RAMADOUR INDUSTRIES LTD v. BULLEN CHRISTIAN ANTHONY

CACV 19/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 19 OF 2016

(ON APPEAL FROM LDPD 1912 OF 2015)

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JUDGMENT

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Hon Lam VP:

1.  I agree with the judgment of Hon Yuen JA.

Hon Yuen JA:

2.  This is an appeal by Mr Christian Anthony Bullen (“the Tenant”) from a decision of Mr Alex Ng, a Member of the Lands Tribunal, given on 15 October 2015 which was subsequently confirmed on review in a decision given on 21 December 2015 (“the Decision”). 

3.  The Decision arose from an application made by Ramadour Industries Ltd (“the Landlord”) for vacant possession of a house in Lamma Island (“the premises”) and payment of sums including arrears of rent, mesne profits, rates and/or government rent.

4.  The Tribunal ordered that the Tenant deliver vacant possession, and pay the Landlord arrears of rent and mesne profits at $8,000 a month, and rates and/or government rent at $216 a month, until vacant possession was delivered.  The Tribunal also ordered that the Tenant pay the costs of the proceedings.

Background

5.1.   Briefly, the relevant facts are as follows.

5.2.   The Landlord and Tenant first entered into a tenancy agreement of the premises in July 2011.  The term relevant to the present appeal was a two-year term which commenced on 1 September 2014.

LDPD1047/2015

6.  In April 2015 the Tenant was in arrears, as a result of which the Landlord made an application to the Tribunal for possession in LDPD1047/2015.  The Tribunal granted the Tenant relief against forfeiture by an order made on 25 June 2015.

LDPD1912/2015

7.1.   However as from 1 July 2015, the Tenant was in arrears again.    

7.2.   On 5 September 2015 the Landlord made another application to the Tribunal for possession in LDPD1912/2015.

7.3.   On 11 September 2015 the Tenant filed his notice of opposition.  He did not deny owing rent for July and August 2015, and indicated that he intended to apply for relief against forfeiture.  He indicated also that he would be able to pay the amount owed by three instalments.  The parties entered into negotiations for payment but the matter was not resolved.

7.4.   On 2 October 2015 the parties appeared before the Tribunal which ordered (among other things) that:

(1) the case be fixed for a further call-over on 15 October 2015,

(2) the Tenant to have leave to file written submissions on the grounds on which he was applying for relief for forfeiture again,

(3) the Tenant to make interim payment to the Landlord of arrears of rent/mesne profits for the period 1 July 2015 to 30 September 2015 in the total sum of $24,000 on or before 12 October 2015 and

(4) failing the payment of such interim payment, the Tenant’s grounds of opposition and for relief against forfeiture would not be considered.

7.5.   On 5 October 2015 the Tenant paid $24,000 which were the arrears/mesne profits for July to September 2015.  He also paid arrears of government rent from April 2015 which had been claimed in the Application.  It appears there was no payment of interest or costs or offers thereof.  

Order

8.  The Application was heard on 15 October 2015.  As mentioned earlier, the Tribunal ordered:

(1) the Tenant to deliver up vacant possession of the premises,

(2) a stay of execution of the possession order until 29 October 2015,

(3A) the Tenant to pay the Landlord arrears of rent/mesne profits at $8,000 a month from 1 October 2015 until vacant possession is delivered,

(3B) the Tenant to pay the Landlord rates and/or government rent at $216 a month from 1 April 2015 until vacant possession is delivered,

(4) the Tenant to pay the Landlord’s costs of the Application summarily assessed at $11,865.

9.1.   On 11 November 2015 the Tenant applied for a review.

9.2.   The review was heard on 7 December 2015, resulting in the Decision which was given on 21 December 2015.

Decision

10.  The Tenant advanced 9 grounds on review which the Tribunal discussed and dismissed.  I will not repeat the Tribunal’s reasons here, save to say briefly that the Tribunal found that

(1) even if some indulgence had been shown by the Landlord to the Tenant in the past for late payment of rent, no waiver or acquiescence or quasi-agreement had been proved by the Tenant, nor had he proved that the Landlord had waived forfeiture,

(2) the sum paid by the Tenant by way of interim payment did not amount to a discharge of all the sums he owed the Landlord,

(3) relief against forfeiture was not mandatory,

(4) the Tenant had not shown any good cause for relief against forfeiture.

11.1.   The Tenant wished to appeal.  Section 11(2) of the Lands Tribunal Ordinance Cap.17 provides that a party may only appeal on an error in point of law.

11.2.   The Tenant applied for leave to appeal from the Tribunal, which was refused on 11 January 2016.  Leave was given by a single judge of the Court of Appeal on 29 January 2016.

Appeal

12.  Essentially the Tenant’s submission on appeal was that the Tribunal had made an error in law in not granting relief against forfeiture.  He argued that the principle in equity was that forfeiture is merely security for the payment of rent.  Hence he should have been granted relief and the fact that he had already been granted relief previously (in LDPD1047/2015) should be irrelevant.  He derived support for the latter proposition from a judgment of Deputy Judge Au-Yeung (now Au-Yeung J) in Far East Land Holdings Ltd v Empire Asian Ltd [2011] 4 HKLRD 472. 

Discussion

13.  It should first be noted that by the time of the hearing before this court (February 2017)¹, the lease had already expired by effluxion of time.  There is therefore no question of the Tenant being able to set aside the order for vacant possession now on the basis of relief against forfeiture.  Nevertheless the issue on appeal may affect other matters and it raises an interesting point which this court should address. 

14.1.   It is well-established that relief against forfeiture was a creation of the courts of equity which regarded forfeiture as security for non-payment of rent and would therefore generally grant relief against forfeiture when arrears were paid.  

14.2.   However s.21F High Court Ordinance Cap.4 is a “codification, in a set form”, as a matter of substantive law², of the equitable relief against forfeiture.  Since the enactment of this legislation, relief against forfeiture has been “governed entirety by statute”³. 

14.3.   This section provides at ss.(3)(b) as follows:

“(3) If:

...

(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”.

14.4.   More significantly in the present case, the section provides at ss.(1A) as follows:

“Where during the term of a lease the application of this section has prevented the lessor from enforcing against a lessee a right mentioned in subsection (1)⁴, then during that term this section shall not be applicable again to prevent the lessor from exercising that right against the lessee unless the Court is satisfied that there is good cause why this section should apply in favour of the lessee”. (Emphasis added).

15.  In my view, the statute is clear: where during a term of tenancy, a tenant fails to pay rent, he would be entitled as of right to relief once; if he fails to pay rent again during that term, then he must satisfy the court that there is good cause for it to grant him relief again. 

16.1.   In arguing against that construction of the statute, Mr Bullen sought to rely on a passage in the judgment in Far East Land Holdings at para.18.  In that case, the tenant had been granted relief against forfeiture on condition that it paid rent on the 7^th day of each month for the remainder of the term.  The tenant’s officer signed the cheque for payment of rent on a Friday which was only paid on the Monday, due to the intervening weekend.  The judge held that the cheque was signed only on Friday due to an oversight. 

16.2.   In that case, the landlord submitted that the tenant had failed to show good cause for another grant of relief under s.21F(1A), relying on the tenant’s past defaults in paying rent prior to the earlier grant of relief.  The judge described these previous defaults as “foregone conclusions”.  It was in this context that the judge said (para. 18):

“The Court in exercising its discretion, whether under s.21F or the equitable jurisdiction, pays no regard to previous defaults: Gill v Lewis [1956] 2 QB 1, especially since those defaults were before Master Levy’s order [for relief against forfeiture]”.

16.3.   In Gill, the court held that there was no effective judgment for possession as judgment had only been obtained against one of two joint tenants⁵.  However it also held that even if judgment had been obtained against both tenants, a court of equity would not refuse relief simply on the ground that there had been previous actions for rent[6].

17.  In my view, it is not appropriate to derive assistance from Gill for the English legislation did not contain the equivalent of our s.21F which mandates the Hong Kong courts (and the Lands Tribunal) to draw a distinction between the first and subsequent exercise(s) by a lessor of the right of forfeiture for non-payment of rent.  On the first exercise, s.21F(3)(b) stipulates that the court shall grant relief against forfeiture.  On any subsequent exercise(s), s.21F(1A) stipulates that it is for the lessee to satisfy the court of good cause why it should exercise its discretion in his favour. 

18.1.   In Far East Land Holdings, the judge found that the officer of the tenant company who was responsible for paying rent was out of town but had authorised another person to attend to the payment, which was due on a Friday.  That person, in what the judge described as a “slip” or oversight, did not come into the office to sign the cheque until Friday afternoon.  Due to banking hours and the intervening weekend, the rent was only paid on the following Monday.  The judge found that in those circumstances the slip or oversight constituted good cause for the court to exercise its discretion to grant relief against forfeiture a second time.  The previous failure to pay rent was not material unless it served to discredit the tenant’s evidence of the oversight (which obviously, in that case, it did not).

18.2.   In my view, that is the full extent of the meaning of the passage in Far East Land Holdings which Mr Bullen has sought to rely upon.  It does not mean that when the court exercises its discretion under s.21F(1A), it cannot or should not take into account the fact that this was a second (or subsequent) default in payment of rent within the same term of tenancy, which has led the lessor to exercise his right of forfeiture.  Applications for forfeiture and relief should not be considered in a historical vacuum.  That would negate the legislature’s clear intention to draw a distinction (in the availability to a tenant of relief against forfeiture) between the first and the subsequent exercise(s) by a lessor of the right of forfeiture for non-payment of rent.  It is clear from s.21F(1A) that the mischief it was enacted to deal with was abuse of relief against forfeiture by subsequent (or even serial) defaulters of rent.

19.  Further it should also be noted that in the present case, unlike Far East Land Holdings, no sums were paid before LDPD1912/2015 was commenced.  Payment was made subsequently but that was after an order for interim payment.  I cannot see any error of law in the consideration of the Tribunal of the issue of good cause. 

Order

20.  The appeal should be dismissed with an order nisi that the appellant pay the respondent’s costs of the appeal.

Hon Kwan JA:

21.  I agree with the judgment of Hon Yuen JA.