YAU NGAI v. ITALINA (HOLDINGS) LTD

LDPE 936/2024

[2025] HKLdT 57

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO LDPE 936 OF 2024

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BETWEEN

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D E C I S I O N

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1.  This is Italina (Holdings) Limited’s (“Respondent”) application dated 14 February 2025 to set aside the default judgment dated 7 August 2024 entered by HH J M Wong (“Default Judgment” and “Application”). The Applicant is represented by Mr Felix H Y Tang. The Respondent is represented by Mr Martin Ho and Mr Sik Chee Ching

Default Judgment

2.  The Default Judgment provides that:

(1) The Respondent do deliver vacant possession of the suit premises known as Unit No.8, 11^th Floor (“Unit 1108”), Fu Hang Industrial Building (“Building”), No.1 Hok Yuen Street East, Kowloon to the Applicant.

(2) The Respondent do pay the Applicant arrears/ mesne profits at the rate of HK$28,000.00 per month from 1 April 2019 until delivery up of vacant possession of the suit premises.

(3) The Respondent do pay the Applicant management fees at the rate of HK$1,051.00 per month from 1 February 2020 until delivery up of vacant possession of the suit premises.

(4) The Respondent do pay the Applicant the costs of this Application which are summarily assessed at HK$3,200.00.

Respondent’s bases to set aside Default Judgment

3.  The Respondent seeks to set aside the Default Judgment on the following bases:

(1) The Judgment was irregular as the Respondent did not have notice of the action at the time when the Judgment was entered.

(2) The Respondent has a meritorious defence.

(3) The Applicant was in breach of his duty of full and frank disclosure on the ex parte application for default judgement.

Evidence

4.  The parties have filed and served the following affirmations:

(1) Respondent: 1^st Affirmation of Yau Siu Chan dated 13.2.2025 and 2^nd Affirmation of Yau Siu Chan dated 17.6.2025

(2) Applicant: Affirmation of Yau Ngai dated 19.5.2025.

Facts and procedural history

The parties and Unit 1108

5.  The Respondent is a family company. It is owned and/or operated by the 7 siblings of the Yau family (“Siblings”). The only shareholders and directors of the Respondent are the Siblings. Their respective shareholding and directorship in the Respondent are as follows:

(1) Yau Ngai, the Applicant (34% shareholding and a director);

(2) Yau Tak (24% shareholding and a director);

(3) Yau Siu Chan, who filed 2 affirmations in support of the Application (12% shareholding and a director);

(4) Iao Sio Fai (11% shareholding and a director);

(5) Iao Sio Meng (8% shareholding and a director);

(6) Iao Sio Fan (6% shareholding and a director); and

(7) You Shao Min who passed away in 2018 (5% shareholding and a director).

6.  Since 1985 the Yau’s have had a number of family businesses, including the Respondent. A WeChat group was created for communication between the Siblings on matters, including concerning the Respondent (“WeChat Group”). At all material times the Applicant was a member of the WeChat Group.

7.  The Applicant is the elder brother who is and has been the owner of Unit 1108 since 1985. Prior to June 2018, Unit 1108 had been used by other family businesses as one of their offices free-of-charge.

2018 Tenancy Agreement

8.  In around June 2018, the Applicant and the Respondent entered into the written (undated) Tenancy Agreement whereby the Applicant as landlord agreed to let Unit 1108 to the Respondent as tenant for a term of 2 years for the period between 1 July 2018 and 30 June 2020 at a monthly rent of HK$28,000 (“Tenancy Agreement”).

9.  Terms of the Tenancy Agreement included:

(1) Clauses 3 and 7, the Respondent shall pay rent on the first day of each month by way of bank transfer.

(2) Clause 15, the number of keys handed over by the Applicant to the Respondent, which was left blank. The Respondent says this is because there was no handing over of any keys at the start of the Tenancy Agreement.

(3) Clause 1, during the term of the tenancy, the tenant shall not surrender the tenancy; otherwise, rental shall be paid for the remaining term of the tenancy as compensation. If the tenant requests to surrender the tenancy during the second year of the term of the tenancy, the landlord shall have the right to deduct one month deposit to compensate his losses, or both parties may terminate the tenancy with one month’s notice.

10.  There were two layers of gate/door at the entrance of Unit 1108. An inner glass door (“Glass Door”) and an outer roller gate (“Roller Gate”) with a built-in lock. Prior to June 2018:

(1) Respondent’s case: The Glass Door and Roller Gate had been there prior to June 2018 with the same password and built-in lock. All along some of the Siblings, such as the Applicant, Yau Tak and Yau Siu Chan knew the Glass Door passcode and had a copy of the key to the built-in lock and therefore have access to Unit 1108. As it had been used by family businesses of the Yau’s, there was no handing over of the key of the built-in lock at the commencement of the Tenancy Agreement.

(2) Applicant’s case: The lock of the Glass Door and Roller Gate had been changed by the Respondent, and the Applicant had not been provided with the keys of both.

11.  A photograph adduced of the Glass Door shows that it was protected by a “combination/ passcode lock” rather than a key lock. The Respondent says that this contradicts the Applicant’s case on the Glass Door being protected by a key lock.

The Lock

12.  In or about the beginning of January 2019, the Applicant installed an additional padlock to the Roller Gate of Unit 1108 (“Lock”).

Lock - Applicant’s case

13.  The Applicant’s case is that when he inspected the Respondent’s documents held in Unit 1108 on 18 December 2018, he discovered evidence that the shareholder Yau Tak, was making secret profits at the expense of the Respondent. When the Applicant went to Unit 1108 again in mid-January 2019, the Roller Gate was already locked. The Applicant was told that Yau Tak had dismissed all the staff of the Respondent. The Applicant had serious concerns about missing documents, including the need to preserve incriminating evidence of Yau Tak’s making of secret profits to the detriment of the Respondent. He therefore placed a Lock on the Roller Gate to double-lock Unit 1108.

14.  The Applicant’s position is that he explained the reasons for placing the Lock in a WeChat Group message to the Respondent’s shareholders on 17 February 2019 (“17 February 2019 Message”). The Applicant stated that:

(1) Yau Tak had locked Unit 1108 in late December 2018 and dismissed all of the Respondent’s staff.

(2) Since he had already taken over the books and records of the Respondent, it was his duty to preserve the documents in Unit 1108.

(3) Given his doubts about the integrity of Yau Tak, he placed the Lock to preserve the status quo. If the Lock should be removed, then the shareholders of the Respondent would have to agree.

(4) He stated that this message was specifically directed to the shareholders of the Respondent.

Lock – Respondent’s case

15.  The Respondent’s case is that by the 17 February 2019 Message, the Applicant admitted that the Lock was installed by him and sought to justify installing it by reason of the Respondent’s failure to pay rent for the period between January and February 2019 and the need to preserve the property in Unit 1108. The 17 February 2019 Message included:

“To all shareholders of Italina (holdings) Limited …

Regarding the issue with HKIG at Unit 1108 …Mr Yau Tak, at the end of December 2018, pulled down the roller shutter of and closed Unit 1108 without issuing any form of notice, preventing me from entering to check the accounts.

Later, I learned from Iao Sio Fai that Yau Tak had already dismissed all staff members in Unit 1108, and as of today, the rent for January and February 2019 remains unpaid! ...

I have added a new lock to the main door of Unit 1108… to preserve the scene inside the unit after Yau Tak closed Unit 1108 …”

16.  The Applicant repeated his reasons for placing the Lock in a letter to the shareholders of the Respondent on 25 March 2019.

17.  Throughout March and April 2019 the shareholders discussed what to do with the Lock. The Applicant wanted Yau Tak to be there when the Lock was removed but he could not attend because he fractured his foot. By reason of the Lock, the Respondent was unable to access Unit 1108 and ceased operating therein. The accounting staff Ms Lee and auditor were prohibited from entering Unit 1108 and performing their duties, leading to their resignation and termination of services respectively.

18.  The Respondent’s evidence is that it had been denied access to Unit 1108 because of the Lock and it repeatedly requested the Applicant to immediately remove the Lock, but that he refused to do so.

19.  The Respondent stopped paying rent to the Applicant from April 2019 onwards. The last rental payment made by the Respondent was on 4 March 2019, for January to March 2019.

May 2019 Notice –Respondent’s case

20.  On 12 May 2019, Iao Sio Fai on behalf of the Respondent sent a WeChat message to the Applicant to notify the Applicant that, (a) the Tenancy Agreement would be terminated by 30 June 2019 in light of the Applicant’s wrongful conduct; and (b) asked the Applicant to remove the Lock so the Respondent could remove its property from Unit 1108 and so that it would not disrupt the normal operation of the Respondent (“May 2019 Notice”). The Applicant did not remove the Lock at that time. In fact it was not removed until December 2020.

21.  The May 2019 Notice provides, inter alia, as follows:

“Notice of tenancy Surrender for Office Premises at Unit 1108…

To Mr Yau Ngan: Regarding the tenancy situation of the office on the 11^th floor of Fu Hang Industrial Building, since January of this year, after a lock was added to the metal roller shutter, we have been unable to enter for normal use and to handle related documents and items. The specific reasons are clear to everyone, and I will not elaborate here.

We hereby notify you that we will no longer rent this unit from 1 July 2019. Please be informed and assist in handling this matter. Additionally, …

This serves as formal notification. Tenant: Italina (Holdings) Limited Tenacy handler: Iao Sio Fai 12 May 2019”

22.  In light of the Respondent’s inability to access Unit 1108 and the termination of the Tenancy Agreement, the Respondent changed its business registration address from the address of Unit 1108 to the address “Room 909, 9^th Floor, Fu Hang Industrial Building, 1 Hok Yuen Street East, Hung Hom, Kowloon” (“Unit 909”) on 17 May 2019. Due to oversight of the Respondent, the address of the registered office was only updated in the Form NAR1 on 4 November 2020, as opposed to the Form NAR1 on 4 November 2019.

23.  As at 30 June 2019, the Lock had not been removed by the Applicant. Consequently, the Respondent was not able to remove property in Unit 1108 before the end of the Tenancy Agreement, according to the May 2019 Notice.

Events between July 2019 and December 2020

24.  According to the Respondent the Tenancy Agreement had been terminated by the May 2019 Notice and it has not paid the management fee of Unit 1108 from July 2019 onwards. However, the outstanding management fee between July 2019 and February 2020 had been settled by a company named Fabrica De Artes Ferragems Fai Meng (“Fai Ming Factory”), a Macau company that is unrelated to the Respondent and is solely managed by Iao Sio Fai. The parties dispute the effect of the Fai Ming Factory payment:

(1) The Applicant invites the Tribunal to treat the Fai Ming Factory payment of the outstanding management fee as an admission that the Respondent was the tenant of the Unit.

(2) The Respondent considers that Fai Ming Factory’s payment has no bearing on the tenancy dispute and was merely personal conduct of Iao Sio Fai to maintain the reputation of the Yau’s as well as the relationship between the Yau’s and the management of the Building.

25.  Having considered all of the evidence I am not prepared to just treat the payment as having come from the Applicant. Both parties agree that the payment was made by Fai Ming Factory, not the Respondent. It is entirely plausible that Iao Sio Fai paid to maintain the reputation of the Yau’s as well as the relationship between the Yau’s and the management of the Building, given the evidence of the Yau’s history and an ongoing relationship with the Building. They had been using Unit 1108 for years, even before the Tenancy Agreement, and another premises, Unit 909. I am unable to determine the issue on affidavit. Therefore, I decline the invitation to treat the payment as an admission by the Respondent that is was the tenant of Unit 1108 at that time.

June 2020

26.  30 June 2020 was supposed to be the last day of the Tenancy Agreement term, but for the May 2019 Notice. However, even as of 30 June 2020, the Lock was not yet removed by the Applicant.

June 2020 - Applicant’s case

27.  By letter dated 5 June 2020 (”5 June 2020 Letter”), to Iao Sio Fai, Iao Sio Meng and the Respondent, the Applicant informed the Respondent that:

(1) The Tenancy Agreement would expire on 30 June 2020.

(2) Since the tenant has refused to sign the Termination Agreement, continues to occupy, along with prolonged rental arrears from 1 April 2019, the tenancy will terminate on 30 June 2020.

(3) The Respondent is notified that the Applicant will repossess the premises, to remove all belongings and to settle outstanding rent and unpaid fees.

(4) In the event the Respondent does not vacate by 30 June 2020 the Respondent will be deemed to have forfeited ownership of all remaining items.

(5) The Applicant reserves the right to forcibly enter and auction the items and, if the auction proceeds are insufficient to cover rental arrears, legal action will be pursued.

28.  By WeChat Group message on 30 June 2020 (“30 June Message”) being the last day of the term the Applicant, inter alia:

(1) Denied the validity of the May 2019 Notice on the basis that any termination of the Tenancy Agreement must be made by way of a mutually signed termination agreement and that at 1 July 2019 3 months rent and management fees for April, May and June were overdue;

(2) Referred to his letter dated 10 June 2019 demanding rent for April to June 2019 and stating the letter served as notice to repossess the premises.

(3) Stated that the Tenancy Agreement subsisted until 30 June 2020, instead of 30 June 2019, so the Respondent should pay rent and management fee up to 30 June 2020.

(4) Stated that he would enter the premises with force and auction all items therein to settle outstanding rent. If the proceeds were insufficient to cover outstanding rent he reserved the right to legal recourse.

(5) Concluded that the main culprit is Yau Tak. All responsibility should be borne by him.

29.  The Applicant’s 30 June 2020 Message did not accept that the Tenancy Agreement had been terminated by the May 2019 Notice, stating that:

“The above facts show that even if Iao Sio Fai used a WeChat message as a notice of lease surrender, at the time of giving such notice, two months' rent and two months' management fees were already overdue. By 1/7/2019, the keys had not been returned, nor had the tenant's belongings been removed. The fact that the tenant's items were not cleared out and the keys were not returned signifies continued occupation of this Unit 1108 property.”

30.  The Respondent suggests that the basis for the Applicant insisting on signing a mutually agreeable termination agreement appears to be clause 1 of the Tenancy Agreement. The Applicant was not treating the May 2019 Notice as having terminated the Tenancy Agreement by the Respondent’s acceptance of the Applicant’s repudiation.

July 2020

31.  By WeChat message on 1 July 2020 (“1 July 2020 Message”) the Applicant notified the Respondent that as at past midnight on 30 June 2020 “I the landlord, now deem the tenancy as having automatically abandoned a; tenants belongings within Unit 1108” and have the right to repossess the property and proceed to auction all items belonging to the tenant. The proceeds from the auction will be used to pay outstanding rent. If the proceeds are insufficient he will initiate legal proceedings.

32.  By message on 14 July 2020 the Applicant sent a soft copy of a demand letter dated 14 July 2020 (“July 2020 Demand”) by the Applicant’s solicitors Cheung Wong & Associates (“CWA”) to the Respondent, demanding unpaid rent and management fee up to 30 June 2020 and vacant possession of the unit.

33.  By message on 17 July 2020 the Applicant informed the Respondent that he had picked up the hard copy of the July 2020 Demand he sent to the Unit 1108 and forwarded it to Iao Sio Fai.

34.  By message on 19 July 2020 Iao Sio Fai referred to the CWA letter of 17 July 2020, replying that the Tenancy Agreement had already been terminated by the May 2019 Notice.

December 2020

35.  The Applicant removed the Lock on 22 December 2020 and informed the shareholders of the same by WeChat Group message. At the same time, the Applicant stressed that he had no access to Unit 1108, which was still locked by Yau Tak.

2022 to June 2024

36.  In January 2022 the Respondent engaged a secretarial company BBCL and changed its registered office from Unit 909 to the address of BBCL at Room 1805-06, Hollywood Plaza, 610 Nathan Road, Kowloon (“Hollywood Address”).

2022 Authorisation Letter – Applicant’s case

37.  In October 2022, there was a water leakage incident, also referred to as the locksmith incident, in Unit 1108. The Applicant did not have the key to the lock installed by the Respondent, while the Respondent had lost its key. The shareholders therefore agreed to engage a family relative Mr Chan to break open that lock.

38.  The Applicant says to that end, the shareholders executed, on behalf of the Respondent, the 2022 Authorisation Letter, authorising Mr Chan to break open that lock. The WeChat messages leading up to the signing of the 2022 Authorisation Letter, specifically noted that the directors of the Respondent should sign first. He stated that he was seeking the approval of all the shareholders and directors of the Respondent to break open the lock, and the Respondent should bear the expenses.

39.  Once Mr Chan removed the old lock and installed a new one, there was a new set of keys (“2022 New Keys”). The Applicant directed the 2022 New Keys to be sent to the Respondent, taking the view that it was inappropriate for him to enter Unit 1108 with the Respondent’s property therein. The Respondent received the 2022 New Keys, which keys, were never returned to Applicant.

2022 Authorisation Letter – Respondent’s case

40.  October/ November 2022 was the water leakage incident:

(1) On 11 October 2022, the Applicant received a notice from the management office sent to Unit 1108 requesting the Applicant to open Unit 1108 and allow workmen to inspect the toilet of Unit 1108 to ascertain the source of water seepage. Thereafter only the Applicant was in contact with the management of the Building and the locksmith.

(2) For reasons unbeknown to the Respondent, the Applicant drafted an authorisation letter and insisted the Siblings sign to authorise a family member, to attend at Unit 1108 with him and the locksmith. Solely for the purpose of promptly assisting the management of the Building to resolve the issue, the Siblings signed the 2022 Authorisation Letter. It was not issued by the Respondent, and the space for the Respondent’s chop was also left empty.

(3) Immediately thereafter after, by a demand letter dated 23 November 2022 from CWA (“November 2022 Demand”), after a lapse of more than 2 years, the Applicant suddenly wrote to the Respondent to follow up the July 2020 Demand. As the Respondent had already replied to the July 2020 Demand, which was similar, the Respondent did not consider it necessary to reply to the CWA November 2022 Demand.

41.  I note the Applicant was taking a different position from that which he took on and around 30 June 2020, when he gave notice that he was recovering possession, if necessary breaking in to gain entry, taking property within Unit 1108 and auctioning it for the proceeds to cover arrears of rent. The Applicant in 2022 was taking a different stance, that he should not have the keys, contrasted with June/ July 2020 when he was treating the property within as abandoned and auctioning it. If the Applicant had recovered vacant possession and still held the documents or property within, but had not auctioned or otherwise disposed thereof, his capacity in holding the property may be in issue. The basis on which he then required the shareholders sign the 2022 Authorisation Letter is in issue. If he had repossessed Unit 1108 all issues in respect of the Respondent’s documents and property may be shareholder/ director or company matters, rather than landlord and tenant issues.

42.  Given the Yau family history with the Building and that a water seepage problem may be serious, or require immediate attention, I cannot disregard the Respondent’s evidence that solely for the purpose of promptly assisting the management of the Building to resolve the issue, the Siblings signed the 2022 Authorisation Letter. The Respondent’s chop was not applied. This incident was in October 2022, so more than 2 years after the Tenancy Agreement term had ended and the Applicant had said he was recovering possession, and longer since the May 2019 Notice termination date of 30 June 2019. The Respondent’s evidence is potentially credible. It is not possible to resolve the conflicting reasons for so acting on affidavit.

43.  Moving forward to 2024, due to the Respondent’s failure to provide documents, BBCL terminated its service agreement with the Respondent by email dated 23 February 2024. Significantly, the Respondent says that it was only aware of that termination in late October 2024/ early November 2024.

May 2024 Resolution - Applicant’s case

44.  The Applicant says that in May 2024 the shareholders attempted to come together to resolve the issue. This resulted in the execution of the May 2024 Resolution, which was signed by all of the Respondent’s directors and shareholders. He says that the May 2024 Resolution shows that it was clearly agreed by all shareholders and directors of the Respondent that: (1) as of that date, the Respondent continues to be in occupation of Unit 1108, (2) the Respondent would deliver vacant possession of Unit 1108, (3) the outstanding rent, management fees, and liability associated with the surrender of Unit 1108 should be borne by the Respondent, and (4) the Respondent would clear out its items from Unit 1108 within 7 days. This is also referred to as the 2024 clearance incident.

45.  The Applicant submits that the May 2024 Resolution reflected a considered consensus among all shareholders of the Respondent. In the original draft, it was proposed that the Respondent shall not be liable for outstanding rent and fees in respect of Unit 1108. That was deleted. Instead, additional words were handwritten on the May 2024 Resolution that the Respondent should clear out within 7 days.

46.  The Respondent did eventually vacate Unit 1108 in around 1 June 2024. The Applicant suggested that the keys could be returned together with a memorandum of termination that he had prepared. That was not signed by the Respondent and the keys were not returned.

47.  The Applicant then commenced these proceedings on 14 June 2024.

May 2024 Resolution - Respondent’s case

48.  Whereas the Respondent’s versions of events is as follows:

(1) In May 2024 the Applicant informed the Respondent that Unit 1108 had been leased and requested it vacate its property therein that had remained there due to his refusal to remove the Lock during the subsistence of the Tenancy Agreement.

(2) To remove the property in Unit 1108, put an end to the long running dispute and facilitate the leasing of Unit 1108, the Respondent acceded to the Applicant’s request to remove the property and to execute the May 2024 Resolution, which was an internal document of the Respondent.

(3) The May 2024 Resolution was intended to deal with the ultimate parties responsible for the Respondent’s liability if it was held liable for any unpaid rent/ management fee and possession of Unit 1108. In the first draft prepared by the Applicant, it was stated that the liability for rent and management fee under the Respondent’s name should be borne by Yau Tak and Iao Sio Fai, but not the Respondent. As there was no agreement between the directors the draft was edited in real time by the Applicant during a meeting to the effect that the liability for rent and management fee should be borne by the Respondent but not any director.

(4) After that the Respondent’s property in Unit 1108 was cleared. However, the Respondent did not accede to the request to execute a draft Termination Memorandum.

49.  Again, where the truth lies between the different versions of events and explanations for the May 2024 Resolution is not something that can be determined on affidavit. There were outstanding issues between the Applicant and the Respondent, but also the Siblings. Taking the Applicant’s versions, in May 2024 the shareholders attempted to come together to resolve the issue. Further, the 1^st version of the resolution prepared by the Applicant provided that Yau Tak and Iao Sio Fai take responsibility, not the Respondent. That would be consistent with his stance in June 2020, that Yau Tak bore responsibility. The Respondent’s version being, to put an end to the long running dispute and facilitate the leasing of Unit 1108, the Respondent acceded to the request to remove the property in Unit 1108 and accommodated the Applicant’s request in executing the May 2024 Resolution, being an internal document of the Respondent. Further, the Respondent refused to sign the Termination Memorandum, also prepared by the Applicant.

50.  At that point, being 2024, the parties may well have agreed to terms that were a compromise or a position they were then prepared to take to resolve issues or allow Unit 1108 to be leased, rather than an admission of the factual and legal position. The post-2022 facts and matters or events relied upon by the Applicant are controversial. He had prepared a resolution providing two of the Siblings were responsible, not the Respondent. That was amended. The Respondent’s version is potentially credible, at least on paper. To require the Tribunal to make determinations on this evidence really is requiring it conduct a mini trial on affirmation. If the Applicant had repossessed Unit 1108 in June 2020, as he stated he was, he then possessed the Respondent’s property to dispose of as he saw fit. What he did with it and in what capacity would be in issue. Some subsequent acts of the Applicant could be in his capacity as director, member or other than qua landlord. His concern over documents may be as a director or shareholder in possession of the Respondents property, as distinct from his capacity qua landlord. There are issues as to the Applicant’s capacity at any given time. Although not all can be elevated to assist the Respondent as to a defence.

LDPE 936/2024

Notice of the action – Respondent’s case

51.  Unbeknownst to the Respondent:

Notice of Application

(1) The Applicant on 14 June 2024 filed the NOA claiming that:

(i) The Tenancy Agreement lasted from 1 June 2018 to 30 June 2020;

(ii) The Respondent failed to pay rent from 1 April 2019 to 30 June 2020;

(iii) The Respondent failed to pay management fee of HK$1,051 per month from 1 February 2020 to 30 June 2020; and

(iv) Since 1 June 2020, the Respondent has failed and fails to give vacant possession of Unit 1108, and is liable for mesne profits of $28,000 per month and damages of $1,051 per month.

(2) The Affirmation of Service of Chow Oi Nui dated 20 June 2024 affirms the NOA was sent to the Respondent by ordinary post to the Hollywood Address on 17 June 2024 and placed in a conspicuous place on or at the entrance of Unit 1108.

Rule 15 Application

(3) On 3 July 2024, the Applicant made an application for judgment in default, pursuant to rule 15 of the Lands Tribunal Rules, Cap.17A (“LTR” and “the Rule 15 Application”). In the Rule 15 Application the Applicant framed the application as a simple non-payment of rent case and did not provide any other information in addition to that stated in the NOA. Regarding service of the NOA, he stated that “as far as I know, the said copy was neither returned nor undelivered. I have no evidence or information to indicate that service is ineffective”.

Default Judgment

(4) On 7 August 2024, the Applicant obtained the Default Judgment.

52.  Between the 14 June 2024 NOA and 7 August 2024 Default Judgment there was ongoing communication between the Applicant and other directors, including Yau Siu Chan and reference to the Tenancy Agreement. Despite this, the Applicant never informed Yau Siu Chan of these proceedings, nor did he inform the Respondent, or any other director, of the present action. Even between 7 August 2024 and 27 October 2024, despite being in contact, the Applicant did not inform the Respondent or any director of the present action.

53.  It was not until a 28 October 2024 WeChat message, that the Applicant asked Yau Siu Chan whether he was aware of the “order” from the Lands Tribunal regarding Unit 1108. Yau Siu Chan replied he did not know, and immediately relayed the message to the other directors.

2024 Hollywood Address

54.  The Respondent investigated and found in the junk email box a termination email sent by BBCL to the Respondent on 23 February 2024 whereby BBCL had terminated the secretarial service with the Respondent. BBCL by telephone in early November 2024 notified the Respondent that upon the termination of services on 23 February 2024 all incoming mail sent to the Hollywood Address to the Respondent had been rejected and returned by BBCL to the sender. By message in January 2025, the Applicant admitted that some legal documents served to the Hollywood Address had been returned. He sought to clarify that the legal document returned to him was limited to the Default Judgment.

55.  In light of BBCL’s termination of service the Respondent changed its registered office address from the Hollywood Address to the Unit 909 address. By WeChat Group message on 16 November 2024 (“16 November 2024 Message”), Yau Tak informed everyone, including the Applicant, that a Form NAR 1 and Form NR1 of the Respondent had been sent out and that the address had been changed from the Hollywood Address to the Unit 909 address. The Applicant therefore had knowledge of the change of address back to Unit 909 by 16 November 2024 at latest.

Statutory Demand

56.  Notwithstanding the Applicant’s knowledge he still served a Statutory Demand on the Respondent at the Hollywood Address on 18 November 2024. Therefore the Respondent was unable to respond to it. The Applicant alleges that he was only aware of the change of address in December 2024, which the Respondent considers to be a lie in order for him to justify his move to serve the Statutory Demand on the Hollywood Address on 18 November 2024 to obtain a tactical advantage.

57.  On 16 December 2024, the winding-up Petition under HCCW 700 of 2024 was presented based on the Default Judgment and was served on the Respondent at the Unit 909 address.

58.  The Respondent became aware of HCCW Action as follows:

(1) By WeChat Group message on 19 December 2024 the Applicant himself informed the Siblings that he had collected certain legal documents regarding the Respondent in the letter box of Unit 909 (“Unit 909 Legal Documents”) that he had delivered to Iao Sio Fai. He did not explain what they were.

(2) By WeChat Group message on 24 December 2024 Iao Sio Fai informed the other directors of the Respondent he had picked up the Unit 909 Legal Documents, that were found to be the Petition and the Applicant’s verifying affirmation.

59.  The Respondent intended to convene a Board meeting on 17 January 2025 to set up a special committee to handle the HCCW Action and the present action. The Applicant as a director strenuously opposed the proposed resolution. Eventually the Respondent passed the resolution, set up the committee and engaged solicitors, Messrs Oldham, Li & Nie (“OLN”) to act for the Respondent. OLN filed a Notice to Act, inspected the Court file and obtained the documents.

60.  On 14 February 2025, the Respondent took out the Setting Aside Application herein. The HCCW Action is adjourned pending this Application.

Legal Principles

61.  Rule 15(7) of the Lands Tribunal Rules provides that “The Tribunal may on such terms as it thinks fit set aside or vary any order made under this rule”.

62.  In considering a setting aside application under rule 15(7) of the LTR, the Tribunal would apply the legal principles on setting aside a default judgment in the context of Order 13 of the Rules of the High Court, Cap. 4A (“RHC”): Alwaysfull Industries Ltd v Leung Lai Bing Peggy (unreported, LDPD 286/2014, 4 July 2014) at §§16-18. Those principles are as follows:

(1) If the judgment is irregular, the Hong Kong position is that such judgment is to be set aside as of right.

(2) If the judgment is regular, the merit of the defence needs to be examined and the defaulting party has to show that his case and evidence adduced in support is potentially credible and carries some degree of conviction.

(3) The burden was on the defaulting party to prove that the judgment was irregular. Whether such burden of proof is discharged was a matter of evidence.

(4) When a defendant deposes that he has not received the writ through the post, the court has little option but to believe this save when there is sufficient material to cast doubt upon the defendant’s credibility to enable the court to disbelieve him.

(5) This does not mean that the court must accept a defendant’s assertion no matter how improbable. A defendant is still required to provide convincing evidence, but how much evidence is required must depend on the circumstances.

63.  The Respondent submits that service of originating process is only effective when the proceedings are brought to the notice of a defendant and not on mere delivery of the writ to the address as stated in the procedural rules: Cosec Nominees Ltd v Lau Hon Ming [2001] 2 HKLRD 581 at 588C-E; Phillip Securities (HK) Ltd v Lam Chi Bin Stanley [2002] 1 HKC 432 at §§2-14. If the defendant does not have notice of the proceedings at the time when the default judgment was entered, the judgment would be an irregular one. This was also the approach adopted in Alwaysfull Industries.

64.  The Applicant confirms that the principles on setting aside default Judgment are not in dispute. The Tribunal first has to determine whether the judgment was regularly entered, namely whether there was valid service. If the answer is in the affirmative, the Tribunal would proceed to consider whether the applicant had raised an arguable defence.

Regular or irregular Default Judgment

Regular Judgment – Applicant’s case good service

65.  The Applicant’s case is that the Form 22 NOA was served on the Respondent’s registered address, namely the Hollywood Address, on 17 June 2024. The Respondent only changed its registered address to Unit 909 of the Building on 3 November 2024. Therefore that service was effective and the Default Judgment is regular.

Irregular Judgment – Respondent’s case no notice of proceedings

66.  The Respondent’s case is that it had no notice of the proceedings. On 17 June 2024 the NOA was served on the Hollywood Address, which was the address of the registered office at that date. However, BBCL had terminated its service with the Respondent on 23 February 2024 so rejected and returned all incoming mail addressed to the Respondent thereafter. The Respondent had not received the NOA, and had no knowledge of the present action until it was informed by the Applicant on 28 October 2024, being 2 months after the Default Judgment was entered. As the proceedings were not brought to the notice of the Respondent at the time of the Default Judgment, it must be an irregular judgment, and ought to be set aside as of right.

67.  The Applicant had cast doubt on the authenticity of the BBCL termination email of 23 February 2024, so the Respondent produced further evidence of the termination email to show the Respondent’s lack of notice of the present action. The argument had moved on by the hearing, when the Applicant’s case was that actual notice was not required.

Service – Applicant’s case

68.  Mr Ho submits that the Respondent’s assertion that it did not have actual notice of these proceedings because the BBCL secretarial service agreement had been terminated does not assist the Respondent.

69.  Section 827 of the Companies Ordinance, Cap. 622 (“CO”) provides:

“A document may be served on a company by leaving it at, or sending it by post to, the company’s registered office.”

70.  The effect of section 827 of the CO is that a document so served is validly served on a company, even though its officers may have no notice of the document; or even if the office had been vacated.

71.  In Chan Pui Kwan v Ecrent (HK) Company Ltd [2018] HKCFI 1619, the employer sought to set aside a default judgment granted by the Labour Tribunal. It argued that service was irregular because the notice of hearing was served on its registered address and not last known place of business. The employee knew of that place of business address, but failed to effect service there or inform the bailiff of that address. Hon Au-Yeung J rejected that argument observing at §10 that:

“10. The notice of hearing was served by the bailiff on the RO. The Presiding Officer held that it was valid service in accordance with section 827 of the Companies Ordinance, Cap 622. There was no need to establish that the company had actual notice of the writ where service was effected under section 827. A writ might be served on a company by simply leaving it at its registered office even though the plaintiff was aware that the office had already been vacated.”

72.  The Court of Appeal came to the same view in Ho Kwok Wah v Group Jewellery Arts Ltd & Others [2000] 3 HKC 595, 598G-599D and United Venture Navigation Co. Ltd v Shum Yuen Nim [1991] 2 HKC 73 at §§85-86. The Court of Appeal explained why that represents the law in Ho Kwok Wah at §11 598I:

“It appears to me quite clear, when one reads together section 356, Order 10 and Order 65, that a writ may be served on a company by simply leaving the writ at the registered office of the company. A company after all, apart from its servants, agents and its directors, has no other animate entity but at least it has a registered office which may be determined by a simple company search in the Companies Registry and it is to that which, inevitably, people should look, in my view, when serving documents.”

73.  The authorities cited by the Respondent do not concern section 827 of the CO at all. The correct legal position is as stated in Chan Pui Kwan at §12. The rules generally governing the service of a writ, for example Order 10 RHC, give way to the more specific provision in section 827 of the CO.

74.  The Respondent also says that the Applicant should have sent the NOA to the shareholders, via WeChat and not served on the Hollywood Address. However, the Applicant was under no duty to send the NOA to the shareholders via WeChat or other means. His only duty was to effect service in the way prescribed by the rules. According to section 827 of the CO that means serving the proceedings on the Respondent’s registered address, namely the Hollywood Address. Service was hence valid and the Judgment was regularly obtained.

Service – Respondent’s case

75.  The Respondent submits that section 827 of the CO does not render notice unnecessary. The starting point is that there is a distinction between service of originating process under Order 10, rule 1 RHC, where personal service is required, and service of other documents under Order 66, rule 5 RHC, where personal service is not required.

76.  The issue here is the relationship between Order 65, rule 3 RHC and the second limb of section 827 of the CO, sending by post:

(1) Order 65, rule 3 RHC suggests that registered post to the registered office is permissible as if it is a case of Order 10, rule 1(2) RHC. As Order 10, rule 1(2) RHC, according to Phillip Securities line of authorities, is subject to the phrase “unless the contrary is shown” and hence actual knowledge of the proceedings on the part of the defendant, the same applies to Order 65, rule 3 RHC.

(2) The question is whether the second limb of section 827 of the CO would produce the effect that posting the document to the registered office, whether registered or ordinary post, and irrespective of the defendant’s knowledge of the proceedings, would constitute a further alternative to personal service of originating process to a defendant company.

77.  The Respondent submits that section 827 of the CO does not have that effect because:

(1) There are good reasons for imposing a higher requirement for service of originating process, namely actual notice of the proceedings. Alternatives to personal service do not guarantee actual notice, for example lost mail, and hence only give rise to the presumption of actual notice. Absent good reason why actual notice should be dispensed with simply because a defendant is a company, posting documents to the registered office must also be subject to the phrase “unless the contrary is shown” and hence actual knowledge of the proceedings on the part of the defendant.

(2) Under Order 10, rule 1(1) RHC only service by registered, as opposed to ordinary post can constitute an alternative to personal service. There is no reason why the legislature intended to make an exception simply because the defendant is a company.

(3) The contrary construction, that posting a document to the registered office, whether registered or ordinary post and irrespective of the defendant’s actual knowledge of the proceedings, would constitute a further alternative to personal service is essentially abrogating the well established distinction between service of originating process and service of other documents.

(4) Authorities which support the Respondent’s contention are:

(a) In C & S Dental Care Ltd v Premier Asia Medical Centre Ltd [2020] HKDC 1023, the plaintiff had argued that the actual return of the posted writ did not affect the entitlement to obtain judgment because service was effected pursuant to section 827 of the CO (§11). HH J Simon Leung held that section 827 of the CO does not have the effect of rendering the actual return of the posted writ irrelevant (§§26-27).

(b) In Guangdong International Trust and Investment Corporation Hong Kong (Holdings) Ltd v Yuet Wah (Hong Kong) Wah Fat Ltd [1997] HKLRD 489, the writ was served by both ordinary and registered post. Keith J held that service of originating process to the registered office by post should be governed by Order 65, rule 3(2) RHC rather than section 367 (predecessor of section 827 of the CO) (700E). Therefore, the requirement of actual notice remains applicable, and service of originating process by ordinary post is not sufficient, notwithstanding section 827 of the CO.

(5) The authorities cited by the Applicant either concern “leaving” the originating process at the registered office, rather than postal service, or some different regime, and do not assist him:

(i) Ho Kwok Wah, the writ was left at the registered office of the company, so does not concern the second limb of section 827 of the CO, namely postal service. The Court of Appeal held that leaving the writ at the registered office constitutes good service.

(ii) United Venture, the writ was left at the registered office of the company. The case does not concern the second limb of section 827 of the CO.

(iii) Chan Pui Kwan concerns a judgment of the Labour Tribunal. The judgment was not a default judgment. The document concerned was a “notice of hearing” rather than any originating process. The Labour Tribunal did not have any provision like Order 10, RHC and rule 7 of the LTR or phrases akin to “unless the contrary is proved”. There was no allegation that the notice of hearing was returned. The case does not assist on the issue here.

78.  The Respondent also submits that section 827 of the CO is not applicable to possession proceedings in the Lands Tribunal because:

(i) One of the main reasons for application of section 827 of the CO in relation to originating process in the High Court and District Court is the presence of Order 10, rule 7 RHC, which specifically permits the application of provisions other than Order 10, rule 1 RHC. Such provisions is absent in the Lands Tribunal Rules.

(ii) Companies Ordinance provisions and the Lands Tribunal deal with completely different subject matter. The Respondent has not been able to locate any Lands Tribunal decisions applying section 827 of the CO, let alone the second limb.

(iii) The Respondent accepts the proposition that general provisions give way to specific provisions. Here rules 7 and 7A of the LTR are more specific provisions dealing with possession proceedings in the Lands Tribunal, and should trump the general provisions in section 827 of the CO, which only deals with service of documents on companies generally: re YS Lee & Sons Jewellery Co Ltd [1984] HKC 470 at 472I.

79.  Rule 7 of the LTR, Method of service, provides that “(1) Service of a document required to be served on any person may be effected - ” by the various methods set out in the rule. Rule 7(2) provides that “Where service of a document is effected by ordinary post such service, unless the contrary is proved, shall be deemed to have been effected at the time at which the document would be delivered in the ordinary course of post”.

80.  Further, the Respondent submits that section 827 of the CO, on the facts of this case does not assist the Applicant. The Tribunal must consider the evidence and the actual provision relied upon to effect service as affirmed in the affirmation of service: Wong Yan Yan & Another v Hui Man Fan Cindy aka Hui Miu & Others [2024] HKDC 116.

81.  In the context of rule 10 of the LTR, it provides the purpose of filling an affirmation of service, using Form 30, is to show service in compliance with rule 7 of the LTR or substituted service is in compliance with rule 9 LTR.

82.  The Form 30 Affirmation of Service standard form provides 4 options for types or mode of service that correspond with rules 7 and 7A of the LTR:

(1) Ordinary post: Rule 7(1)(b)(iii) and hence triggering rule 7(2) providing “unless the contrary is proved” time deeming provision.

(2) Personal service: Rule 7(1)(b)(i) and (ii).

(3) Insertion into letter box: Rule 7(1)(b)(iv).

(4) Posting up in a conspicuous place: Rule 7A.

83.  Mr Tang submits that there is simply no room in Lands Tribunal proceedings for modes of service other than those stipulated in rule 7 and 7A of the LTR, particularly when Form 30 is adopted.

84.  By filling the blanks in paragraph 1 and 4 of Form 30, the Applicant’s case was that the NOA has been served under rules 7(1)(b)(iii) ordinary post and 7A of the LTR. It is unfair for the Applicant now to contend otherwise by reference to section 827 of the CO.

85.  Further, in paragraph 1 of the Applicant’s Rule 15 Application it states that:

“(1) A copy of the Application Form 22 was duly served on the Respondent as per the latest “Affidavit/Affirmation of Service” filed into the Tribunal. As far as I know, the said copy was neither returned nor undelivered. I have no evidence or information to indicate that service is ineffective”.

86.  By making reference to the issue whether the document was returned, and effectiveness of the service, plainly it was always the Applicant’s case that it was the actual notice of the proceedings that matters. He should not be entitled to change his case belatedly by relying on section 827 of the CO, and be able to argue actual knowledge does not matter.

Material non-disclosure as to service

87.  The Applicant does not dispute that he was under a duty to give full and frank disclosure in the Rule 15 Application and such duty covers the question of service. However, the Applicant contends that the Respondent fails to show the matters he has to draw to the Tribunal’s attention. The Respondent’s submissions do actually set out the matters the Applicant should have drawn to the Tribunal’s attention or disclosed: Respondent’s Submission dated 2 July 2025 §62.

88.  If those matters had been drawn to the attention of the Tribunal it would have realised that the case is peculiar, considered that the modes of service adopted were not effective and required the Applicant to perform extra steps in communicating the proceedings to the Respondent.

89.  In exceptional circumstances, even if a judgment is regular, the court has a discretion to set aside unconditionally before looking at the merits. The Applicant was the only director of the Respondent with knowledge of the proceedings before the Default Judgment was entered. He could easily have informed other directors but chose not to do so. The Respondent was precluded from responding to the NOA and the exceptional jurisdiction should be exercised. I decline to do so.

Discussion - service

90.  Rule 7(1) of the LTR provides that service of a document “may be effected” by the methods listed. The methods of service under Rule 7 of the LTR are permissive. The rule provides how service may be effected, but those methods are not comprehensive or exhaustive as to the mode of service. It is possible to carry out good service by other means, including where the recipient is a company, by sending the document to the company’s registered office. The Respondent sought to distinguish the RHC and RDC on the basis that they specifically permit application of provisions other than Order 10, rule 1, but that such provision is absent in the LTR. In fact the LTR provide that service “may” be, not “shall” only be, served as stated. I do not accept the Respondent’s submission that there is simply no room in Lands Tribunal proceedings for modes of service other than those stipulated in rule 7 and 7A of the LTR, particularly when Form 30 is adopted.

91.  I hold that service on a company in accordance with section 827 of the Companies Ordnance is valid service of documents for the purposes of possession proceedings in the Lands Tribunal. The mode of service in Lands Tribunal proceedings is subject to any express provision under any Ordinance providing for a specific mode of service, or to the contrary. The Applicant was entitled to serve the NOA in these proceedings on the Respondent in accordance with section 827 of the CO.

92.  Service pursuant to section 827 of the CO includes service by post. The section makes no distinction between registered and ordinary post. There is no express additional requirement that the document served must be otherwise brought to the notice of the company, nor any qualification such as “unless the contrary is proved”. I do not imply such qualification. In Chan Pui Kwan the facts involved leaving a Labour Tribunal notice of hearing at the registered office, rather than the second limb, postal service. However, Au Yeung J held that there was no need to establish that the company had actual notice of the writ where service was effected under section 827 of the CO. A writ may be served by leaving it at the registered office. The Respondent’s submission that there should be no distinction between an individual and a corporate body for service of originating process fails to have regard to the authorities on the significance of the registered office of a company: Ho Kwok Wah §72.

93.  Guangdong International Trust held that the Companies Ordnance did not state when an address became the new registered office. Whether it was as soon as the Companies Registry was notified of the change or when the Companies Registry registered the new address. There was a gap in the evidence. The plaintiff had failed to prove that the defendant’s office was still at the Tsim Sha Tsui address on date of service and not at the new Wanchai address. The case does not assist the Respondent to establish that postal service on a company at the registered office is subject to the additional requirement of actual notice.

94.  In so far as general provisions give way to specific provisions, first, the Companies Ordinance is primary legislation, while the Lands Tribunal Rules are secondary legislation. Further, rule 7(1) of the LTR expressly provides service “may” be so effected. It does not mandate the only method or prohibit other modes of service. It permits service pursuant to section 827 of the CO.

95.  The Form 30, Affirmation of Service affirms that “I did on Monday, the 17^th day of June, 2024” serve the Respondent with a copy of the NOA “by sending the same to the Respondent by ordinary post addressed to” the Hollywood Address. The Form 30 Affirmation affirms service was by ordinary post, without stating the statutory provision relied upon. Section 827 of the CO includes service by post. The affirmation of service duly evidences service. In any event a Form is not a legislative provision. The printed Form is drafted to cover the various options under the LTR so that the affirmant can simply identify which. Reference to the Form here does not take the matter any further.

96.  The Rule 15 Application includes the standard form statement “As far as I know, the said copy was neither returned nor undelivered. I have no evidence or information to indicate that service is ineffective”. The requirement to so state is a safeguard for a respondent. It meets the concern of mail being returned to sender.

97.  I have found that service on a company at its registered office by post pursuant to section 827 of the CO is permitted here. The section makes no distinction between originating process and other documents. The Hollywood Address remained the registered office of the Respondent at date of service of the NOA. Service by the Applicant on the Hollywood Address was effective service. Therefore, the Form 15 Application statement denying having any evidence or information to indicate that service was “ineffective” would not be a misrepresentation. There is no requirement of actual notice or receipt by any officer, director or shareholder of the Respondent.

98.  I find that the NOA was validly served. Therefore, I hold that the Default Judgment dated 14 February 2025 is a regular judgment.

Defence

Meritorious Defence – Respondent’s case

99.  An undertaking by the landlord for quiet enjoyment is to be implied from the mere relation of landlord and tenant. The covenant for quiet enjoyment entitles the tenant to enjoy his lease against the lawful entry, eviction or interruption of any man, but not against tortuous entries, evictions or interruptions: Gold Shine Investment Ltd v Secretary for Justice (unreported, HCMP 1272/2008, 28 December 2009) at §72.

100.  Similarly, the landlord’s covenant of non-derogation from grant is implied from the mere relation of landlord and tenant: Fortune Global Development Ltd v Shung Cheong Food Trading Ltd [2002] HKLRD 447 at §§58-59.

101.  In Mega Yield International Holdings Ltd v Fonfair Co Ltd (unreported, HCA 948/2009, 5 March 2013), DHCJ Woo held at §8 that:

“There can hardly be anything more important than the possession of the premises let in an agreement for a tenancy. The failure to provide possession goes right to the root of the agreement that must be construed as breach of a condition and repudiation of the agreement that entitles the tenant to accept the repudiation and treat the agreement as at an end.”

102.  The Respondent refers to the principles on acceptance of repudiation summarised in Chitty on Contracts (35^th Edition) at §28-066:

(1) An act of acceptance of a repudiation requires no particular form. It is usually done by communicating the decision to terminate to the party in default.

(2) Acceptance of a repudiation must be clear and unequivocal.

(3) Once a repudiation has been accepted, the acceptance cannot be withdrawn. If the parties thereafter resume performance of the contract, their rights are governed by a new contract, even if the terms remain the same.

103.  The issues in the present case are:

(1) Whether the Applicant’s conduct of installing the Lock to the Roller Gate constitutes a repudiation and /or repudiatory breach of the Tenancy Agreement.

(2) Whether the May 2019 Notice, or any other act, constitutes a valid acceptance of the Applicant’s repudiation.

(3) The relevance of the events subsequent to the acceptance of repudiation.

104.  The Respondent answers the three issues as follows.

105.  First, by installing the Lock to the Rollar Gate, when only the Applicant himself has a copy of the key of the Lock in January 2019, he took away the possession of Unit 1108 from the Respondent. This is classic conduct of repudiation of the Tenancy Agreement. The landlord’s covenants of quiet enjoyment and non-derogation of grant are implied in to the Tenancy Agreement: Gold Shine §72; Fortune Global §10. The conduct of installing the Lock on the Roller Gate prohibited the Respondent from accessing Unit 1108 and operating within, which conduct must be in repudiatory breach of those two implied covenants.

106.  Secondly, by the May 2019 Notice, the Respondent expressly communicated to the Applicant its decision to terminate the Tenancy Agreement and referred to his act of installation of the Lock. The wording of the May 2019 Notice is clear and unequivocal, and hence a valid act of acceptance of repudiation: Chitty at §28-066.

107.  Thirdly, once the repudiation has been accepted by the May 2019 Notice, such acceptance cannot be withdrawn, and all subsequent acts would not revive the Tenancy Agreement: Chitty §28-066. That would include (1) the Fai Ming Factory’s payment of management fees in 2020, (2) the 2022 water leakage incident, and (3) the 2024 May Resolution.

108.  In so far as the Applicant argues that the Respondent did not vacate, by failure to remove the property within Unit 1108, this was caused by the Applicant’s installation of the Lock and refusal to unlock it until at least December 2020, more than 1.5 years after the May 2019 Notice. The Respondent submits that it is absurd to suggest that the Respondent still had an obligation to return and remove the property after that time.

109.  In any event by the 5 June 2020 Letter, 30 June Message and 1 July Message, the Applicant himself made it very clear that the possession of Unit 1108 would be recovered by the Applicant and all the property inside Unit 1108 would be treated as having been given up by the Respondent. These messages show that, first, it would be no longer possible for the Respondent to vacate/ remove the property in Unit 1108 without being accused of trespass. Secondly, it is merely the Applicant’s afterthought to place reliance on any property remaining at Unit 1108.

110.  The Respondent submits that faced with such difficulty, the Applicant sought to argue that (1) the Applicant’s conduct of installing the Lock was done in his capacity as the director of the Respondent; and (2) the May 2019 Notice issued by Iao Sio Fai was made in the absence of any Board resolution of the Respondent. The Respondent replied as follows.

111.  First, it is now undisputed that it was the Applicant who installed the Lock. As long as that was done by the Applicant, it is sufficient to find repudiation and/ or repudiatory breach by the Applicant. Initially the Respondent submitted that it is unnecessary, and impossible, to ascertain the intention behind the Applicant.

112.  In any event, the issue of the Lock and non-payment of rent had always been dealt with at the same time, and in the same message, including the 17 February 2019 Message and email dated 11 March 2019. It is unfair now for the Applicant to say that part of a message was communicated between the landlord and tenant and another part was communicated at the internal company level to suit his own purpose.

113.  Second, the 2019 May Notice resolution argument can be disposed of thus. Iao Sio Fai was entrusted and authorised by the Respondent to handle matters concerning the Tenancy Agreement. He was the one who entered it on behalf of the Respondent. If his act of terminating the Tenancy Agreement must be backed by a resolution of the Respondent there would be no valid Tenancy Agreement at all. The 1 March 2019 Demand Letter by the Applicant shows when communicating with the Respondent in relation to Tenancy Agreement matters it was the Applicant’s practice to approach Iao Sio Fai and Yau Tak. Similarly, they were the directors of the Respondent who had been responding to the Applicant. He had never challenged Iao Sio Fai’s capacity, showing that this must be another afterthought.

No Arguable Defence - Applicant’s case

114.  Since the Judgment was regularly obtained, it is incumbent on the Respondent to show an arguable defence in order to set aside the Judgment. The Applicant submits that there is none.

Lock – capacity of the Applicant

115.  The Respondent’s only point on merits was that the Applicant allegedly repudiated the Tenancy Agreement by installing the Lock. That however disregards the fact that the Applicant did not install the Lock in his capacity as landlord of Unit 1108. He did so as a director of the Respondent, and the Lock was one of the steps taken in the context of the dispute between shareholders over the management of the Respondent.

116.  This is evident from the 17 February 2019 Message that the Applicant addressed to the shareholders of the Respondent and the 11 March 2019 letter. The Applicant made clear that he had installed the Lock to protect the documents and property of the Respondent and to facilitate his investigation of whether Yau Tak was making secret profits at the Respondent’s expense. There was no reference to his capacity as landlord.

117.  The Applicant only had a right to the documents of the Respondent by virtue of his position as its director. His right to inspect the documents in Unit 1108 was established after he had commenced proceedings in the Companies Court. His concern that documents of the Respondent located in Unit 1108 ought to be preserved has nothing to do with the fact that he was the owner of Unit 1108.

118.  The Applicant asserts the Respondent has no answer to this on the facts. Its only submission was that as long as the Applicant placed the Lock, it did not matter whether he did so as director or as landlord, which is against the weight of well-established authorities and must be rejected. I do not accept that was the Respondent’s only answer.

119.  Alma Property Management Ltd v Richard George Crompton [2023] EWCA Civ 849 is instructive. Alma was the freeholder of a property. Receivers were the lessees of the common parts. At the same time the receivers only held that lease as bare trustee for Alma. Alma therefore wore two hats – one as landlord and one as beneficiary of the lease. The receivers sought to assign the lease. Alma refused. The receivers sought a declaration that Alma had unreasonably withheld consent. The claim was allowed. In seeking to resist that claim, Alma had tried to rely on the fact that it was the beneficiary of the lease. Alma contended that the receivers were trustees and had to do as they were told by the beneficiary. Unlike the landlord, Alma said that the beneficiary can refuse that assignment on any grounds. Accordingly, on Alma’s case, the fact that it did not give reasonable consent as landlord was neither here nor there.

120.  The English Court of Appeal rejected that argument. It emphasised that the two capacities had to be kept distinct. At §§54 to 55, the Court of Appeal remarked:

“54. On the one hand [Alma] was the landlord. On the other it was the beneficiary under a trust of the lease. It is necessary to keep these two capacities distinct. Suppose for example a case where the landlord (A) has let to a lessee (B) who holds on trust for a beneficiary (C). …

55. Now in the present case Alma occupies the position of both A and C. It could have asserted its rights as beneficiary (no doubt contingently on the Court finding that the Receivers took the Common Parts Lease in exercise of their powers) and sought to prevent the Receivers assigning on the basis that it would be a breach of trust. But it did not do so. The only argument was whether Alma as landlord was reasonably entitled to require that the Receivers enter into authorised guarantee agreements. Since that was the issue, the Court was simply not concerned with the rights and wrongs of the matter as between trustee and beneficiary; it was only concerned with the rights and wrongs of the matter as between landlord and tenant.”

121.  Mr Ho refers to the English Court of Appeal decisiosn in Morshead Mansions Ltd v Di Marco [2009] 1 BCLC 559 as another illustration. MML was the landlord of a flat. Di Marco was the tenant. At the same time, Di Marco was a shareholder of MML. MML passed a shareholders resolution at a general meeting requiring members, including Di Marco, to contribute to a “sinking fund” to pay for the management of the building and other expenses. Di Marco argued that the resolution was invalid, as it was a way to circumvent section18 of the Landlord and Tenant Act 1985, which limited the amount that landlords can collect from tenants by way of service charges.

122.  That argument was rejected. The Court of Appeal emphasised that MML was demanding contribution from Di Marco qua shareholder, and not qua tenant. The legislative provision concerning service charges was not engaged. At §30, the Court of Appeal held:

“30. In my judgment, Mr Di Marco’s contentions, which were forcefully made, pay in sufficient regard to the crucial legal distinction between the liability of a tenant to the landlord under a lease containing service charge provisions, and the liability of the member of a company, in which all the tenants are shareholders, to the company under separate contracts made in and pursuant to the Articles to establish and recover contributions to a Recovery Fund. The two kinds of legal relationship can co-exist between the same parties, but they are different relationships incurred in different capacities and they give rise to different enforceable legal obligations. A defence to one of the claims is not necessarily available as a defence to the other legally separate claim.”

123.  Mr Ho submits that these authorities recognise that where a party wears two hats, it is important to decide the capacity in which that action was taken. The question of capacity directly goes to the question of legality. I wholly agree. The question of the capacity in which the Applicant was acting at any given time is a significant issue for determination in these proceedings.

124.  The Applicant submits that all evidence points to the Applicant installing the Lock qua director in the context of an ongoing company dispute. It was not an act in his capacity as landlord and could not have constituted repudiation of the Tenancy Agreement. I cannot agree that “all of the evidence” points one way.

125.  The Applicant maintains that the fact that the Applicant placed the Lock qua director and did not thereby repudiate the Tenancy Agreement is a matter that was recognised by the Respondent by conduct. He relies on subsequent events, including those that took place years after expiration of the Tenancy Agreement term. Starting from after the Lock was installed, first the Respondent continued to pay rent until March 2019. Second, in Yau Tak’s WeChat message on behalf of the Respondent dated 12 March 2019, he made clear that the Lock had to be removed so that auditors can continue their work. There was no mention of any issues concerning the Tenancy Agreement. I cannot agree. The 12 March 2019 message starts off addressing arrears of rent, that they had now been paid and only then asks for the Lock to be removed and addresses other issues.

126.  Third, when the Respondent purported to terminate the Tenancy Agreement by the May 2019 Notice, it did not do so by accepting repudiation:

(1) A party accepts repudiation when he intimates his intention to abide by the contract no longer. He is exercising the right to treat the contract as at an end: Hirji Mulji v. Cheong Yue Steamship Co., Ld. [1926] AC 497, 509.

(2) The party accepting repudiation may also communicate his acceptance by an unequivocal overt act which is inconsistent with the subsistence of the contract: Chitty §28-066.

(3) The acceptance of repudiation would have meant that the Tenancy Agreement would have been terminated forthwith. However, the Respondent only said that it would no longer rent the premises starting from 1 July 2019. It was a mere prospective suggestion that is not consistent with an acceptance of repudiation (which would have resulted in the immediate termination of the contract). The May 2019 Notice recognises that the Tenancy Agreement would subsist at least until 1 July 2019. It would not constitute an acceptance of repudiation, as the May 2019 Notice is inconsistent with such acceptance.

(4) The May 2019 Notice did not even state that the Applicant was in breach of the Tenancy Agreement.

Applicant’s repudiation of Tenancy Agreement – Respondent’s case

127.  The Respondent’s position was not only that the Applicant’s intention does not matter. It is also that the Applicant inserted the Lock “as the landlord”, and not on behalf of the Respondent as tenant.

128.  Mr Tang submitted that the time line is important. The Applicant installed the Lock in January 2019. Prior to that, no director or shareholder had proposed, by calling a meeting, to install the Lock to Unit 1108. It follows that the Respondent could not have authorised the Applicant to install the Lock to Unit 1108. Given the potential conflict of interest, as a result of the Applicant's role both as the landlord and as a director of the tenant, in the absence of any authorisation from the Respondent, it is legally impossible for the Applicant to contend that his conduct of installing the Lock was done on behalf of the Respondent. The Applicant could have easily called a meeting prior to installing the Lock, but he did not. The assertion that he was not installing the Lock as landlord, first raised in his affirmation in May 2025, was merely an after-thought.

129.  The Applicant admitted that he installed the Lock only a month after doing so in January 2019, by the 17 February 2019 Message. Even in the 17 February 2019 Message, the Applicant complained about the Respondent’s non-payment of rent from January to February 2019 and also referred to the need to protect the documents in the same message.

130.  The Respondent never recognised that the installation of the Lock was done by the Applicant qua director. Indeed, in the email dated 11 March 2019 the Respondent dealt both with the issue of removal of the Lock and the rent payment together.

131.  The Respondent submits that authorities cited by the Applicant are distinguishable. In those cases notwithstanding that the person concerned was wearing two hats, there was no difficulty in ascertaining as to which capacity the conduct concerned was relevant.

132.  The Respondent distinguishes the authorities thus:

(1) In Morshead the fund Di Marco was required to contribute to was clearly in respect of his capacity as a member/ shareholder of MML. He could not defend his failure to contribute under his other different capacity. That his conduct was based on and in relation to his capacity as a shareholder of MML was well supported by all the contemporaneous documents. It was not possible for him to contend otherwise. That feature is absent in the present case.

(2) Similarly, in Alma Property both the claims and the counterclaims concern the landlord and tenant relationship. So the purported defence based on the trustee and beneficiary relationship between them was inapt.

133.  Once it is found that the Applicant was in repudiatory breach of the Tenancy Agreement the Respondent says it would be entitled to damages for the loss arising from the breach. It has a cross-claim that could also be relied upon as a defence of set-off.

Respondent’s acceptance of repudiation

134.  The issue then is whether the May 2019 Notice, or any other act of the Respondent, constitutes a valid acceptance of the Applicant’s repudiation. The test to determine what constitutes a valid acceptance of the Applicant’s repudiation is whether the Respondent’s conduct is clear and unequivocal. The Respondent submits it undoubtedly was. At the time of the May 2019 Notice, Unit 1108 had been locked by the Lock for 4 months and the Respondent had refused to pay rent for two months. The May 2019 Notice putting the Tenancy Agreement to an end coupled with the circumstances was more than clear and unequivocal. The termination date stated in the May 2019 Notice does not affect the analysis, and at most goes to the issue as to whether the acceptance took effect on 12 May 2019 or 30 June 2019.

Notice to Quit – Respondent’s alternative case

135.  Alternatively, if the tribunal does not consider that the May 2019 Notice constitutes a valid acceptance of the Applicant’s repudiation, Mr Tang submits it must also constitute a notice to quit, the effect of which is to put an end to the Tenancy Agreement. In my view the difficulty with that is clause 1 of the Tenancy Agreement. The Applicant appeared to rely on the clause 1 requirement that such early termination required mutual agreement of both landlord and tenant. Clause 1 is an express term providing for termination of the tenancy. It does not allow the tenant to unilaterally give notice to quit within the first year of the term. The construction of the Tenancy Agreement is in issues. If the May 2019 Notice was intended as a notice to quit, whether the Respondent complied with or was in breach of the Tenancy Agreement, and the consequences that follow are in issue. It may be that the Respondent would be liable for the rent for the full term in any event “as compensation”, in terms of clause 1 of the Tenancy Agreement. The notice to quit defence is more tenuous.

Discussion - defence

136.  I have been through all of the evidence making some observations above. The Respondent’s evidence and account is potentially credible. I am not able to reject the Respondent’s evidence. There are real conflicts that cannot be resolved on affidavit. Particularly significant is the determination of the capacity in which the Applicant was acting when he placed the Lock on Unit 1108. This must be determined objectively. He did not state what he was doing, and why, at the time. If there was anything untoward – of which I make no findings at all – it is understandable that he would not call a meeting first or in advance. So alerting the Siblings may risk defeating the purpose. As soon as the Lock was securely in place he failed to inform the Respondent of what he had done and why. He could, for example, have taken a photograph and sent a WeChat message at the time. He was not bound to do so. However, his failure to immediately make clear what he was doing, and why, leaves open how his act should be construed and the capacity in which he was acting. At that moment the Respondent was in arrears of rent. When informed, the Respondent’s rent was 2 months in arrears. Yau Tak and Iao Sio Fai’s response dated 11 March 2019 starts by stating that the rent for January, February and March was outstanding, but the three months’ was paid in full on 4 March 2019. This is a response in respect of a tenancy issue, so properly made to a landlord. Having notified the Applicant that the arrears had been paid, he is then asked to now open the Lock and other matters are addressed.

137.  Mr Ho submits that it is not reasonably arguable that the Tenancy Agreement was terminated by reason of the Applicant installing the Lock. I cannot agree. I accept Mr Ho’s submissions that where a party wears two hats, it is important to decide the capacity in which that action was taken. The question of capacity directly goes to the question of legality. The Applicant says he acted in 2 different capacities. His conduct should be construed objectively not subjectively. The facts here are readily distinguishable from Morshead and Alma Property, where there was no difficulty in determining in which capacity acts were done. The Respondent submits that the capacity in which the Applicant was acting was, at the very least, an issue to be determined after trial. Which acts were done in what capacity should not be determined on affidavit. In my view the issue of the capacity of the Applicant in fixing the Lock and his different acts should be determined at trial.

138.  The May 2019 Notice does state that “The specific reasons are clear to everyone, and I will not elaborate here”. Therefore, the May 2019 Notice must be read in context. The proper construction of the May 2019 Notice requires a determination of the factual context. It is not disputed, inter alia, that the Lock was still in place, that the Respondent could not enter and work and also, that the rent had been in arrears. A party accepts a repudiation when he intimates his intention to abide by the contract no longer. He is exercising the right to treat the contract as at an end: Hirji Mulji, 509. The party accepting repudiation must communicate his acceptance by an unequivocal overt act which is inconsistent with the subsistence of the contract: Chitty §28-066.

139.  In my view the May 2019 Notice intimates the Respondent’s intention no longer to abide by the Tenancy Agreement and to put it to an end. The May 2019 Notice is in clear and unequivocal terms. The Respondent’s acts were inconsistent with the continuation of the Tenancy Agreement. The Applicant submits that the acceptance of repudiation must terminate the Tenancy Agreement forthwith, but the Respondent said that it would no longer rent the premises starting from 1 July 2019 and that is not consistent with an acceptance of repudiation, which should result in the immediate termination of the agreement.

140.  It is certainly arguable that the May 2019 Notice was effective to accept the Applicant’s repudiation and terminate the Tenancy Agreement. There may be an issue as to the date the termination takes effect, whether the agreement remained open for both until then and, also, whether such date prevents the 2019 May Notice taking effect as acceptance of a repudiation at all.

141.  I have considered all of the evidence and submissions. The evidence adduced in support of a defence in respect of the Lock is potentially credible and carries some degree of conviction. I cannot reject such defence. I find that the Respondent has adduced credible evidence sufficient to discharge the burden of showing a defence on the merits. The Default Judgment should be set aside, subject to the Applicant’s alternative arguments.

New Tenancy – the Applicant’s alternative case

142.  The Applicant argues, in any event and without prejudice to his primary position, even if the Tenancy Agreement was terminated, it was clear that the Respondent remained in exclusive possession of Unit 1108. As a matter of law, it would have entered into a periodic tenancy with the Applicant by conduct, and therefore continue to be liable for rent.

143.  When a contract is terminated by the acceptance of repudiation, the contract cannot be revived. However, if the parties thereafter resume performance of the contact, their rights are governed by a new contract, even if the terms remain the same: David Friedman v Sieger Limited DCCJ 3670/2012 (9.1.2014) at §33 (DDJ Douglas Lam).

144.  In the context of tenancy arrangements, where a tenancy expires, and the tenant remains in possession, the Court can infer that the parties have entered into a new periodic tenancy over the premises. Thus in Javad v Mohammed Aqil [1991] 1 WLR 1007, Nicholls LJ stated at 1012:

“As with other consensually-based arrangements, parties frequently proceed with an arrangement whereby one person takes possession of another's land for payment without having agreed or directed their minds to one or more fundamental aspects of their transaction. In such cases the law, where appropriate, has to step in and fill the gaps in a way which is sensible and reasonable. The law will imply, from what was agreed and all the surrounding circumstances, the terms the parties are to be taken to have intended to apply. Thus if one party permits another to go into possession of his land on payment of a rent of so much per week or month, failing more the inference sensibly and reasonably to be drawn is that the parties intended that there should be a weekly or monthly tenancy. Likewise, if one party permits another to remain in possession after the expiration of his tenancy…”.

145.  Similarly, in Kam Wing Property Investments Limited v Koncord Limited HCA 1543/2003 (21.11.2003), DHCJ To cited the earlier case of Tayleur v Wildin (1868) LR 3 Ex 303, and explained at §12:

“Thus, if a tenant remains in possession after the notice to quit took effect without the consent of the landlord, he becomes a trespasser. If he remains in possession with the consent of the landlord, then he does so under a new tenancy, the old tenancy having been terminated upon expiry of the notice to quit.”

146.  Mr Ho submits that it is clear that the Applicant and the Respondent continued to treat the Respondent as renting Unit 1108, notwithstanding the May 2019 Notice. I cannot agree that it is “clear” that the Respondent “continued to treat the Respondent as renting” Unit 1108. The clearest indication that a tenant is renting premises is the payment of rent. The Respondent did not continue to pay rent. No rent was paid by the Respondent from April 2019. The Applicant did not follow up with demands for rent on the basis of a new tenancy agreement. The Applicant relies in particular on the following three matters to suggest a new tenancy.

147.  First, it is not in dispute that the Lock was removed in December 2020. However, no steps were taken by the Respondent to deliver vacant possession, and to remove its property and documents from Unit 1108. The Respondent replies that first, the Applicant has omitted to state the fact that no key had been passed by the Applicant to the Respondent at the commencement of the Tenancy Agreement. Secondly, the Applicant also omits to mention the fact that it had been the Applicant’s stance, as reflected in the 5 June 2020 Letter, the 30 June Message and 1 July 2020 Message, that the Tenancy Agreement had already come to an end and the property therein had already been treated as having been given up by the Respondent after 30 June 2020.

148.  Mr Ho concludes that the only sensible explanation is that all parties continued to treat the Respondent as renting the property. I cannot agree. The fixed term had expired on 30 June 2020. The Lock remained in place, such that the Respondent had no access to Unit 1108 on that date, nor at any time over the following 6 months. Further, the Applicant had made it abundantly clear at that time that he was treating any property as abandoned and he was disposing of it, whether by auction or otherwise.

149.  The evidence is not that the Respondent remained with the Applicant’s consent. In my view the evidence is overwhelming that if the Respondent remained, it was without the Applicant’s consent.

150.  Second, the Respondent is said to have continued to treat itself as being in possession of Unit 1108 in 2022 in how it handled a water leakage incident:

(1) When on 11 October 2022, the Applicant was informed by the management office of the Building that there was suspected water leakage in Unit 1108 he did not have access to Unit 1108 because the Respondent had placed a lock over the Roller Gate. The shareholders therefore agreed that the Respondent would engage Mr Chan to break open the doors.

(2) The Respondent therefore executed the 2022 Authorisation Letter in order to authorise Mr Chan to break open the lock. The Respondent would only have done so if it regarded itself as being in exclusive possession of Unit 1108 as tenant.

(3) The Respondent replies that Mr Chan had not been authorised by the Respondent. While some of the directors signed the 2022 Authorisation Letter, it was not issued by the Respondent and the space for the chop was also left empty

(4) According to the Applicant says the contention that the 2022 Authorisation Letter was not issued by the Respondent because there was no company chop does not make sense. None of the shareholders had any personal right or interest in Unit 1108. Only the Applicant and the Respondent did. The 2022 Authorisation Letter would only have any meaningful effect it was issued by the Respondent. It was executed by the Respondent in the capacity as tenant: “Tenant of Rm 1108 Fu Hang Industrial Building Italina (Holdings) Limited” The WeChat messages forming the background showed that the Applicant was seeking the consent of the shareholders.

(5) When Mr Chan broke the existing lock and installed a new one, the Applicant did not accept the new key. The Respondent’s allegation that the Applicant deliberately did that to create a false impression that the Respondent was occupying Unit 1108 is serious, not supported by any evidence and not pursued in the Respondent’s submissions.

(6) The Respondent replies that the Applicant’s behavior of insisting to send the 2022 New Keys to the Respondent was inconsistent with his earlier stance that he considered it necessary to preserve the documents in Unit 1108. Plainly the Applicant’s case is internally inconsistent.

151.  I have found that the Respondent’s evidence and explanations regarding the 2022 water leakage incident and the 2022 Authorisation Letter are potentially credible. In my view there is inconsistency in the Applicant’s evidence and case. For example, sending the 2022 New Keys to the Respondent after claiming he needed to lock Unit 1108 to protect documents within. On the basis of this evidence I am unable to come to a determination that there was a new tenancy that would allow the Respondent’s case to be disregarded.

152.  Third, the Applicant continues that the Respondent unequivocally confirmed its status as tenant by the May 2024 Resolution. That was a considered resolution agreeing that the Respondent would be responsible for Unit 1108 rent, and would clear out. The initial draft of the May 2024 Resolution suggested declaring that the Respondent had nothing to do with returning Unit 1108 to the landlord and outstanding rent. There were specific handwritten amendments to change that. It was finally resolved that the Respondent would be responsible for the outstanding rent. The May 2024 Resolution would not have been passed if the Respondent did not regard itself as a tenant of Unit 1108. The Applicant maintains that the May 2024 Resolution is clear and unequivocal evidence representing the consensus amongst all shareholders that the Respondent was still occupying Unit 1108, that it was obliged to deliver vacant possession and that it should be responsible for outstanding rent.

153.  The Applicant concludes that all the circumstances therefore powerfully point to the fact that both Applicant (as landlord) and the Respondent (as tenant) had treated the Respondent as in occupation, and remained a tenant, of Unit 1108 as at May 2024. In the circumstances, there simply can be no arguable defence that the Respondent was no longer a tenant of Unit 1108 since June 2019.

154.  The Respondent repeats that the only document signed was the May 2024 Resolution, which was merely an internal document of the Respondent to deal with the issue as to the ultimate parties responsible for the Respondent’s liability if the Respondent is found to be liable. It is completely different from any document between the Applicant as landlord and the Respondent as tenant, whereby the Respondent acknowledges liability. The Respondent expressly refused to sign the document that purported to deal with the liability as between the Applicant and the Respondent. Applying the authorities relied upon by the Applicant, such as Morshead, as expressly stated in the document, the Applicant only signed as a shareholder and director of the Respondent. Such document has no role to play in governing the relationship between the Applicant as landlord and the Respondent as tenant.

155.  The Respondent makes a further point that in the NOA the Applicant’s case is that the Tenancy Agreement lasted until 30 June 2020 and there was no tenancy agreement thereafter. Similarly in the Rule 15 Application, it was also the Applicant’s case that the Tenancy Agreement lasted until 30 June 2020, and there was no tenancy agreement thereafter.

156.  The Court of Appeal in Chu Hoi (International) Ltd v Chow Kwok Fong (No.2) [2024] 4 HKLRD 414 applied the principle that the default judgment must be granted on the same basis as that in the Notice of Application. Therefore, the Applicant cannot now defend the Default Judgment on the basis of arguments that have not been raised, whether in the NOA, Rule 15 Application, or at all.

Discussion - new tenancy

157.  I have found that the Respondent’s account and evidence is potentially credible. These issues should not be determined on affidavit. I do not accept that the inevitable conclusion on the evidence is that there was a new tenancy. There is ample evidence that the Respondent did not treat itself as a tenant or in occupation after June 2019 and June 2020, and that it did not treat itself as still remaining in occupation throughout, up to May 2024. The evidence of the Applicant is also inconsistent. The Applicant failed to demand rent for long periods of time, despite it being agreed that no rent was paid from April 2019. He had made it clear that he was treating the tenancy at an end, exercising his right to recover the premises and dispose of property within at the end of the fixed 2 year term, not consenting to a new tenancy. The Respondent never resumed performance, by payment of rent, or otherwise. There is no dispute on the law. If the parties after termination resume performance of the agreement, their rights are governed by a new agreement. In my view the evidence does not support a periodic tenancy. The Tribunal cannot infer that the parties entered into a new periodic tenancy over Unit 1108. The defence cannot be disregarded by reason of a new periodic tenancy.

158.  Further, the NOA brought a claim on the basis of a fixed term tenancy that expired by effluxion of time or notice and sought arrears of rent and thereafter mesne profits. The NOA did not claim that there was a periodic tenancy or any alternative basis. The Default Judgment was granted on the basis of the claim in the NOA.

Trespass and mesne profits – Applicant’s alternative case

159.  The Applicant’s fallback argument, in the event that the Tenancy Agreement was terminated, is that it was the Respondent’s duty to deliver vacant possession: Prime Win Enterprises Ltd v Nova Management Consultants Ltd HCSA 60/2003 (16.3.2004) at §16. There are two aspects to vacant possession.

160.  First, the tenant must remove his property from the premise. As Lord Greene MR observed in Cumberland Consolidated Holdings Ltd v Ireland [1946] KB 264 at §270 in the context of a vendor’s obligation to deliver vacant possession in a sale:

“Subject to the rule de minimis a vendor who leaves property of his own on the premises on completion cannot, in our opinion, be said to give vacant possession, since by doing so he is claiming a right to use the premises for his own purposes, namely, as a place of deposit for his own goods inconsistent with the right which the purchaser has on completion to undisturbed enjoyment.” (emphasis added)

161.  Similarly, Recorder Ambrose Ho SC in Strong Beauty Ltd v Gain Legend Industries Ltd [2008] 1 HKLRD 570 at §24 said that:

“I have borne in mind the observation of Lord Greene MR in Cumberland Consolidated Holdings Ltd v Ireland (at p.271) that the right to vacant possession was denied only when the impediment in question was substantial. But having regard to the presence of the objects and furniture (described as plenty on the fifth floor, as well as the situation seen in the photographs of the roof), I do not think it can be said that the plaintiff had delivered vacant possession of those parts of the Property. The presence of those items clearly interfered, in a substantial manner, with the defendant's physical enjoyment of its right to the use and occupation of those parts. It is irrelevant whether the objects belonged to the plaintiff or someone else. Nor is it an answer to say that the defendant could easily have them removed. In my view, it is wrong to cast upon a purchaser who is entitled to vacant possession the burden of deciding how to deal with the chattels left on the premises and incurring the expenses of their disposal, unless, of course, it can truly and properly be described as de minimis (which is not the present case).”

162.  Second, the tenant must also hand over the keys to the property. Thus in Prime Win Lam J (as Lam PJ then was) held at §17:

“Neither does it matter that the property was not physically occupied by the tenant, see Woodfall's Law of Landlord & Tenant, Vol. 1, Para. 19.011; Mutual Luck Investment v Yeung Chi Kuen (No. 1) [2003] 1 HKC 47 at p. 88 Para. 137. Nor does it matter that the tenant had actually vacated from the property and the landlord knew about it through inspection. So long as a tenant still retained control over the property (by keeping the keys, whether by himself or through his agent), he had not yet performed his duty to deliver vacant possession to the landlord.”

163.  Where the tenant remains in possession of the premise after a tenancy agreement is terminated without the landlord’s consent, he is liable for mesne profits until he relinquishes possession: Kam Wing Property §12. The Respondent failed to deliver vacant possession even up to date.

164.  First, it is not in dispute that the Respondent’s property remained in Unit 1108 until 1 June 2024. It was removed only after the May 2024 Resolution resolving to vacate Unit 1108. However, it is undisputed that the Lock was in place at the end of the Tenancy Agreement term and was not removed until December 2020. The Applicant appears to disregard that he had already made clear that he was taking possession of the premises at the end of the Tenancy Agreement. He also claimed that he was taking possession of the property within. Whether or not he disposed of it, by auction or otherwise, or held it in Unit 1108 is a separate issue.

165.  Second, the Respondent did not re-deliver any keys to Applicant:

(1) Following the 2022 water leakage incident the Applicant sent the 2022 New Keys to the Respondent’s office, taking the view that since the Respondent still had its property in Unit 1108, he should not enter. The Respondent’s allegation that the Applicant refused to accept the 2022 New Keys to concoct the impression that the Respondent was in possession of Unit 1108 is baseless. Moreover, the Respondent could always have sent the 2022 New Keys back to the Applicant. It never did so.

(2) After the Respondent cleared property out in June 2024, there was an attempt to return the 2022 New Keys to the Applicant. He suggested that the key could be returned to him together with a Termination Memorandum that he had prepared. The 2022 New Key was not returned to the Applicant and the Termination Memorandum was not signed.

166.  In Prime Win, after the tenancy was terminated, the tenant had handed over the keys to the management office instead of the landlord. Lam J (as Lam PJ then was) held that the tenant had failed to deliver vacant possession: Prime Win §20. The Court emphasised that it did not matter even if the tenant had actually vacated the premise and the landlord knew about it through inspection. So long as a tenant still retained control over the premise (by keeping the keys, whether by himself or through his agent), he had not yet performed his duty to deliver vacant possession to the landlord: Prime Win §17.

167.  Mr Ho submits that on the facts of this case, until and unless the keys were handed over to the Applicant, the Respondent did not deliver vacant possession.

Discussion – Vacant possession

168.  There is no dispute on the law. There are two aspects to vacant possession. First, the tenant must remove its property. Second, the tenant must hand over the keys to the premises. If the tenant retains control over the premises it has not performed its duty to deliver vacant possession to the landlord. Here there are contested issues of fact as to both requirements of delivering vacant possession.

169.  First, there are factual issues in respect of keys. The Tenancy Agreement left blank the number of keys handed over at commencement of the term. The Respondent’s case is that no key was provided by the Applicant as landlord. The issues include whether any key was handed over at the commencement of the Tenancy Agreement term? If not, what is the effect? Whether the Applicant had a key to the Roller Gate or knew the Glass Door keypad passcode? Even if he did, whether Yau Tak or the Respondent added a padlock to the Roller Gate or changed any lock or passcode number? Further, the issues surrounding and effect of the 2022 New Keys being sent to the Respondent, whether deemed to be the key to be returned under the Tenancy Agreement, or upon giving vacant possession?

170.  Secondly, the issues regarding the Respondent’s property remaining in the premises in respect of delivering vacant possession, which I shall not repeat. In my view it is clearly arguable that the Lock and the Applicant prevented the Respondent delivering vacant possession.

Determination - defence

171.  I find that the Respondent has shown that its case and evidence adduced in support is potentially credible and carries some degree of conviction. The Respondent has discharged the burden of showing a defence on the merits. The Default Judgment shall be set aside.

Full and Frank Disclosure

Breach of duty of full and frank disclosure – Respondent’s case

172.  The Respondent submits further, a material non-disclosure is a ground for setting aside a default judgment as of right: Deng Minghui v Chau Shuk Ling [2007] 1 HKLRD 905 at §§6-9; Bpost Hong Kong Ltd v Jade Incorporation Ltd [2017] 5 HKLRD 453§54. The Court of Appeal in Chu Hoi expressly held that an application for default judgment under rule 15 of the LTR is an ex parte application that imposes a duty on the applicant to make full and frank disclosure.

173.  The Respondent’s case is that the Applicant failed to draw the Tribunal’s attention to all the material facts potentially giving rise to the ineffective service of the NOA, which are set out above, the lack of notice of the proceedings and the Respondent‘s meritorious defence.

174.  As to the merits of the defence, the Respondent submits that instead of framing the application as a simple non-payment of rent case, the Applicant should have drawn the following facts to the attention of the Tribunal at the very least:

(1) The Applicant had installed the Lock on the built-in lock in January 2019, which prevented the Respondent from accessing Unit 1108 thereafter. That would be capable of constituting a repudiation or repudiatory beach of the Tenancy Agreement.

(2) The Applicant had refused to remove the Lock, despite repeated demands from the Respondent.

(3) The existence of the May 2019 Notice, which would be capable of constituting an act of acceptance of the Applicant’s repudiation.

(4) The Applicant had only removed the Lock in December 2020, which renders it impossible for the Respondent to vacate its property in Unit 1108 before December 2020.

(5) No key had been handed over by the Applicant to the Respondent at the commencement of the Tenancy Agreement. Clause 15 of the Tenancy Agreement, stating the number of keys provided, was left blank.

(6) By the 5 June 2020 Letter, 30 June 2020 Message and 1 July 2020 Message, the Applicant himself made it very clear that the possession of Unit 1108 would be recovered by him and all the property inside Unit 1108 would be treated as having been given up by the Respondent.

(7) After the 2022 water leakage incident, the Applicant insisted on sending to the Respondent the replacement key for the lock, the 2020 New Keys.

(8) The Respondent had removed its property from Unit 1108 during the 2024 clearance incident.

(9) The Applicant knows the password of the Glass Door and had a copy of the key to the built-in lock all along.

No breach of full and frank disclosure duty - Applicant’s case

175.  The Applicant does not dispute that in applying for default judgment, he was under a duty to give full and frank disclosure in respect of service. Properly analysed, there is no material non-disclosure.

176.  First, in the context of applications for default judgment, the duty to give full and frank disclosure generally speaking does not extend to a duty to disclose potential defences: Bluesun Capital Ltd v Tewoo Group Finance No 3 Limited [2021] HKCFI 2040 at §53. That is because default judgment is entered as long as there is due service of the Writ: Order 13, rule 7(1)(b) RHC. Merits are not material to the Court’s assessment as to whether default judgment ought to be granted.

177.  Second, while there may be a duty to give full and frank disclosure in respect of the question of service, there is no defect with service in the present case.

178.  Third, Chu Hoi was a case where the default judgment was granted on a very different basis as compared to the applicant’s pleaded case. Obviously, if the default judgment did not flow from the applicant’s pleaded case, this is a matter that ought to have been drawn to the Tribunal’s attention. This is not the case here.

179.  Mr Ho submits accordingly, the material non-disclosure complaint fails.

180.  The Respondent replies that the argument that the duty to give full and frank disclosure does not extend to the merits of the case, making reference to Order 13, rule 7(1)(b) RHC, fails to appreciate that this Default Judgment was granted pursuant to rule 15 of the LTR. Unlike Order 13, rule 7(1)(b) RHC, which prohibits the filing of evidence, rule 15 of the LTR specifically provides that evidence should also be assessed. In fact, the Applicant himself in the Rule 15 Application adduced evidence. It is illogical for him to argue now that the full and frank disclosure does not extend to the merits of the case. Order 19, RHC is more apt.

181.  The Respondent suggests that the difference between rule 15(3) of the LTR and Order 13, rule 7(1)(b) RHC may be explained by the informal nature of the proceedings in the Lands Tribunal. The Notice of Application in Lands Tribunal proceedings is different from formal pleadings. Therefore, in an application for default judgment, it is necessary for the Tribunal to go beyond the Notice of Application to assess whether the applicant is entitled to default judgment.

182.  The Respondent maintains that the matters that the Applicant should have disclosed to the Tribunal are listed above. By analogy with Chu Hoi, at the very least, the Applicant should have disclosed the installation of the Lock or the May 2019 Notice, to the Tribunal at the Rule 15 Application for default judgment. In Chu Hoi the applicant had in fact exhibited the notice to quit in the application for default judgment, but was still criticised for not drawing the Tribunal’s attention to the same (§ 22). This is based on the principle that detail buried in the exhibit cannot constitute proper disclosure. The present case is said to be a fortiori, the Applicant did not even adduce any exhibit concerning the installation of the Lock, or the May 2019 Notice.

Discussion – non disclosure

183.  Rule 15(2)(1)(a) and (b) of the LTR provide that an application for an order to be made by default of opposition pursuant to subrule (1) shall be made in writing to the registrar and, where the application relates to mesne profits (whether in whole or in part), accompanied by evidence proving the amount of those mesne profits claimed. Upon the application and upon assessing the evidence, if any, accompanying the application, the registrar may, subject to subrule (4A), cause an order to be entered in favour of the applicant in terms of the application with cost.

184.  Under subrule (4A) the registrar may, where he thinks fit, refer the application to the President or a presiding officer, who may make such order thereon as the justice of the application may require. Under rule 15(7) the Tribunal may on such terms as it thinks fit set aside or vary any order made under rule 15 of the LTR.

185.  The Lands Tribunal is a creature of statute. The reason the Tribunal assesses the evidence is because rule 15 of the LTR, promulgated under the Lands Tribunal Ordinance, Cap.17, provides for it to do so. The Tribunal will consider the rule 15 application and, where there is a claim for mesne profits, assess the evidence proving the amount of those mesne profits claimed and any other evidence, whether the rule 15 application is in terms of the Notice of Application and whether the applicant has substantiated its case on the evidence, such that it is entitled to judgment in terms of the relief sought in the Notice of Application.

186.  The LTR do not expressly provide for the rule 15 application to be accompanied by evidence of any defence or disclosure of any potential defence to the application. If the Notice of Application claim or the rule 15 application raises questions, the Tribunal may issue requisitions and require further evidence. The Notice of Application is accompanied by a Statement of Truth. The applicant must verify the facts stated in the Notice of Application. The rule 15 application is brought on the basis that the applicant is entitled to the relief claimed in the Notice of Application. Beyond that, it is a matter for a respondent to raise any potential defences.

187.  In Chu Hoi the failure to disclose went to the claim made by the applicant. I am not satisfied that the Applicant breached its duty of disclosure on the Rule 15 Application. I would not set aside the Default Judgment on that basis.

Disposition

188.  The Default Judgment is a regular judgement. The Respondent has discharged the burden of showing an arguable defence on potentially credible evidence with some degree of conviction. The Default Judgment shall be set aside.

Costs

189.  The Default Judgment was regular but the Applicant contested the application. Costs shall follow the event. I make a costs order nisi that the Applicant shall pay the Respondent the costs of the application on the District Court scale with certificate for counsel. Either party may apply to vary the nisi costs order within 14 days hereof, failing which the order shall become absolute.

Order

190.  I make the following order:

(1) The Respondent’s application by summons dated 14 February 2025 (the Application) be allowed. The Default Judgment dated 7 August 2024 be set aside.

(2) The Applicant do pay the Respondent the costs of the Application on the District Court scale with certificate for counsel.