XCHRX TSE CHIU FAI AND OTHERS v. ASIA 1 COMMERCIAL SYSTEM CO. LTD. AND ANOTHER

HCA 13929 of 1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 13929 OF 1999

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REASONS FOR DECISION

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The Plaintiffs as landlords had a tenancy agreement with the First Defendant for the lease of Shop No. 9, Ground Floor, Shun Shing Building, Nos. 6-14 & 18-24 Yan Ching Street, Tuen Mun ("the Shop") for three years from 18 June 1997 to 17th June 2000 at the monthly rent of $80,000. The rent was reduced by mutual agreement to $70,000 in October 1998. Still, the First Defendant failed to pay rent from October 1998. The Plaintiffs then obtained warrant to distress for rent in January 1999. The warrant was executed in May 1999. By about that time, it became clear that the First Defendant wanted to surrender the business tenancy and had in fact abandoned or vacated the Shop. The Plaintiffs, there can no dispute about that, re-entered the Shop peaceably on 7th June 1999. The First Defendant has consistently maintained that it did not want the Shop any more.

2. After re-entry, the Plaintiffs re-let the Shop to Ad-Mart by a tenancy agreement dated 22nd July 1999. Whilst Ad-Mart contractors were decorating or renovating the Shop, the Second Defendant, an employee of the First Defendant, together with a number of people went to the Shop on 4th August 1999 and claimed to be the "existing tenant" of the Shop and interfered with the work of the contractors. The contractors left and someone put new locks on the shop. The Second Defendant so far does not deny what he did on 4th August 1999. He, however says that only he alone went to the Shop, not with other people. The Plaintiffs then issued the writ herein on 28th August 1999 against both Defendants.

3. Perhaps in view of the problems created by the Defendants, Ad-Mart and the Plaintiffs entered into a fresh tenancy agreement on 27th August 1999 to run from 11th October 1999 on condition that the Plaintiffs obtain an appropriate injunction against the Defendants.

4. On 3rd September 1999, Yeung J granted an injunction ("the Injunction Order") requiring both Defendants (1) to unlock the Shop and remove all their effects therein, and (2) not to trespass or interfere with the use of the Shop by the Plaintiffs and those authorized by the Plaintiffs. The Plaintiffs were also expressly allowed by the terms of the order to re-gain possession and use of the Shop. It must be pointed out that the Second Defendant was present in person at the hearing on 3rd September 1999. The learned judge read the Second Defendant's affirmation dated the same day and heard the Second Defendant's arguments before granting the Injunction Order.

5. Thereafter, apart from filing acknowledgement of service of the writ indicating that the Plaintiff's claim would be contested, neither Defendants filed or served any defence nor stated any grounds of defence in any affirmation. To conclude the case, the Plaintiffs took out a summons for Order 19 judgment against both Defendants on 3rd November 1999. The summons was supported by affidavit evidence and duly served. On 23rd November 1999, the summons was heard by me. Neither Defendant was present on that occasion. There being no problem with proof of the Plaintiffs' case, I gave judgment in terms. Effectively, the Plaintiffs had an order for possession, a mandatory injunction requiring both Defendants to clear off from the Shop, an injunction prohibiting both Defendants from trespassing or interfering with use of the Shop and judgment for damages to be assessed, together with costs of the action.

6. The Defendants then applied to set aside default judgment on the ground that it was granted in their absence. On 6th December 1999, the parties appeared before me on this application. It was explained to the director appearing for the First Defendant that there was no real ground for resisting judgment since the First Defendant could not afford the rent, did not want the Shop and had no intention or justification in returning to the Shop. There was no point in prolonging the matter which would only mean probably liability for more costs. The director accepted the situation and was content to leave the application in the discretion of the court. In view of the fact that there was no viable defence in sight, the First Defendant's application to set aside default judgment was dismissed.

7. As to the Second Defendant, he was very rowdy. He professed to be very much aggrieved by the Plaintiff's action herein and the allegations made against him and about the state of the Shop which led to the First Defendant suffering loss. However, the fact remained that the Second Defendant admitted again before me that he did go to the Shop on 4th August 1999 although not with 7 or 8 other people as alleged. Presumably, the Second Defendant had no convincing arguments against the imposition of an injunction before Yeung J, and he advanced none such before me either. The Second Defendant had no locus standi so far as the tenancy or possession issues are concerned although he did behave as if he controlled the First Defendant.

8. In the final analysis, it is trite law that an absentee defendant has to demonstrate at least a viable defence before he is entitled to have default judgment set aside. There was none shown. Nevertheless, the Second Defendant being unrepresented, in order to allow him the last opportunity to state his case, but at the same time to provide security for the Plaintiffs and to caution the Second Defendant against frivolous contest, I gave the Second Defendant leave to defend on condition that he pays into court $20,000 within one month as security for costs. In default of payment as ordered, the judgment given on 23rd November 1999 stands. I assessed $20,000 as the amount the Plaintiffs must have so far incurred by way of costs. Costs of the hearing before me was reserved; clearly, if the Defendant does not pay into court, question of further costs would be academic.