the Solicitors’ Address 33.Mr. Cheng, a legal clerk of the R’s Solicitors is the one who had been responsible for handling the respondent’s dispute over the Repair Work with the applicant including the issuing of the letters in November and December 2013 to the applicant’s solicitors. He confirmed that a copy of the Form 22 had been received by the R’s Solicitor on or about 13 February 2014. He had tried to contact the respondent by telephone but to no avail. It was only until 18 March 2014 when the respondent called him to ask about stamp duty that he had been able to relate the fact that a Form 22 had been served on his firm and the respondent had told him that she had received no document or Form 22 from the applicant. 34.Relying on Rule 7(1)(a) of the LTR which provides that :
35.I am not satisfied that the service to the Solicitor’s Address can be an effective service. Whilst the R’s Solicitors is acting for the respondent in the exchange of correspondence with the applicant’s solicitor, there is nothing to suggest that the R’s Solicitors must also be acting for the respondent in these proceedings. There is no confirmation from the R’s Solicitors that they have instructions to accept service of these proceedings. I found nothing which could give any authority to the R’s Solicitors to accept service in these proceedings. The mere fact that the applicant’s solicitor had indicated the intention to institute legal proceedings to the R’s Solicitors in the 26 Nov Letter and the R’s Solicitors had replied by way of the 5 Dec Letter cannot be valid basis for this court to draw the inference that the R’s Solicitors is instructed to accept service of these proceedings. 36.The R’s Solicitors may have acted improperly by not alerting the applicant’s solicitors that they have no instructions to accept service after their failure to get into contact with the respondent, but this cannot be taken as an acknowledgment of instructions to act and accept service when in fact there is none from the respondent. 37.In any event, even if the Form 22 had been received by Mr. Cheng, there is nothing to challenge his evidence that he had failed to get into contact with the respondent. Under such circumstances, the Form 22 had not been brought to the attention of the respondent and cannot be an effective service at the Solicitor’s Address. Conclusion on Regular Judgment 38.Having considered all the above, I am satisfied that the Default Judgment is a regular judgment given the fact that the respondent should have notice of these proceedings with the Form 22 being sent to the Business Address as well as the Accountant’s Address. Meritorious Defence 39.It is the respondent’s evidence that in the end of November 2013, during a conversation she had with Mrs. Lee at the lobby of the Kadoorie Avenue Mansion, Mrs. Lee agreed that the respondent could move out of the Suit Premises but the 2-month rental deposit would not be refunded and would treat that as rental for November and December 2013 (“the Verbal Agreement”). As a result of the Verbal Agreement, the respondent found an alternate accommodation and moved out from the Suit Premises in December 2013. Mrs. Lee, having notice of the removal, called the respondent and asked for a written surrender of tenancy to be prepared by the respondent and together with the key to the Suit Premises, be dropped into Mrs. Lee’s letter box. The respondent drafted the surrender of tenancy on 20 December 2013 (“the Written Surrender”) (page 196 of Bundle) and have it inserted into Mrs. Lee’s letter box together with the key of the Suit Premises on 31 December 2013. Since Mrs. Lee agreed to an early termination of the T/A with the rental deposit being set off towards the rent for the month of November and December 2013, the respondent contended that vacant possession had been surrendered on 31 December 2013 upon an agreement for early termination and for the rental deposit to be set off against the rent for November and December 2013. Under such circumstances, no rent had been in arrears which justified the Default Judgment. And according to an enquiry by Ms. Hau (“Ms. Hau”), the secretary of the respondent, the Suit Premises had already been rented out again in April 2014. 40.Mrs. Lee denied any meeting with the respondent and least to say the Verbal Agreement as to early termination of the T/A as well as for the setting off of the rental deposit against the rent for November and December 2013. It is the evidence of Mrs. Lee that she heard from Mr. Wong that it seemed the respondent was moving away from the Suit Premises in mid to late December 2013. She then asked the estate agent to contact the respondent for the outstanding rent and the key to the Suit Premises but the estate agent was told by the respondent not to get involved in this. Mrs. Lee was then told by Mr. Wong that the lock to the Suit Premises had been changed to its original one in January 2014 yet no key had been returned to the applicant. It is also denied by Mrs. Lee about the renting out of the Suit Premises to someone else since April 2014. 41.It is the submission of Ms. Toh that “where the ultimate outcome would depend on whose evidence is believed and no provisional view of the probable outcome of the action can be formed without a trial, the appropriate test is whether the defence ‘could well be established’ at trial, and if the defendant’s version could well be believed at trial, it follows that the defence has ‘a real prospect of success : El Vince Ltd v Wu Wen Sheng [2001] 3 HKLRD 455” (§35 of Submission). 42.I found the evidence of the respondent is inherently implausible and contradicted by undisputed contemporaneous documents. I found the respondent had failed to establish a case that could well be believed at trial or that there is reasonable prospect that the intended defence of the Defendant would succeed and be accepted at trial. 43.Had there been the Verbal Agreement between the respondent and Mrs. Lee for an early termination of the T/A as well as the setting off of rent against the deposit, one would be surprised to note that not a word of this effect had ever been mentioned in the Written Surrender prepared by the respondent. The wordings of the Written Surrender reads :
44.I agree that the respondent cannot be expected to draft the Written Surrender in proper legal terms but one would expect the respondent to state what had happened leading to the early termination. The Verbal Agreement was the basis for the respondent not to be bound by the T/A and without which she would face serious legal consequences for breach of contract. In the affirmation of the respondent, she also said that “Mrs. Lee called me again and reminded me to insert the surrender of lease agreement and to return the key to the main door of the Flat into her mailbox” (emphasis added) (page 165 of Bundle). Upon such request, any layman would not have missed out the Verbal Agreement if the landlord is asking for a written confirmation of the agreed surrender. If the landlord is eager to have a written note of the agreement in this regard, should the respondent, being the tenant, be more alert to make sure that such agreement should be reflected in the Written Surrender for own protection? I agree with Mr. Hariman for the applicant that the wordings of the Written Surrender gives one the impression that it was a unilateral declaration of intent by the respondent only and not with the consent and agreement of the parties. The fact that the document drafted by the respondent did not have a word on the Verbal Agreement between the parties is unbelievable and incredible. 45.The date mentioned by the respondent for the Verbal Agreement to be reached is also inconsistent with the date stated by Mr. Cheng in his affirmation. There is nothing to explain such an inconsistency. Furthermore, the date on the Written Surrender did not tally with the evidence of the respondent that the agreed date for termination should be 31 December 2013 and the actual date for the surrender of vacant possession was also 31 December 2013. Why would the respondent put 20 December 2013 on the Written Surrender which is not the actual date agreed or actual date of surrender? There is no explanation from the respondent to clear this inconsistency. 46.And if there was the Verbal Agreement including the setting off of rent for November and December 2013 against the deposit, one would wonder why the respondent had not asked her solicitor to refute the allegation of rent running in arrears raised by the applicant in the 5 Dec Letter. As stated in §3 above, there were correspondence between the solicitors of the parties in November and December 2013. In the 26 Nov Letter issued by the applicant, the issue of rent running in arrears had been raised by the applicant’s solicitors. The relevant part reads :
47.The reply from the respondent, through the R’s Solicitor is the 5 Dec Letter which reads :
48.The respondent had also adduced the affirmation of her secretary, Ms. Hau to show that the applicant must have received the keys to the Suit Premises. Ms. Hau said that she had checked with Mr. Joe Lee (“Mr. Lee”) of Centraline Property and confirmed that the Suit Premises had been rented out in the beginning of April 2014. The applicant denied this. Given the fact that this is hearsay evidence and without any evidence in support, I declined to attach any weight to this piece of evidence. If the applicant had already got back the keys, it would be unreasonable for the applicant to issue these proceedings and asked for an order for possession. 49.And the evidence of Mr. Wong is that the respondent arranged for her contractor to change the lock of the Suit Premises in early January 2014, instead of in December 2013 alleged by the respondent. Mr. Wong, being the management staff of the Kadoorie Avenue Mansion, had no reason to lie or take side in this case. His evidence should be more credible than that of the respondent. If there was discussion between Mr. Wong and the contractor of the respondent about the return of the keys in early January 2014, the respondent’s contention that keys to the Suit Premises had already been returned in December 2013 cannot stand. 50.It is also the submission of Ms. Toh for the respondent that the conduct of Mrs. Lee, upon being informed by Mr. Wong of the respondent’s suspected moving out, in asking the estate agent to contact the respondent for the return of the keys to the Suit Premises is consistent with the Verbal Agreement, hence supporting the respondent’s case. I beg to differ. It is the evidence of Mrs. Lee that she is not only asking for the keys, but also the arrears of rent. This is inconsistent with the Verbal Agreement alleged by the respondent. The evidence of Mrs. Lee in this regard did not in fact support the respondent’s case. And the reaction of Mrs. Lee is only normal for a landlord who was being told that the tenant was already in the course of moving out. 51.I found the respondent had failed to raise a meritorious defence by establishing that there was an agreement with Mrs. Lee for an early termination as well as for the setting off of the rent for November and December 2013 against the deposits. 52.Ms. Toh submitted that this court should also consider a surrender by operation of law in that “where the owner of a particular estate has been a party to some act the validity of which he is afterwards estopped from disputing, and which would not be valid if his particular estate had continued to exist. This principle does not depend on the actual intention of the parties but on estoppel and it takes place independently, and even in spite of intention: Woodfall’s Law of Landlord and Tenant, Vol. 1, §17.018, February 2011. It is thus necessary to examine the parties’ actions objectively and consider whether it should be implied from those acts that surrender has taken place.” (§44 of Submission). 53.In order to establish a surrender by operation of law, according to the Woodfall’s Law of Landlord and Tenant Vol. 1 2012, the respondent must show that :
54.Given my refusal to accept the respondent’s evidence that the keys had been returned by the respondent or accepted by the applicant, there is no basis for surrender by way of operation of law to arise. Conclusion 55.Having considered all the arguments raised by the respondent, I found the Default Judgment is a regular judgment and the respondent has also failed to discharge the burden of showing a meritorious defence which had a real prospect of success. The Default Judgment should not be set aside and all the application made by the respondent must be dismissed. Costs 56.Costs of this setting aside application be to the applicant, to be taxed at District Court scale if not agreed, with certificate for counsel. This is a costs order nisi. Unless any of the parties apply by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.
Mr Wayne Hariman Gilbert, instructed by Liu, Chan & Lam, for the applicant Ms Tanie Toh, instructed by M.K. Lam & Co., for the respondent |
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