YEUNG KWAI YAN v. COOPER JOHN GILES

cacv 150/2005

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 150 of 2005

(on appeal from HCA NO. 10649 of 2000)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This was an appeal from a judgment and order of Deputy High Court Judge K. Y. Chan given on 29 March 2005.  The judge had allowed an appeal by the plaintiff and gave summary judgment under Order 14 of the Rules of the High Court, ordering that the plaintiff was entitled to recover vacant possession of premises in Sai Kung.  In the order, arrears of rent of $652,271 were ordered to be paid, but that appears to be a typographical mistake as the amount pleaded in the statement of claim and referred to in the judgment was $657,271.  There were also orders for payment of the sum of $24,546.17 being arrears of government rates and $754 in respect of electricity charges.  At the conclusion of the hearing, this appeal was dismissed with an order for payment of $101,750 costs as a gross sum ordered under Order 62 Rule 9(4) of the Rules of the High Court.

Background

2.  By an agreement dated 5 June 1995 the plaintiff agreed to let to the defendant house number 36 Tin Shek Road, Hing Keng Shek Village, Sai Kung (“the property”) for residential purposes for a period of 24 months commencing 26 June 1995 at a rent of $13,000 per month.  Amongst the other terms of the tenancy agreement, which was in an estate agent’s standard form, the defendant agreed to pay all water, gas and electricity charges.  Under clause 20 of the agreement the defendant acknowledged that he had “thoroughly read” the contents of the agreement and that it would be “absolutely and immediately” determined if he should cause any breach of any of the items in the agreement.

3.  In the statement of claim, originally dated 28 December 2000, it was pleaded that Part IV of the Landlord and Tenant (Consolidation) Ordinance Cap. 7 (“the Ordinance”) applied to the tenancy.  The statement of claim then went on to aver that the defendant was in breach because rent in the sum of $657,271 was then outstanding.  It was also pleaded that the defendant was in further breach in failing to pay the sum of $24,546.17 in respect of rates and penalty for failing to pay the rates and also that the defendant was in breach by failing to pay electricity charges of $754.  By paragraph 9 of the statement of claim it was alleged that the plaintiff had, by letter dated 4 September 2000, forfeited the tenancy agreement on the grounds of the various breaches. 

4.  In June 2001 the plaintiff obtained judgment in default.  However that was set aside in August of that year on the basis of an affirmation by the defendant’s wife and an affidavit by the defendant himself in which they said that the plaintiff had sold the property to the defendant’s wife.  The defendant’s wife even went so far as to exhibit a copy of what she said had been the sale and purchase agreement dated 27 June 1997.  She also produced what she said was a copy of a receipt for $550,000 for the purchase monies.  This was subsequently admitted to have been the most appalling pack of lies.  In August 2003 the defendant’s wife was sentenced to 16 months imprisonment on her admission of charges of possessing and using false instruments namely those 2 documents.  I can only conclude reference to this chapter in these proceedings by the observation that I consider the defendant’s wife to have been fortunate that her sentence of imprisonment was suspended for two years.  I refrain from making any comments in relation to whether it would be difficult to believe that the defendant himself had not been complicit in this affair.

5.  In September 2004, after the criminal proceedings had been concluded and the bogus defence conclusively demolished, the plaintiff sought summary judgment.  Unfortunately the master dismissed that application in February 2005.  When the matter came before the judge, he had no difficulty in dismissing many of the objections raised by the defendant, which did not amount to defences in law.  It seems that the main defence put forward by the defendant was that the agreement had not been stamped in accordance with the requirements of the Stamp Duty Ordinance, Cap. 117.  Again, the judge, quite rightly, had no difficulty in accepting the undertakings of the plaintiff’s solicitors to have the stamp duty and any penalty paid.  He thus gave judgment for the plaintiff.

6.  Although the hearing before the judge took place in March 2005, it has taken until July of this year for this case to reach this court.  On this appeal the defendant has, on the very last day before the hearing, submitted a skeleton argument in which he seeks to raise yet another argument.  Relying this time on section 119L(2) of the Ordinance, the defendant argues that the plaintiff is not entitled to maintain an action to recover rent under the agreement in the absence of the plaintiff showing that a notice in the specified form had been submitted to the Commissioner of Rating and Valuation.  This court was not prepared to allow such a point to be taken at this stage.  These proceedings have been on foot for more than five years.  This point was never raised by the defendant in his defence.  Instead, as already noted, the defendant saw fit to rely on blatant lies.

7.  The defence remains still with the fraudulent allegation that the defendant had purchased the property.  There was no mention of this point in the court below.  The notice of appeal is rambling but contains no reference to the point.  The defendant’s skeleton argument was delayed until the day before the hearing.  It is now far too late for this new point to be raised at the eleventh hour before the second appeal.  In any event it would require evidence going back to what happened 11 years ago.  Whether or not the relevant documents are still available is open to doubt.  At best, even if this point were a good one, it would merely be that there would be some further delay before the plaintiff could ultimately succeed in obtaining the final order.

8.  The defendant then raised the question as to whether he should be liable for the government rates.  Section 21 of the Rating Ordinance Cap. 116 provides:

“(1) The owner and occupier of a tenement shall both be liable to the Commissioner for payment of the rates assessed thereon, but the same shall be deemed to be an occupier’s rate and, in the absence of any agreement to the contrary, shall be paid by the occupier.

(2) Where no such agreement exists and the rates assessed, on any part thereof, are paid by the owner of the tenement, the amount paid may be recovered by him from the occupier in an action for money paid to his use, or, if the occupier is still in occupation of the tenement, by distress in the same manner as for rent.”

9.  Since there is no dispute that the defendant was at the material time the occupant, the liability for the government rates fell upon him and the fact that the plaintiff has paid those rates is sufficient to enable the plaintiff to claim reimbursement from the defendant.

10.  Not content with simply raising the above matters the defendant attempted to argue that there was no forfeiture clause in the tenancy agreement and hence the plaintiff would not be entitled to forfeit the tenancy agreement even if the defendant did not pay the rent.  In my view, such an argument is not only unattractive but wrong.  Clause 20, to which reference has already been made, clearly states that the agreement would be absolutely and immediately determined if the defendant was in breach of any of that the terms thereof.  Quite apart from any other term, the term for payment of rent is fundamental to any tenancy agreement.  Although the letter of 4 September 2000 does not appear to be in the court papers, the plea in paragraph 9 of the amended statement of claim is clear and the receipt and contents of that letter is admitted in paragraph 26 of the defence.  In consequence, therefore, the plaintiff is entitled to rely upon the fact that the agreement has been terminated.

11.  Finally, the defendant sought to rely in some way upon the documents relating to the purported sale which his wife had admitted were forgeries when she was convicted in 2003.  The argument in this respect was simply hopeless.

12.  In those circumstances, there was nothing in this appeal and it fell to be dismissed.

Hon Cheung JA:

13.  I agree with the reasons of Rogers VP.  I would add the following views of my own.

14.  The gist of the defendant’s case in the appeal is that in order to forfeit the tenancy by reason of his failure to pay rent, the plaintiff must show that such a right was conferred by the express terms of the tenancy and that the law would not imply such a term : Ho Wai Fung v. Tang Mei Lin [1987] 3 HKC 458.

15.  This point has not been relied upon by the defendant in the pleadings (which were drafted by counsel) or in his affirmation filed in opposition to the plaintiff’s application for summary judgment.  It is a well-known principle that under Order 14 a defendant must condescend to give particulars of his defence.  In any event, this last minute defence is misconceived.

16.  Under the Tenancy Agreement, the defendant was required to pay rent in advance on the first day of each month (Clause 1).  Clause 20 specifically stated that,

‘The tenant has expressly and thoroughly read the contents of this Agreement which shall absolutely and immediately be determined if the Tenant causes any breach of any item herein.’

17.  Clause 20 is clearly in the nature of a forfeiture clause.  In broad terms, a right of forfeiture may be defined as “a right to determine a lease by a landlord if (a) when exercised, it operates to bring the lease to an end earlier than it would “naturally” terminate; and (b) it is exercisable in the event of some default by the tenant” : Woodfall’s Law of Landlord and Tenant Vol. 1 para. 17.057.

18.  Clause 20 is specific and unambitious.  Breach by the defendant of the Tenancy Agreement would cause it to be terminated during the two year fixed term and afterwards when it continued under Part IV of the Ordinance.

19.  The plaintiff was clearly relying on this clause when he asked for possession from the court when the defendant failed to pay the rent.  By then the defendant was in breach of the Tenancy Agreement.  The plaintiff obviously treated him to be in breach and commenced the proceedings on the basis that the Tenancy Agreement had been terminated by reason of his breach.  The judge granted the order and further provided the conditions of relief to the defendant which were not complied by him.  There is no merit in the defendant’s case on possession.

20.  As to the defendant’s case on rates, the general rule is that if the lease does not spell out this responsibility, rates should be paid by the tenant, although he may be able to claim them back from the landlord if the rent is expressed to be inclusive of rates : see Merry : Hong Kong Tenancy Law 4^th Ed page 57.  Sections 21(1) and (2) of the Rating Ordinance (Cap. 116) clearly supported this view.  In this case the Tenancy Agreement provided that the rent of $13,000 is exclusive of rates.  This means the defendant is responsible for the rates.

Hon Chu J:

21.  I agree with the reasons given by Rogers VP and Cheung JA and have nothing to add.