PARK KIT INVESTMENT LTD. v. CHEUNG WAN PING

CACV 43/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 43 OF 1999

(ON APPEAL FROM HCA 5349 OF 1998)

-------------------------------------------------

----------------------

J U D G M E N T

----------------------

Leong, J.A.:

1. The Plaintiff Park Kit Investment Ltd. was the landlord of the premises at Lots 2064 E & F in DD130 Tuen Mun. By a tenancy agreement in writing dated 1 November 1993, the plaintiff let the premises to the defendant Cheung Wan-ping and one Ling Mou-king (Ling) as tenants for three years expiring on 31 October 1996. The defendant and Ling were partners of a Park Hong Ling Home for the Aged and they used the premises to operate this home for the elderly. When the 3-year term expired, the defendant stayed on and paid rent at the same rate every month and used the premises for the same purpose. The rent was paid by the defendant to the plaintiff. On 25 July 1997, the plaintiff pursuant to s.122 of the Landlord and Tenant (Consolidation) Ordinance, Cap.7 (the Ordinance) served on the defendant a notice addressed to her to terminate the monthly tenancy on 31 January 1998. The notice was not addressed to Ling nor was it served on Ling. The defendant failed to deliver up vacant possession of the premises after 31 January 1998. On 3 April 1998, the plaintiff issued a writ claiming possession of the premises against the defendant. The defendant instructed her solicitors to file a defence but without her fault, no defence was filed by her solicitors. As no defence had been filed, the plaintiff on 20 May 1998 obtained default judgment against the defendant.

2. The defendant's application to set aside the default judgment was dismissed by Master Bennett. Her appeal against the master's decision was dismissed by Sakhrani, J. on 23 November 1998. She now appeals against the judgment of Sakhrani, J. and seeks an order that the default judgment be set aside.

3. It is well settled that to succeed in an application to set aside a regular default judgment, the defendant must show that she has a defence which has a real prospect of success.

4. Before Sakhrani J., the defendant accepted that the judgment was a regular judgment. The Judge accepted that there was evidence that defendant's failure to file a defence was due to her solicitors negligence and that this evidence should be taken into account when he came to his decision. However, the Judge considered that the primary question was whether the defendant had a defence with real prospect of success. The defence the defendant sought to adduce was that the tenancy was a domestic tenancy under Part IV of the Ordinance because the tenancy agreement stipulated that the premises should only be used for residential purpose and the premises were in fact used as a residential home for the elderly. Notice of termination therefore should be given under Part IV which applies to domestic tenancies rather than under s.122(1)(b) of Part V of the Ordinance. The Judge found that the monthly tenancy was created after the expiration of the 3-year term and the defendant who paid the rent monthly was the only tenant in this monthly tenancy. The Judge also found the premises were used as a boarding and lodging house and under s.115A(l)(e) of the Ordinance; such use is a use other than as a dwelling. The Judge's conclusion is reinforced by a certificate by the Commissioner of Rating and Valuation certifying that on 10 August 1998, the primary user of the premises was non-domestic. He found that the notice was a valid notice under s.122(1)(b) of the Ordinance and it effectively terminated the tenancy on 31 January 1998. The Judge therefore concluded that the defence was one without real prospect of success.

5. The defendant in the present appeal does not seek to challenge the conclusion of the Judge that the primary user of the premises was non-domestic and that a monthly tenancy with the defendant as the sole tenant was created on expiration of the 3-year term. What the defendant asserts in her first ground of appeal is that the court ought not to let her solicitors' negligence be visited upon her and no injustice is caused to the plaintiff if the default judgment is set aside. The short answer to this is that if the defence has no real prospect of success, it does not matter whether it was the fault of the defendant's solicitors that no defence had been filed and that the Judge had taken this evidence into account when he came to his decision.

6. In her second ground of appeal, the defendant says that the plaintiff's notice under s.122(1)(b) of the Ordinance does not have the effect of terminating the tenancy since it was served on only one of the two joint tenants. It should be noted that this second ground is a new ground which was not raised either in the defence or in the court below. It is submitted by Mr. Edward Chan, S.C. leading counsel for the plaintiff, that as this point was not argued in the court below, the defendant should be precluded from relying on this ground. Be that as it may, we allowed the defendant to develop this argument to see if there is any merit in it.

7. Mr. Au-Yeung for the defendant contends that the notice was addressed only to one of the two joint tenants and therefore it is defective. He relies on two paragraphs in Kirsten, Property Notices (1994 ed) at pp70-71:

"The reversion to a tenancy or the tenancy itself may be held by joint landlords or tenants, respectively, and in this case care should be taken to join in and to serve all co-owners and to ensure that they are correctly identified in any notice."

"The position is strict in relation to tenancies protected by the 1954 Act. A notice addressed to one out of two joint tenants is bad although it is an irregularity which can be waived."

8. Mr. Au-Yeung also relies on Norton v. Charles Deane Productions Ltd. [1970] EG 268 where it was held that a notice of termination under the Landlord and Tenant Act 1954 should be served on all tenants where there was more than one tenant, otherwise the notice was defective but such an irregularity might be waived.

9. The answer provided by Mr. Chan to these contentions is this:

(1) The original 3-year tenancy was not under Part V of the Ordinance. The monthly tenancy that was created after the 3-year tenancy expired is one under Part V and that is why s.122(1)(b) applies. That being the case and the only tenant in this monthly tenancy being the defendant, service of the notice of termination on the defendant only would suffice.

(2) S.122(5) of the Ordinance provides that a notice under the section may be served in any manner which would constitute effective service of a notice to quit and, relying on the ancient case of Doe d Lord Macartney v. Crick (1805) 5 Esp. 196, Mr. Chan submits that in common law a notice to quit to one of the joint tenants would be sufficient to terminate the tenancy.

(3) The UK position under the Landlord and Tenant Act 1954 is different from the position in Hong Kong under our Landlord and Tenant (Consolidation) Ordinance since there is no equivalent of our s.122(5) in the 1954 Act and the strict requirement of service on all tenants is not applicable here.

10. Another argument of Mr. Chan is that, even if the monthly tenancy remained a joint tenancy, the defendant was agent of the joint tenants in the tenancy. Although both the defendant and Ling are the tenants named in the tenancy agreement, the defendant has always had the conduct of the management of the tenancy, whether the 3-year tenancy or the subsequent monthly tenancy. It is therefore submitted that the notice was addressed and served on the defendant as agent of the tenants. This was sufficient notice for the purpose of s.122 since service on an agent of the tenants is service on all the tenants. He relies on Doe d Prior v. Ongley (1850) 10 C.B. 25 at 34.

11. In my opinion, while the strict provisions in the 1954 Act require that a notice of termination of tenancy must be addressed to all the tenants in the tenancy, the position in Hong Kong is different. In Hong Kong if in common law, service on one of the tenants is sufficient to constitute a valid notice to quit, then by virtue of s.122(5), it is also a valid notice under s.122(1)(b). In Doe d Macartney v. Crick (above), Lord Ellenborough held that this was the common law position but it should be noted that in that case Lord Ellenborough was dealing with an oral notice and he gave no reason for his conclusion. Even though this case is cited in Hill & Redman's Law of Landlord & Tenant, how much weight it carries is far from clear. In any case, all tenants in a tenancy have the same interest in the tenancy and a notice of quit should be addressed to all tenants so that each may be aware that his interest in the tenancy is being terminated. Unless one tenant may be regarded as an agent of the rest, in which case service on the agent is service on all the tenants, a notice on one of the tenants only would be bad.

12. In my view the evidence was sufficient for the Judge to conclude that the defendant was the only tenant in the monthly tenancy and that the defendant was the only tenant to be served under s.122(1)(b). This finding is not challenged by the defendant. The evidence in support is found in the defendant's affirmation that she paid rent monthly under the monthly tenancy and continued to do so until 1 February 1998 when the plaintiff's solicitors refused to accept further rent from her. It is also found in the letter of 30 July 1996 from the plaintiff's solicitors to the defendant offering to renew the tenancy on new terms and in the letter of 4 October 1996 from the plaintiff's solicitors informing her to pay rent to the solicitors. There is also the fact that the certificate of exemption of Residential Care Home for the Elderly was in the name of the defendant. The defendant in her capacity as tenant of the premises, had sought a surveyor's opinion to challenge the certificate of primary user of the Commissioner for Rating and Valuation. Thus although Ling was a named tenant, effectually the defendant was the sole tenant or alternatively the defendant was the active partner in operating the home at the premises the subject matter of the tenancy. That being so, the notice though served on the defendant only is not invalid to terminate the tenancy.

13. The Judge had decided the case primarily on the merits of the defendant's defence and his conclusion that the defence had no real prospect of success cannot be faulted. The new ground also does not show any merit in the defendant's defence either. That being the case the appeal must be dismissed.

Woo, J.:

14. I agree.

Godfrey, J.A.:

15. I also agree.

16. If the material before us had compelled the conclusion that, at the date of the notice to quit served on the defendant here, there were two tenants of the property, of whom the defendant was only one, I might have been minded to allow the defendant's new point (i.e., that the notice to quit served on her alone was a bad notice) to be taken before us and to have set aside the default judgment entered against the defendant. But, far from compelling such a conclusion, all the material before us suggests otherwise, and indeed that the Judge was right to proceed as he did on the footing that the only tenant of the property on the date of the notice to quit was, in fact, the defendant.

17. The appeal will accordingly be dismissed.