KONG SHING TAI v. KHAN USMAN

LDPD1746/2016

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO LDPD 1746 OF 2016

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DECISION
(APPLICATION FOR LEAVE TO APPEAL)

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1.  This is an interlocutory application taken out by the respondent on 13October 2016 seeking leave to appeal against my judgment made on 30September 2016 (“the 30September 2016  Judgment”). The respondent also seeks to stay the execution of delivering vacate possession of the suit premises which is situated at Room A on Roof, 15 Sheung Heung Road, To Kwa Wan, Kowloon (“the Premises”)

Background

2.  By a tenancy agreement in Chinese dated 26January 2016 (“the Tenancy Agreement”), the applicant, as landlord, let the Premises to the respondent, as tenant, for a term of 2 years from 1February 2016 to 31 January 2018 at a monthly rent of $2,000 (inclusive of rates, Government rent and property tax).

3.  Clause 1 of the Tenancy Agreement provides that:

「乙方必須在每月租期之首日上期繳交租金、如過期六天不交租。乙方同意甲方有權截斷水電終止合約, …. 追討一切損失的權利。」

That is, the rental should be payable in advance on the first day of each month during the term of the Tenancy Agreement and if the rental is 6 days in arrears, the landlord has the right to cut the electricity and water supply and termine the Tenancy Agreement and to pursue her claim for all loss.

4.  In addition, clause 4 of the Tenancy Agreement provides that the respondent be responsible for water charges at $12 per unit of consumption and electricity charges at $1.50 per unit of consumption.

5.  According to a Notice of Application filed by the applicant on 23 August 2016, the respondent had failed to pay rent since 1 August 2016 and there was rental in arrears in the sum of $800 for the period between 1 July 2016 and 31 July 2016. The applicant applies for recovery of possession of the Premises and for order for mesne profits plus water/electricity charges outstanding.

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 on 6 September 2016.

7.  Then on 7 September 2016, this Tribunal made the following orders (“the Default Judgment”) :

(1)   Subject to paragraph (4) below, the respondent do deliver vacant possession of the Suit Premises to the applicant;

(2)   The respondent do pay the applicant arrears of rent/mesne profits as follows:

(a)   Balance of arrears of rent from 1 July 2016 to 31 July 2016 in the sum of $800;

(b)   Arrears of rent/mesne profits at the rate of $2,000 per month from 1 August 2016 until delivery up of vacant possession;

(3)   The respondent do pay the applicant the costs of this Application which is summarily assessed at $800; and

(4)   If the respondent should on or before 21 September 2016 (“Relief Expiration Date”) pay into the Tribunal all the arrears of rent/mesne profits as stated in paragraph 2 above (including all arrears of rent/mesne profits due on or before the date of payment) together with the costs referred to in paragraph 3 above, the respondent be relieved from the forfeiture incurred herein, and the lease of the Suit Premises be reinstated.

8.  Leave was however granted for the applicant to withdraw the claims for electricity and water charges.

Interlocutory Application dated 11 August 2016

9.  In fact, this was not the first time when the Tribunal made a similar default judgment (“Earlier Default Judgment”) against the respondent.

10.  On 9 May 2016, the applicant made a similar application, LDPD 986/2016, on the ground that the respondent had failed to pay rent since 1 May 2016.

11.  Then the respondent failed to file the Notice of Opposition also and the Tribunal made a similar default judgment on 15 June 2016.

12.  However, on 11 August 2016, the respondent filed an interlocutory application with the Lands Tribunal asking for the Earlier Default Judgment to be set aside.

13.  Attached to this interlocutory application was an affirmation by the respondent which can be summarized as follows:

(1)   The respondent, though acknowledging himself as the tenant, was not staying at the Premises. Instead, the Premises were rented to Mr Nasir Rehman (“Nasir”) who is a torture claimant and has no Hong Kong Identity Card which was required by the applicant for the letting of the Premises. The respondent only signed the Tenancy for behalf of Nasir out of goodwill.

(2)   The respondent was informed by Nasir that he had a verbal agreement with the applicant in May 2016 to reduce the monthly rent to $1,200 per month plus water and electricity charges. Since then Nasir started to pay the reduced rent and the applicant made no attempt to take action to recover possession of the Premises.

(3)   The applicant failed to serve any pre-action letter and failed to serve court documents such as statement of claim prior to and after the commencement of proceedings. This explains why no Notice of Opposition was filed.

(4)   The Premises comprise an illegal structure on the Roof and the ownership of the applicant is in doubt.

14.  Hearing of this interlocutory application took place on 19 August 2016 but the applicant failed to attend. Having heard the one-sided story of Nasir who appeared for the respondent, I set aside the judgment dated 15 June 2016

Interlocutory Application dated 22 September 2016

15.  And as before, on 22 September 2016, the respondent filed an interlocutory application with the Lands Tribunal asking for the Default Judgment to be set aside.

16.  The affirmation attached to this interlocutory application actually repeated what was stated in the earlier interlocutory application of 11 August 2016.

Hearing on 30 September 2016

17.  When hearing of this new interlocutory application took place on 30 September 2016, the applicant was able to attend explaining that last time, ie on 19 August 2016, she attended the wrong court and therefore missed the hearing.

18.  Nasir also appeared for the respondent in this hearing and produced a loose slip of paper[1] (“Exhibit R1”) with the applicant’s bank account number on the front and his calculation of the rent payable on the back. Nasir said this was done at a restaurant when he and the applicant met after the applicant filed her earlier application LDPD 986/2016 whereby they had an agreement for rental reduction. Nasir also admitted that he speaks Punti and therefore can communicate with the applicant[2].

19.  Nasir also produced the bank pay-in slips since May 2016 to September 2016 (“Exhibit R2”) to support his assertion of the rental reduction agreement. The May payment was made on 11 May 2016 and the June payment was made on 2 June 2016.

20.  As it turned out, when the Tenancy Agreement was signed, Nasir initially deposited the rental payment reserved in the Tenancy Agreement into the bank account of the applicant’s husband in March and April 2016 respectively. The bank pay-in slips were produced as Exhibit R3[3].

21.  However, Nasir later found the rental expensive when compared with his friend’s and therefore approached the applicant for a discount. He also explained to the applicant that he had no Hong Kong Identity Card and could not work in Hong Kong. He promised that if he got a Hong Kong Identity Card and found a job, he would revert to paying the original amount of rental of $2,000 per month.

22.  In rebuttal, the applicant submitted that she was philanthropic and was prepared to let the Premises to Nasir for being considerate that the latter had no place to live. The rental reserved in the Tenancy Agreement was already $1,000 less than the market rent. However, when her husband later found out that rental payments in April and May were late, he blamed her for letting the Premises to a Pakistan. In order to avoid further challenge by her husband, the applicant requested Nasir to deposit the rentals reserved into her own bank account instead and that explained why she wrote on Exhibit R1 her own account number. She did not accede to the respondent’s request for rental reduction and regretted that the respondent wrote his own figures on the back of Exhibit R1 afterwards.

23.  Nasir said it was he who asked the applicant for her own bank account number because he had found out from Exhibit R3 that the bank account was not in her name (notwithstanding that he should have realized that earlier when he deposited the rental payment for March 2016).

Assessment of Evidence

24.  From the above, it is apparent that the evidence of the applicant and Nasir about whether they came to an agreement to reduce the monthly rental was in dispute.

25.  In this regard,  Hui Cheung Fai and Another v Daiwa Development Ltd, HCA 1734/2009 (unreported, 8 April 2014) at §§78-82 has set out the following general principles as to fact finding and assessment of credibility:

“78. In deciding whether to accept a witness’s account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: eg Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5th May 2011) §39 (Chu J).

79. In determining a witness’s credibility, I have also attached importance to the consistency of the witness’s evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.

80. I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses: Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36-37 (Bokhary PJ).

81. The practical approach to assessing credibility of witnesses in a case such as the present may have best been summarised by the words of Robert Goff LJ, as he then was, in The Ocean Frost [1985] 1 Lloyd’s Rep 1 at 57:

“Speaking from my experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth.”

82. Whilst these words were spoken in the context of a fraud case, I believe they are applicable to any case where a witness’ credibility features prominently in the court’s determination…”

26.  It was undisputed that Nasir had made a request for reducing the monthly rental payable. But bearing in the mind the Tenancy Agreement was newly signed and the personal situation of Nasir had not changed, it was more probable than not that Nasir made such a request because he found out (whether rightly or wrongly) that the monthly rental reserved in the Tenancy Agreement was higher than the market level. Particularly, this request was made after the applicant had already applied to the Tribunal for recovery of possession on 9 May 2016.

27.  Based on the evidence and response from the applicant, I did not find any good reason that she would have agreed to the rental reduction. There was no consideration to support the applicant’s accepting less.

28.  As regards the payments by Nasir on 11 May 2016 (ie two days after the applicant applied to the Tribunal in LDPD 986/2016) and onwards, I accept the applicant’s evidence that she just applied them to set off part of the rental in arrears since 1 May 2016. Indeed the applicant applied to the Tribunal for the Earlier Default Judgment. There was no evidence of estoppel arising thereof.

29.  More importantly, in law, the one who asserts the existence of an agreement must shoulder the burden of proving his case. I had grave doubt that the scribbles on the back of Exhibit R1 by Nasir were anything that could support an agreement.  The figures that were scribbled were not written on the same side where the applicant wrote down her bank account number. There was no evidence of the applicant’s acknowledging or approving the same either. At most, it could only prove that some sort of negotiation was taking place but it was far from being an agreement.

Illegality of the Premises

30.  The respondent and Nasir also alleged the Premises being on the Roof comprise illegal structure for which the ownership was doubted. This was the additional ground raised by Nasir that the rental reserved in the Tenancy Agreement was too high.

31.  However, the Tenancy Agreement was created by agreement between the parties. In Tang Chi Ho v Wong Yuk Ha[1996] 1 HKC 525, Godfrey JA of the Court of Appeal had the following ruling:

“In addition, it is submitted on behalf of the tenant that the landlord himself has no interest in the property and therefore cannot accordingly institute any proceedings against the tenant. This assertion of a jus tertii is not open to the tenant. A tenant is not permitted to deny his landlord's title. If then the present landlord is the landlord of the tenant, this allegation that the landlord has himself no interest in the property would afford the tenant no defence.”

32.  Thus, the respondent or Nasir is absolutely estopped from denying the title of the applicant as landlord by whom he was let into possession, whether or not he has notice of any defect in title.

Setting Aside the Default Judgment

33.  On the other hand, the respondent submitted that he or Nasir did not receive the Notice of Application and therefore failed to file the Notice of Opposition.

34.  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 Li Hing Chung [1994] 1 HKC 213, 219). 

35.  As in Bank of China (Hong Kong) Limited & Others v Cheung King Fung Francis & Another[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.

36.  During the hearing on 30 September 2016, the applicant said she had placed a copy of the Notice of Application dated 23 August 2016 in the letter box. However she also conceded that there are altogether 3 units on the Roof which shared the use of the same letter box. I consider there are real possibilities that the Notice of Application was not duly served to the respondent or Nasir.

37.  The applicant also submitted she had affixed the Notice of Application outside the Premises for three days. In spite of this, she failed to produce evidence on how or where she had affixed the Notice of Application though when she did the same in May 2016, she met Nasir and they went to a restaurant for discussion thereafter.

38.  Again, bearing in mind the applicant is a laywoman and all the 3 units on the Roof are most probably illegal structures as alleged by the respondent, I had doubt if the Notice of Application was properly served.

39.  Hong Kong Civil Procedure 2016 (at §13/9/5 at pp228-229) states inter alia as follows :

“When a defendant deposes that he has not received the writ through the post, the court has little option but to believe this save when there is sufficient material to cast doubt upon the defendant’s credibility to enable the court to disbelieve him (which is a matter of evidence dependent on the circumstances of the case: see Wei Bingqing v. Xie Diangrong, unreported, HCA No. 2654 of 2003, [2006] H.K.E.C. 634).”

40.  In Cheng Chi Lun v Ng Lai Ming Juliana HCA1611/2006 (unreported, 14 February 2007), Mr Recorder Fok SC also said at §26 as follows:

“The Court of Appeal has, however, made clear that this does not mean that the court must accept a defendant’s assertion no matter how improbable: Bank of China (Hong Kong) Ltd v Cheung King Fung, Francis and Anor, unrep, CACV 66 of 2005, 5 July 2005 at § 33 per Tang JA. A defendant is required to provide convincing evidence; how much evidence is required must depend on the circumstances of the particular case” ibid. §34. The relevant question is whether there is sufficient evidence to cast doubt on the Defendant’s credibility such that the court should not accept the bare allegation that she has not received the writ.”

41.  In this case, there was insufficient evidence to cast doubt on the responsibility’s credibility or that of Nasir’s denial of receiving the Notice of Application. On the balance of probabilities, I accepted therefore that the Default judgment was irregular.

The30September2016 Judgment

42.  In view of the above, I made the following order on 30 September 2016:

A.   The Default Judgment be set aside.

B.   (1) Subject to paragraph (4) below, the respondent do delivervacant possession of the Premises to the applicant;

(2)   The respondent do pay the applicant arrears of rent/mesne profits as follows:

(a) balance of arrears of rent from 1 July 2016 to 31 July 2016 in the sum of $800;

(b) arrears of rent/mesne profits at the rate of $2,000 per month from 1 August 2016 until delivery up of vacant possession;

(3) The respondent do pay the applicant the costs of this application which is summarily assessed at $800;

(4) If the respondent should on or before 14 October 2016 (“Relief Expiration Date”) pay into the Tribunal all the arrears of rent/mesne profits as stated in paragraph (2) above (including all arrears of rent/mesne profits due on or before the date of payment), together with the costs referred to in paragraph (3) above, the respondent be relieved from the forfeiture incurred herein, and the lease of the Premises be reinstated.

Interlocutory Application dated 13 October 2016

43.  On 13 October 2016, the respondent filed another Interlocutory Application seeking leave to appeal against the 30September 2016Judgment and to stay execution of delivery of vacant possession.

44.  However, the grounds in support of the intending appeal as attached to the Interlocutory Application were nearly the same as those stated in the former Interlocutory Application dated 22 September 2016 and have been heard on 30 September.

45.  In this morning when this interlocutory application was heard, I reminded the Nasir who again appeared on the behalf of the respondent that I could not see how these grounds in this interlocutory application could be taken as issues in the “point of law”.

46.  Nasir still could not point out “point of law” apart from repeating what had been submitted on 30 September 2016.  

47.  Notwithstanding the above, Nasir raised a new issue that the Premises had leakage problem on the roof. On the one hand, the applicant responded that she had already repairs conducted by a contractor, 「祥記」, in May and June 2016. On the other hand, in Charmway Development Ltd v Long China Engineering Ltd [2001] 3 HKC 515 at p.519D-I, Chu J (as she then was) recited the common law principle that the covenant to pay rent is independent of the other covenants or obligations under a lease. It is generally of no defence in saying that the tenant is not obliged to pay rent or the landlord is not entitled to rent by reason of alleged breach of the tenancy agreement on the landlord’s part. The principle applied to the facts of that case where the obligation of the tenant to pay rent was not expressed to be subject to or conditional upon compliance by the landlord of its obligations thereunder.

Leave to Appeal

48.  Section 11(2) of Cap. 17, Lands Tribunal Ordinance (“the Ordinance”) provides that

“Subject to section 11AA and the provisions of any Ordinance relating to appeals from the Tribunal, any party to proceedings before the Tribunal may appeal to the Court of Appeal against a judgment, order or decision of the Tribunal on the ground that such judgment, order or decision is erroneous in point of law.”

49.  And section 11AA (6) of the Ordinance provides that:

“Leave to appeal shall not be granted unless the Tribunal, the Court of Appeal or the registrar hearing the application for leave is satisfied that –

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appeal should be heard.”

50.  The 30September 2016Judgmentwas mainly basedon the “findings of facts” and more importantly, the respondent’s intending grounds of appeal were not issues in “point of law”. I cannot see how the respondent should be given the leave to appeal.

51.  This case indeed involves a simple application for recovery of possession and payment of outstanding rent/mesne profit and costs. Since I did not allow the respondent the leave to appeal, the consequential application by the respondent for stay of execution of possession of the premises pending appeal is therefore refused.

Costs

52.  Since both parties are not legally represented, I decide not to make any costs order for this application.

Conclusion

53.  The interlocutory application by the respondent to seek leave to appeal and stay of execution of the order for possession be  dismissed. Costs order nisi that there be no order as to costs. The cost order shall become absolute if no party applies to vary the order.