FUR HUNTER LTD. v. MEDITERANEO LTD.

LDPE1018 of 2002

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Application No. 1018 of 2002

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JUDGMENT

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Background

1. The Applicant, which claimed to be the landlord of the suit premises known as "LOT SA787 ON G/FL., & 1/FL., 7 SB787 ON G/FL. HIRAM'S HIGHWAY SAI KUNG DD 215" ("Premises"), filed in the Tribunal an application against the Respondent on 4 October 2002 applying for recovery of possession of the Premises and an order for payment of rent, mesne profit and costs on the ground that the Respondent, as the tenant of the Premises, failed to pay rent from 20 March 2002 and rates.

2. On 24 October 2002, the Applicant filed an application for judgment by way of affidavit/affirmation in default of opposition pursuant to Rule 15 of Lands Tribunal Rules. The Tribunal declined to give a default judgment as sought. The case was fixed for hearing on 27 January 2002 during which, after hearing the submission by both parties, the Tribunal gave the following orders:

"1. Application dated 24 October 2002 by the Applicant for judgment by way of affirmation in default of opposition be dismissed;

2. Leave granted to the Respondent to file Notice of Opposition on or before the noon of 30th November 2002;

3. The Applicant and the Respondent shall file witness statements, if necessary, on or before 4th December 2002;

4. Adjourned to 6th December 2002 at 10:30a.m., 1 day reserved."

3. The Respondent filed on 30 November 2002 a notice of opposition opposing the application on the following grounds:

"There is no tenancy agreement in place. Only a license agreement to operate the restaurant Portofino under the management of Mediteraneo Ltd. The License was granted to Mediteraneo Ltd. by Pop In Ltd., against certain rights and obligations as set out in the agreement. An instrinsic (sic) part of this License agreement was that Pop In Ltd. and Fur hunter Ltd. would do nothing to jeopardize the status of the licenses, including the liquor license held by Ms. Margaret Chin. Fur hunter Ltd. was only party to the contract of the license agreement in this respect. As requested by landlord Mediteraneo was paying license agreement fees to Fur hunter Ltd."

4. The Respondent also sent to the Tribunal two witness statements by two ex-directors of the Respondent, Mr. Barry N. Kalb and Mr. Karl J. Grebstad, as well as a copy of the Business Registration Certificate of the Respondent for the period from 24/3/2002 to 23/3/2003 which show that the business's name of the Respondent, which operated on the premises of "Lot-787 DD-215 Hirams-Highway G/F & 1/F Sai Kung HK" was one "Portofino Restaurant".

The Applicant's case

5. The Applicant was represented by Ms. Margaret Chin who gave evidence for the Applicant. She produced 6 exhibits altogether. She said that Exhibit A1 was the lease agreement between the Applicant, Fur Hunter Ltd. ("Party 1"), Pop In Ltd. ("Party 2") and the Respondent, Mediteraneo Ltd. ("Party 3"). She also produced Exhibit A2, a Demand Note for Rates showing that the rate payer's name was Pop In Ltd. and the address of the property was described as "DD 215 LOT 787 SA & SB, HIRAM'S HIGHWAY, G/F & MEZZ, SAI KUNG." During the hearing, Ms. Chin clarified that the "1/FL" in the description of the Premises in the Applicant's notice of application was intended to mean the "MEZZ". (i.e. mezzanine floor) as shown in the Demand Note for Rates. Ms. Chin said that she personally owned all the 9 units in Section A, Section B and Remaining Portion of Lot 787 in DD 215 ("the lot") through the Applicant, Fur Hunter Ltd., a company she owned and controlled.

6. Ms. Chin gave evidence that the Applicant was the registered owner of all the 9 units (G/F, M/F and 1/F) in the said building standing on Section A, Section B and the Remaining Portion of the lot. The Applicant first bought the 6 units of Section A and Section B in about 1990. In 1999, the previous tenant of these 6 units, which had operated a Japanese Restaurant returned vacant possession of the said 6 units to the Applicant. Then, she decided to move back to live in the 2/F of Section A. As a devoted Christian, she was planning to use during the daytime of week days the kitchen of the G/F of Section B for the mission / business of lunch box for students. About the same time, she agreed with the Respondent's proposal to lease out the G/F & M/F of Section A, and G/F of Section B (with the proviso that she could use during the daytime the kitchen on G/F of Section B for her proposed lunch box mission/business). The partners of the Respondent drafted the agreement for the said Premises. She found the agreement to be acceptable and therefore she signed the agreement on behalf of the Applicant and Pop In Limited with some amendments made. A copy of the signed agreement was produced as Exhibit A1. She agreed that because she had wished to share the use of the kitchen of the Premises with the Respondents and since the general restaurant license and the liquor license were held by Pop In Ltd. and herself respectively, the agreement of the 3 parties was intended to be the lease of the Premises to the Respondent.

7. Ms. Chin said that after she had given possession of the Premises to the Respondent, the latter refused to let her to share the use of the unit at G/F of Section B of the lot (i.e. the kitchen) as previously agreed. The then owners of the 3 units in the Remaining Portion of the lot were very sympathetic to her plight and eventually sold their 3 units (G/F, M/F and 1/F of the Remaining Portion of the lot) to her in 2001 so that she could use the new premises for the students' lunch box mission / business. She again held the units of the Remaining Portion of the lot in the name of the Applicant, Fur Hunter Ltd., which was in the business of fur trading. She had planned to use the G/F of the Remaining Portion of the lot as an "Outreach Café" to be used by a charity, "Youth Outreach".

8. She said Item 12 of Exhibit A6 was a copy of a letter dated 2 December 2002 from his accountant, Messrs. Tony Kwok Tung Ng & Co, which confirmed that the Applicant was the registered owners of all 9 units in the lot, according to the land search made on August 2002.

9. In addition, Ms. Chin said her accountant also confirmed by a letter dated 9 October 2002 (Item 12A of Exhibit A6) that the total sums of rental and rental deposit received by the Applicant from the Respondent during the period from May 2000 and December 2001 were in the sums of $505,309.79 and $60,000.00 respectively. The monies were received by the Applicant in the form of various cheques issued by the Respondent and deposited in the Applicant's bank accounts. Also, no rental income was received during the month of August 2000, April 2001 and December 2001.

10. She said that she had other litigation with the Respondent, including one in Small Claims Tribunal, between the Respondent and Pop In Limited. She however confirmed that the case in the Small Claims Tribunal was not in respect of non-payment of rent for the period as stated in this application. She said that she had applied for an injunction in the High Court but the application had been dismissed.

11. The bundle marked Exhibit A6 and produced by Ms. Chin also included a copy of a receipt dated 20 June 2000 (Item 9A). The receipt shows that Fur Hunter Limited received from Mediteraneo Ltd. a rental sum of $30,000 for Portofino Restaurant for the period from "20/06/00 to 19/7/00". Ms. Chin testified that all the hand-writing shown on the said copy of the receipt with the exception of her signature were entered into by a represntative of Mediteraneo Limited. All she did was to chop on the original copy of the receipt with the company chop " For and on behalf of FUR HUNTER LIMITED" and signed the original copy of the receipt. However, afterwards, in other litigation, she discovered that a few additional hand-written words, "For Pop In Ltd. / Fur Hunter Ltd." were added in underneath her signature in the copy of the said receipt. She illustrated the point by marking with an arrow and a word "fault" in Item 9A of Exhibit A6.

12. During the hearing, Ms. Chin stressed that she had suffered a lot since the commencement of tenancy with the Respondent. All she asked for with this Tribunal was recovery of possession of the Premises since she had not received any rent for some months but still had to be responsible for the payment of monthly mortgage installments. Also, she lost the general restaurant license (previously held by Pop In Limited) and the liquor license (held by her personally) as a result of the disputes between her and the Respondent. In addition, she was afraid of the Respondent's representatives and did not dare to continue to live in the unit, 2/F of Section A of the lot again. In the final submission, Ms. Chin, after hearing the evidence from Mr. Mohammed Saif Rahman ("Mr. Rahman") of the Respondent that the Respondent only admitted non-payment of rent/license fee for the Premises from 20 May 2002, conceded that she agreed to seek to recover possession of the Premises on the ground that the Respondent failed to pay rent from the latter date.

The Respondent's case

13. The Respondent was represented by Mr. Rahman, who was the present managing director of the Respondent. He gave a written statement (i.e. Exhibit R1) which, he admitted, had been used for another litigation involving the Respondent and Ms. Chin. He amended Exhibit R1 in excluding a number of attached documents but including 5 relevant attachments, as follows:

Attachment (1) - a copy of a faxed letter dated 18 January 2002 from Karl J. Grebstad to Pop-In Limited;

Attachment (2) - a copy of a faxed letter dated 23 January 2002 from Karl J. Grebstad to Pop-In Limited;

Attachment (3) - a copy of a letter dated 20 February 2002 from Barry N. Kalb to Ms. Margaret Chin, Pop-in Ltd.;

Attachment (4) - a copy of a letter dated 2002-09-27 from Hong Kong Police, Sai Kung Division to Portofino Restaurant;

Attachment (5) - a photocopy of photo prints

14. Mr. Rahman produced, during the hearing, evidence to deny that neither "Ms. Margaret Chin nor her two companies (Fur Hunter Ltd. & Pop In Ltd.) own the property where the restaurant is located" (Exhibit R2). The document he produced was a copy of a letter dated 12 September 2000 from Messrs Barlow Lyde & Gilbert attaching a copy of an incomplete land search record from Sai Kung Land Register dated 11/9/2000. Also, he produced a copy of a letter he wrote on 5 August 2002 to Margaret Chin C/o Pop In Ltd. (Exhibit R4).

15. Finally, Mr. Rahman produced some copies of letters pasted outside the Premises, addressed from the Food and Environment Hygiene Department ("FEHG") and from the Liquor Licensing Board regarding the cancellation of licenses, as well as a copy of a letter from the Independent Police Complaints Council dated 17 September 2002 to Ms. Chin. These documents were collectively produced and marked as Exhibit R5. In particular, Mr. Rahman pointed out that according to these letters, the general restaurant license held by Pop-In Limited was cancelled by Ms. Chin by a letter dated 2 October 2002 to FEHG. A staff of FEHG called and informed him the decision in person on 3 October 2002. Similarly, the Liquor Licensing Board replied by a letter dated 16 August 2002 that after receiving a notice of cancellation dated 25 July 2002 from Ms. Chin, the Board accepted to cancel the license as requested.

16. In his submission, Mr. Rahman said that he had been advised by a friend that since there was no tenancy between the Applicant and the Respondent, the application was outside the jurisdiction of the Lands Tribunal.

The findings of the Tribunal

17. Since Ms. Chin for the Applicant conceded that she agreed with the Respondent that the latter owned the Applicant's monthly fee / rent from 20 May 2002, the Tribunal finds that there is consensus of fact in this regard. Although Mr. Rahman in his evidence in chief claimed that after 20 May 2002, he had offered to pay rent by a cheque once but the cheque was returned to him. However, it remained unchallenged that even after the commencement of the present proceeding, the Respondent had not paid any rent for the period after 20 May 2002. As to whether the Respondent had attempted to pay the rent but was not accepted by Ms. Chin, the Tribunal does not find, on balance of probabilities, to accept this evidence by Mr. Rahman.

18. Although the Respondent did not state in the notice of opposition that the Applicant was not the owner of the Premises, he sought to produce during the hearing Exhibit R2 to deny that neither Ms. Chin nor her two companies were the owner of the Premises. However, this document, which was dated in the month of September 2000, was over 2 years away from the date of the Applicant's application of 4 October 2002. Therefore, it cannot be accepted as a piece of appropriate and sufficient evidence. It would be a very simple matter for Mr. Rahman to obtain an up-dated land search record of the Premises to prove his point, if he wished to. On the other hand, the contents of the copy of a letter dated 2 December 2002 from the Applicant's accountant, who confirmed that all 9 units in the building of Lot 787 in DD 215 (which included the Premises) was not disputed by the Respondent. Therefore, this Tribunal accepts Ms. Chin's evidence that the Applicant was the registered owner of the Premises in this application.

19. The only remaining ground raised by the Respondent to oppose the application was that "there is no tenancy agreement in place, ...The License was granted to Mediteraneo Ltd. by Pop In Ltd." (see notice of opposition filed by the Respondent). However, it was noted that in the same notice of opposition, the Respondent pleaded that "As requested by landlord Mediteraneo was paying license agreement fees to Fur hunter Ltd." It does not make sense that the word "landlord" here referred to the Applicant, Fur Hunter Ltd. So, the word "landlord" referred to by the Respondent must be Pop In Ltd. In other words, by its own admission, the Respondent already pleaded that Pop In Ltd. was the landlord of the Premises and, at the request of Pop In Ltd., the Respondent was paying license agreement fees to Fur Hunter Ltd.

20. Although two ex-directors of the Respondent wrote letters confirming that the agreement reached among the 3 parties: the Applicant, Pop In Ltd. and the Respondent was only a license but not a tenancy agreement, these are mere statements. The Tribunal finds that it would be necessary to study in more details the terms of the agreement, the manner in which the agreement have been complied with, the past conduct of the parties, as evidenced by the exchange of correspondence between the parties before the commencement of the present application by the Applicant.

22. In the agreement signed by the Applicant, Pop In Ltd. and the Respondent on 20 March 2000 (i.e. Exhibit A1), the Tribunal notes that the following wordings may support the Respondent's contention that there was no tenancy agreement between the Applicant, Fur Hunter Ltd. (Party 1) and Mediteraneo Ltd. (Party 3):

Preamble of the agreement - "Whereas Party 1 is the owner of the premises ...and Prty 2 is the holder of a Resturant and Liquor Licence ("the Licences") for a portion of the Premises, and Party 3 is desirous of opening and operating a resturant on the Premises, the parties have therefore agreed that Party 2 with the authorization of Party 1 shall sub-let the Premises to Party 3 and Party 3 shall operate the restaurant business on behalf of Party 2, against the payment of a monthly fee ("Monthly Fee") to Party 2, using the existing Premises, Licences, fixtures and fittings, furnishings, facilities, decoration and equipment located at the premises.

Clause 5 - In addition to the Monthly Fee, Party 2 will receive 10 of the net profits on sales exceeding HK$400,000 in any given calendar month.

23. The monthly money payable by Party 3 to Party 2 was described in the agreement as "Monthly Fee", but not as rent. However, we heard evidence from the Mr. Rahman that in all the invoices and receipts issued by Party 2 and Ms. Chin, the monthly sum the Respondent had been paying were referred to as "rent" by both Party 2 and Party 3. Although Mr. Rahman said that it was a mistake of the Respondent's accounting department to refer to the sums payable by the Respondent under the said agreement as the "rents", the Tribunal finds that they were very unlikely the results of sheer mistakes of the Respondent's accounting department.

24. In addition, the Tribunal finds that contrary to the Respondent's submission, there is over-whelming evidence that there was a sub-letting relationship between Pop In Ltd. (Party 2) and the Respondent, Mediteraneo Ltd. (Party 3). The following are extracts from the agreement in support of this conclusion:

Clause 1 - Party 2 sub-lets those portions of the Premises outlined in Appendix 1 ("the Restaurant Area") to Party ...

Clause 3- "Party 1 hereby authorizes Party 2 to sub-let the Restaurant Area to Party 3 without restriction, notwithstanding any prior agreements to the contrary."

Clause 4 - "... except that Party 2 shall have use of the Premises on a rent-free basis until the sooner of May 20 2000 or when the resturant opens for business (but in any case at least until May 1 2000).

Clause 6 - "Party 3 shall have full use of the Restaurant Area as described and coloured pink in the attached Appendix 1, at such hours and days as noted in Appendix 1, except that Party 2 will have use of the kitchen during such hours and under such terms as noted in Appendix 1." (In this respect, Mr. Rahman's oral evidence was that it had been agreed by the parties that the Respondent should be entitled to exclusive use of all the Premises during the term of the Agreement, with the proviso that Ms. Chin reserved the rights to use the kitchen on the ground floor of Section B of the lot for certain hours during the day time for 4 p.m. except Saturday, Sunday and public holidays.)

Clause 9 - Party 3 will upon signing of this Agreement pay to Party 2 a rental deposit of HK$90,000, being the equivalent of three months' rent.

25. Also, the Tribunal finds that in most of the documents produced by the Respondent (i.e. Exhibits R1 to R4), the said agreement at Exhibit A1 was all the time referred to by the Respondent as a lease, under which the Respondent was renting the Premises from Pop In Ltd. and Ms. Chin. On the contrary, there was no reference at all that the said agreement was a license agreement between the Applicant and the Respondent.

26. Summing up, the Tribunal finds that there was a landlord and tenant relationship between Pop In Ltd. and the Respondent. The agreement signed by the 3 parties in the year 2000 was a lease agreement in which Pop In Ltd. was the landlord of the Premises with the Respondent the tenant. Although the monthly sum of money payable by the Respondent to Pop In Ltd. was described in the agreement as a Monthly Fee, the description cannot be taken as conclusive. For reasons set out above, the Tribunal finds that the monthly sum payable was monthly rent.

27. However, although the Tribunal finds and agrees with the Applicant that the Applicant was the registered owner of the Premises, there was no sufficient evidence that there was any direct landlord and tenant relationship between the Applicant and the Respondent.

28. In addition, the Tribunal accepts the evidence that on the request of Pop In Ltd., the Respondent paid the monthly rent to Fur Hunter Ltd. This is understandable since Fur Hunter Ltd. was the registered owner and had to pay the monthly mortgage sum using the rent received. However, although the agreement described the letting between Pop In Ltd. and the Respondent as a sub-letting, there was no evidence from the Applicant that there was any head lease between the Applicant and Pop In Ltd. Also, there was no evidence that Pop In Ltd. had ever paid any rent to the Applicant. In fact, even if there was a head lease between the Applicant and Pop In Ltd., the Tribunal finds that the Tribunal has no jurisdiction to deal with the application by the Applicant for non-payment of rent from the Respondent to Pop In Ltd. Furthermore, even if the Applicant and Pop In Ltd. were owned and controlled by Ms. Chin, it does not follow that the Applicant could apply to the Tribunal against the Respondent simply on the basis that the Applicant was the registered owner of the Premises and that the Respondent owned rents to Pop In Ltd., which was owned by the same individual (who was the owner of the Applicant). This is because both the Applicant and Pop In Ltd. were incorporated companies and as such, were treated as separate legal entities.

30. Lastly, the Tribunal also considered if there was any principal and agent relationship between the Applicant and Pop In Ltd. There was however no evidence at all that in the landlord and tenant relationship between Pop In Ltd. and the Respondent, the Applicant acted as the principal for Pop In Ltd. with Pop In Ltd. serving as the agent of the Applicant.

31. As such, since there was no direct landlord and tenant relationship between the Applicant and the Respondent, the Tribunal decides that under Section 8 of the Lands Tribunal Ordinance, the Tribunal does not have jurisdiction on the Applicant's application. Therefore, the application fails on this ground.

Order

1. The Applicant's application dated 24 October 2002 be dismissed;

2. The Applicant shall pay the Respondent's costs of this application, which is summarily fixed at $1,000.