LUI KING CHUN, THE EXECUTRIX OF THE ESTATE OF LAW DEI HEE aka LO TAI HI aka LO TAI HI, DECEASED v. KINZIE

DCCJ 95/2023

[2024] HKDC 599

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 95 OF 2023

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REASONS FOR DECISION

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Factual and procedural background

1.  This is an appeal by the defendant against the decision by Madam Registrar M Soong to grant summary judgment in favour of the plaintiff on 6 October 2023. At the end of the hearing on 18^th January 2024, I dismissed the appeal. The following are the reasons for the dismissal.

2.  The plaintiff claims as the landlord of the subject property to recover possession of the leased premises on account of non-payment of rent, and for arrears of rent and mesne profits.

3.  By a Tenancy Agreement dated 15^th March 2022 (“the Tenancy Agreement”), the plaintiff as the landlord let to the defendant as the tenant the premises known as “2^nd Floor and Roof of Block B of the building erected on Lot No 2945 in Demarcation District No.316, Lantau Island, New Territories” (also known as “2^nd Floor and Roof of Block B of 40 Lo Uk Village, Pui O, Lantau Island, New Territories”) (“the Property”) for domestic use for a term of 3 years commencing from 15^th March 2022 at a monthly rent of HK$6,500.

4.  It is the plaintiff’s case that since 15^th June 2022, some two to three months into the tenancy, the Defendant had defaulted in payment of rent.  As at the date of the hearing before the Registrar, there had been 19 months of outstanding rent/mesne profits calculated at HK$6,500 per month, amounting to a total sum of HK$123,500.

5.  There is no real dispute that despite demands made by the plaintiff, the defendant has failed to pay the outstanding rent.  On 27^th October 2022, at a meeting arranged between the plaintiff and the defendant, the defendant signed an undertaking promising the plaintiff she would settle all the then arrears of rent by 15^th November 2022, failing which she would move out of the Property.  The undertaking was signed by the defendant and witnessed by an estate agent.

6.  It is also not disputed that despite the undertaking, the defendant had failed to settle the arrears of rent and did not move out of the Property.

7.  The plaintiff has also adduced evidence from an ex-landlord of the defendant of a property previously let to the defendant in the adjacent village that the defendant had similarly defaulted in paying rent in the past.  In relation to this allegation, suffice for me to state at this point that little weight could be placed on such limited evidence in respect of this past dealing between the defendant and her previous landlord. In any event, that dealing was not part of the tenancy arrangements between the parties under consideration in the present case.

8.  The defendant filed an Amended Defence and Counterclaim on 21^st November 2023, admitting that she has failed to pay rent since 15^th June 2022. According to the defendant, she has been going through a period of financial difficulty, but as she expects to be compensated in an alleged labour-related claim, she maintains that she would fully settle the arrears of rent in due course.

9.  At the same time, the defendant also seeks to counterclaim against the plaintiff for damages suffered as a result of the plaintiff’s deprivation of her quiet enjoyment of the Property, and for harassment caused by family members of the plaintiff (“the Family”), one of whom was also a neighbour of the defendant living adjacent to the Property. According to the defendant, such acts included persistent pounding on the door of the Property by members of the Family, yelling loudly at the plaintiff from outside her premises, throwing away her personal belongings placed outside her door, turning off the water and electricity supply from time to time, all in an attempt to evict the defendant. As a result of such harassment, the defendant alleges that she has suffered loss in terms of pain and suffering in the sum of HK$320,000, along with the replacement cost of her lost or damaged personal property, and damages to be assessed for loss of enjoyment of the Property.

10.  On 31^st August 2023, the plaintiff applied for summary judgment and judgment on admission, and also for striking out of the defendant’s counterclaim.  After hearing the plaintiff’s application, the learned Registrar granted judgment on 6^th October 2023 in favour of the plaintiff and made an Order for vacant possession of the Property, arrears of rent and mesne profits, and for costs, but subject to relief against forfeiture in the event that the defendant made full payment on or before 20^th October 2023.  The plaintiff’s application for striking out of the counterclaim was refused.

11.  On 26^th October 2023, the defendant filed a Notice of Appeal against the said judgment and Order made.

Applicable principles

12.  First of all, it is trite that an appeal against a Master’s decision is by way of a rehearing as though the application has come before the judge for the first time, and the court’s discretion is not fettered by the previous exercise of discretion by the Master – see Hong Kong Civil Procedure 2024, Vol 1, paragraph 58/1/2.

13.  Insofar as applications for summary judgment under Order 14 of the Rules of the District Court, Cap.336H (“RDC”) are concerned, the principles have been summarised in Golden Sunrise Limited v. Lee Kwok Hung & Anor[2005] 1 HKC 466, where the court stated:

“29. The principles applicable to an Order 14 application are well known and are not in dispute: see Hong Kong Civil Procedure 2004 para. 14/4/9. A defendant must show that there are triable issues and that he has a real or bona fide defence. The test is whether the defendant’s assertions are reasonably capable of belief, having regard to the context and the circumstances and evidence of the case as a whole: Re Safe Rich Industries Ltd [1994] HKLY 183. It is also trite that the court should not embark upon a mini-trial on affidavits: Mass International Ltd v Hillis Industries Ltd & Another [1996] 1 HKC 434 at 439. Accordingly, it is inappropriate to resolve disputed credibility on affidavits.”

14.  The plaintiff also pointed out that according to Order 58, Rule 1(3) of the RDC, unless the Court otherwise orders, the notice of appeal must be issued within 14 days after the judgment, order or decision appealed against was given or made.  In the present case, the Order and Judgment of the Registrar was made on 6^th October 2023, but the Notice of Appeal was not filed until 26^th October 2023.  No application for leave to appeal out of time was made by the defendant. The plaintiff submitted that the Notice of Appeal is liable to be struck out on this ground alone. In this respect, given the delay was a matter of 6 days and was not contumelious, the court was prepared to allow the matter to proceed and be heard.

Whether the defendant has a real or bona fide defence

15.  The plaintiff submitted that nowhere in her counterclaim has the defendant pleaded that the alleged acts of harassment by the members of the Family were authorized by the plaintiff or done with her consent.  It was not alleged that the plaintiff had knowledge of those alleged acts of harassment either.

16.  As the plaintiff pointed out, to the contrary, it was pleaded in paragraphs 53 and 54 of the Amended Counterclaim that the defendant was “grateful to the patience of the Plaintiff”, that she considered the plaintiff “a very kind and compassionate and caring person”, that “it appears that the Family do not agree with the Plaintiff’s decision to grant the Defendant leniency”, and “the Defendant would not have been able to pursue the legal claim in the Labour Tribunal without the generosity of the Plaintiff”.

17.  The plaintiff further submitted that in respect of the defendant’s counterclaim for harassment, the cause of action as pleaded in the Amended Counterclaim is breach of Section 70B of the Landlord and Tenant (Consolidation) Ordinance, Cap 7 (“the Ordinance”).  

18.  Under section 70B of the Ordinance, it is a criminal offence for any person to harass a tenant or sub-tenant with an intent to evict him from the leased premises.  Any offender is liable to a fine upon conviction of HK$500,000 and to imprisonment for 12 months upon a second or subsequent conviction.  Section 70B of the Ordinance therefore merely provides for a criminal offence of harassment against a tenant with an intent of eviction, as the defendant has herself pleaded in paragraph 8 of the Amended Defence and Counterclaim.  It does not provide for a civil wrong of harassment.  Thus, even assuming that there has been a breach of Section 70B of the Ordinance, this does not in itself constitute a valid cause of action.  Further, as the plaintiff has pointed out, section 70B applies to a Part II tenancy under the Ordinance, whereas the tenancy herein falls under Part IV of the Ordinance.

19.  In the premises, the court agrees with the plaintiff’s submission that the defendant’s reliance on breach of Section 70B of the Ordinance as her counterclaim is misplaced. In any event, there may be difficulty in establishing a common law claim of harassment without allegations of trespass or assault. In the context of a tenancy, however, there may be a claim that the landlord is in breach of his covenant for quiet enjoyment by the tenant.

20.  The plaintiff however submitted that in any event, the defendant’s counterclaim, even if it is based on a breach of covenant for quiet enjoyment, would not provide the defendant with a valid defence either, for the following reasons.

21.  Firstly, the acts under complaint were said to have been committed by members of the Family without the any allegation on the part of the defendant that such acts had been authorized or consented to by the plaintiff. There is no allegation that the plaintiff had knowledge of such acts in any event.

22.  Secondly, a tenant’s covenant to pay rent is separate and independent from the landlord’s covenants under the lease including a covenant for quiet enjoyment.  A tenant cannot refuse to pay rent on the ground that the landlord has breached his covenants or obligations under the lease. In Charmway Development Limited v Long China Engineering Limited, HCA 54 of 2001,16^th July 2001, Chu J (as her Lordship then was) held as follows:

“18. Under the common law, the covenant to pay rent has been regarded as independent of the other covenants or obligations under a lease, including, for example, the covenant for quiet enjoyment : Edge v Boileau and Others [1885] 16 QB 117, see also Taylor v Webb [1937] 2 KB 283.  A tenant's obligation to pay rent is not dependent upon the compliance by the landlord of its obligations under the lease.

19. There is therefore no room for the defence asserted by the plaintiff to the counterclaim, namely, it is not obliged to pay rent or the defendant is not entitled to rent by reason of the alleged breaches of the Tenancy Agreement on the defendant's part.”

23.  The above principles were affirmed in Golden Sunrise Limited v Lee Kwok Hung & Anor [2005] 1 HKC 466, a case referred to by the plaintiff. In that case, the plaintiff as the landlord sued and applied for summary judgment against the 1^st defendant (as the original tenant) and the 2^nd defendant (as the substituted tenant) for vacant possession and arrears of rent.  The 1^st defendant denied liability on the ground that he had already surrendered the tenancy and had procured the 2^nd defendant as the substituted tenant.  The 2^nd defendant admitted that he was the substituted tenant, but refused to pay rent on the ground that the landlord had breached the terms of the tenancy by failing to repair the premises rendering the same uninhabitable.  The 2^nd defendant also counterclaimed for damages and sought to set-off his damages against the rent in arrears.

24.  The learned Judge dealt with this issue as follows:

“42. Mr Cheng argues that the second defendant has a right of set-off such that it is not a breach of the tenancy agreement to withhold payment of the rent.  The set-off that the second defendant relies on is an unliquidated claim for damages on account of a breach of the implied term to repair the common part.  As such, it is in the nature of an equitable set-off.

43. I accept that as a matter of law, a cross-claim by a tenant may operate as a set-off to a claim for rent by the landlord: Woodfall on Landlord and Tenant vol 1 para 7.114.  But that is not the same as saying that a tenant will be released from his obligation to pay rent whenever he has an unliquidated cross-claim.  What is clear in this case is that the collapse of the structure attached to the external wall took place outside the Shop.  The cross-claim that the second defendant is asserting does not relate to the condition and state of any part of the Shop itself.  The alleged breach relied on by the second defendant has not denied the second defendant of the use and enjoyment of the Shop, which is the subject matter of the tenancy.

44. The second defendant has also never notified the plaintiff of his intention to withhold or suspend payment of the rent and rates as a set-off of his loss of business.  In fact, the second defendant’s case, as appeared from the pleading and affirmations, is that the landlord has no right to receive rent because the plaintiff did not carry out remedial work to the part of the external wall above the Shop.

46. In my view, while it may be possible for the second defendant’s counterclaim to operate as a set-off against the claim for rent and rates, it is not an arguable defence to the claim for possession on account of non-payment of rent and rates.  The plaintiff is therefore entitled to enter summary judgment against the second defendant for vacant possession of the Shop subject to the statutory right to a relief against forfeiture.

47. As for the claim for unpaid rent and rates and mesne profits, it is to be observed that      the second defendant has given no particulars for the counterclaim of $1.2m in the pleading.  In his affirmations, he said that prior to the incident on 30 June 2003, the business was operating at a monthly profit of $65,000, whereas after 30 June 2003, it was incurring a monthly loss of $95,000.  On this basis, he counterclaims for a monthly sum of $170,000.  No documents, such as the books and accounts or the tax returns of the salon, have been produced to support any of these assertions.  Although the second defendant has exhibited the computer printouts of his personal bank account, they do not show the turnover, income or expenditure of the salon business.  At any rate, the printouts stop at 30 June 2003.

48. The second defendant’s counterclaim and the defence of set-off are therefore at best shadowy.  Leave to defend the claim for rent, rates and mesne profits should only be granted on terms.  The appropriate condition is for the second defendant to make payment into court of the rent and mesne profits accrued up to January 2005, being the sum of $1.6m (ie $100,000 x 16 months) and of the future rent as and when it falls due.  Given that the second defendant will have a period of 28 days to pay the arrears in rent for the purpose of the relief against forfeiture, it will be appropriate to allow 28 days for meeting the condition for leave to defend.”

25.  As the plaintiff has pointed out, the pleaded case of the defendant has not provided any particulars that the acts complained of were committed by the plaintiff or were done at her request or with her knowledge. There is thus no valid basis or sufficient evidence before the court, in any event, to support a possible finding that the plaintiff was in breach of her covenant in the Tenancy Agreement for quiet enjoyment by the defendant, and had caused the defendant her loss of quiet enjoyment of the Property.

26.  It was further submitted by the plaintiff, and I agree, that in the present case, there is no pleading of a set-off in the Amended Defence and Counterclaim.  A defence of set-off has to be specifically pleaded (see Hong Kong Civil Procedure 2024, Vol 1 at paragraph 18/8/34).  Therefore, the defence of set-off is not available to the defendant.

27.  In any event, even if assuming that the alleged acts complained of could be attributable to the plaintiff, the alleged claim for damages for pain and suffering and emotional distress is in fact an unliquidated claim that should be assessed[1]. It is in the nature of an equitable set-off.  As such, it is not a defence to the Plaintiff’s claim for possession on account of non-payment of rent.  At the most, it could only be relied upon as a defence to the plaintiff’s claim for arrears of rent and mesne profits (see Golden Sunrise Limited above). But as I have already found, on the evidence before the court, and on the defendant’s pleaded case, there is insufficient basis to make a finding that the acts complained of were attributable to the plaintiff.

Conclusion

28.  For the reasons set out above, I agree with the plaintiff that the defendant cannot rely on an alleged Amended Counterclaim as a defence to the plaintiff’s claim.  In the circumstances, the defendant has not shown that she has a bona fide defence or that there are any triable issues in relation to the plaintiff’s claim. Nor do I find there are any other reasons that would lead the court to consider that the plaintiff’s claim should proceed to a trial.

29.  The defendant’s appeal was therefore dismissed, with costs to the plaintiff summarily assessed at HK$16,000.

30.  Lastly, it remains for me to thank Mr Lam for his assistance, and the defendant for her attendance and submissions at the hearing.