XCHRX SECRETARY FOR JUSTICE v. LAM CHI BIN STANLEY

HCA148/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.148 OF 2001

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J U D G M E N T

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Dispute

1. This is a dispute arising out of a tenancy agreement dated 25 November 1999 ("the Agreement"), whereby the Hong Kong SAR Government agreed to let to the defendant Flat A2, 26/F, Block A and car parking space No.C1/25, Elm Tree Tower, No.8 Chun Fai Road, Hong Kong ("the Property") for a term of two years from 15 July 1999 to 14 July 2001 at the monthly rent of $40,000.

2. On 3 February 2000, the plaintiff commenced proceedings in HCA1359 of 2000 ("the first action") against the defendant, alleging that the defendant had failed to pay rent since September 1999 and management fees and provisional rates since August 1999, totalling $102,896.28. By reason of the defendant's breach, the Government re-entered the Property on 16 November 1999. It claimed for, inter alia, vacant possession of the Property, the said sum of $102,896.28 and damages. In his defence, the defendant raised these allegations. When the Property was rented, he had made it clear to the estate agent that it was to be rented by his company. To facilitate the signing of the tenancy agreement so that the Property would not be let out to others, the agent suggested that the tenancy agreement should be first signed in his name. It could be changed to the company's name later. But the change did not take place. Lastly, the defendant in his defence asked the plaintiff to issue invoice to his company so that it could pay the rent forthwith.

3. Apparently, nothing further happened in the 1st action. I will come back to the parties' evidence in this respect later.

4. On 10 January 2001, the plaintiff commenced the present proceedings for, inter alia, vacant possession of the Property, arrears of rent from December 1999 to December 2000, arrears of management fees from August 1999 to December 2000 and arrears of rate up to 31 December, mense profit from 1 January 2001 up to delivery of vacant possession and damages.

5. In his defence dated 26 February 2001, the defendant alleged that an agreement had been reached by the parties in connection with the first action; that he had already ceased to rent the Property in his own name; that the tenancy should have been signed by his company, Silicon SMT Manufacturers Ltd ("Silicon"); that the Government had agreed to it, as evidenced by its letter dated 23 March 2000; that the Government had failed to deliver the new tenancy agreement or sent demand note for rent to Silicon; that accordingly, no rent could be paid; and that in the circumstances, the Agreement had been terminated and he or Silicon was waiting for the new tenancy agreement.

6. Until the hearing before me, the defendant had all along been acting in person in both actions.

Summary judgment, setting aside and appeal

7. By summons dated 1 March 2001, the plaintiff applied for summary judgment. At the first hearing on 19 March 2001, the master gave direction for filing of affirmations and adjourned the matter to 2 April 2001 at 9:30 a.m. The defendant did file his affirmation as directed.

8. On 2 April 2001, the defendant however did not appear at the appointed time. The master then proceeded to enter judgment in his absence. The defendant only turned up at about 11:40 a.m. The master then advised him to apply to set aside the judgment. Subsequently, the defendant took out three summonses. The first summons was dated 2 April 2001 for "rehearing the action" ("the first summons"). It was adjourned to 21 June 2001 for argument. The second summons was dated 9 June 2001 for striking out the writ of summons. It was dismissed on 18 June 2001. The third summons was dated 21 June 2001 for setting aside the summary judgment and for striking out the writ of summons ("the third summons"). It was heard together with the first summons. In the event, they were all dismissed.

9. The defendant now appeals against the master's order made on 21 June 2001 of "refusing to restore the hearing to set aside [the summary judgment]" : see the notice of appeal dated 4 July 2001. I note the notice of appeal was prepared by the defendant himself.

10. On 11 July 2001, the defendant obtained a stay of execution of the summary judgment pending appeal. The stay was conditional upon payment into court the judgment sum and mense profit. But the defendant had failed to comply with the conditions.

Reason for not appearing at the appointed time

11. Given the nature of this appeal, the defendant had to first explain satisfactorily why he did not turn up at the appointed time on 2 April 2001. The reason was that he had failed to pay particular attention to the appointed time when the master adjourned the matter. He thought that like the first hearing, it would be at 11:30 a.m.

12. In the absence of any evidence to the contrary, I accept his explanation. I do not see any reason why he would deliberately turn up late or any real benefit that he might gain from such behaviour.

Whether Order 32 rule 5 or Order 14 rule 11 applies?

13. Mr Ng, counsel for the defendant, took a preliminary point : Order 32 rule 5 and not Order 14 rule 11 should apply to this appeal. This point was, in counsel's submissions, material to the proper test to be adopted when the merits of the defence were to be considered.

14. Order 14 rule 11 provides that any judgment given against a party who does not appear may be set aside. In Morigood Development Ltd v. Sunny Trading Co. (a firm) [1999] 2 HKC 710, Keith J (as he then was) assumed without deciding that the nature of the test on the merits which should apply under this rule was the test to be applied on an application to set aside a judgment entered in default under Order 13 rule 9. The position in England appeared to be similar : see The Supreme Court Practice 1999, Vol.1, para.14/11/1 at p.198. Under Order 13 rule 9, the defendant must show a defence with a real prospect of success.

15. Mr Ng accepted that to be the test should Order 14 rule 11 apply. However, he submitted that when the defendant took out the first summons, which was in substance an application to rehear the Order 14 summons, the order of the master had not been perfected yet. Thus, Order 32 rule 5 should apply. What the defendant need only show was a bona fide defence. This is the test to be applied on a summons for summary judgment.

16. For present purposes, I am prepared to accept that the first summons was in substance an application for rehearing the Order 14 summons. Rehearing the summons was permissible under Order 32 rule 5(3) so long as the order had not been perfected. However, at the adjourned hearing on 21 June 2001, the order had already been perfected. It was perfected on 28 May 2001. By then, the court did not have the power to rehear the Order 14 summons. The first summons had become academic. The only way that the defendant could do to deal with the summary judgment in those circumstances was to take out an application to set it aside under Order 14 rule 11. Under this rule, the court may revisit the judgment despite the perfection of the order. That was exactly what the defendant did by taking out the third summons.

17. From the above analysis, it was clear that the master was correct in dismissing the first summons, which had already become academic at the time of the hearing before her. As I understand the effect of the notice of appeal and the thrust of Mr Ng's submissions, this is in substance an appeal against the master's dismissal of that part of the third summons relating to the setting aside application. Thus, in my view, Order 14 rule 11 applies. Given Mr Ng's stance, I will adopt the test as stated in paragraph 13 above when considering the merits of the defence.

18. Having concluded that Order 14 rule 11 applies, I do not need to deal with Mr Ng's submission on the proper test should Order 32 rule 5(3) apply. For present purposes, even assuming that the proper test to be applied is the one for an Order 14 summons (whether or not Order 32 rule 5(3) or Order 14 rule 11 applies), the result of this appeal would be just the same. The reasons will become apparent later.

19. I now turn to consider the merits of the defence.

Case for the defence

20. The first defence the defendant sought to raise is that he was not a contracting party to the Agreement. He elaborated his case further in his affirmations thus.

21. He was a director of Silicon. Silicon had provided accommodation to him over 10 years. The last accommodation so provided was at 14/F, Monticello, 48 Kennedy Road from 25 June 1997 to 24 June 1999. When the tenancy for this premises was about to end, the Company instructed Jones Lang LaSalle ("JLL") to look for premises. JLL subsequently recommended the Property. In June 1999, Ms Cindi Yeung of JLL and the defendant went to the office of the Government Property Administrator at Wan Chai to pay the deposit. The defendant waited at his car while Ms Yeung went to the office. Later she came back and told him that if the tenancy agreement was to be signed by a company, a lot of documents would be required. The defendant said he would first pay the deposit and signed the tenancy agreement later. Ms Yeung said the Property was very popular in the market. It was necessary to first sign the last page of the tenancy agreement. Alteration in respect of other matters might be made later. The defendant then signed on the document. But no formal tenancy agreement had been made yet.

22. On 16 July 1999, the Government Property Administrator through Ms Yeung delivered the key to the Property to the defendant. But there was no formal tenancy agreement yet. The defendant paid the commission to JLL. The tenancy matters were later handled by First Pacific Davies who sent to the defendant a form for standing instructions of auto payment through the bank. The defendant did not sign on it and returned it to them.

23. Three months after he had moved into the Property, the Company had not signed any formal tenancy agreement.

24. On 6 December 1999, First Pacific Davies sent a tenancy agreement dated 25 November 1999 to the defendant. He was asked to acknowledge receipt of the same. He was surprised because the tenancy agreement was supposed to be signed by the Company. Although he had signed on it but the Company's chop was intended to be affixed onto it later. He therefore refused to acknowledge receipt.

25. The defendant further deposed that in connection with the first action, the parties had agreed as a settlement that the Government would issue a new tenancy to Silicon. Pursuant to this agreement, the defendant had paid $124,540 to settle the arrears of rent. In this connection, Mr Ng relied on a demand note dated 28 April 2000 for that sum.

26. The plaintiff denied that there was ever any settlement reached as alleged. The sum of $124,540 was just a part-payment of the outstanding arrears claimed in the first action. The present action was commenced because the defendant continued to default in payment of rent after December 1999. The first action only covered the period up to November 1999. Presumably, no further steps need to be taken in the first action in light of the present proceedings.

27. In my view, the defendant's evidence simply does not substantiate his defence that he is not a party to the Agreement. In fact, this line defence is inconsistent with his defence filed in both actions. According to the defence filed in the first action, he was told that he should sign on the tenancy agreement in his own name first. It could be changed to Silicon's name later. That was how apparently he came to sign the Agreement. His complaint was that somehow no change in the name was effected later. Thus, even on his own plea in the first action, the defendant accepted that he had signed the Agreement in his own personal capacity. There is apparently no room for him to suggest now that he was not a contracting party to the Agreement. In the defence filed herein, after referring to the alleged settlement agreement reached in connection with the first action, the defendant pleaded that he had already ceased renting the Property in his own name. He went on to allege that the Agreement had been terminated and he was waiting for a new tenancy, presumably to be made with Silicon. Thus, by necessary implication, the defendant must have at least accepted that he was a party to the Agreement until the time the parties had allegedly reached the settlement agreement for the first action.

28. Mr Ng submitted that the Agreement was dated 25 November 1999 and the defendant was not in Hong Kong. It was therefore impossible for him to have signed the Agreement on that date. That may well be the case. But it did not necessarily follow that the Agreement was not binding on him. As analysed above, even on his own pleadings, the defendant must have accepted he was a party to the Agreement before the alleged settlement agreement was reached. The mere fact that the Agreement was apparently dated about 4 months after the defendant had actually went into possession did not make any real difference. On the evidence before me, I fail to see any reason how he would have entered into possession of the Property if he had not entered into a tenancy agreement with the Government. Further, the assertion that Silicon had provided the defendant as a director accommodation in the last ten years is neither here nor there. That might well be the arrangement he had with Silicon. But it did not necessarily follow that he was a party to the Agreement.

29. Mr Ng further submitted that the tenant to the Agreement was Silicon. That of course was not borne out by evidence. The defendant did not sign the Agreement as an agent of Silicon. In fact, his case was that he was signing the Agreement in his own personal capacity. He only said that the name would be changed later or a formal tenancy with Silicon would be issued in due course.

30. That brings me to the second defence on the alleged settlement agreement. I do not see any merit in this defence either for the following reasons. First, it did not sit well with the first defence. As noted, the defendant pleaded that after reaching the settlement agreement, he ceased to be a tenant in his own name. In other words, he was the tenant before the settlement was reached. Secondly, the settlement was said to be an oral agreement. But the defendant had failed to identify the particular officer of the plaintiff who had allegedly agreed to settle the matter with him. Nor had the defendant explained why the agreement was not reduced into writing. The landlord is the Hong Kong SAR Government. The tenancy matters were handled by the Government Property Administrator. Given the importance of the alleged settlement agreement, I fail to see any reason why the responsible officer would not have reduced it into writing. The best documentary evidence the defendant could point to is a letter dated 23 March 2000. But the letter simply did not have the effect as he alleged. There, the plaintiff was setting out conditions or terms upon the compliance of which the plaintiff might discontinue the first action. It was also stated that "our client is prepared to grant a tenancy to [Silicon] as suggested by you upon your payment of the arrears, interest and our costs". There is simply no evidence to suggest that the terms had all been complied with or subsequent to the letter, the Government had agreed to issue a new tenancy in the name of Silicon. The defendant also relied on the payment of $124,540 as proof of the settlement. However, he failed to produce any documentary evidence to show that the Government had agreed to accept a lesser payment to settle the action apart from the demand note of 28 April 2000. In my view, the mere fact that the Government had issued the demand note is insufficient. Thirdly, the defendant had failed to explain why the plaintiff would act in breach of the settlement agreement by not issuing the new tenancy to Silicon and commencing the present proceedings, when what the plaintiff did was entirely consistent with its case that there was no settlement agreement and the sum of $124,540 was only a part payment of the arrears.

31. Finally, Mr Ng submitted that according to his own calculation, the plaintiff might have obtained a larger sum that it was entitled to. As I understand him, Counsel was not suggesting that it must necessarily be the case. This is a fresh point not taken before the master. The plaintiff had already produced all the relevant demand notes in support of its claims. But the defendant had not adduced any evidence to show how the claim was excessive. Indeed, it was never his complaint until counsel sought to raise this point. In the circumstances, I do not accept Mr Ng's submission.

Conclusion

32. For the foregoing reasons, I am not satisfied that the defendant has any defence with a real prospect of success which will enable him to set aside the summary judgment. In fact, I am not satisfied that he had raised any bona fide defence at all, even if the ordinary test for an Order 14 application is to be adopted.

33. I would add that in any event that the terms of the Agreement had already expired in July 2001. Whatever his defence might be, there is simply no justification for the defendant not to deliver up vacant possession of the Property now. In this regard, I agree with the observation of Ms Liu who appeared for the plaintiff that the defendant is trying to delay the plaintiff from obtaining the fruit of the judgment.

34. This appeal is unmeritorious and must fail. I dismiss it accordingly with an order nisi that costs be to the plaintiff, to be taxed if not agreed. The order nisi is to be made absolute 14 days after the handing down of this judgment.