PROVADA LTD v. DOUGLAS MULCOCK also known as MULCOCK DOUGLAS JOHN

HCA 862/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 862 OF 2013

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JUDGMENT

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The application

1.  This is an application by the plaintiff for summary judgment under Order 14 RHC.

2.  The plaintiff is represented by Mr. Ching of solicitor.  The defendant is absent.  The defendant is deemed to have notice of this hearing because his solicitor had attended before the listing clerk on 31 July 2013 for fixing the date of hearing today.  The defendant filed his Notice to act in Person on 6 August 2013.  The proceedings should proceed despite the defendant’s absence today.

The factual background

3.  I shall adopt Mr. Ching’s written submissions for the factual background of this application:

“a. The present case involves the dispute between the Landlord and the Tenant in respect of arrears of rent of Ground Floor at No.22, Stanley Mound Road, Stanley, Hong Kong together with an open Car Parking Space No.9 (“the Premises”).

b. The Plaintiff issued the Writ of Summons on 20^th May 2013.  The Defendant has not filed the Defence.  The Writ of Summons and the Statement of Claim were amended on 4^th July 2013 pursuant to Order 20 rule 3 of the Rules of the High Court.  On 4^th July 2013, the Plaintiff took out a summons pursuant to O.14 r.1 and O.29 r.10 and 12, RHC (“the Plaintiff’s Summons”).

c. In the hearing on 22^nd July 2013 before Master A. Ho, it was ordered that Judgment be entered for the Plaintiff against the Defendant for vacant possession of the Premises.  The Defendant’s previous solicitors, Mr. Gregory Payne of Messrs. Payne Clermont, submitted that the Defendant would dispute the Plaintiff’s claim on the following grounds:

i. the deposit previously paid by the defendant should be used to set-off the arrears of rent; and

ii. the surcharge at the rate of 2% per month is a penalty clause which is not enforceable.”

4.  In support of its application for summary judgment, the plaintiff has, by its director, Mr. Wong Tat Sum Samuel, filed an affirmation on 4 July 2013 together with the two tenancy agreements.

5.  The defendant has not filed any evidence in opposition to this application.

6.  Having considered the contents of Mr. Wong’s affirmation, I am satisfied that the plaintiff has established a prima facie case as pleaded in the Amended Statement of Claim against the defendant.

The legal principles on Order 14

7.  For Order 14 application, the primary burden is on the plaintiff to prove its prima facie case.  The burden then shifts to the defendant to show to the court that there is triable issue, Yue Tai Plywood & Timber Company Limited v Far East (Wagner) Engineering Limited by Recorder J Leong [2001] 2 HKLRD 446.  See also Billion Silver Development Limited v All Wide Investments Limited CACV258/1999 at §26[1].

8.  Summary judgment, if to be given, must be on the Plaintiff’s pleaded case.  See §4 of Bokhary JA in Super Electric Motor Limited v Pai Chung Ying CACV 225/1994 (unreported) 6 April 1995.

9.  Mr. Ching intends to deal with the issues raised by the solicitor acting for the defendant on the previous occasion, i.e. whether the rental deposit should be applied to set off the plaintiff’s claim and whether the interest at 2% per month on the outstanding rent in arrears is a penalty under the law.

The legal principles on set-off of rental deposit

10.  On the issue of set-off, the plaintiff relies upon the judgment of Orient Bright International Limited v Hiang Kie Hong Kong Limited CACV220/2004, which adopted the decision in Wong Kam-kong v Intercontinent Mercantile Co. [1968] HKLR 331 at 339 and 344 for the proposition that at common law there is no bar to a landlord forfeiting the deposit if there is such a stipulation in the agreement.  In such a case, the deposit is not recoverable and therefore cannot be used as a set-off against the claim for arrears of rent unless some equitable principle is applicable.  See §16.

11.  However, it appears that the plaintiff has not pleaded in its Amended Statement of Claim for forfeiture of the rental deposit.  Nor has the plaintiff asked for such relief in this application.  Applying the legal principle in Super Electric Motor Limited , this Court should not make an order on the forfeiture of the rental deposit.  It will be a matter for decision when the defendant raises it before this Court.  I decline to deal with it here.

The legal principle on penalty

12.  On the issue of whether the interest at 2% per month on the arrears in rent amounts to a penalty, Mr. Ching relies upon Ip Ming Kin v Wong Siu Lan CACV201/2012 (unreported) 28 May 2013, in which the Court of Appeal held that the burden is on the defendant to show that the stipulation for interest at 2% on the outstanding rent in arrears is a penalty, the Court adopting a broad-brush approach that it should not be eager to hold, for commercial contract, that the stipulation is in terrorem against the defendant.  See paragraphs 38 and 60 of the judgment.

13.  The defendant has not filed any evidence to discharge the burden.  Adopting the Court of Appeal’s approach, I find that the defendant has not been able to show that this stipulation is a penalty.  As such, the Court should give effect to it.

Costs

14.  The plaintiff will have the costs for this application and for today’s hearing as well.  As the defendant is absent today and from the evidence before me, it is highly likely that the defendant will abandon his defence to the plaintiff’s claim, including the plaintiff’s claim for costs of the action. In order to save time and costs for the plaintiff, who may only obtain an empty judgment for the costs, I agree to assess the costs for the action and for this application summarily under Order 62 rule 9A RHC. I have received a schedule of costs from Mr. Ching for the action, including the hearing today.  I am satisfied that the costs claimed in the schedule are reasonable and I allow the costs as claimed at HK$57,405.00 although today’s hearing may be shortened by the defendant’s absence.

Order

15.  I shall make an order in terms as follows:

a. Summary judgment to the plaintiff on the arrears of rent for the sum of HK$613,000.00;

b. The sum of HK$91,860.00 being the surcharge of the arrears of rent;

c. Interest at judgment rate from the date of the writ until the payment of the judgment sum;

d. The mesne profits at the rate of HK$48,000.00 per month from 1 June 2013 to the date when vacant possession of the premises is delivered up or obtained by the plaintiff;

e. Costs of this action, summarily assessed under Order 62 rule 9A at HK$57,405.00 to be paid by the defendant within 14 days from the date hereof.