LAI YI v. TSUI KIN CHUNG

LDPD 1406/2015

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO. LDPD1406 OF 2015

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Reasons for Decision (2)
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1.  This is the hearing of the respondent’s summons of 3 July 2015 asking for:

i) Striking out of the applicant’s application herein pursuant to O.18 r.19 of the Rules of High Court, Cap 4A (“RHC”); and

ii) An anonymity order.

2.  On 4 September 2015, this tribunal dismissed the aforesaid summons of the respondent and indicated that brief reasons of decision will be handed down in due course. They are as follows.

3.  On even date this tribunal also handed down a decision (1) (“1^st decision”) in which detailed background and relevant affidavit evidence have been set out. This tribunal do not wish to repeat them herein. If necessary, that decision will be referred to. 

The Striking Out Application

4.  O.18 r.19 (1) and (2) of the RHC stipulate that:

“(1) The Court may, either of its own motion or on application, at any stage of the proceedings order to be struck out or amended any pleading or the indorsement of any writ in the action, or anything in any pleading or in the indorsement, on the ground that ¾

(a) it discloses no reasonable cause of action or defence, as the case may be; or

(b) it is scandalous, frivolous or vexatious; or

(c) it may prejudice, embarrass or delay the fair trial of the action; or

(d) it is otherwise an abuse of the process of the court;

and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.

(2) No evidence shall be admissible on an application under paragraph (1)(a).”

5.  It is obvious from the respondent’s 1^st Affidavit sworn on 3 July 2015 that he would be relying on grounds (a), (b) and (d) only.

It Discloses No Causes Action

6.  According to O.18 r19 (2) of RHC, no evidence will be admissible on an application under this limb. The gist of the respondent’s ground, so far as can be discerned from his written and oral submission, is that the applicant fails to fill up the blank identifying the section of the Landlord and Tenant (Consolidation) Ordinance, Cap 7 (“LT(C)O”) under which the main application was made. He said the applicant should have filled up the section reference of the LT(C)O or that it was under common law.

7.  Rule 68 of the Lands Tribunal Rules (“LTR”) Cap 17A sets out proceedings under Part I, II, IV and V of LT(C)O shall be commenced by the applicant filing with the registrar a notice of application substantially in accordance with Form 22.

8.  The current statutory Form 22 listed under the Schedule to the LTR can be used for a number of applications to the Lands Tribunal under the LT(C)O. However, many of these applications, e.g. determination of market rental or new tenancy are now non-existent. It is because substantial overhaul has been done to the LT(C)O in or about 2004 which, as from 9 July 2004, has basically removed a tenant’s security of tenure previously enjoyed. Almost all provisions in Parts I, II, IV and V of the LT(C)O have gone. Only a few sections remain in Part IV applicable to domestic premises. One of which is that if there is a covenant for payment of rent on a due date but no condition for forfeiture is specified if it is broken, there is implied in the tenancy a right to forfeiture if payment is not made within 15 days of the due date[1]. Most of the cases now coming before the tribunal are based on grounds such as non-payment of rent, breach of covenants and termination of tenancy. Common law principles rather that provisions of the LT(C)O are applicable. It can therefore be argued that Form 22 is not applicable as it is not an application under LT(C)O, though a covenant implies under Part IV is relied on.

9.  Despite the substantial amendments made to the LT(C)O, it has been the practice of the Lands Tribunal that landlord’s claims for possession and arrears of rent, no matter under the LT(C)O or the common law, be continued to be commenced by filing with the registrar a slightly modified Form 22. The modification includes deletion of obsolete reference such as application for determination of prevailing market rental/new tenancy. In the opinion of the tribunal, this modified form is substantially in accordance with Form 22.

10.  It is noted that the applicant stated clearly in her application form that she is:

i) asking for recovery of possession of the suit premises; and

ii) payment of outstanding rental and/or mesne profits.

on the ground that the respondent has failed to pay rent since 17 June 2015. She also indorsed on the said Form 22 that the tenancy was from 17 July 2013 to 16 July 2015 at the monthly rate of $6,900 and the address of the premises to be recovered being Flat 4, 23^rd floor, Block A of Siu Hei Court, Tuen Mun. She signed at the space provided together with a statement of truth under which she subscribed her signature. The application was issued on 2 July 2015 which is the 16^th day after the alleged due date.     

11.  In the tribunal’s judgment, there is no ambiguity as to the cause of action and reliefs now being sought by the applicant. Although the application is not a case under the LT(C)O, the use of Form 22 or a form substantially the same as Form 22 will not invalid such claim because the law looks at substance, not form. Further, even assuming (without accepting) the applicant should have inserted certain particulars, the mere fact that it has not been so filled up would not extinguish a cause of action. Section 10(5)(a) of the LTO stipulates that the proceedings of the tribunal shall be conducted with as much informality as is consistent with attaining justice. Accordingly, even filing up the blank is essential, the proper course for this tribunal is to ask the applicant to amend rather than to dismiss the application.

12.  On a fair reading of the application form filled up by the applicant, one will not have any difficulty to understand the alleged cause of action and the material facts, namely non-payment of rent giving rise to a right to forfeiture. The respondent’s submission that he will be prejudiced as he cannot prepare his defence effectively and efficiently is totally without merit and misconceived.

Scandalous, Frivolous or Vexatious   

13.  For the second ground, the respondent basically said that the applicant should not have sued him because as a matter of law, rental deposit can be used to set off loss arising out of the arrears of rent. He relied on Hoi Cheng Pan v Headstart Educational Group Ltd [2007] HKEC 963 at §49 and §12 of The Center (51) Limited v Richfu Holding Group Limited (unreported) HCA 1729/2012, 20 June 2013 to support his proposition. He said the application herein was not made by the applicant out of good faith[2].

14.  He also relies on Clause 7 of the Tenancy agreement dated 10 July 2013 signed between them which provides the following:

“The Tenant shall pay to the Landlord the Security Deposit set out in Schedule I [i.e. HK$13,800] for the due observance and performance of the terms and conditions herein contained and on his part to be observed and performed. Provided that there is no antecedent breach of any of the terms and conditions herein contained, the Landlord shall refund the Security Deposit to the Tenant without interest within 7 days from the date of delivery of vacant possession of the Premises to the Landlord or settlement of any outstanding payment owed by the Tenant to the Landlord, whichever is later. If the Rent and/or any charges payable by the Tenant hereunder or any part thereof shall be unpaid for seven (7) days after the same shall become payable (whether legally demanded or not) or if the Tenant shall commit a breach of any of the terms and conditions herein contained, it shall be lawful for the Landlord at any time thereafter to re-enter the Premises whereupon this Agreement shall absolutely determine and the Landlord may deduct any loss or damages suffered by the Landlord as a result of the Tenant’s breach from the Security Deposit without Prejudice to any other right of action or any remedy of the Landlord in respect of such breach of the Tenant.”

15.  In the tribunal’s view, the respondent may have misconceived the principles stated in the cases referred to by him.

16.  First of all, security deposit paid by tenant to a landlord under a tenancy agreement is normally in the nature of a guarantee or pledge for the fulfilment of the tenant’s contractual obligations. Clause 7 of the parties’ tenancy agreement in the preceding paragraph set out exactly the same. Further, unless there is an express provision entitling the tenant to appropriate the deposit as rent, which is rare if not non-existent, a tenant cannot, after providing the landlord with a deposit, then ask his rent to be deducted from such deposit during the currency of a tenancy. The tenancy agreement in the present case contains no provisions entitling him to do so. In fact, it does not make sense because if it were so provided, the tenant will then be in breach of the tenancy agreement for not providing the requisite deposit.

17.  Given the nature of the rental deposit, it will be wrong for the respondent to say that he is entitled to apply his rental deposit to set off his rent for the last month of the term.

18.  It will only be after the applicant as landlord has exercised her right of re-entry, i.e. forfeiture, that she may apply to set off her loss/damages using the deposit.

19.  Secondly, when a landlord faces with a situation where a tenant fails and/or refuses to pay rent, he is perfectly entitled in the circumstances to hold in his hand the deposit intact, and takes proceedings against the tenant.  Normally he has at least 2 options before him. He can sue for the outstanding rent only, thus keeping the tenancy alive. Alternatively, he can forfeit the tenancy if the overdue period is long enough entitling him to do so, and sue for possession of the premises as well as for outstanding rent/occupation rent, i.e. mesne profits.

20.  If the landlord elects the latter option, he must manifest his intention to forfeit and communicate to the tenant. The issue and service of a writ claiming possession against the tenant is well established to be a sufficient indication of the landlord’s intention to claim forfeiture. The same applies to an application issued out of the Lands Tribunal. It is the service of the application, not its issue which effects the forfeiture[3]. The tenancy will be effectively terminated and relates back to the date of service of the application[4]. All claims which accrued before the forfeiture remain unaffected, and accordingly a landlord is entitled to claim all outstanding rent up to the date of service, and mesne profits thereafter until actual possession[5]. It is only when the landlord effectively re-enters that his claim for mense profits is crystallized. In the present case, the applicant elects to go about her claims by the latter option.    

21.  The case of Hoi Cheng Pan refers to by the respondent concerned a landlord claiming against the tenant for damages arising from repudiatory breach of the tenancy. In that case, the tenant never took delivery of the premises despite the fact that a tenancy agreement had been signed. The landlord accepted repudiation of the tenancy and sued the tenant for damages including rent/difference in rent for the unexpired terms. It is not a case of forfeiture. When the landlord was suing he was in possession of the premises and was in a position to quantify all his loss. It was held by HH Judge Marlene Ng that credit should be given to all money ever received by the tenant, including the rental deposit.

22.  The Center (51) Limited in fact discussed and affirmed what had been set out in Hoi Cheng Pan. It will be unnecessary for this tribunal to discuss further that case.

23.  Hoi Cheng Pan is quite different from the present case. In Hoi Cheng Pan, the landlord has never parted with possession. He was suing for common law damages arising from repudiatory breach of contract. He was then in a position to quantify all his loss. In the present case, the applicant chose to forfeit the tenancy. Possession has not yet been recovered. Although she does not ask for common law damages, she is in any event in no position to know whether there have been other breaches until after she has re-entered the suit premises.

24.  The right to forfeit a tenancy, if exercise, operates to bring the tenancy to an end earlier than it would “naturally” terminate according to its terms.[6] Normally the landlord cannot ask for mesne profits for the terms beyond possession. As for common law damages, the landlord can ask for loss in rent/difference in rent after re-letting, subject to the duty of mitigation. The law on this area may be complicated and is evolving. It is now a generally accepted proposition that the remedies of forfeiture and common law damages under ordinary contractual concepts can co-exist and be claimed at the same time, at least it seems to be the Hong Kong position now: see Court of Appeal decision in Well Century Holdings Ltd v Leung Kam Yu[7]. In any event, in the present case although the applicant is not asking for common law damages, before she has effectively recovered possession, she is in no position to know exactly how much mesne profits she is entitled to, or whether she has other damages arising from breach of tenancy prior to her re-entry. Accordingly, it is reasonable for her to hold on to the deposit until after judgment and do the set-off after she has re-entered. She may wish to enforce the judgment if there is still a deficit. However, surplus, if any, has to be refunded. It is consistent with Clause 7 of the tenancy agreement[8].

25.  In the present case, the applicant has no choice but to sue for possession if she elects to forfeit. There was then no evidence suggesting when the respondent would surrender possession. It was not until 21 July 2015 that he said possession would be delivered on 26 July 2015. It will be too much to expect the applicant to sit and wait until she was told when he would leave. The main application cannot be said at any rate to amount to scandalous, frivolous or vexatious as alleged. Striking out under this head is without basis.

 Otherwise an Abuse of the Process

26.  So far as can be discerned from the respondent’s affidavits, his grounds for striking out under this head can broadly be summarized as follows:

i) The applicant should have issued a notice to quit under clause 4 of the tenancy agreement to ask for possession of the suit premises instead of suing him in the Lands Tribunal. She did serve 2 “notices to quit” on 29 June 2015 and 6 July 2015[9];

ii) The applicant initiated the proceedings first but does not make any response in subsequent proceeding especially in this interlocutory application. She also put in no evidence[10];

iii) The applicant in fact really wants to sue for outstanding rent only but not possession[11]. The application is not bona fide and proper, and therefore the “… irresistible [interference] (sic)(interference) made (sic) [is] that she is abuse of court’s process.[12]”

27.  There is no dispute that the applicant served a notice dated 29 June 2015 headed “termination of tenancy (終止租約)” on the respondent stating that the tenancy would expire on 16 July 2015 and that the respondent had to leave on before 29 July 2015 (“1^st notice’). She did serve another similar notice with the same heading dated 6 July 2015, informing the respondent of the same expiry date and asking him to leave before 16 August 2015 (“2^nd notice’).

28.  The term of the tenancy is 2 years commencing 17 July 2013 to 16 July 2015. It is provided under clause 4 of Schedule II a Break Clause as follows:

“Notwithstanding anything to the contrary hereinbefore contained, the Landlord/Tenant/either party shall be entitled to terminate this Agreement earlier than as herein provided by serving not less than one months’ written notice or by paying one month’s Rent in lieu to the Landlord/Tenant/other party provided that the said written notice shall not be served before the expiration of the eleventh months of the Term of Tenancy. (i.e. the Tenant shall rent the Premises for at least twelve months).

29.  In the tribunal’s judgment, if the applicant wants the respondent to leave upon expiry of the 2-year term on 16 July 2015, the common law position is that notice is not required. The term simply expires by effluxion of time[13]. The aforesaid provision relied on by the parties are not applicable. Alternatively, even if a notice were required, the 1^st notice falls short of the contractual requirement because less than one month’s notice was given when time for service is taken into account. It will be ineffective and has no effect. The tenancy remains alive until the forfeiture is effected by the service of the Lands Tribunal application as discussed above.

30.  As to what courses the applicant should take the choice is entirely hers. The respondent has no right to dictate what she should do. So long as one is taking a course one is entitled by law to do so one cannot be criticized for abusing a process. Neither can one be criticized as such only because one chooses to sue instead of to settle. At most an adverse costs order may be made against him if it is shown later that steps taken by him are unreasonable in the circumstances.

31.  From the Whatsapp messages exchanged between the parties disclosed so far, the respondent has never said positively as to whether, and if so, when, he would be moving out of the suit premises when rent for the past month remained outstanding despite demands. In the circumstances, one would then ask why taking of legal proceedings an unreasonable course. The allegation of oppression is totally unfounded.

32.  Once the tenancy was forfeited by service of the notice of application herein, the 2^nd notice will have no effect as there is no longer any subsisting tenancy to be terminated. 

33.  On his second ground under this limb, the respondent may have misconceived about the procedure. It is true that the respondent has not filed any evidence together with her main application. However, the usual procedure is for the registrar to list the main application for directions as to its future conduct, including setting of timetable for filing of evidence[14]. It will not be necessary for the applicant to put in any evidence when the main application was filed. Further, the failure to respond to the striking out application cannot be a logical reason for striking out the main application. It is an after-thought ground and is illogical and irrational.

34.  Concerning the third ground under this limb the respondent refers to the applicant’s defence filed in response to his claim in the Small Claims Tribunal. He cited a paragraph of the applicant’s defence filed therein which purports to say that because rent in respect of June 2015 has been in arrears the applicant instituted proceedings in the Lands Tribunal. The respondent therefore says since the applicant only intends to sue for outstanding rental, not possession, her application should be struck out.

35.  This tribunal do not think it a fair ground. First of all, not all the documents filed with the Small Claims Tribunal are exhibited. This tribunal is in no position to know the full picture so that a fair and contextual assessment can be made. Further, the main application issued herein is clear and unequivocal in that she intends to recover possession of suit premises. The legal effect is that the tenancy will be forfeited upon service of the application and in fact has been so forfeited. Such consequence cannot and will not be altered by the mere fact it not being mentioned in other proceedings. In the circumstances, the so-called “irresistible inference” allegedly drawn by the respondent is not understood and in fact without basis. Such inference simply cannot stand.

36.  This tribunal has no hesitation to dismiss his striking application.

Anonymity Order Application

37.  An anonymity order is an order for non-disclosure of the identity of a party in legal proceedings. The respondent’s ground for an anonymity order, in gist, is this. He said he has been suffering from a chronic disease, namely depression, and has been receiving psychiatric treatment and medication[15]. The publication of judgment, either in the Judiciary website or law reports will inevitably disclose his identity which in turn will affect his medical condition. He said he is “… vulnerable and overreact to everything”, and the anonymity order can keep him in a stable medical condition[16]. While the hearing can still be held in public and supervised by the public, the keeping of his name known to the public can still achieve the desirable result of public trial but with less detriment to him. Public very often is not interested in the name of the parties or witness. He wants his name to appear as “LT” during the course of hearing and in any written decision[17].

38.  The Court of Appeal in In the Matter BU[18] discussed the general principles in granting anonymity order. That case concerns a torture claimant intending to lodge a judicial review. He applied for an anonymity order in his intended legal proceedings. The principles enunciated by the learned Cheung CJHC and Stock VP can be summarized as follows:

i) The starting point and general rule is that judicial proceedings are held in public and the parties are named in judgments. It is a right provided in the Hong Kong Bill of Rights. There may be circumstances which justify the exclusion of the press and public from all or part of a trial. These circumstances include (a) reasons of morals; (b) public order; (c) national security in a democratic society; (d) when interest of private lives of parties (children, patient, etc[19]) so required; and (e) special circumstances which the court considers publicity would prejudice the interests of justice[20] (e.g. preserving secret technical processes; publicity would defeat the object of hearing; identity of victim in blackmail case; harm to witness or party from third parties; deterring a party from pursuing a case freely or at all; highly personal evidence which should be kept confidential are revealed, etc [21]).

ii) The guiding principle is therefore whether the interests of justice are shown so to require, and in determining what the interests of justice require, the court should bear in mind the relevant competing components of what interest in such cases[22]. It is a balancing exercise between different competing interests.

iii) The court’s jurisdiction making the anonymity order is not in doubt. It is available even to a piece of litigation where the trial or other hearings will be held in open court or in chambers (open to public) with no restriction on reporting[23].  

iv) When the anonymity order is made, the principle of open justice is thereby compromised, because third parties’ right to freedom of expression, which includes freedom to seek, receive and impart information, is necessarily curtailed. This third parties’ right is also guaranteed under the Bill of Rights[24].

v) The right of expression is not absolute. It may be restricted for the respect of the rights or reputation of others or for the protection of national security or of public order, or of public health or morals[25].

vi) Different rights are in play. As a very general statement, the right to life and freedom from torture, etc should take precedence over the right to freedom of expression and freedom of the press[26].

vii) Much will depend on the circumstances of each case. A remote risk of danger to life or safety will be insufficient. Each application must therefore be examined on its own facts and issues[27].

viii) The position adopted by the asylum seeker or torture claimant will always be an important factor because he is likely to be in a good position to assess the risks and to say whether or not he needs anonymity for his protection. However, his view is not binding on the court or final[28].

ix) It is the applicant for such order who has to put in sufficient materials to satisfy the court that such order should be made. The burden is on him to justify the making of the anonymity order[29]. His justification for anonymity order such as fear of risk of life or safety, whether of himself or of others, should be clearly articulated. “How” and “why” his/his family member’s safety is at risk must be explained.

x) An anonymity order does not, by itself, exclude members of the public or the press from attending a hearing, which is a separate matter to be considered and decided if necessary[30].

39.  The aforesaid guiding principles will be applied to the present case.

40.  Apart from his own assertions, the respondent filed a medical certificate dated 12 June 2015 stating he was suffering from depression and was recommended sick leave that date. This certificate was attached in his witness statement signed on 18 August 2015 and filed the next date. There are 2 more medical certificates stating that he was suffering from a “medical condition” issued in respectively 2012 and 2014. Apart from these certificates there is no medical evidence as to how and to what impact the disclosure of the respondent’s identity will have on the respondent’s health.

41.  In further support of his case, he also filed letters of the Director of Social Welfare suggesting he is now claiming disability allowance. No medical condition or any assessment by any expert/medical practitioner has been produced to this tribunal.

42.  In the tribunal’s judgment, the reporting of a party’s case, if adverse to him, will inevitably bring embarrassment and may cause negative impact on a party’s emotion. It may particularly be so if that party is suffering from an emotional disorder. Further if the court rules against a party it may also bring inconvenience to him in a particular respect. However, causing of embarrassment or inconvenience or emotional disturbance to a party, even though with a medical condition, is insufficient as these are normal incidents of litigation. Whether the effect will be so severe as to endanger one’s life or seriously affect one’s health to the extent of justifying an anonymity order depends entirely on the seriousness of one’s medical condition. Although the respondent said he is sensitive, vulnerable and over-reactive, it is unsupported by medical evidence. Further, whether his problem has been sufficiently controlled by medication is also an important consideration but evidence in this respect is lacking. The letters from the Director of Social Welfare showing that he is receiving disability allowance add nothing to his case as nothing is said of his medical condition. Except being told that he is suffering from a medical condition, the tribunal has no clue as to the seriousness of his problem and the likely impact of publicity of the order on him. In the absence of any objective evidence, the fact that a party is suffering from depression by itself is not a sufficient justification for an anonymity order. The respondent fails to discharge his burden in establishing the need for such order.

43.  It is noted that the respondent also asked for an anonymity order to be made in the Small Claims Tribunal proceedings initiated by him. Again, save and except a certificate stating he is suffering from depression, no objective evidence has been filed in support. 

44.  The respondent has enclosed in his said witness statement a letter dated 7 May 2014 issued to him by the Administrative Appeals Board (“AAB”). It is noted in that letter the AAB agreed to allow him to use the letters “LT” in lieu of his name in certain proceedings. The nature of the proceedings before the AAB, however, is not disclosed. In any event the AAB’s decision is not binding on this tribunal.

45.  The respondent refers to a Court of Appeal decision in L v Equal Opportunities Commission & Others[31], Asia Television Ltd v Communications Authority[32] and an English Court of Appeal decision in R v Socialist Worker Printers and Publishers Ltd. This tribunal has gone through them and does not consider they add further to the principles set out by the Court of Appeal in In the Matter of BU[33] and summarized above.

46.  By reasons of the above, this tribunal does not consider the respondent has made out a case that justifies an anonymity order to be granted. The interests of justice requires that the parties’ names be disclosed in the proceedings herein. His application is dismissed.

47.  This tribunal does not see why costs are not to follow the event and accordingly make a costs order against him. By summary assessment, I consider $1,000[34] appropriate. This tribunal therefore makes a costs order nisi that the respondent is to pay the applicant’s costs of this summons assessed summarily at $1,000, and the same will be made absolute unless an application by either party is made to have it varied within 14 days from today.