WONG CHUN YU ALEX AND ANOTHER v. KWONG SIU YIN

L. T. 755 OF 1991

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LANDS TRIBUNAL Application No. 755 of 1991

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D E C I S I O N

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1. The Applicants were the owners of Flat 1, 5th Floor, Heng Fa Chuen, Chai Wan (hereinafter called “the suit premises”).

2. The 2^nd-named Applicant, Madam Tang Lai Yung, entered into a Chinese tenancy agreement, dated 20^th January 1990, with the Respondent Madam Kwong Siu Yin and let the suit premises to the Respondent at the monthly rental of HK$6,800 for the term from 1^st February 1990 to 31^st January 1991.

3. By an application dated 6^th March 1991, the 2 Applicants claimed against the Respondent for forfeiture of the tenancy on the ground of non-payment of rent since 1^st November 1990. 

4. The Applicants also claimed arrears of rent from 1^st November 1990 onwards, after giving a credit of HK$2,705, being the proceeds of a distraint warrant issued on 20^th December 1990.

5. The 1^st-named Applicant, by an affirmation filed on 17^th August 2004, said that the Respondent had, in fact, failed to pay rent since 1^st September 1990.  He did nothing then because of the comfort from the two months rental deposit.  But I note that when he applied for a warrant of distress, he only sought to recover the arrears of rent for 2 months, from 1^st November 1990 to 31^st December 1990.  He did not seek to recover the rental from 1^st September 1990 to 31^st October 1990, so as to regain the allegedly depleted deposit. 

6. In an affirmation of Mr. Norman Yeung Man Kin, the sole proprietor of the solicitors for the Applicant, which was filed on 17^th May 1991 in support of the Applicants’ application for judgment in default of Notice of Opposition, Mr. Yeung said that the Respondent had failed to pay rent since 1^st November 1990, and not 1^st September 1990.

7. Judgment in default of Notice of Opposition was granted to the Applicants on 10^th June 1991, and the Applicants recovered vacant possession on 6^th August 1991.  The total outstanding arrears of rent and mesne profits from 1^st November 1990 to 6^th August 1991 was at HK$61,048.62.

8. A charging order nisi was obtained by the Applicants on 18^th March 1992, over Flat J, 11^th Floor, Tower 2, Lai Yi Court, Shaukeiwan Plaza, Hong Kong (hereinafter called “the charged premises”).

9. The charged premises were purchased by the Respondent and one Yu Kam Chu as joint tenants on 12^th January 1991, and it was mortgaged to the Bank of China by them on 26^th January 1991.  The charging order nisi was served at the suit premises on 19^th March 1992, when those premises had already been regained by the Applicants on 6^th August 1991.  But the order was not served at the charged premises.  The charging order nisi was made absolute on 30^th March 1992 (and later amended) for the said sum of HK$61,048.62, in the absence of the Respondent.

10. No explanation has been given on why the charging order nisi was not served at the charged premises, despite this issue being raised by the Respondent in her application to set aside the default judgment.  Technically, the charging order was not part of the Respondent’s application today, but the unsatisfactory service of the order nisi may have an effect on the court’s view on the Applicants’ fides.

11. By a summons of 19^th July 2004, the Respondent seeks to set aside the default judgment.  She filed an affirmation in support on 20^th July 2004.  She said since about September 1990, she found that the Shell gas supply to the premises and the related installation were not in order.  She had repeatedly urged and requested the 2^nd-named Applicant to inspect the gas supply and the related installation, but the 2^nd-named Applicant failed to instruct anyone to carry out an inspection.

12. She had no alternative but to instruct one Kwong Tai Hong Construction Company Limited (hereinafter called “KTH”) to inspect the installation for the gas supply.  KTH issued a job order dated 3^rd October 1990, and sent somebody to inspect the installation. 

13. At the end of the inspection, KTH gave a note to the Respondent, saying that as a result of a safety inspection on 3^rd October 1990, it was discovered that the gas supply to the suit premises had leakage in the supply pipe and, for the sake of safety, the gas supply was discontinued pending repair.  This note bears a chop mark of the Shell LPG Centralised Supply Service Centre of KTH, situated in Heng Fa Chuen. 

14. The Respondent further said that as there was no more gas supplied to the premises and it was wintertime, the premises were not in tenantable condition and she could not stay there anymore. 

15. She then referred to the distraint by the Applicants in December 1990, and alleged that she had already moved out in early October of the same year.  She said she was informed about the distraint when the management company requested her to attend their office to collect her personal belongings.  When she did so, she also left the keys of the premises with the manager of the management company, who promised to deliver the same to her landlord.

16. She denied of having received the Notice of application for possession of the premises which was issued on 6^th March 1991. 

17. On the delay in making the present application to set aside the judgment in default, she said she was not aware of the present proceedings or the charging orders, and she was only made aware of the charging orders in 2003 when she tried to obtain a mortgage loan from a new financial institution - which I understand to be an attempt to arrange for a transfer of mortgage.

18. She said after she was informed of the charging orders in 2003, she started to search her papers and documents to locate the tenancy agreement, which provided that the 2^nd-named Applicant should be responsible for all repairs of the premises.  She believed that the agreement was the main evidence to show that the failure or refusal of the 2^nd-named Applicant to repair the gas supply entitled her to terminate the agreement.

19. She also believed that only after she had the agreement in hand that she could apply to set aside the default judgment and the charging order.  Therefore, she did not obtain any legal advice until she had successfully located a copy of the agreement from her safe-deposit box in late June 2004.

20. The 1^st-named Applicant, Wong Chun Yu Alex, made an affirmation, which was filed on 18^th August 2004, to oppose this application.  As I have pointed out above, he alleged that the Respondent had not paid rent since September 1990, but he just used the 2 months’ rental deposit to cover the rental for September and October 1990; hence, the distraint was only for the rental for November and December 1990. 

21. He said that he was not informed by the Respondent about the gas leakage.  He also denied that the 2^nd-named Applicant had been requested by the Respondent to inspect the gas leakage, or that he and the 2^nd-named Applicant had been shown the KTH document, or that the two of them had been informed in October 1990 of the Respondent’s decision to move out because of the gas leakage.  But, he did not say whether the 2^nd-named Applicant had been informed by the Respondent about the gas leakage.  According to him, the Respondent had failed to pay rent since September 1990, and he only applied for distraint in December 1990.

22. In my view, it is highly likely that the Respondent would have been asked to pay rent before the distraint was resorted to, and the Respondent would have given some excuse for not paying, but the 1^st-named Applicant did not say a word about any attempt to collect rent from the Respondent, or any excuse put forth by the Respondent for not paying.

23. In the light of the Respondent’s allegation of gas leakage, as supported by the KTH document, and the silence of the 1^st-named Applicant on any attempt to collect rent and the Respondent’s response thereto, I find that it is highly likely that the Respondent was telling the truth that there was a gas leakage problem in early October 1990. 

24. However, even if there was gas leakage, it did not mean that the liability to fix the problem would have rested with the landlord.  Clause 4 of the Tenancy Agreement provides that the costs for maintenance and repair of the facilities within the suit premises were on the account of the Respondent.  Thus, the Respondent could not have moved out or terminated the tenancy on the ground of failure of the landlord to repair the gas leakage.

25. Furthermore, I also find that the Respondent had not moved out in early October 1990.  She had left a lot of personal belongings and household appliances in the suit premises.  These were only seized in the distraint on 31^st January, 1991.  Her boyfriend, one Mr. Wong Wai Man, had also left there a microwave oven, a marble-top table with chairs, a micro-cassette recorder and a bench sofa.  With these things kept inside the suit premises, it can hardly be said that there was vacant possession.

26. Thus, even if the Respondent should have ceased living in the suit premises since some time in early October 1990, because she had found a new job which required her to live in Taiwan for some time, she was still keeping possession of the suit premises.  The suit premises could still be used as her accommodation.

27. However, when the warrant of distraint was executed on 31^st January 1991, things assumed a different scenario.  From that date onwards, there was a security guard posted inside the premises, to keep watch on the things seized under the warrant. 

28. The sized items were only sold in an auction on 11^th February 1991.  These things included a TV set, ceiling lights, mah-jong table, chairs, coffee table, telephone set, metal racks, key set, aquarium set, wooden cabinets, wall clocks and table clocks, picture frames, refrigerator, washing machine, cabinets and drawers, rice-cooker, ironing rack, dressing table, electric iron, mirrors and stools, and many other small items like flower vases, dustbins, small electrical appliances and household equipment.

29. These things were bought by the 1^st-named Applicant at the auction, and he removed all of them away from the premises.  When these things had all been removed on 11^th February 1991, it would have been extremely inconvenient for the Respondent to continue living in the suit premises.  And I repeat that between 31^st January 1991, and 11^th February 1991, there was a security guard positioned in the premises keeping watch on the seized items, and it is not possible for her to continue living there during the said period.

30. Furthermore, she had already acquired the charged premises, at the latest, on 26^th January 1991, and thus had somewhere else to live in.

31. She said she had returned to the premises after the auction, and assisted her friend, Mr. Wong, to move his items away.  She also collected her personal belongings from the management office on that occasion, and surrendered her keys to the manager, who promised to hand them over to the landlord.

32. It is understandable that, after the auction of her belongings and the removal of the same, there was not much point in retaining possession of the premises, unless she bought new appliances to replace those that had been taken away.  However, the evidence available does not show that she had done so. 

33. The 1^st-named Applicant’s affidavit only referred to his breaking into the suit premises on 6^th August 1991, with the help of a locksmith.  He did not say whether the Respondent had left anything inside the premises on that occasion.  Indeed, if the Respondent was still living there, the 1^st-named Applicant should have found the usual household appliances and personal belongings of the Respondent, inside the premises.  An application under section 8(8) of the Lands Tribunal Ordinance would then have been made by the Applicants for an order from the Tribunal on the disposal of these appliances and belongings.  There is, however, none in this case. 

34. All these suggest that the Respondent should have moved out from the suit premises prior to occasion when the 1^st-named Applicant broke into it on 6^th August 1991.  These tend to support the Respondent’s case that she had surrendered the keys to the Applicants through the manager.  However, there is no evidence to show that the surrender, as alleged, had been accepted by the landlord. 

35. As I have found that it was her obligation to repair the gas leakage, she could not have terminated a tenancy unilaterally because of the gas-leakage.  Nevertheless, when the landlord applied for possession on the ground of forfeiture for non-payment of rent on 6^th March 1991, the tenancy had come to an end.  If she had already delivered to keys prior to that date, her liability to pay the rent or mesne profits would cease at the expiry of 6^th March 1991.

36. I find that she has a real prospect of success in showing that she had paid the rent up to October 1990, and her 2 months deposit had not been set off in the judgment and in the charging order.  In that event, I would hold that she is liable to pay rent only up to 6^th January 1991, after giving her credit for the said deposit.  This is in line with the 1^st-named Applicant’s intent of giving her such credit, as shown in his affirmation aforesaid.  The net amount due from the Respondent from 1^st November 1990 to 6^th January 1991 after deducting the proceeds of auction at HK$2,705, but after the addition of the outstanding rates from July 1990, is the sum of HK$13,448.62.  Of the total sum outstanding under the charging order absolute at HK$61,048.62, the Respondent has no defence to this sum of HK$13,448.62. 

37. Regarding the balance sum of HK$47,600 of the judgment sum, I have already held that the Respondent has a real prospect of success to show that her 2 months deposit at HK$13,600 had not been set off, and I would therefore give her unconditional leave to defend that sum.

38. For the remaining sum of HK$34,000, different considerations apply.  This sum is for the 5 months’ rental from 6^th March 1991 to 6^th August 1991.

39. The Respondent’s case is that she had returned the keys to the landlord through the manager.  I hold that if she had indeed done so, her liability to pay the rent would stop on 6^th March 1991, upon the issue of the application.  I have also referred to the facts that support her case on the return of the keys.

40. But the Respondent’s case is not entirely satisfactory, despite having some support from the evidence outlined above.  There is doubt on whether her personal belongings would have been taken to the management office after the distraint and auction, because distraint and auction would not have entitled the landlord to regain possession of the premises.  It is also doubtful if the management office would have kept such things for the Respondent, or promised to deliver the keys on her behalf to her landlord without the landlord’s prior consent. 

41. I would also mention 2 matters.  The Respondent has said that she has not received the Notice of Application as issued on 6^th March, 1991.  There is, however, an affirmation by the solicitor, Mr. Yeung, filed on 17^th May 1991, that the Notice of application had been sent to the Respondent by registered post, and the letter had not been returned. 

42. I, therefore, do not accept the Respondent’s case that she had not received the application.  If she had moved out sometime in October 1990, I find that she should have returned to the premises to facilitate Mr. Wong’s removal of his items, and also to collect her own belongings and surrender her keys to the manager, in early March 1991, and she got the application on that occasion.

43. Alternatively, if she had, as contended by the Applicants, failed to move out from the premises until some time in August 1991, then there was no question of her not receiving the application.  

44. These matters make the Respondent’s case of surrender of keys shadowy.  If she had not returned the keys, she would have been liable to pay rent up to 6^th August, 1991.  I am therefore only prepared to let her defend this sum of HK$34,000 on condition of her paying it into the tribunal within 1 month from day. 

45. The Applicants have further argued that delay on the part of the Respondent in making the application has caused them prejudice.

46. There is no evidence of any prejudice before the court, and submission was made by counsel for the Applicants that if the application to set aside should have been made some time last year, the Applicants would have served the application on the Respondent again, and would have got judgment, to be followed by fresh charging orders and registration of the same.  Now that the premises have been sold, and the Applicants are being prejudiced in not being able to register a fresh charging order.  No other prejudice is being alleged. 

47. As I have held that the Respondent should have received the Notice of application, the Applicants would not have been required to serve the application again.  The prejudice as alleged by counsel, therefore, has not occurred.

48. I thus order,

1.      that the name of the 1^st-named Applicant be deleted from the judgment and the amended charging order absolute;

2.      the rate of interest of 11.5% per annum be deleted from the amended charging order absolute and the words “judgment rate” be substituted thereof;

3.      I grant unconditional leave to the Respondent to defend this application as brought by the 1^st-named Applicant;

4.      the judgment and the amended charging order absolute be further amended by deleting the sums payable and the calculation thereof, and substituting thereof a lump sum of HK$47,448.62;

5.      the Respondent do have unconditional leave to defend the sum of HK$13,600;

6.      on condition that the Respondent shall pay a sum of HK$34,000 into the tribunal, to be kept in an interest-bearing account, within one month from the date hereof, the judgment and the amended charging order absolute be further amended to a lump sum of HK$13,448.62, and the Respondent shall then be further entitled to defend the sum of HK$34,000; and

7.     finally on costs, since both sides have succeeded to considerable extent, costs of this application be in the cause, with certificate for counsel.