MUI LAI SZE v. HAU CHI FAI

cacv 317/2004

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 317 of 2004

(on appeal from LDPE NO. 667 of 2004)

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J U D G M E N T

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Hon Tang JA (giving the judgment of the court):

1.  The appellant, Hau Chi Fai, became the tenant of Shop N, G/F, Glamour Garden, Nos. 1-5 Chik Fai Street, Nos. 22-26 Mei Tin Road, Shatin, the premises, under a written tenancy agreement for a term of two years commencing 1 March 2004 at the monthly rent of $7,600.  The premises were non-domestic premises.  Clause 3 of the tenancy agreement provided that the rent was payable on the first day of every month in advance and for re-entry in the event of such rent remaining unpaid for more than ten days. 

2.  The appellant fell into arrears in May 2004.  By a claim issued out of the Lands Tribunal, LDPE 667/2004, dated 15 June 2004, the respondent (in this appeal), Mui Lai Sze, claimed possession of the premises for non-payment of rent since 1 May 2004. 

3.  The claim contained a notice to the appellant that, should he wish to oppose the application, he should do so by filing a notice of opposition (Form 7) within 14 days of the receipt of the claim.

4.  The claim which was amended was served by post on 17 June 2004.

5.  No notice of opposition was given by the appellant.

6.  On 5 July 2004 the respondent applied for possession in default of notice of opposition.

7.  On 13 July 2004, pursuant to Order 15(3) of the Lands Tribunal Rules, the Deputy Registrar caused an order to be entered in favour of the respondent for possession as well as costs in the sum of $800.  In addition the appellant was also ordered to pay rent or mesne profits at the monthly rate of $7,600 from 1 June 2004 until vacant possession was delivered up.  The rent for the month of May having in the meantime been paid on 30 June 2004.

8.  On 15 July 2004 the applicant applied for a stay of the order for possession.  That was heard on 27 July 2004 by Mr Lam, the Member.  At the conclusion of the hearing Member Lam made certain orders.  The written order of Member Lam dated 27 July 2004 was filed on 8 October 2004.  The following orders were made in the written order:

(1)	The application by the appellant for a stay of the order of 13 July 2004 was refused;
(2)	The appellant’s application for a stay of the possession order made at the hearing was granted;
(3)	The appellant was ordered to pay $7,600 to the respondent on 30 July 2004, and the sums of $7,600 each on 6 August, 16 August and 1 September.  If the appellant failed to pay any of the aforesaid amounts on the stipulated time, the order for temporary stay would be revoked and the respondent entitled to commence procedures for possession;
(4)	No order as to costs.

9.  No payment was made on 1 September 2004.  According to the appellant that is because at the hearing on 27 July nothing was said about payment on 1 September.  He had since applied for a transcript of the hearing on 27 July.  According to the transcript of the hearing on 27 July this is what Member Lam said.

“第一點，就我就對於申請人--答辯人要求擱置，答辯人即係佢喇，申請人係你吓，擱置嗰個04年7月13日嗰個法庭嗰個判令就係我唔能夠批准嘅吓。

第二點，就即係答辯人就其實喺庭上面要求就係將嗰個收樓令就係暫緩執行嘅，咁呢一點就我就准許吓。

但係第三點，就係要佢有一個時間表去還番嗰啲錢嘅，畀番嗰啲錢嘅。個時間表係點呢？就係答辯人需要喺04年嘅7月30日就要繳付--畀番申請人7，600鈫嘞。另外就要喺8月6號，即係一個星期之後喇大約，同埋再喺8月16號分別每次都要畀7，600鈫。

咁如果你唔能夠按呢一個時間表，呢個規定嘅時間表繳交任何一期嘅款項，咁你就即係完嘞吓，因為任何一期你唔畀，嗰個業主就已經係可以繼續佢嘅收樓嘅程序嘞，呢個判令亦都係作廢嘅吓。”

The appellant is correct that he had not been specifically told by Member Lam that he had to make payment on 1 September or that the continuation of the stay would depend on such payment.

10.  Furthermore, the order of 27 July was filed on 8 October 2004 therefore it could not have been served on the appellant prior to that date.  That being the case even if the order as drawn up had correctly reflected what Member Lam intended and that he was entitled so to supplement the oral order which he made on 27 July that could not affect the appellant since he had no notice of it until after the date for compliance had long elapsed. 

11.  It appeared that on 17 September 2004 the respondent applied for an order for possession on the basis that the sum of $7,600 had not been paid on 1 September 2004. 

12.  On 24 September 2004 the appellant applied for a stay and in his affirmation in support he said that he had not heard clearly the order which was made on 27 July. 

13.  The application was heard by HH Judge Chan on 30 September 2004. 

14.  At the hearing on 30 September 2004 this is the order made by HH Judge K Y Chan: 

"	1.	The stay of execution as imposed by Member LAM on 27th July 2004 on the order for possession be removed immediately, if it has not been removed upon the Respondent’s failure to pay the rental for September 2004 on 1st September 2004;
	2.	The Applicant is at liberty to recover possession of the suit premises;
	3.	No order as to costs."

15.  On 1 November 2004 HH Judge K Y Chan granted a stay pending this appeal. 

16.  On 29 November 2004 the respondent’s application to lift the stay was dismissed.  HH Judge Chan also ordered that the costs of the application be in the appeal. 

17.  Section 21F of the High Court Ordinance, Cap. 4 applies to relief against forfeiture by action for non-payment of rent in the Lands Tribunal.  See section 8(9) of the Lands Tribunal Ordinance, Cap. 17. 

18.  The relevant provisions of section 21F are:

“	(3)	If-
		(a)	the action does not cease under subsection (2); and
		(b)	the Court at the trial is satisfied that the lessor is entitled to enforce the right of re-entry or forfeiture,
	the Court shall order possession of the land to be given to the lessor at the expiration of such period, but not being less than 7 days from the date of the order, as the Court thinks fit, unless within that period the lessee pays into court all the rent in arrear and such sum as the Court shall direct on account of the costs of the action.
	(3A)	The Secretary for Housing, Planning and Lands may, by notice published in the Gazette, amend the number of days specified in subsection (3) by substituting another number therefor.
	(4)	The Court may extend the period specified under subsection (3) at any time before possession of the land is recovered in pursuance of the order under that subsection.
	(5)	Subject to subsection (6), if-
		(a)	within the period specified in the order; or
		(b)	within that period as extended under subsection (4),
		the lessee pays into court-
			(i)	all the rent in arrear; and
			(ii)	the sum directed to be paid on account of the costs of the action,
		he shall hold the land according to the lease without any new lease.”

19.  Section 21F is applicable to a judgment in default of notice of opposition.  In Tindixs Services Ltd v Cheng Wing Chun [1998] 4 HKC 194, a decision of this court, a judgment in default of notice of intention to defend gave possession to the landlord with “no reference there to any stay of execution and in particular no reference to matters which should have been inserted by reason of section 21F(3) …” per Rogers VP at 196H.  I think the Headnotes provide a sufficient summary of the decision.

“(2) The matter for relief against forfeiture was governed by statute.  Under s 21F(3) of the High Court Ordinance (Cap 4), it was mandatory that the court should order possession of land to be given to the lessor, and that the possession should be stayed for four weeks to enable the defendant to pay arrears of rent.  The judgment should be restored but should be amended to contain a provision providing for the four-week period from the date of the original order (at 197 H-I, 198D).”

20.  The Court of Appeal in Tindixs then ordered that the order for possession should not take effect provided that the tenant paid all arrears in rent and costs before the expiration of four weeks from the date of the order of the Court of Appeal (as per the sealed order). 

21.  Tindixs Services Ltd is binding on the Lands Tribunal and on us.  It follows that the order which was made on 13 July 2004 was wrong.  It should have given the appellant not less than seven days from the date of the order to pay all the rent in arrear and costs.  Naturally the order must be served on the appellant so that the appellant could make payment within 7 days.  We believe the order should also inform the appellant of the provisions of section 21F(3).

22.  The order of 13 July not having provided as required by section 21F(3) should be amended to give to the appellant not less than seven days to pay all arrears in rent.

23.  It is common ground that the appellant is current on his payment of rent, the last such payment having been made on 1 April 2005.  That being the case it would be futile to amend the order of 13 July to give the appellant time to pay all arrears of rent.  There being no arrears of rent payable, the order we would make is a declaration that the appellant, having already paid all arrears in rent, should hold the premises according to the tenancy agreement “without any new lease” pursuant to section 21F(5). 

24.  However, we should mention that in 1990 in Hong Kong Land Property Company Ltd v Shung World Investment Ltd and others [1990] 2 HKC 545, Master Patrick Chan (as he then was) held that because section 21F(3) referred to possession being granted if the court was satisfied “at trial” that the landlord was entitled to re-enter, it did not apply to a judgment in default of defence.  He held, therefore that it was not necessary to include in the order for possession the condition imposed by section 21F(3).  The decision of Master Patrick Chan had not been brought to the attention of the Court of Appeal in Tindixs Services Ltd.  However, that would not affect the binding authority of Tindixs Services Ltd.

25.  Moreover, whether the decision in Tindixs was correctly decided would not affect the outcome of this appeal.  If section 21F does not apply then the equitable rules regarding relief against forfeiture for non-payment of rent would apply in full force.  That being the case an application for relief against forfeiture could be made by counterclaim in the landlord’s action or by summons in the action brought by the landlord or by the tenant bringing his own action for relief.  The appellant was unrepresented.  We believe Member Lam should have treated his application of 13 July as an application for relief against forfeiture.  There was no reason why relief against forfeiture should not have been granted.  A reference to Woodfall on Landlord & Tenant at 17.181 suffices:

“In the eyes of equity, the proviso for re-entry was merely a ‘security’ for the rent.  Equity is in the ‘constant course’ of relieving against forfeiture where the tenant pays the rent and all expenses.  Thus save in exceptional circumstances the function of the court is to grant relief when all that is due for rent and costs has been paid up.”

26.  Also, we have difficulty in understanding the purpose of the order of 27 July.  Why should an open ended stay be granted?  How long was the stay to last and for what purpose? 

27.  We believe Member Lam should have given relief against forfeiture on 27 July 2004 and set aside the order for possession on payment of all rent then in arrears and the costs of $800.

28.  However, having regard to Tindixs, section 21F(3) governed the positions of the parties.  We mention the ordinary equitable rules so that the parties should know that whether section 21F(3) applied or not, the appellant would nevertheless be entitled to remain in possession under the tenancy agreement.

29.  We also wish to mention that, for the avoidance of doubt, section 21F(3)(b) should be amended by the deletion of “at the trial”, if, having regard to the enactment of section 21F(1A) it was not intended that the restriction on relief against forfeiture should not apply to default judgments.

30.  So the appeal is allowed and it is declared that the appellant shall hold the premises according to the tenancy agreement referred to in paragraph 1 above.

31.  In all the circumstances, we make an order nisi that each party pays its own costs.  The order shall be made absolute unless there is an application for a different order by the parties or either of them within 14 days of the delivery of this judgment.