KING TIER LTD v. LAU JOSEFINA RODRIGUEZ

  DCCJ 1885/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1885 OF 2009

--------------------

---------------------

REASONS FOR DECISION

Background

1.    The Plaintiff (“Landlord") seeks summary judgment against the Defendant ("Tenant") for delivery up of vacant possession of Room 701, 7^th Floor, Sunny House at Nos. 12 – 16 Li Yuen Street West, Hong Kong ("Premises"), for outstanding rent, mesne profits at $6,000 per month, and service fees of $700 per month in respect of the Premises.

2.   The Tenant in her defence claims that she was entitled to withhold payment of the rent due because the service of the lifts in the building where the Premises are situated had broken down, or had been suspended and stopped for improvement. She claims that she operates a hairdressing business at the Premises, and that as a result of the interruption of the lift service, she suffered loss of income and damage in her hairdressing business, as customers were not able to use the lifts to visit the Premises. The Tenant further claims that one customer of hers had fainted when she was trapped in the lift, and the Tenant may be faced with a claim by this customer. The Tenant accordingly claims that she has a counterclaim against the Landlord in respect of her loss and damage, and is entitled to set off such a claim against the rent in arrears.

3.  The Tenant further claims that if the Landlord is entitled to forfeit the lease by virtue of her non-payment of rent, then she asks for relief against forfeiture.

4.  At the conclusion of the hearing on 12 August 2009, I granted summary judgment on the Landlord's claim, but gave relief against forfeiture on the Tenant's application. The reasons for my decision are set out below.

The issue

5.  The Tenant does not dispute any terms of the Tenancy Agreement under which the Landlord's claims are made in these proceedings, nor that the rent for the months of July and August 2009 are still outstanding. There can be no dispute that the Tenant did not pay rent for February, March and April 2009 when they fell due and was in breach of her covenant to pay rent, which breach would entitle the Landlord to forfeit the lease. The Tenant can only obtain leave to defend if she can show that she has a legal or equitable set-off in respect of her claim of the Landlord's breach of covenant that would extinguish the Landlord's claim for rent, and hence the right to forfeiture.

6.  In essence, the issue for determination in this case is whether the Landlord is in breach of the Tenancy Agreement by virtue of the breakdown or suspension of the lift service, and whether the Tenant has a bona fide defence of set-off.

Legal principles for Order 14

7.    The principles applicable to applications for summary judgment are clear.  To resist an Order 14 application, the defendant must show that there are triable issues.  A concise statement of the standard approach in an application for summary judgment is to be found in the dicta of Ma J, as he then was, in Schindler Lifts (Hong Kong) Ltd. v. Ocean Joy Investments Ltd. [2003] 1 HKC 438.  The court has to determine two questions: firstly, whether what the defendant says is believable as opposed to whether its version of events is to be believed; and secondly, if it is, whether what the defendant says amounts to an arguable defence in law. In determining the first question, the court should not embark on a mini trial of the action on affidavit evidence.  The burden of proof is not a heavy one.  It is not the function of the court at this stage to assess if a defence will succeed at trial.  Insofar as the second question is concerned, summary judgment will not be granted if there are arguable defences or serious disputes of law. Further, it is for the defendant to condescend on the particulars of the defences raised.

Whether there are triable issues

8.  The Tenant claims simply that in February 2009, the Landlord had put up notices throughout the building to say that improvement works would be conducted on the lifts in the building. She claims that such works then started, without giving further particulars of the dates or other details regarding the work. It is alleged that "after the works", and up until July 2009, "the lift" failed to work and frequently broke down, as a result of which the Tenant's business was interrupted and that she sustained damage.

9.  According to the Landlord's notice of works dated 6 February 2009 ("Notice") which the Tenant has exhibited to her Affirmation, the improvement works for the lifts were planned for March 2009. The Notice states that the improvement work will involve completely stopping one lift at a time for about 35 to 45 days, during the period of duration of the works of about 70 to 90 days. On the Landlord's evidence, one lift was in operation all the time.

10.  Clause 4 (k)(i) of the Tenancy Agreement made between the parties expressly provides that the Landlord shall not in any circumstances be liable to the Tenant in respect of any loss or damage sustained by the Tenant or any other person caused by or through or in any way owing to any defect in or breakdown of the lifts, or any other service provided in the building.

11.  The Tenancy Agreement contains the usual covenant by the Landlord (under Clause 3(b)) that the Tenant shall peaceably hold and enjoy the Premises during the term without any interruption by the Landlord.

12.  It is established that under the common law, a tenant's covenant to pay rent is independent of the other covenants and obligations under a tenancy agreement, including the covenant of the landlord to provide quiet enjoyment (Edge v. Boileau (1885-86) LR 16 QBD 117, Charmway Development Ltd. v. Long China Engineering Ltd. [2001] 3 HKC 515). There is hence no legal right of set-off of a claim for breach of the Landlord 's covenant to give quiet enjoyment against a breach of the Tenant 's covenant to pay rent.

13.  For equitable set-off to apply, the counterclaim must be at least closely connected with the same transaction as that giving rise to the claim, and the relationship between the claims must be such that it would be manifestly unjust to allow one to be enforced without regard to the other. The decision in Ridge Ltd. v. Golden Castle Ltd [2005] 3 HKC 592 makes it clear that a counterclaim for equitable set-off against a claim for rent on the basis of an alleged breach of covenant for quiet enjoyment cannot be established.

14.  For there to be a case of interference with quiet enjoyment, there must be substantial physical interference with the enjoyment of the premises (Owen v. Gadd  [1956] 2 QB 99, Ridge Ltd. v. Golden Castle Ltd., op cit.). The facts in Ridge Ltd. are similar to the facts of this case. On the evidence produced in this case, the manner of the carrying out of the improvement works to the lifts in the building, as outlined in the Notice, does not prevent access to the Premises. There may be inconvenience or delay occasioned by one lift being out of service, but customers could use the remaining lift, or the staircase. On the bare particulars provided, I cannot see that there was substantial physical interference with the Tenant's enjoyment of the Premises.

15.  In my Judgment, the Tenant has failed to raise any triable defence on the ground of set-off.  I accordingly granted summary judgment in favor of the Landlord, for the rent and service fees in arrears for the months of July and August 2009, and dismissed the Tenant's counterclaim.

16.  In view of the fact that the term of the Tenancy Agreement was due to expire on 30 September 2009, and the Tenant has paid up the rent due, save for the months of July and August 2009, after hearing the Tenant, I granted to her relief against forfeiture on condition that she pays to the Landlord the outstanding rent for July and August 2009 within 14 days from the date of my order, and further pays on or before 1 September 2009 the sum of $6,700 being the rent and service fee payable for the month of September 2009.

17.  An order was also made for the Tenant to pay to the Landlord the costs of the action, including the costs of the Order 14 Summons with certificate for Counsel, which costs were assessed at $28,000 in total.