Gloryson Ltd. v. Alfred Lau & Co.

LDPE238/2002
(Review)

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

New Tenancy Application No. 238 of 2002

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JUDGMENT

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Background

1. The Applicant was the former landlord and the Respondent the tenant of the subject premises known as Unit 1901-2 Wing Shan Tower, 173 Des Voeux Road Central, Hong Kong ("the Premises"). According to the information given by both parties, the Applicant has disposed of the Premises on 30 April 2002. Prior to the assignment of the Premises to the new owner, the Applicant filed an application to the Tribunal on 7 March 2002 (as amended on 26 March 2002), applying for recovery of possession of the Premises on the ground that "the Respondent has failed to pay rent since 1 December 2001 and the expiry of Tenancy Agreement on 11 March 2002, as per attached".

2. On 31 July 2002, the judgment for the Applicant's application was handed down to the parties. The orders were:

1.	The Application for vacant possession of the suite premises to the Applicant is dismissed;
2.	The Respondent shall within 7 days from today pay the Applicant arrears of mesne profits from 12 March 2002 to 30 April 2002 as assessed by the Tribunal in the sum of $25,664.52;
3.	The Respondent shall also within 7 days from today pay the Applicant (i) arrear of rates for the period from 1 April 20002 to 30 April 2002 in the sum of $244.95 and (ii) arrears of management fee for the period from 12 March 2002 to 30 April 2002 in the sum of $7,699.35;
4.	The Respondent shall within 7 days from today pay the Applicant's costs of this Application, in the sum of $540;
5.	Payment out to the Applicant upon payment in by the Respondent, if any.

3. On 27 August 2002, the Respondent filed an application for review of the judgment dated 31 July 2002. The Respondent also filed an affirmation setting out the following reasons for the review:

1.	The mesne profit should be calculated at the rate of $10 per sq. ft., instead of $12 per sq. ft. as determined by the Tribunal;
2.	There was no opportunity for him to argue for the costs of the original application before the Tribunal handed down its Judgment including a cost order after receiving written submissions by the parties;
3.	The Applicant had without lawful ground and justification deducted a sum of $40,319.07 from the deposit of the Respondent, leaving only a balance of $2,830.93. The Respondent submitted that the Tribunal should have the jurisdiction as the District Court in the granting of remedies and reliefs, equitable or legal, as the District Court.

4. On 27 August 2002, the review application was fixed for hearing on 10 September 2002

Assessment of the mesne profit of the Premises from 12 March 2002 to 30 April 2002

5. The Respondent produced as an attachment to his Affirmation a copy of the tenancy agreement of the Premises between the Respondent and the new landlord. That tenancy agreement was dated 8 August 2002, eight days following the date of the Judgment for the original application. In clause (1) of that tenancy agreement, the rent was stated as $13,000 per month, exclusive of rates, management fee and Government Rent. Since the agreed gross area of the Premises is 1,300 sq. ft., the unit rate of the current rent passing is $10 per sq. ft. of gross area.

6. We find that that rental evidence adduced by the Respondent could not have been made available to the Tribunal when the matter of the mesne profit was considered in the hearing for the original application. And, although there is the time difference (of about 5 months) between the date of commencement of that new tenancy for the Premises and the subject period under consideration, it is not too far away for the purpose of valuation.

7. The Applicant did not object to the production of that new rental evidence by the Respondent. Also, the Applicant chose not to make any submission regarding the revised assessment of mesne profit by the Respondent.

8. In view of the new evidence produced by the Respondent and that no other evidence was adduced by the Applicant regarding the assessment of mesne profit, the Tribunal agrees to re-assess the mesne profit of the Premises for the period from 12 March 2002 to 30 April 2002 by using a unit rate of $10 per sq. ft., i.e., same as that fetched by the new tenancy of the Premises. Therefore, applying this rate to the gross floor area of the Premises, the mesne profit for the said period is estimated to be in the sum of $21,387 (i.e. $10 per sq. ft. x 1,300 sq. ft. x [1 +{20/31}]).

Deduction of deposit by the Applicant

9. The Respondent submitted that the Applicant had wrongfully deducted a sum of $40,319.07 from the deposit of the Respondent, leaving only a balance of $2,830.93. The Respondent stated in his Affirmation attached to the present review application that the Tribunal had the jurisdiction to grant remedies and reliefs, equitable or legal, as the District Court. Therefore, the Tribunal erred in the Judgment of 31 July 2002 in saying that the matter of the Respondent's allegation did not form the subject matter of the Applicant's original application and was also outside the jurisdiction of the Tribunal.

10. It turned out that the version of the Lands Tribunal Ordinance ("the Ordinance") quoted by the Respondent was an out-dated issue of the Ordinance (Cap. 17 of the Laws of Hong Kong). According to the current version of the Ordinance, sub-section (9) of section (8) should read, as follows:-

"(9) In the exercise of its jurisdiction, the Tribunal shall have the same jurisidiction to grant remedies and reliefs, equitable or legal, as the Court of First Instance." (Added 30 of 1983 s.2. Amended 27 of 1993 s.43; 25 of 1998 s.2)

11. However, the Applicant's original application was made pursuant to sub-section (8) of the Ordinance, which also contains many other sub-sections, in addition to sub-section (9). In particular, sub-section (8) of section 8 is relevant in processing the original application by the Applicant:

" (8) The Tribunal shall have the jurisdiction, in any application for possession or for ejectment, under the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) or otherwise, and in any application for a new tenancy under Part IV of that Ordinance, whether or not it grants any such application, to make orders for the payment of rent, mesne profits, including interim payments of rent and mesne profits, and for the payment of any other money which is due under the tenancy or sub-tenancy." (underline added)

12. Therefore, it is abundantly clear that although the Tribunal did not grant an order for possession, the Tribunal did have the jurisdiction to make orders for the payment of mesne profits and any other money (i.e., rates and management fee) that is due under the tenancy.

13. Also, sub-section (8A) of section 8 has the following provision:

"(8A) The Tribunal shall have jurisdiction to determine any claim or counterclaim or set-off and counterclaim transferred to it under section 7 or 10 of the Small Claims Tribunal Ordinance (Cap. 338)."

14. Therefore, apart from the cases covered by the above sub-section (8A) of section 8 of the Ordinance, there is no provision under the Ordinance for the Tribunal to determine any counterclaim made by the Respondent, including an alleged wrongful deduction of money from the deposit kept by the Applicant, in an application for possession and payment of mesne profits and any other money due under the tenancy (i.e. the original application lodged by the Applicant).

15. Whilst sub-section (9) of section 8 of the said Ordinance provides that the Tribunal shall have "the same jurisdiction to grant remedies and reliefs, equitable or legal, as the Court of First Instance", this must be read in the context of the first few words of the said sub-section, "In the exercise of its jurisdiction." That is it say, the said sub-section did not state that the Tribunal has the same jurisdiction as the Court of First Instance, when dealing with such matter as for instance, a counter claim by the Respondent that the Applicant wrongfully deducted a certain sum of money from the Respondent's deposit kept by the Applicant. For this reason, the Tribunal decides that the Respondent's submission in the review cannot be supported by interpreting section 8 of the said Ordinance as a whole.

Existence of rent-free period from 12 March 2002

16. Although the Respondent did not state this as a ground in his Affirmation, he repeated in his submission what he had said before regarding his interpretation of the rent-free period provisions in the lease signed by the Applicant and the Respondent. He first said that "by conduct", he should be entitled a rent-free period from 12 March 2002, during the third-year of the tenancy. When asked by the Tribunal to clarify the meaning of "by conduct", the Respondent admitted that what he actually meant was that "by implication", there should be a rent-free period for the option year.

17. The Applicant opposed this application, and submitted that the reasoning of the Tribunal had been clearly set out in the Judgment dated 31 July 2002.

18. The Tribunal finds that the Respondent was repeating himself in the review hearing what he had said in the original hearing. His reasons for suggesting that there should be a rent-free period in the third year of the tenancy were the same as before. There is nothing new in his arguments given in the review. Since the Tribunal thoroughly considered the matter in the Judgment dated 31 July 2002, the Tribunal is not going to repeat all the analysis here again. In a nutshell, the main reason for rejecting the Respondent's argument was that in the original written tenancy agreement entered into by the parties, the rent-free period referred to 4 specified months during the 2-year term of the tenancy. Whilst the said tenancy agreement mentioned about "with an option to renew for another 1 year lease commencing from 12th March 2002 to 11th March 2003 subject to the market rate," there was no similar or other provision for any rent-free period during the option year. Therefore, contrary to what the Respondent suggested, there was no provision stating that the rent-free period in the option year would be automatically given. So, the agreement should not be construed in such a way that "by implication", a rent-free period in the option year would have to be given by the Applicant. Hence, the Respondent's argument for a 2-months' rent-free period from 12 March 2002 must fail.

Cost of the original application

19. The Respondent submitted that since according to the Judgment given on 31 July 2002, the Applicant's application for possession was dismissed by the Tribunal, the Respondent should be awarded the costs of the original application but not the other way round. Also, the Respondent added that the Applicant had made an error in the application in that the Applicant applied for recovery of rent, but not mesne profit. Finally, the Respondent submitted that the costs for the original application should be awarded to the Respondent, at District Court scale, to be taxed if not agreed.

20. The Respondent submitted that since Mr. Alfred Lau was a solicitor, he was acting for the Respondent, Alfred Lau & Co., in the capacity as the latter's solicitor but not as the latter's principal appearing in person. The Tribunal cannot accept this argument. The Tribunal has checked the hand written notes of the proceedings and find that Mr. Alfred Lau did represent the Respondent in these hearings held on 4 different dates, 30 April 2002, 29 May 2002, 21 June 2002 and 31 July 2002. However, there was no other person or solicitor representing the Respondent while Mr. Alfred Lau was giving evidence. For example, on 29 May 2002 and 21 June 2002, Mr. Alfred Lau himself gave much evidence regarding the negotiation with the Applicant and the new landlord, and the valuation of the mesne profits respectively.

21. In addition, the Tribunal finds that before giving evidence, Mr. Alfred Lau affirmed in each and every occasion in words that follow: "I (name in full) solemnly affirm that the evidence that I shall give shall be the truth, the whole truth and nothing but the truth."

22. In the circumstances, the Tribunal cannot agree that even if costs should be awarded to the Respondent, it should be awarded on solicitor scale as if a solicitor represented the Respondent. Therefore, partly for this reason and partly because the Applicant only sought costs in the sum of $540, the Tribunal decided to award costs summarily after receiving the written submissions by the parties and without hearing the parties' submissions on costs. The Tribunal reached such a decision since the Tribunal considered that it would be more cost effective to all the parties. However, as a matter of principle, the Tribunal agrees with the Respondent that the parties do have the rights to address the Tribunal on the matter of costs. Therefore, in the review, the parties were invited to address the Tribunal again on this matter. The Respondent's position and reasons for seeking costs have been summarized above. On the other hand, the Applicant submitted that the same cost order as appearing in the Judgment dated 31 July 2002 should remain unchanged.

23. The Tribunal has considered the submissions on costs put forwarded by the Applicant and the Respondent. Regarding the Respondent's argument that the Application for possession was dismissed, the Tribunal would like to point out that this matter had already been considered in the Judgment dated 31 July 2002. The important point here is whether the cause of action existed at the date of the original application by the Applicant (i.e., the date of the Application, Form 22). The Tribunal found and stated in the Judgment dated 31 July 2002 that from the evidence available to the Tribunal, the cause of action did exist at the date of the original application. Since the Respondent did not even rebut this finding in his review application, the Tribunal finds it hard to understand his argument that he should be awarded costs only because the Tribunal did not make an order for possession as originally sought by the Respondent. In practice, there may well be many reasons for not granting an order for possession, such as when the tenant has already left the premises, or the tenant has already returned the premises to the landlord, or as in this case, the old landlord has sold the premises to a new landlord in the interim period; however, either one of these circumstances has nothing to do with the cause of action and the reasons for awarding costs. That the Respondent cannot understand this simple logic, which has been clearly set out in the Judgment dated 31 July 2002 is quite beyond the Tribunal's understanding.

Costs of this review

24. Of all the grounds stated by the Respondent as to be the reasons for the review, the Tribunal finds that the Respondent was only correct in stating that he did not have the opportunity to argue for costs after his filing of the written submission but before the Tribunal handed down the written Judgment, which included the costs order on 31 July 2002. Although the Respondent succeeded to have the mesne profit re-assessed in his favor, this was only due to the production by the Respondent of new evidence, which was not made and could not have been made available to the Tribunal in the original hearing. So, the Respondent should not be awarded costs on that issue. For all other reasons, the Respondent was not correct. The Respondent failed to persuade the Tribunal to set aside or amend any of the Orders made on 31 July 2002, other than the Order on mesne profits. This includes the following: he failed to persuade the Tribunal to decide on the matter of his alleged unlawful deduction of deposit by the Applicant; he failed to persuade the Tribunal to reverse or amend its decision on the interpretation of rent-free period; and he failed to revere or amend the costs order of the original application. Hence, all in all, if the Applicant had asked for the costs of this review application, the Tribunal shall award costs to the Applicant. Nevertheless, probably since the Applicant was represented by a staff of the Applicant's agent, the Applicant did not ask for the costs of this review application. Hence, in the circumstances, the Tribunal decides not to give any costs order for this review.

Orders for the Review

25. Therefore, the following orders be made:

1. Upon review, the Order No. (2) made on 31 July 2002 be amended to as follows:

"The Respondent shall pay the Applicant arrears of mesne profits from 12 March 2002 to 30 April 2002 as assessed by the Tribunal in the sum of $21,387";

2. Apart from Order No. (2), all the other Orders made on 31 July 2002 remain unchanged;

3. There is no order as to costs for this review application.