EVER GOLD INTERNATIONAL DEVELOPMENT LTD v. VINCENT THOMAS

HCMP 3240/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 3240 OF 2013

(on an intended appeal from DCCJ No. 1138 of 2013)

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

1. This is an application by Mr Thomas Vincent (“the D”) for leave to appeal out of time from a judgment of Yee DJ given on 22 July 2013 in DCCJ1138/2013. The learned judge dismissed the D’s appeal from a judgment of Registrar Lui dated 21 June 2013 ordering the D to deliver vacant possession of 1/F , No.15 Burd Street, Sheung Wan (“the Premises”) of which the D was the tenant to Evergold International Development Ltd (“the P”) his landlord. The D was also ordered to pay rent in arrears and mesne profits.

2. After Yee DJ’s judgment, the D had applied to the judge for leave to appeal and for a stay of execution.  These applications were refused on 21 August 2013. 

Summons for leave to appeal out of time

3. On 2 December 2013 the D issued a summons in this court for leave to appeal out of time.  In his affirmation the D said that his application was out of time as he was waiting for a decision for legal aid funding, which was refused.  However he also had new evidence which he wished to adduce. 

Summons for stay of execution

4. On 13 January 2014 the D issued a summons for a stay of execution on the ground that there were special circumstances rendering the enforcement of the judgment inappropriate, as (1) he has applied for leave to appeal; and (2) it was a “moot point that the tenancy agreement is invalid due to illegal structures within the premises”.  He exhibited two letters from the Buildings Department dated after Yee DJ’s judgment which will be referred to below. 

Background

5.1   The relevant facts are that on 20 March 2012 the D entered into a written tenancy agreement with the P.  The term was for 2 years from 4 April 2012 but Schedule II clause 4 (“the break clause”) provided that either party was entitled to terminate the agreement earlier than as provided, by (among other things) serving at least 1 month’s written notice to the other party, provided this was done after the expiration of the 11^th month of the term.

5.2   It is common ground that the D failed to pay rent since September 2012 but continued to occupy the premises. 

5.3   On 5 March 2013 the P through its solicitors served a written notice on the D to terminate the agreement under the break clause and demanded that he vacate the premises after a month.  The letter also demanded payment of the rent in arrears but did not purport to terminate the tenancy agreement on the ground of non-payment of rent. 

5.4   The D failed to vacate the Premises and failed to pay arrears of rent or mesne profits. 

Proceedings

6. On 8 April 2013 the P issued proceedings in DCCJ1138/2013 claiming vacant possession and arrears of rent and mesne profits. 

Defence

7.1   The D filed a defence alleging that the Premises contained illegal structures and had “electrical/drainage defects”.  However these were not particularized in the Defence.

7.2   On request the D gave further and better particulars of the alleged illegal structures in a letter dated 9 June 2013, as follows: the kitchen had been moved, a new room had been created, the main bedroom had been extended to enclose a balcony, and an open area at the rear had been converted into a covered area with electrical power points and windows.  However no particulars were given of any “electrical/drainage defects”, or “faulty electrical wiring” or “defective drainage” alleged in the Defence.

7.3   The D alleged in the Defence that the consequence of the illegal structures and the “electrical/drainage defects” was that he “deemed” the tenancy agreement to be “non-valid”. He alleged that rent was withheld due to the P’s failure to “correct” the illegal structures and electrical/drainage defects.  He lodged a counterclaim alleging that he and his family had suffered “severe discomfort” and sought damages for “breach of contract/signing an invalid contract” to be assessed.

P’s application for summary judgment

8.1   The P sought summary judgment which was granted first by Registrar Lui, and then on the D’s appeal, by the judge.

8.2   The judge noted first in his judgment that the onus was on the D to show a triable issue, with evidence condescending on particulars.  He noted the principle of the common law (reiterated by Chu J, now Chu JA, in Golden Sunrise Ltd v Lee Kwok Hung [2005] 1 HKC 466) that in the absence of express agreement, a tenant’s obligation to pay rent is an independent obligation, and the common law did not imply into a lease a condition or term that a property was fit for the purpose for which it was let.  He also held that in any event, the mere existence of illegal structures would not invalidate the tenancy agreement.  He found the D had advanced no valid reasons for remaining in possession of the Premises.  He found that the D had failed to show any triable issues and that whilst the D may continue his counterclaim if so advised, there was no valid set-off to the P’s claims.

Application for leave to appeal out of time

9.1   As the D’s application for leave to appeal was made out of time, the first consideration for this court is whether the court’s discretion should be exercised to give the D an extension of time. 

9.2   It is well-established that in the exercise of discretion whether or not to grant an extension of time, the relevant considerations are: (1) what is the length of the delay? (2) what are the reasons for the delay? (3) what are the chances of the appeal succeeding if time is extended? and (4) the degree of prejudice to the other party if the application is granted.

10. First, the length of delay.  Yee DJ refused leave to appeal on 21 August 2013.  Order 58 rule 2(4A) of the Rules of the District Court, Cap. 336 requires an applicant who wishes to apply for leave from the Court of Appeal to do so within 14 days.  The D did not apply to this court for leave to appeal until 2 December 2013.  The delay in the present case is substantial.

11. Second, the reasons for the delay. 

11.1   The D said first that he was waiting for a decision for legal aid funding.  This is not an acceptable ground for delay as it would be tantamount to making an exception to the general rule for all cases where an applicant applies for legal aid. 

11.2   However the D also relied on new evidence, ie the Buildings Department letters. The first letter dated 28 November 2013 (“the November letter”) refers to “certain unauthorized building works found at the captioned premises”, the captioned premises being “1/F including flat roof thereof [etc]”.  The second letter is dated only December 2013 (“the December letter”).  This is a letter to the owners of the entire building and referred only to an unspecified common area being in a dangerous condition. 

11.3   We should therefore first consider whether any or both of these letters should be allowed to be adduced as fresh evidence.

11.4   In Ladd v Marshall [1954] 1 WLR 1489 it was held that further evidence is admissible on appeal only where such evidence satisfies 3 conditions: (1) it could not have been obtained at the hearing with reasonable diligence; (2) it would or might, if believed, have an important effect on the mind of the tribunal, though it need not be conclusive; and (3) it is of a sort which inherently is not improbable. 

11.4.1  Regarding condition (1), obviously this is satisfied as neither letter could have been obtained at the hearing before Yee DJ because neither had come into existence.

11.4.2  Regarding condition (3), this is also satisfied.  Neither letter is inherently improbable, having come from the Buildings Department, which is a third party to the proceedings. 

11.4.3  Regarding condition (2), the letters should be examined individually for their possible impact on the court had they been available at the time of the hearing. 

11.4.4  First, the November letter.  This refers to “certain unauthorized building works found at the captioned premises”, the captioned premises being “1/F including flat roof thereof [etc]”.  Although the premises described in the tenancy agreement did not include “the flat roof”, the letter did not make a distinction between the 1/F and the flat roof, so this letter is at least some evidence supporting the D’s allegation that there were unauthorized building works in the Premises.

11.4.5  The December letter was however a letter to the owners of the entire building and referred only to an unspecified common area being in a dangerous condition.  It refers to a repair order to the owners but this was not produced in evidence.  Accordingly there was no evidence that the dangerous condition referred to the Premises.  We cannot see what relevance the December letter bears to the present proceedings.

11.4.6  Accordingly the November letter having satisfied the 3 conditions of Ladd v Marshall, leave should be given for the D to adduce as further evidence the November letter but not the December letter.

12. Third, the chances of the appeal succeeding if time is extended.  The judge gave two separate orders:

(1) an order for vacant possession

(2)  an order for payment of arrears and mesne profits.

The question is whether, with the benefit of the November letter, the D can show that he has a reasonable prospect of success under s.63A District Court Ordinance of overturning either one of the two orders.  It is well-established that this requires the D to show that he has an appeal with prospects of success that are more than fanciful but which do not need to be probable. 

12.1.1  In our view, first there is no chance of the D succeeding on appeal from the order for vacant possession.  There is simply no legal entitlement of the D to occupy the premises. 

12.1.2  The P has terminated the tenancy agreement applying the break clause, not on the basis of non-payment of rent.  The break clause is a contractual entitlement open to either party under the agreement and is not dependent on payment or non-payment of rent.  The tenancy agreement having been terminated, the D simply has no right to occupy the P’s premises after its expiry.

12.1.3  Even on the D’s own case that the tenancy agreement was somehow rendered invalid, there is no principle of law that gives him the right to occupy premises belonging to another.  As such, he is a trespasser. 

12.2.1  As for the order for payment of arrears and mesne profits, the question is whether the D has any defence to those claims.  The judge referred to the principle that in the absence of express agreement, a tenant’s obligation to pay rent is an independent obligation, and the common law did not imply into a lease a condition or term that a property was fit for the purpose for which it was let.  Hence, he held that even if he accepted that there were illegal structures or the defects of which the D complained, the D’s obligation to pay rent was not affected (para 15) and the D would be left to his counterclaim if he wished to pursue it.

12.2.2  The principle of law enunciated by the judge is correct where there is no express agreement as to fitness of purpose. 

12.2.3  We note however that under the tenancy agreement, clause 9 provided that the landlord “shall keep and maintain the structural parts of the premises including the main drains pipes and cables in proper state of repair provided that the Landlord’s liability shall not be incurred unless and until written notice of any defect or want of repair has been given by the Tenant to the Landlord and the Landlord shall have failed to take reasonable steps to repair and remedy the same after the lapse of a reasonable time from the date of service of such notice”.  Although the D did not plead or rely on this clause, he was not legally represented.  We have therefore examined the issue to see if, as a matter of law, that may provide him with a defence in law to the P’s claims for arrears of rent and mesne profits.   

12.2.4  It seems to us that in light of the November letter confirming the existence of unauthorized building works in the Premises, if (as the D alleged) originally open areas in the Premises have been enclosed by walls, that may affect the state of the structural parts of the Premises so as to entitle the D to invoke clause 9. 

12.2.5  Although the D has not produced evidence of written notice to the P, he has alleged in para 15 of the Defence that “despite various demands (for over a year), the P has failed and refused to carry out repairs and remedial work to the premises”. The P would therefore have been aware of the D’s complaints for some time and apparently has not taken any steps to put the structural parts of the Premises into a proper state, as shown by the November letter. 

12.2.6   The question then is whether the P’s possible breach of clause 9 would provide the D with a defence to the P’s claims for arrears of rent and mesne profits.  A tenant who suffers damages (albeit unliquidated damages) due to a landlord’s breach of his obligation to repair may claim an equitable set-off against the landlord’s claims for arrears of rent and mesne profits if there was an adequate connection between the claim for rent and the cross-claim for damages (British Anzani (Felixstowe) Ltd v International Marine Management (UK) Ltd [1980] 1 QB 137). 

12.2.7   In the present proceedings the D has counterclaimed damages in his Defence for “discomfort due to excessive dampness and other health-damaging and dangerous conditions prevalent within the Premises”.  However there is no allegation or evidence that the “dampness” had been caused by the structural alterations, nor what “discomfort” or damage to health there has been which had been caused by the structural alterations.  Nor are there any particulars of any relevant loss or damage.  For instance it has not been alleged that the D has himself paid for any repairs, or that he has suffered any damage for his inability to use any part of the Premises for any period of time during the year of his tenancy due to the structural alterations. 

13. In the circumstances, we take the view that even had the judge taken into account clause 9 (even though it had not been pleaded or relied upon by the D), there would still be no defence of set-off to the claims for arrears of rent and mesne profits.  In conclusion there is also no chance of the D succeeding on an appeal from that order. 

14. Fourth, as a matter of completeness, we would note that it is a well-established principle that an absence of prejudice suffered by the other party to a proposed appeal is not in itself a ground to extend time. 

15. Accordingly the application for leave to appeal out of time must be dismissed.

Application for stay of execution

16. As for the D’s application for stay of execution, the fact that a party has applied for leave to appeal is not a ground for a stay of execution.  What is relevant is his chances of success on appeal.  It follows from our conclusions in paras 12 and 13-14 that the D’s application for stay of execution must also be dismissed.  

Order 

17. By reason of the matters above, (1) the application for leave to appeal out of time is dismissed, and pursuant to Order 59 rule 2A(8) RHC, it is ordered that no party may request this determination to be reconsidered at an oral hearing inter partes; (2) the application for stay of execution is also dismissed; and (3) the P not having taken any steps in the MP proceedings, we make no order as to costs.