SIT KI MAN AND OTHERS v. KEYLAND LTD

LDCS 13001 of 2006

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE APPLICATION NO.13001 OF 2006

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REASONS FOR RULING

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1.  This is a claim by the applicants for compensation as a tenant whose tenancy has been terminated by an order for sale under the Land (Compulsory Sale for Redevelopment) Ordinance Cap. 545. On 28 March 2012, leave had been granted to the applicants to take out this claim out of time with reasons reserved.  This is the reasons for the ruling.

Background

2.  The applicants are the tenant of the premises situated at Shop No. 1 on Ground Floor of Hang Tang House, No. 7-19 Tang Lung Street, Hong Kong (“the Suit Premises”) whereas the respondent is the landlord of the Suit Premises as well as the owner of all the undivided shares of No. 7-19 Tang Lung Street (“the Lot”).

3.  The respondent, being the majority owner, issued the proceedings for a compulsory sale order of the Lot on 1 December 2006 (LDCS 13000/2006 refers) (“the Main Application”).  The respondent obtained an order for sale by public auction and had successfully acquired the Lot on or about 12 June 2008.

4.  The applicants took out the application in this case on 4 March 2009 by way of Form 34 (“Form 34”) asking for compensation to be assessed for the loss and damages it will suffer at the termination of the tenancy upon a compulsory sale order being made (“the Connected Application”).  Notice of Opposition was filed by the respondent on 26 March 2009 and one of the grounds of opposition is that the applicants had no locus in taking out the Connected Application since the applicants had failed to comply with the time limit under Rule 78E(1) of the Lands Tribunal Rules (“Rule 78E”).

5.  It is agreed at the hearing on 28 March 2012 that whether leave should be granted to the applicants to take out the Connected Application out of time should be dealt with as a preliminary issue (“the Leave Application”).  In support of the Leave Application, Mr. Li Fung Kwong (“Mr. Li”), one of the applicants and Mr. Lau Ho Lam (“Mr. Lau”), a clerk of the Respondent’s solicitors, are called by the respective parties to testify.

6.  It is the applicants’ case that they had no notice of the Main Application until around April 2008 when the respondent approached them for vacant possession.  Parties then had negotiations about the compensation to be made and that failed by end of 2008.  The applicants then took out this application in early 2009.  And it is also the applicants’ case that the respondent had failed to establish prejudice if leave is granted for the applicants to take out the Connected Application out of time. 

7.  The respondent’s argument is that notice required under the law had been affixed and served on the 3 applicants and they should have notice of the Main Application.  And having notice of the proceedings, the applicants had failed to take action promptly.  Whatever injustice suffered by the applicants, it is a fault of their own making so no leave should be granted. 

Legal Principle

8.  Section 78B(4) of the Lands Tribunal Ordinance (“the Ordinance”) requires an applicant in a compulsory sale application to affix and publish a copy of the notice as specified in Part 2 Schedule 1 of the Ordinance (“the Notice”) not later than 7 days after filing of the notice of application with the Tribunal.

9.  And Rule 78E requires a tenant, who wishes to make representations concerning compensation upon an order for sale, to file with the registrar a notice of application substantially in accordance with Form 34 within 21 days of affixing of the Notice under Section 78B(4).

10.  Under Section 10(2)(d) of the Ordinance, this Tribunal do have jurisdiction, on good cause, to enlarge the time fixed by the Ordinance for the giving of any notice, whether or not that time has already expired.

11.  Parties before us had no argument about the principle laid down in the case of Chimbusco Pan Nation Petro-chemical Co. Ltd v Owners and/or demise charterers of the ship or vessel “Decurion” (CACV 198/2011) that :

“it is clear that the applicable principle in deciding whether time should be extended is to look at all relevant matters and consider the overall justice of the case. A rigid mechanistic approach is not appropriate: see Nantong Angang Garments Co. Ltd v. Hellmann International Forwarders Ltd, CACV 64/2005. There are two conflicting principles at play. First, a party being required to observe the procedural rules, the default of which may result in judgment being entered against it. Second, a party should not be deprived of an adjudication on the merits due to a procedural default unless there is prejudice to the other party which cannot be compensated by costs. These two principles are not absolute. A rigid application of the first principle may lead to dismissal of actions without consideration of whether the defendant has been prejudiced by the default. But, the Court has treated the existence of such prejudice to be crucial and often decisive. Likewise a rigid application of the second principle without exception may enable a wealthy litigant to flout the rules. The resolution to these two conflicting principles is to consider all the circumstances of the case and not confine the decision to the application of a universally applicable rule of thumb: see Costellow v. Somerset County Council [1993] 1 WLR 256, per Sir Thomas Bingham M.R. at 263” (at paragraph 11(1)).

12.  In considering whether good cause had been shown under Section 10(2)(d) of the Ordinance, the overall circumstances of the case should be considered and ascertained how the balance of justice lies between the parties. 

Whether the Applicants had notice of the Main Application

13.  This issue turns on the credibility of the witnesses. 

14.  Mr. Lau testified that he was responsible for the service of relevant document in the Main Application including :

a)   on 4 December 2006, affixed a true copy of the notice of the Main Application on the pillar to the right of the main entrance of the Suit Premises;

b)   on 4 December 2006, served a true copy of the notice of the Main Application together with a copy of the valuation report on the 3 applicants by pre-paid ordinary post to the Suit Premises;

c)   on 6 December 2006, affixed the Chinese and English version of the Notice on the pillar to the right of the main entrance of the Suit Premises;

d)   on 6 December 2006, caused a Notice to be advertised on a Chinese language newspaper and a English language newspaper published and circulating in Hong Kong; and

e)   on 16 July 2007, served a true copy of the amended notice of the Main Application on the 3 applicants by pre-paid ordinary post to the Suit Premises.

15.  Mr. Li testified that he and the other 2 applicants had never received any court document from the respondent or its solicitors concerning the Main Application nor had they ever seen any Notice being affixed outside the Suit Premises. Yet, Mr. Li agreed that any postage sent to the Suit Premises should be able to reach him.  And the very first time he became aware of the Main Application was in April 2008 when representatives of the respondent approached them requiring them to deliver vacant possession of the Suit Premises.

16.  Having heard from the witnesses, we found Mr. Lau to be a truthful and honest witness whilst Mr. Li did not impress us to be a credible witness.  Mr. Li is taking a total denial attitude towards questions put to him.  When being asked about letters sent to the applicants by the respondent and/or its solicitors in August or September 2008, Mr. Li adamantly replied that he had never received or seen them.  But this assertion by him is in contradiction to what being stated in his own statement.  There is no explanation to such inconsistencies. We do not accept his evidence.

17.  It is found that the respondent had served and affixed the Notice as required by the Ordinance and the applicants did have notice of the Main Application back in December 2006.    

Leave to Issue Form 34 out of Time

18.  Having found that the respondent had affixed the Notice on 6 December 2006 and the applicants did have notice of it but failed to take out the Connected Application within 21 days thereafter in compliance with Rule 78E, the next question is whether the applicants should be granted an extension of time to lodge their claim.

19.  Since the applicants’ case is that they had no knowledge of the Main Application, once it is ruled against them, no explanation can be offered by the applicants as to the delay.  So the applicants’ failure to comply with the time limit may be a fault of their own.  Yet, this is only one of the factors to be considered in whether to grant leave and should not be considered as the only deciding factor.

20.  We found that mere inordinate or inexcusable delay is not sufficient to decline leave. Mere delay, even without an explanation, is not sufficient to justify declining the applicants their right to claim.  In Wing Fai Construction Co Ltd (in liq) v Yip Kwong Robert (FACV3/2011), it is held that mere delay per se may not be considered to be an abuse of process and abuse is usually demonstrated by proving that there is inordinate and inexcusable delay which has caused real prejudice.  Even though Wing Fai (supra) is a case for dismissal for want of prosecution, we found that the same principles should also be applicable here since by denying the applicants leave to take out the Connected Application out of time, it is in effect denying their right to proceed with this case and have their claim struck out.  This is a draconian order with irreparable consequences.

21.  This Tribunal has to ensure fairness between the parties.  In order to succeed, we found that mere delay by the applicants is not sufficient and the respondent must establish that the delay had caused real prejudice to them.  It is accepted by the respondent that no prejudice had been caused by the delay of the applicants to take out the Connected Application.  So, if leave were to be given, no prejudice will be suffered by the respondent.  On the contrary, if leave is being denied, the applicants will be deprived of its right to compensation, which is their entitlement.  Justice required leave be granted to enable the applicants to assert their legal rights upon the termination of the tenancy. 

Conclusion

22.  Having considered the evidence and submissions before us, this Tribunal ruled that even though the applicants had failed to comply with the time limit set by Rule 78E of the Lands Tribunal Rules, leave should be granted for the applicants to take out the Connected Application out of time.