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LDPE000371/2004
LDPE 371/2004
IN THE LANDS TRIBUNAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
Part V Possession Application No. LDPE 371 of 2004
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Wang Yick Investment Company Limited |
Applicant |
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Chan Fuk Chi (陳福芝) |
Respondent |
Coram: Member C.Y. LAM, Member, Lands Tribunal
Dates of Hearing: 17 & 18 June 2004
Date of Judgment: 14 July 2004
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J U D G M E N T
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1. This is an application for possession of a commercial property leased out to the Respondent for a term of 3 years. The property locates at the Ground Floor, No.45 Granville Road, Kowloon (hereinafter known as "the Subject Property"). The application also seeks to recover the arrears accrued since 22nd February 2004 and costs. The Applicant sent in the application on 2nd April 2004 and the Respondent opposed the application on the ground that the Applicant had failed to fulfill its repair obligations under the tenancy agreement. The Respondent had no denial concerning the period of rent in arrears and amount of outstanding rates.
2. On commencement of the trial, the Respondent' counsel reduced the ground of opposition only to those as follows: -
(a) The application is outside the jurisdiction of the Lands Tribunal; and
(b) Forfeiture of deposit amounts to a penalty to the Respondent.
3. The Tribunal must first of all deal with issue (a). As if the application falls outside the Land s Tribunal's jurisdiction, the Lands Tribunal is no longer a proper forum for the second issue.
Lands Tribunal's Jurisdiction
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(A) The Respondent's Arguments |
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The Respondent's counsel considered that the Property is leased for commercial purpose, and therefore it is not a tenancy subject to Part IV of the Landlord and Tenant (Consolidation) Ordinance, Cap 7. S.116 (1) of the Ordinance provides clearly that Part IV is applicable to domestic tenancy only. |
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He also considered that Part V of the same Ordinance does not apply because the Property is held under a tenancy for a term of three years. S.121 (2)(a) of the Ordinance has made it very clear that Part V should not apply to a tenancy for a fixed term of three years or more. Having established that the Landlord and Tenant (Consolidation) Ordinance, Cap 7 was not applicable, he went on to ascertain the authority of the Lands Tribunal under the Lands Tribunal Ordinance, Cap 17. He referred the Tribunal to S.8 of the Lands Tribunal Ordinance, Cap 17, in particular, those provisions relate to applications for possession, i.e. subsections (6), (7) (8) and (9). He did not find any of these subsections could deal with the subject application. Subsections (6) and (7) explicitly refer to the power of the Tribunal to grant possession for applications covered by the Landlord and Tenant (Consolidation) Ordinance, Cap 7 only whereas the subject application is, as analysed earlier, not within the purview of that Ordinance. He agreed that Subsection (8) is not just confined to applications within the purview of that Ordinance but the Tribunal's jurisdiction is restricted to make orders for rent, mesne profits, and money due and no more. In connection with Subsection (9), he cited H.H. Judge Chow's decision given in Circus Capital (Asia) Limited v. Panoramic Properties Limited [LDMP 3 of 2003 dated 14th April 2003] that it is not an additional power independent of the previous subsections. |
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(B) The Applicant's Arguments |
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The Applicant's counsel held a different view. He considered that the provision of S.121 (2) (a) must be read in full. The latter part of S.121 (2) (a) is relevant and self-evident. S.121 (2)(a) of the Ordinance states that |
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"This Part shall not apply to the following: - (a) a tenancy for a fixed term of 3 years or more the agreement for which contains no provision for earlier determination of the same other than for breach of any of the provisions of the agreement or under a provision of the tenancy allowing forfeiture or determination following the destruction, or partial destruction, of or damage to the premises;" |
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The part of S. 121(2)(a) which the Applicant's counsel considered relevant is as underlined above. Since the tenancy agreement contains the provision for earlier determination, i.e. Clause 4.11 (see Page 14 of the Document Bundle), he considered that the Property is held under a Part V tenancy albeit the term of tenancy being three years certain. To avoid further dispute as to whether Clause 4.11 is acceptable for the purpose of S.121 (2)(a), he cited the decision made by the Court of Appeal in Wong Shuk Yee v North Sea Fishing Village Co Ltd [1994] 3 HKC. The Court of Appeal in that case ruled that a clause somewhat similar in contents to Clause 4.11 satisfied the requirement of S.121 (2)(a). Therefore, he concluded that the tenancy of the Property is within the ambit of Part V. |
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(C) The Tribunal's View |
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The Tribunal does not agree to the Respondent counsel's interpretation of Subsection (8). Subsection (8) does not restrict the Tribunal's power to the grant of orders for rent, mesne profits and money due only. It has the power to make orders for possession. The words "whether or not it grants any such application" (i.e. the application for possession or ejectment) in the middle of that subsection clearly indicate that it has such power. It carries the meaning that it is up to the Tribunal to consider whether it is appropriate to grant or not such application. |
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As to the applicability of S.121 (2)(a) of the Landlord and Tenant (Consolidation) Ordinance, the Tribunal agrees with the Applicant's counsel that the latter part of subsection (2)(a) is relevant and should be read in conjunction with the earlier portion. The Tribunal also notes that the Respondent's counsel had cast doubt on the similarity of Clause 4.11 to the clause referred to in Wong Shuk Yee v North Sea Fishing Village Co Ltd [1994] 3 HKC. No doubt, the wordings are not identical. They are generally similar in nature. Both clauses provide that in the event of fire etc. or some other causes beyond the control of the landlord that renders the premises unsuitable for use or habitation and that in the opinion of the landlord, reinstatement is impracticable, the tenancy may be terminated. As such, the Tribunal has to dismiss the Respondent counsel's argument and consider that Clause 4.11 satisfies the provision of S.121 (2)(a). The tenancy is therefore clearly within the ambit of Part V. |
Other Claims of the Applicant
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(A) Forfeiture of Deposit |
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There were considerable debates on the de facto nature of the intended forfeiture. The Applicant's counsel did not accept that it is a penalty to the Respondent. He cited the Wong Kam-kong v Intercontinent Mercantile Co [1968] Civil Appeal No.14 of 1968 to support his argument. He emphasized that although that was a judgement dated back to 1968, it remained a useful guidance yet not over-ruled by the Court of Appeal or the above in any subsequent cases. |
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The Respondent's counsel viewed it a penalty. A wealth of arguments and authorities were also given to indicate the unreasonableness for the Tribunal to allow it. His most convincing point is that a very minor breach can be taken as an excuse to forfeit a large sum of money in such an amount as the deposit paid in the subject case if forfeiture is considered appropriate. Moreover, the Applicant had requested for a court order for the return of the outstanding rent etc. If the order is granted, there does not appear to be a further need to redress the Applicant. In other words, there should not be a court order for paying back the arrears in parallel to the order for forfeiture of deposit on account of rent arrears. If the Tribunal does grant both, it exactly penalizes the Respondent. |
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The Tribunal considers that the issue falls outside the jurisdiction of the Lands Tribunal Ordinance, Cap.17. S.8 (8) of the Ordinance only provides that in applications for possession and ejectment, the Tribunal may make orders for the payment of rent, mesne profits and money due only. The deposit is not pertinent to any of these payments under the tenancy agreement. The Tribunal therefore does not find the need to analyse any further the two counsels' arguments and authorities cited. The Tribunal does feel indebted to the two counsels for their efforts made to research the authorities. These efforts were made under the encouragement of the Tribunal. |
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(B) Rates and Interest |
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Both issues gave rise to no significant dispute. The Applicant confirmed that it made payments (see Page 33 of the Document Bundle) to the Rating and Valuation Department to settle the rates unpaid by the Respondent. Under Clause 4.2 of the Tenancy Agreement, the Applicant may charge interest for late payment of rent and other charges at the compound rate of 2% per month. This monthly interest rate equates to a rate of 24% per annum, whereas the current best lending rate is 5% and the judgement rate, 8% per annum only. The Applicant requested for an order for interest on the arrears calculated at this compound rate. The rates and interest are the money due referred to under S.8 (8) of the Lands Tribunal Ordinance, Cap. 17. The Tribunal is empowered to rule both issues. The only concern is whether the interest rate of 24% per annum is reasonable and does not amount to a penalty. In this regard, the Respondent had nonetheless made no submission. |
Orders
6. The Tribunal hereby orders that: -
(a) Vacant possession of the Subject Property shall be delivered to the Applicant conditional upon the Respondent failing within two weeks in terms of s. 21 of the High Court Ordinance, Cap 4, to pay the sums provided for in the ensuing paragraphs (b)(i) and (c);
(b) The Respondent shall pay the Applicant (i) arrears of rent in the sum of $100,000 per month for the period from 22nd February 2004 to 21st April 2004, (ii) mesne profits at the rate of $100,000 per month from the 22nd April 2004 up to the date of delivery of vacant possession of the Subject Property to the Applicant, (iii) the arrears of rates for the period from 1.10.2003 up to 30.4.2004 and (iv) the interest calculated in accordance with Clause 4.2 of the Tenancy Agreement dated 21.7.2001 on the arrears of rent in (i) above for the period up to and including the 2nd April 2004 and thereafter at the judgement rate for both the arrears of rent and mesne profits; and
(c) The Respondent shall pay the Applicant's costs of this application, which are fitted for counsels and which shall be taxed at District Court Scale if not agreed.
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C.Y. LAM |
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Member |
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Lands Tribunal |
Representation:
Mr. CHOW Hung-fat instructed by M/S So, Lung & Associates, for the Applicant
Mr. Jimmie HO instructed by M/S Benny Kong & Peter Tang, for the Respondent
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