TEEN ENERGY LTD. v. AXEWOOD LTD.

HCA 2264/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2264 OF 2001

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REASONS FOR DECISION

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Introduction

1. There were 3 applications before me on 28 February 2002: a notice of appeal against the order of Master Au-Yeung made on 3 December 2001 (HCA No. 2264 of 2001 ("2264/01")) and the defendant's 2 summonses respectively dated 27 September and 10 December 2001 asking in effect for relief against forfeiture of the tenancy (HCA No. 2450 of 2001 ("2450/01")). At the end of the hearing, I allowed the appeal (in 2264/01) and granted an order in relation to the summons dated 27 September 2001 (in 2450/01). The following are the reasons.

Relief Against Forfeiture of Tenancies

2. S. 21F of the High Court Ordinance is of great importance to the determination of the said 3 applications. Insofar as it is relevant, that section reads: -

"(1) This section has effect where a lessor is proceeding by action in the Court of First Instance to enforce against a lessee a right of re-entry or forfeiture in respect of any land for non-payment of rent ... ";

"(3) If -

(a) the action does not cease under subsection (2); and

(b) the Court at the trial is satisfied that the lessor is entitled to enforce the right of re-entry or forfeiture,

the Court shall order possession of the land to be given to the lessor at the expiration of such period, but not being less than 4 weeks from the date of the order, as the Court thinks fit, unless within that period the lessee pays into court all the rent in arrear and such sum as the Court shall direct on account of the costs of the action";

"(4) The Court may extend the period specified under subsection

(3)...";

"(7) If the lessee does not?

(a) within the period specified in the order; or

(b) within that period as extended ...

pay into court-

(i) all the rent in arrear; and

(ii) the sum directed to be paid ...

the order may be enforced and so long as the order remains unreversed the lessee shall be barred from all relief ... ";

"(10) Nothing in this section shall be taken to affect?

(a) the power of the Court to enter final judgment in a case where the defendant fails to give notice of intention to defend;

(b) the power of the Court to make any order which it would otherwise have power to make as respects a right of re-entry or forfeiture on any ground other than non-payment of rent; or

(c) section 58(4) of the Conveyancing and Property Ordinance (Cap. 219)"

(emphasis supplied).

3. There is no dispute that there were provisions in the tenancy agreements enabling the plaintiffs to re-enter the suit premises if (among other things) the defendants defaulted in payment of sums due under them.

4. It is the cornerstone of the plaintiffs' case that s. 21F provides for an exhaustive regime of relief against forfeiture of tenancies in the High Court. In other words, the plaintiffs argued that since the enactment of s. 21F, a tenant can ask for "relief against forfeiture" (as provided in that section) in the High Court only if his case falls within the provisions of that section.

5. On the other hand, the defendants relied on the presumption that the court's inherent jurisdiction and common law principles (including those in equity) are not abrogated by statute unless such is the statute's express or implied intention. In particular, in relation to 2264/01, they argued s. 21F has no effect on the court's power to grant relief against forfeiture in cases where the tenant has failed to file a defence.

2450/01

6. The plaintiff commenced this action on 31 May 2001 for the defendant's failure to pay rent and other charges under the tenancy agreement. The defendant failed to give notice of intention to defend. Final and Interlocutory Judgment was entered on 27 June 2001 for such default. Further, a Notice of Judgment was made on 28 June 2001. On 27 September 2001, the defendant took out a summons asking for relief against forfeiture (which was adjourned by the Master to the Judge in chambers). The marginal note of the summons referred to the court's inherent jurisdiction.

7. The defendant relied heavily on the Hong Kong Court of Appeal's decision in Tindixs Services Ltd. v. Cheng Wing Chun [1998] 4 HKC 194. In Tindixs, the plaintiff sued for non-payment of rent. The writ was served personally on the defendant. The defendant's solicitors were unaware of that and did not give notice of intention to defend until 5 days after the time limit, mistakenly believing that they had a longer period to do so. Default judgment was entered. On the defendant's application to set aside the judgment for relief against forfeiture, the acting registrar dismissed the application. The appeal to the judge in chambers was allowed and the judgment was set aside. The Court of Appeal allowed the appeal and restored the acting registrar's order.

8. After reciting s. 21F(3), Rogers JA (as he then was) said: -

"I note at this stage that that section is mandatory; it requires that the court shall order possession of the land to be given by the lessor [lessee] ... [The learned judge then referred to s. 21F(10)(a) and the chronology of events from when default judgment was drawn up to the order made by the judge in chambers] ...

The matter for relief against forfeiture is, in my view, now governed by statute. Section 21F(3) makes it mandatory to order possession of the land. The situation has therefore arisen where the plaintiff was entitled, in my view, to judgment on 27 September but that judgment for possession should have been stayed for four weeks to enable the defendant to pay the arrears of rent"

(p. 197C and H to I).

9. In short, the Court of Appeal concluded that s. 21F (including s. 21F(3)) should be applicable to a case where an acknowledgement of service was given after the time limit for doing so had expired.

10. The plaintiff argued herein that the Court of Appeal overlooked: (

(a) that s. 21F(3)(b) only applies to cases after trial (which, because of s. 21H, includes a hearing under RHC Ord. 14);

(b) that the source of the court's power referred to in s. 21F(10)(a) must have originated elsewhere than s. 21F (for example, inherent jurisdiction and/or RHC Ord. 13). Further, that section provides for the entering of final judgment (as opposed to an "unless" order under s. 21F(3));

(c) the decision of Master P Chan (as he then was) in Hong Kong Land Property Co. Ltd. v. Shung World Investments Ltd. and Ors. [1990] 2 HKC 545.

This argument can be disposed of shortly on the ground that it is not for a lower court to say that the decision of a higher court is per incurium.

11. The plaintiff further argued that Tindixs can be distinguished from the present case. With respect, I disagree; the 2 cases cannot validly be distinguished. The plaintiff's contention that in Tindixs the acknowledgement of service was given 5 days late whereas in this action no acknowledgement was given at all is a distinction without a difference. In both cases, nothing resembling a trial has taken place.

12. By reason of the above matters, even if the plaintiff's above argument was correct, I am obliged to follow the decision in Tindixs by reason of the doctrine of stare decisis. Accordingly, s. 21F, especially s. 21F(3), should be applicable to this action.

13. It is undisputed that by the date of the Judgment, only $5,088.79 (being interest payable) was outstanding. The remainder of the plaintiff's claim has already been paid by the defendant. Counsel for the defendant asked me to extend the period pursuant to s. 21F(4). Counsel for the plaintiff fairly (and correctly) indicated that he had no submission to make regarding that issue. Further, although the payment was made to the plaintiff rather than into court (hence, strictly speaking the section has not been complied with), the plaintiff fairly did not take any point regarding this either. By reason of all the above matters, it is appropriate to grant the time extension sought.

14. An order should therefore be (and was) granted in the defendant's favour. However, the form of the Judgment should have followed that set out in Tindixs (at p. 198D), namely, the Judgment should be amended to contain a provision providing for a period (not less than 4 weeks) from the date of the original order to enable the defendant to make due payment. The Final and Interlocutory Judgment should be amended accordingly. The parties sensibly indicated they would work out the precise form of the order in due course.

2264/01

15. The plaintiff commenced this action on 23 May 2001 also for non-payment of rent (and other sums due under the tenancy). Notice of intention to defend was given on 6 June 2001. However, the defendant failed to file or serve a defence. Final and Interlocutory Judgment was entered on 23 July 2001 by reason of the default.

16. On 4 October 2001, the defendant took out a summons to set aside the said judgment, arguing that the court has power to grant relief against forfeiture. I understand from counsel for the parties that the learned Master dismissed the defendant's application on 3 December 2001 (the order was sealed on 3 January 2002) essentially because she agreed with the plaintiff's contention that there was no jurisdiction to do so. The defendant took out an appeal against that order on 12 December 2001.

17. The back-bone of the plaintiff's argument (as stated above) is that a tenant's claim for relief against forfeiture in the High Court is now governed exclusively by s. 21F which codified the relevant equitable doctrine. The following decisions were relied upon to support the argument: (

(1) Hong Kong Land Property Co. Ltd. v. Shung World Investments Ltd.[1990] 2 HKC 545, 547D (per Master P Chan (as he then was));

(2) Bullen v. Tam Yee Ni [1998] 2 HKC 207, 210C (per Liu, JA);

(3) Tindixs Services Ltd. v. Cheng Wing Chun [1998] 3 HKC 194 (per Rogers JA (as he then was));

(4) Sylvia Seto and Anor. v. Kowloon Shopping Centre Ltd. and Ors. [1980] HKLR717, 737.

18. The plaintiff submitted that the rationale behind the codification of the equitable doctrine of relief against forfeiture of leases is that the equitable jurisdiction created uncertainty and caused potential unfairness and injustice to the landlord. For example, it was decided that the relief was still available to the tenant even after the landlord had in fact regained possession: Billson and Ors. v. Residential Apartments Ltd. [1992] 1 AC 494. On the other hand (so the plaintiff argued), the statute not only helps the landlord by providing certainty (see, for example, s. 21F(7) (quoted above)), it also helps the tenant by (in effect) requiring "relief against forfeiture" to be granted. For example, under s. 21F(2), a High Court action will automatically come to an end if the tenant pays the sums due in accordance with that section within the prescribed time. Further, under s. 21F(3), the court must give a tenant a period no less than 4 weeks even if it should find after trial the landlord's claim is established and an order for possession should be made.

19. If the plaintiff's argument is accepted, not only will it mean that the court's power to relief against forfeiture under the common law would be unavailable to cases falling outside s. 21F, the statutory "relief against forfeiture" (provided for by s. 21F) is also unavailable to such cases.

20. There are 2 reasons why, contrary to the plaintiff's argument above, the court should have the power to grant relief against forfeiture in this action.

21. The first reason can be stated shortly. It is related to the decision in Tindixs. As stated above, the Court of Appeal's decision was in effect that s. 21F (particularly s. 21F(3)) applies to a case where the defendant has failed to give notice of intention to defend. There is no valid reason why that section should not apply to a case where the defendant has given notice of intention to defend (indicating he intends to contest the claim) but failed to file or serve a defence in time.

22. The other reason needs only be considered if the decision in Tindixs is irrelevant to the facts of (and cases similar to) this action. It is as follows. As a starting point, a statute is presumed not to abrogate the common law unless the statute expressly or by necessary implication intends to do so: see, for example, Shiloh Spinners v. Harding [1973] AC 691, 725A-B.

23. S. 21F(10) expressly provides that s. 21F does not affect the matters set out in that subsection. The text of the subsection has been set out above and is repeated here for convenience:-

"(10) Nothing in this section shall be taken to affect (

(a) the power of the Court to enter final judgment in a case where the defendant fails to give notice of intention to defend;

(b) the power of the Court to make any order which it would otherwise have power to make as respects a right of re-entry or forfeiture on any ground other than non-payment of rent; or

(c) section 58(4) of the Conveyancing and Property Ordinance (Cap. 219)".

Hence, it is clear that there are cases which lie outside the regime provided for in s. 21F, one of them being the court's power to enter final judgment where the defendant fails to give notice of intention to defend: s. 21F(10)(a).

24. It must be noted that the final judgment entered pursuant to s. 21F(10)(a) (and possibly also an order made under s. 21F(10)(b)) is entered not under the provisions of s. 21F. The source of that power must have come from the common law, the court's inherent jurisdiction and/or Rules of the High Court (such as Ord. 19). Such being the case, it is highly arguable that the equitable doctrine of relief against forfeiture is available to the defendant regarding such judgment or order. This is because s. 21F(7) is inapplicable.

25. Whether s. 21F intends to abrogate the common law and provide for an exhaustive scheme regarding relief against forfeiture would depend on whether the matters set out in s. 21F(10) are intended to be the only exceptions to s. 21F. If they are, any situation falling outside that subsection would mean that the court has no power to deal with it (whether at common law or otherwise).

26. At least 2 situations are not expressly covered by s. 21F (including s. 21F(10)): one is, as in this action, where the defendant has given a notice of intention to defend but failed to file and serve a defence. The other situation is about a disputed (and defended) claim which initially falls within s. 21F but the defence has subsequently been struck out, for example, under the court's inherent jurisdiction for failure to comply with procedural rules or court orders.

27. There is no valid ground, whether based on policy, general principles or the language of the statute, for concluding that tenants in these 2 situations should be treated less favourably than those falling within the provisions of s. 21F. In fact, to so conclude would likely to result in injustice because, if the common law relief against forfeiture is completely abrogated by s. 21F (save where s. 21F(10) applies), not only will the tenant be unable to ask for relief against forfeiture under the common law, he will also be unable to ask for the statutory "relief" under s. 21F. In both situations, final judgment is entered only because of a procedural default and yet no relief against forfeiture can be granted. On the other hand, for tenants whose defence fails after trial, s. 21F requires the statutory "relief against forfeiture" to be granted in their favour.

28. I cannot find any justification for concluding that such a potentially unjust consequence is intended by s. 21F. With the possible exception of the Tindixs case, none of the cases relied upon by the plaintiff and binding on this court categorically decided that the plaintiff's above argument is correct. Also, the issues involved therein were different. I have dealt with the implication of the decision in Tindixs to the facts of this action earlier. The reliance on the English authorities is of limited (if any) assistance because the statutory scheme is different from that in Hong Kong.

29. For the above reasons, I disagree with the plaintiff's arguments and the decision of the learned Master.

30. To conclude, I find that s. 21F has not abrogated the court's power to grant relief against forfeiture in this action. In the factual context of this action, it is unnecessary to determine whether the power is founded at common law or statute. The facts regarding payment of the sums claimed in this action are similar to those in 2450/01 (see above). The plaintiff's stance regarding whether relief should be granted was also similar to that in 2450/01. Having considered all the circumstances, relief should be granted. The parties also indicated that the precise form of the order would be agreed before the draft order is presented for approval by the court.

31. By reason of the above matters, the appeal is allowed.

Costs

32. I awarded the costs of the appeal in 2264/01 and the 2 summonses in 2450/01 are to be paid by the respective plaintiffs to the respective defendants to be taxed if not agreed with certificate for counsel for the hearing before the Master. Such costs should include any related reserved costs.