YEUNG LAM WILSON AND ANOTHER v. LAW PO CHONG PRISCILLA

CACV 268/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 268 OF 1999

(ON APPEAL FROM HCA 20838/1998)

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J U D G M E N T

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Hon Godfrey JA :

Introduction

1. This is an appeal from an order of Findlay, J made on 2 August 1999, the effect of which was finally to resolve, after a number of interlocutory skirmishes, a dispute between landlord and tenant. The tenant, who lost before the judge, is the appellant in this court, and she has appeared before us in person; the respondents are her landlord, represented before us by counsel (Mr Malcolm Merry) to whom we are indebted for his assistance.

2. The question we have to consider is a question as to the position of a tenant faced with the prospect of (1) a claim for rent from his (or her) landlord; and (2) a claim for mesne profits (in more modern terms, damages for trespass), and for possession, by a mortgagee of the landlord's interest, the mortgage being a mortgage under which the landlord is in default of payment, in particular when the grant of the tenancy to the tenant was a grant made (1) after the date of the mortgage; (2) without the consent of the mortgagee; and (3) in breach of the landlord's covenants in that behalf contained in the mortgage.

The facts

3. The premises with which we are concerned are residential premises; Flat B, 3/F Kingsford Garden, 106 Blue Pool Road, Happy Valley, Hong Kong. The landlord, the owners of the premises, charged them to the Bank of East Asia, Ltd , the mortgagee, by a legal charge dated 23 January 1998, under clause 9.14 of which the mortgagee's written consent to any letting was required. On 15 July 1998, the landlord let the premises to the tenant for a term of 2 years commencing on 1 August 1998 at the rent of $22,000 per month payable in advance. The landlord did not obtain the written or any consent from the mortgagee to the creation of this tenancy, and was already in default of payments of principal and interest due under the mortgage. The mortgagee in due course instituted proceedings against the landlord for payment and for possession of the premises; and on 22 September 1998, it notified the tenant of those proceedings. The tenant could have applied to the court to be joined as a defendant to those proceedings (as the mortgagee's notice to her explained) but she did not do so. Instead, she refused to pay any rent to the landlord after she had paid the rent due for September 1998, and asked the landlord to return her rental deposits and for compensation for other expenses. The landlord refused to do this and, on 5 December 1998, instituted his own proceedings (these proceedings) against the tenant. On 8 September 1999, the mortgagee obtained an order for possession of the premises in its own proceedings, and on 25 October 1999, the tenant gave up possession of the premises to the mortgagee, with several months of her tenancy still to run.

The issue

4. We have to consider whether, on these facts, the tenant has any defence to the landlord's claim for arrears of rent and mesne profits.

The tenant's case

5. The tenant says that the landlord had no title to support the grant of her tenancy and accuses the landlord of bad faith and of oppressive conduct. Further, she says, her "quiet enjoyment" of the premises has been disturbed, for she has been compelled to give up possession of the premises to the landlord's mortgagee. Far from her being liable to pay rent and mesne profits to her landlord, the landlord, she says, is liable to pay damages to her, for the interference with her quiet enjoyment of the premises by the actions of the mortgagee.

The landlord's case

6. The landlord accepts that the tenant may have a claim for damages against the landlord for the disturbance of her quiet enjoyment of the premises, but contends that nothing in the facts I have recited affords the tenant any defence to the landlord's claim for rent and mesne profits.

Conclusion

7. I have been unable to discover any authority directly in point; but in my judgment, the defendant does have at least an arguable defence to the landlord's claim. I shall explain why; but before doing so, I need to dispose of two irrelevant matters canvassed before us.

8. First, the tenant's attack on the good faith of the landlord. This has nothing to do with anything we have to decide. The rights and remedies of the parties against each other in the law of landlord and tenant do not depend on which of them is the saint and which the sinner.

9. Secondly, the "validity" of the tenancy. It is true that a tenant cannot escape from liability to pay rent by attempting to prove that the landlord had no right to create the tenancy. A tenant, as it is said, is "estopped" from denying his landlord's title. But from the moment that a claim for possession of the premises is made by a person, such as the mortgagee here, with a paramount title that "estoppel" becomes irrelevant. What is relevant is that, from that moment, the landlord is in breach of his obligation to the tenant to secure that the tenant will be able quietly to enjoy his or her possession of the premises in right of the tenancy the landlord has granted; and accordingly the landlord cannot thereafter claim to be entitled to rent. The tenant has become a trespasser; but the interest against which he or she is offending is not the interest of the landlord. It is the interest of the mortgagee.

10. In the present case, I am of the provisional view that the tenant was quite right not to pay rent to the landlord after she was notified on 22 September 1998 of the mortgagee's claim to possession of the property. From then on, no doubt, she became liable to pay mesne profits to the mortgagee for her own occupation of the property; but she became absolved from her obligation to pay rent to the landlord. It is almost too obvious to be worth mentioning that under no rational system of jurisprudence could the tenant be liable to pay twice over, both landlord and mortgagee, for her occupation of the property. And if she is liable to pay only once, then it must be to the mortgagee, who has the superior claim, not the landlord.

The result

11. For these reasons, I conclude that all the orders made against the tenant in the landlord's proceedings ought to be set aside, together with all other orders of the court consequential upon such orders. The tenant must have unconditional leave to defend the proceedings, and she will be at liberty to institute such proceedings whether by counterclaim or otherwise as she may be advised to institute against the landlord for the disturbance of her quiet enjoyment of the premises; but she will, no doubt, have to account, in due course, to the mortgagee for mesne profits for her occupation of the premises from 22 September 1998 (when she was notified of the mortgagee's claim) to 26 October 1998 (when she surrendered possession to the mortgagee). All the costs of the tenant of these proceedings (as a litigant in person) here and below must be taxed (if not agreed) and paid by the landlord to the tenant.

Hon Rogers JA:

12. I agree. There is nothing I can usefully add.