PARTIARCH NOMINEES LIMITED v. LAW SERVICES LIMITED AND ANOTHER

HEAD NOTE

LANDLORD & TENANT - forfeiture for non-payment of rent - usual proviso for re-entry with stipulation of "penalty" for late payment - tenant a limited company - second respondent, occupier, guaranteed punctual payment of all liabilities of tenant - judgment by default against tenant.

IN THE LANDS TRIBUNAL OF HONG KONG

HOLDEN AT VICTORIA

APPLICATION NO. 28 OF 1986

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In the matter of an Application: -

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REASONS FOR DECISION

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1. On the 6th January 1986, the Applicant commenced these proceedings by filing a Notice of Application pursuant to Section 117(2) of the Landlord & Tenant (Consolidation) Ordinance (Cap. 7). It claimed against the First Respondent for possession of premises in Repulse Bay, arrears of rent amounting to $68,000, arrears of rates amounting to $5,875.75 and further rates at the rate of 2,797.98 per quarter from the 1st October 1985. Further or in the alternative, it claimed these sums from the second Respondent as guarantor.

2. In the body of Form 13 both respondents are described collectively as the tenant. However, in the other grounds and particulars, the claim is clearly formulated as one arising out of the forfeiture of a tenancy agreement between the Applicant and the First Respondent on the ground of non-payment of the monthly rent of $17,000. The agreement was dated the 25th January 1985 and was for a term of two years from the 15th January 1985. Clause 4(a) of the agreement contained the usual proviso for re-entry but also provided as follows:-

"In addition, a penalty of five per cent (5%) shall be levied on the Tenant whenever any part of the monthly rent hereby agreed upon is in arrears for more than seven (7) days. Should such arrears occur for more than thirty (30) days a further five per cent (5%) penalty shall be charged to the Tenant for each additional month throughout the period of the arrears,"

It was alleged that penalties under this provision began to be incurred in March 1985 and had amounted to $11,050 by the end of 1985. It was also alleged that the Second Respondent had, by a Guarantee dated the 25th January 1985, unconditionally and irrevocably guaranteed the full and punctual payment of all the indebtedness and liabilities of the First Respondent arising from the tenancy agreement.

3. On the 20th January 1986 the Form 13 was amended to include a claim for mesne profits and the penalties of $11,050. On the same date the Second Respondent filed Form 14 in which he described himself as "sub-tenant". No, or no other, grounds or particulars were given, and it is unclear whether he wished to be heard. The First Respondent did not file any Notice of Opposition.

4. On the 1st March 1986 the Applicant applied under Rule 13A of the Lands Tribunal Rules for orders in default. The Registrar raised some queries on the 4th March, and, in particular, advised it that the penalty should be judicially determined in accordance with the decision in Checkmate Enterprises Ltd. v. Kung Fan Bun (L.T. No. 416 of 1984; 6.12. 1984). The queries were dealt with, and on the 21st April 1986 the Registrar made against the First Respondent an order for vacant possession of the premises and for arrears of rent, mesne profits and rates. In the meantime a date was fixed for the hearing, and notice thereof was sent to the Applicant and the Second Respondent.

5. When the application came before me this morning., I indicated to counsel for the Applicant that the Tribunal had no jurisdiction in respect of the claim against the Second Respondent, since his Liability, if any, would arise under the guarantee, and would not be "due under the tenancy ....." of Section 8(8) of the Lands Tribunal Ordinance (Cap. 17). Counsel sought to overcome this difficulty by proposing to amend the particulars to allege that the Second Respondent was the servant or agent of the First Respondent and the occupier of the premises. I doubt whether a full-time practising barrister can be a servant of a limited company. But, even if he can, and he has been in occupation of the premises, I cannot see how any liability he might thereby incur would be due under the tenancy. In my view, the claim against the Second Respondent is clearly beyond the Tribunal's jurisdiction. As it appears to be for an amount or amounts in excess of the jurisdiction of the District Court, no time would be saved or advantage gained by forthwith transferring it to myself in my other capacity. Accordingly, I ordered it to be transferred to the High Court under Section 8A(1)(a) of the Lands Tribunal Ordinance.

6. The outstanding claim against the First Respondent for the alleged penalties is, in my view, clearly within the jurisdiction of the Tribunal, as well as the District Court. No Notice of Opposition has so far been given. Whether these sums are recoverable as agreed liquidated damages or unenforceable as penalties are questions which may be raised by one of the parties or the person who presides over the hearing. As the same questions may be raised by the Second Respondent, it seems to me that they should be dealt with at the same time and by the same tribunal. Accordingly, I considered that the remaining part of the proceedings against the first Respondent should "in the interests of justice", also be transferred to the High Court under Section 8A(1)(b) of the Lands Tribunal Ordinance, and I so ordered.