XCHRX PARK KIT INVESTMENT LTD. v. CHEUNG WAN PING

HCA 5349/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5349 OF 1998

____________

____________

_______________

J U D G M E N T

_______________

1. This is an appeal from the decision of Master Bennett given on 9th November 1998. Master Bennett dismissed the summons taken out by the Defendant on 7th July 1998 applying to set aside the default judgment entered in favour of the Plaintiff on 20th May 1998.

2. The Plaintiff is the owner and landlord of the premises situate in Tuen Mun and registered in the Tuen Mun New Territories Land Registry as Lots Nos. 2064E and 2064F both in Demarcation District No. 130 together with the two three-storey buildings erected thereon ("the said premises"). The Plaintiff let the said premises to the two partners of a partnership known as Park Hong Ling Home for Aged for a term of 3 years from the 1st November 1993 to 31st October 1996 by a tenancy agreement in writing. The two partners were Ling Mon King and the Defendant.

3. It is common ground that the premises were being used at all times as a residential care home for elderly persons. By letter dated 25th July 1997, solicitors for the Plaintiff sent a notice pursuant to section 122 of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) giving notice for the termination of the monthly tenancy of the said premises which was to be terminated on 31st January 1998. A Statement of Claim was issued on 3rd April 1998 and as no defence was filed, judgment was entered in default on 20th May 1998.

4. The relevant principles applicable to applications of this type where the Defendant seeks to set aside a default judgment are well-settled. The leading case of The Saudi Eagle [1986] 2 Lloyd's Rep. 221 sets out the relevant guidelines. The primary consideration is whether the Defendant has merits to which the court should pay heed. It was held that a Defendant who was asking the court to exercise its discretion in his favour should show that he has a defence which has a real prospect of success.

5. There is no doubt that the judgment that was obtained in this case was a regular judgment.

6. In The Saudi Eagle case, the Defendant deliberately decided not to give notice of intention to defend because it suited their interests not to do so. That was a matter taken into account in assessing the justice of the case in The Saudi Eagle. Here, the evidence shows that the failure to file her defence was due to the negligence of her solicitors in failing to serve a defence in time. Nevertheless, in my judgment, the primary consideration still is whether the Defendant has merits to which the court should pay heed. Has the Defendant a defence which has a real prospect of success?

7. The issue in this case is whether Part IV or Part V of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) applies to the tenancy. As I have said, the written tenancy was for a term of 3 years. That term expired on 31st October 1996. I accept counsel for the Plaintiff's submission that after that there was a holding over. There is no doubt that the premises were continued to be run as a home for elderly persons even after the written term expired. I accept that a monthly tenancy was created after the expiration of the written term. Under the written agreement, the rental was said to be payable monthly and the monthly rent was payable in advance. A monthly tenancy was thereby created by the payment of rent on the part of the Defendant and acceptance of rent on the part of the Plaintiff after expiry of the written tenancy agreement. (See, e.g. Adler v. Blackman [1953] 1 Q.B. 146.) There is no dispute that the Defendant paid rent before service of the notice dated 25th July 1997 or that the Plaintiff collected rent prior to that notice being served.

8. Part IV of Cap. 7 relates to tenancies of domestic premises. Section 115 of Cap. 7 defines domestic tenancy as:

"a tenancy of premises let as a dwelling."

9. It was pointed out to me that the tenancy agreement in writing stipulated in Clause 8 that the premises should only be used for residential purposes. However, as I have said, it is common ground that the premises were used at all times as a residential care home for elderly persons. Furthermore, section 115A(1) of Cap. 7 provides as follows:

"Notwithstanding the purpose for which premises were let, in determining the nature of a tenancy for the purposes of this Part the following provisions shall apply -

.......................................................

(e) the use of premises as a boarding or lodging house is a use other than as a dwelling."

10. I should consider what the actual use of the premises was. All along it had been used as an elderly care home for elderly persons. The Defendant was the person to whom the Director of Social Welfare had granted a Certificate of Exemption of Residential Care Home for the Elderly under the Residential Care Homes Elderly Persons Ordinance (Cap. 459). She was the person in control. She was subjected to the Code of Practice for Residential Care Homes (Elderly Persons) which has been produced in evidence. These provide for, inter alia, provision of services, health and care services and nutrition and diet for the elderly persons residing at the home. It is clear from the Code of Practice that the Defendant's obligation is to provide meals. There should be at least 3 meals each day for the elderly persons residing at the premises.

11. On that evidence, counsel for the Plaintiff submitted that the premises were in fact used as either a boarding or lodging house or both and hence such use was use other than as a dwelling within the meaning of section 115A of Cap. 7. The Oxford English Dictionary 2nd Ed. defines 'boarding' as including:

"The supply of stated meals; the obtaining of food, or food and lodging at another person's house for a stipulated charge."

And a 'boarding house' is defined as including:

"A house in which persons board."

Lodge is defined as including:

"To receive into, or keep as an inmate of, one's house for payment; to have as a lodger."

And also as:

"To reside as an inmate in another person's house paying a sum of money periodically in return for the accommodation afforded; to be a lodger, to live in lodgings."

12. I was also referred to Woodfall on Landlord and Tenant [1994 Ed.] para. 1.028 where it is stated that:

"Persons have been held to be lodgers ....................... where a person took a room in an old people's home, which he furnished with his own furniture; but where he was provided with communal meals."

13. On the evidence, I accept counsel for the Plaintiff's submission that the premises were being used as a boarding house as well as a lodging house and as such, the use is other than as a dwelling within the meaning of section 115A of Cap. 7.

14. Furthermore, section 115A(9) provides that:

"A certificate issued by the Commissioner .......... shall, for all purposes, .......... be prima facie evidence of the facts set out therein and of the primary user of the premises on the day on which they were inspected."

15. There was produced in evidence a certificate of primary user of the premises. The Commissioner of Rating and Valuation certified on 14th September 1998 that the primary user of the premises on 10th August 1998, i.e. the date of inspection, was non-domestic. The user has not changed since the premises were let out in 1993. There has been no change of user. In the circumstances, I do not think the cases cited by counsel for the Defendant, namely Kwong Cheung Sun v. Ko Wing On [1982] HKC 404 and Chan Kwok Kwan v. Chan Cheong Wai [1980] HKLR 450 provide any assistance to the Defendant. Part IV, therefore, does not apply to the tenancy in my judgment.

16. In my judgment, by virtue of section 121 of Cap. 7, Part V applied to the tenancy. Under section 122(1)(b), the notice to be served by the landlord should be not less than six months before the day on which it was to take effect. The notice dated 25th July 1997 fulfilled that requirement in my judgment. It effectively terminated the tenancy on 31st January 1998.

17. In the circumstances, the Defendant has failed to show a real prospect of success in her defence. In my view, Master Bennett was correct in dismissing the Defendant's summons dated 7th July 1998 applying to set aside the default judgment.

18. The appeal is dismissed with costs to the Plaintiff.