LEUNG NIE CHUNG, CHARLES v. LI CHUN WAH, EDWARD

IN THE SUPREME COURT OF HONG KONG

SMALL CLAIMS APPEAL NO. 5 OF 1984

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JUDGMENT

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1. Whatever else Mr. Leung, the appellant, may or may not be, he is certainly an enthusiastic litigant and I do not intend that to be a criticism. Nor is he easily discouraged. It is those very qualities, enthusiasm and persistence, which have brought him as far as today. He appeals from a decision by Miss Chan, an adjudicator in the Small Claims Tribunal, given on the 28th February 1984 with leave of Mr. Justice Clough.

2. The background to these matters is this: Mr. Leung was the tenant, and may still be on his account though that is disputed by Mr. Li, of a flat in Block 11, Nam Fung Sun Chuen. On 1st July 1982 he sublet that flat to Mr. Li. The terms of the Sub-tenancy Agreement were committed to writing in Chinese. I have seen a translation. I will come back to the terms of that agreement in a little while. On 10th December 1983 Mr. Li withheld rent. He claimed to be entitled to do so because the principal landlord had either attempted to distrain or had effected a distraint on his goods in the flat which he occupied under the agreement by reason, so Mr. Li believed, of Mr. Leung's previous failure to pay rent to the principal landlord. That is a matter of fact which is in dispute. Mr. Leung's case has always been so far as I understand it, that there never had been any failure on his part to pay rent to the principal landlord and therefore there never was occasion for Mr. Li to withhold rent. It is an issue of fact which it is not necessary for me to attempt to resolve; nor could I in these proceedings. Because Mr. Li withheld rent Mr. Leung took the view that under the terms of the agreement he was in breach and that a deposit of $5,714 which had been paid at the start of the tenancy by Mr. Li to Mr. Leung was forfeit. If indeed Mr. Li had been in breach, the terms of the agreement would seem to provide for the forfeiture of that deposit. But I observe in passing that even in those circumstances an argument survives as to whether or not Mr. Li would nevertheless be able to recover the deposit by invoking the court's jurisdiction in equity to relieve against forfeiture on the ground that to allow the landlord to retain the deposit would be unconscionable. As to that question there are a number of authorities and it is perfectly right if I may respectfully say so, to remark as Clough J. did in giving leave, that difficult questions of law may arise. I think that it was because of those difficult questions of law that Mr. Justice Clough advised Mr. Leung to apply for legal aid.

3. Now I am not entirely clear as to the chronology but it rather seems that the next step which Mr. Leung took was to bring the claim in the Small Claims Tribunal which resulted in the decision from which appeal now lies. In the meantime, Mr. Li continued to withhold rent. The claim in the Small Claims Tribunal was not for arrears of rent. In so far as the Small Claims Tribunal had jurisdiction to entertain it, it was a claim for $5,000, the monetary limit of the Tribunal's jurisdictions, being on Mr. Leung's case a further deposit to which he claimed to be entitled by reason of the first deposit having become forfeit. The learned Adjudicator chose to approach the problem by looking at the nature of the deposit which had earlier been paid by Mr. Li to see whether as a matter of law it was forfeit. Her approach was that if it was not no question of a second deposit becoming payable would arise. The conclusion which the learned Adjudicator came to, without the assistance of legal argument, was that the original deposit was not only a penalty but that it would be unconscionable for Mr. Leung to retain it. Therefore it was not forfeit and since it was not forfeit there could be no claim for a second deposit.

4. Well, that was one way of looking at the question. I approach this matter somewhat differently. I look at the agreement to see whether it provides for the payment of the second deposit in the event of a first deposit becoming forfeit. If when I look at the terms of the agreement I find that it does not the monetary claim by Mr. Leung would fail at the first hurdle and I would certainly uphold the decision of the Adjudicator to that extent. It does not and I do.

5. But because of the form the decision took it almost appears that the learned Adjudicator was making a declaration as to the legal position of the parties with regard to this deposit which of course she would not have had jurisdication to do. I do not think in fact that the learned Adjudicator was making any such declaration, but was simply stating her reasons which lead to the conclusion that the $5,000 claim was not recoverable. Nevertheless some confusion has resulted as to the effect of the decision in the Small Claims Tribunal and incidentally of the result of this appeal on proceedings in the District Court in which Mr. Leung is currently claiming arrears of rent. From what I understand of those proceedings Mr. Li has paid into court all the outstanding rent less a sum equal to the original deposit so that in effect he is admitting his liability to pay rent subject to his right to recover the amount of the deposit. So it rather looks as though the District Court Judge will have the task of deciding whether or not any question of forfeiture arises by reason of Mr. Li's breach, if any, which without tying the Court's hands in any way would seem to be a question to be determined upon evidence, and if the Judge concludes that it does arise, whether or not on the authorities and the facts of this case Mr. Li ought to be afforded relief against that forfeiture on the equitable principles which have been discussed in the cases of which perhaps the best known is Stockloser v. Johnson. ⁽¹⁾

6. Now, the result is that Mr. Leung's appeal stands dismissed in so far as it relates to a claim for $5,000. It is quite unsustainable. But in so far as the decision of the adjudicator goes beyond dismissing that claim and purports, if it does so, to declare the respective positions of the parties at law in relation to the deposit, I set it aside. The matter remains open for the learned District Court Judge who is charged with hearing the question.

                I do not wish to say too much about a matter which obviously distresses Mr. Leung, which is the fact that his legal aid certificate was discharged. I do not know enough about the circumstances. Mr. Justice Clough in giving leave did observe that this appeal could give rise to difficult questions of law, and the fact that he gave leave to appeal ought in itself to be sufficient to demonstrate that there is a point of law which is reasonably arguable on appeal. In those circumstances, subject to means, one would expect an appellant to be offered legal aid, but as I say I do not know enough about the reasons for the discharge of the certificate to be able to make any comment. It may well be that having reflected upon the position Counsel who was originally assigned came to the conclusion that he could not argue the appeal, or it may have been for some entirely different reason. I would, however, make a general observation, not pertaining to this case, that where leave to appeal is given on the ground that there is an arguable point of law then subject to the question of means it would seem right that the appellant should have the benefit of representation and certainly the court is greatly assisted where the parties are represented: the more so of course where, as in this case, the Judge giving leave considered that the point involved was one of difficulty.

(1)    [1954] 1 QB p.476 CA