DCCJ 4172/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4172 OF 2009

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D E C I S I O N

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1.  Mutual, the Plaintiff, act as agent for the owners and landlord of the office building in question in Wanchai.  Mutual entered into a tenancy agreement with Carpe Diem, the Defendant, in May 2008.  For non-payment of rent, air-conditioning charges, management fees and rates, Mutual claims against Carpe Diem for possession of the units together with the outstanding rent and charges.

2.  On 5 November 2009, Mutual obtained default judgment.  Carpe Diem is to give vacant possession of the units to Mutual together with the monetary compensation as claimed.  Mutual also obtained a garnishee order nisi in respect of the judgment debt owed by Carpe Diem.

3.  Carpe Diem applied to set aside the judgment.  On 25 February 2010, the Master dismissed the application, lift the stay of the connected garnishee order nisi and ordered Carpe Diem to pay Mutual’s costs in the sum of HK$34,884 forthwith.

4.  By notice of appeal dated 10 March 2010, Carpe Diem appealed against the Master’s order.  Hence this hearing.

The legal principles

5.  An appeal against the Master’s decision pursuant to O.58 of the Rules of District Court is by nature a re-hearing of Carpe Diem’s application to set aside the default judgment.

6.  In the case of a regularly obtained judgment, the defendant has the burden of satisfying the court that its defence carries a real prospect of success: see L&M Specialist Construction Ltd v Wo Hing Construction Co Ltd [2000] 3 HKLRD 266; Hong Kong Civil Procedure 2010, Vol.1 at 13/9/12-13/9/14.

Discussion

7.  Carpe Diem’s director, Mr Durrant, appears on behalf of the company.  In his affirmation in support of the application to set aside the default judgment, Mr Durrant stated that the information presented by Mutual does not represent the full and accurate picture.  He stated nothing else.

8.  Carpe Diem has not filed any further affirmation, despite the leave of the court dated 20 November 2009 for Carpe Diem to do so for the specific purpose of explaining whether it has received the writ of summons and whether it has a meritorious defence.  Documents from Carpe Diem consist of undated documents under title of “Notation” and various contemporaneous emails.

9.  There is no suggestion that this is an irregularly obtained judgment.  Carpe Diem has to show that its defence has a real prospect of success.

10.  The tenancy agreement was contained in or evidenced by a letter dated 3 May 2008 from Mutual to Carpe Diem.  Among other terms, it provided that the term of the tenancy was 3 years commencing on 13 May 2008.  There is no denial of the non-payment of rent and other charges since July 2009 and rates since April 2009.  Mr Durrant confirmed this before this court.

11.  The emails between the parties show that Mr Durrant has complained to Mutual about its security guard having assaulted him on 24 June 2009.  He threatened to take legal action.

12.  In the affirmation filed on its behalf, Mutual admitted that there was a dispute between Mr Durrant and one of its Gurkha security guards on that day.  Mutual denies the alleged assault.  Nevertheless the security guard involved has since ceased to work for Mutual.

13.  In his email to Mutual dated 24 August 2009, Mr Durrant stated that the “only reason” Carpe Diem stopped paying rent was the failure of Mutual to address that incident on 24 June 2009.

14.  Even assuming that there was the alleged assault, I do not see that Mutual is necessarily responsible for the security guard’s such conduct, though it happened in the course of his duty.  More importantly, any liability arising out of such conduct will be owed to Mr Durrant personally being the victim of the alleged assault.  This has nothing to do with Carpe Diem or its contractual obligation as the tenant under the tenancy agreement to make payments to Mutual as the landlord.

15.  Therefore, if the alleged assault on 24 June 2009 is the “only reason” for Carpe Diem to stop its payments, such reason is simply no defence to Mutual’s claim.

16.  When it comes to the “Notation”, Carpe Diem seeks to categorise all his complaints as those concerning the management of the office building.  Apart from the alleged assault, he also complained about the security guards sleeping on duty, their negligence in locking the gates or doors and jamming the lift doors.  Mutual has allegedly failed to address these complaints.

17.  Mutual denies these allegations.  But as far as all the complaints are said to amount to breach of Mutual’s contractual obligations as the landlord under the tenancy agreement, this is equally no defence to Mutual’s claim.

18.  The court in Charmway Development Limited v Long China Engineering Limited, HCA 54/2001 (16 July 2001) at paras.18-19 made clear this common law position.

19.  Essentially, the covenant to pay rent is independent of the other covenants and obligations under the tenancy agreement.  A tenant’s covenant to pay rent is not dependant upon the compliance by the landlord of its obligations under the lease.

20.  There is therefore no room for the defence that Carpe Diem is not obliged to pay rent or that Mutual is not entitled to rent, by reason of the alleged breach of these obligations under the tenancy agreement on Mutual’s part.

21.  Further, there is no suggestion that Carpe Diem will be entitled to set-off, legal or equitable, on the rent to the extent of any possible claim by Carpe Diem: see Charmway Development Limited at paras.22-26.  Therefore, even assuming that Carpe Diem may put forward a claim by way of counterclaim for alleged breach of the tenancy agreement on the part of Mutual, there is no prospect of any defence of set-off.

22.  In court, Mr Durrant argued that there is a conflict of interest between Mutual and the owners of the office building.  I fail to see how.  Mutual was appointed as the manager and also to step into the shoes of the owners.  It was the contracting party to the tenancy agreement as the landlord.

23.  There is absolutely no merit in the defence of Carpe Diem.

Order

24.  The appeal is dismissed and the order of the Master dated 25 February 2010 stands.

[Parties submit on costs]

25.  Costs of and occasioned by this appeal be to Mutual, summarily assessed at HK$10,000 and payable by Carpe Diem within 14 days.