FUBON BANK (HONG KONG) LTD v. WELFORM LTD

 LDPD 3138/2005

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LDPD Application No. 3138 of 2005

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J U D G M E N T

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Background

1. The Applicant is the landlord/mortgagee in possession and the Respondent the tenant of the premises known as House No. 22, 20^th Street, Hong Lok Yuen, Tai Po, New Territories, (“the Premises”).  The Applicant let the Premises to the Respondent at a rent of $16,000 per month, inclusive of Government rent, rates and management fees payable on the 1^st day of each month, for a period of 2 years commencing from 1 December 2002 under a tenancy agreement dated 18 November 2002.

The Applicant’ Application

2. The Applicant filed on 3 November 2005 a Notice of Application (Form 22) in the Lands Tribunal seeking possession of the Premises on the ground that (i) the original term of the written tenancy agreement had expired on 30 November 2004, and (ii) notwithstanding the expiry of a mutually agreed period of continued occupation, from 1 December 2004 to 28 February 2005 at an agreed rent of $18,500 per month (inclusive of Government rent, rates & management fees), the Respondent still failed to give back vacant possession of the Premises to the Applicant after 28 February 2005.  The Applicants sought the following orders: -

(1) order for vacant possession;

(2) arrears of rent/mesne profits for the period from 1 June 2005 to the date of delivery of vacant possession of the Premises; and

(3) costs.

The Respondent’s Notice of Opposition

3. The Respondent filed a Notice of Opposition (Form 7) on 16 November 2005, signed by a Ms. Cheng Kwok-gee Tina (“Ms. Tina Cheng”) for and on behalf of Welform Limited, the Respondent.  Ms. Tina Cheng stated that she, “as a shareholder and authorized person” was not informed of “any mutual agreement between Welform Ltd and Fubon Bank whatsoever except for the two year Tenancy Agreement with expiry date of 30 November 2004 for monthly rental payment of HKD16,000.-”.   She alleged that the Applicant asked to increase the rent from $16,000 to $20,000 per month but the Respondent refused to accept the suggested new rent and instead “proposed to pay for HKD$18,500.- for the three months after expiry of the tenancy agreement to try look for another premises for rent.”

4. The Respondent further alleged that the Applicant failed to inform the Respondent and revealed the fact that if the Respondent refused to pay for the new rent of $20,000 per month the Applicant would need to serve the “transitional termination notice”.

5. The Respondent also stated that after being advised by a solicitor, the Respondent started paying the original rent of $16,000 from the month of June 2005.  The Applicant accepted these cheques without stating that they wanted possession of the Premises.

6. Finally, the Respondent acknowledged that the Applicant had only served the required “transitional termination notice” on 21 October 2005.

Payment of rent/mesne profits in the interim

7. It was not disputed that after the expiry of the original term on 30 November 2004, the Respondent paid the following sums to the Applicant: -

Cheque	Date of Cheque	Amount	Rent for the period
853634	30/Nov/2004	$16,000	1/Dec/2004 to 31/Dec/2004
934339	7/Jan/2005	$2,500	Additional rent for 1/Dec/2004 to 31/Dec/2004
934340	7/Jan/2005	$18,500	1/Jan/2005 to 31/Jan/2005
934085	1/Feb/2005	$18,500	1/Feb/2005 to 28/Feb/2005
934146	1/Mar/2005	$18,500	1/Mar/2005 to 31/Mar/2005
934221	4/Apr/2005	$18,500	1/Apr/2005 to 30/Apr/2005
934265	3/May/2005	$18,500	1/May/2005 to 31/May/2005
934377	2/Jun/2005	$16,000	1/Jun/2005 to 30/Jun/2005

8. There was no dispute between the parties that the Respondent continued to pay a sum of $16,000 as rent at the beginning of each month from June 2005 onwards.

Evidence from the parties

9. The Applicant was represented by Ms. Chow Shuk-ling (“Ms. Elaine Chow”), head of the Bank’s Real Estate who also gave evidence, producing a number of Exhibits detailing (i) copy of the original written tenancy agreement, (ii) copies of correspondence between the parties including copies of payment/receipt advice from the Applicant and cheques as well as (iii) copies of letters from the Applicant’s in-house Legal Counsel to the Respondent and a copy of a letter dated 7 July 2005 from Messrs. A. M. Mui & Kwan, solicitor for the Respondent at one stage of time.  The Applicant’s position was summarized in the response letter dated 19 July 2005 (signed by her Legal Counsel) addressed to Messrs. A.M. Mui & Kwan, the then solicitor for the Respondent. 

10. The Respondent was represented by Ms. Tina Cheng, a director of the company who also gave evidence.  Apart from repeating what she had already stated in the Notice of Opposition, there was not much evidence from her.  The Respondent’s case was indeed fully summed up in  Messrs. A. M. Mui & Kwan’s letter of 7 July 2005.

The issues of the case

11. There are 3 issues in this case: (1) whether there was any agreement for extension of tenancy agreement or a new tenancy agreement at a monthly rent of $18,500 on inclusive basis for the 3-month period from the original expiry of the written tenancy as contended by the Applicant (i.e., from 1 December 2004 to 28 February 2005); (2) whether the grounds pleaded by the Respondent (i.e. firstly, that the Respondent was ignorant of law and/or secondly that the Applicant did not inform and/or mislead the Respondent that the Respondent was entitled a 12-month period of notice of termination at the previous rent of $16,000 prior to the original expiry date of 30 November 2005) should have any effect on the validity of the agreement for extension of tenancy agreement or a new tenancy agreement as stated above; (3) whether the Applicant has given any valid notice to quit to the Respondent on the Respondent’s case that there was an agreed extension of tenancy agreement or a new tenancy agreement of 3-month duration commencing from 1 December 2004 and expiring on 28 February 2005. 

12. The Applicant pleaded that, “As a precautionary measure, the Applicant did on 21 October 2005 serve a transitional termination notice on the Respondent on the condition that it was without prejudice to the Applicant’s rights to seek a possession order in respect of the subject premises from the Lands Tribunal if the Applicant was legally entitled to do so”.   On the other hand, the Respondent pleaded in the Notice of Opposition that ‘Speaking for themselves and protecting advantages for the Fubon Bank doesn’t really serve the genuine meaning and function of the “transitional termination notice” and I sincerely request the serve of the “transitional termination notice”…’.  However, regardless of the validly of the “transitional termination notice”, it was never the Applicant’s case that following the expiry of the date specified in the said “transitional termination notice”, the Respondent was still in possession.  Therefore, I do not think that it is necessary for me to decide on the validity of the “transitional termination notice” in the present proceedings.

The Law

13. Under section 5 of the Landlord and Tenant (Consolidation) (Amendment) Ordinance 2004 (“Amendment Ordinance”), it was provided that: -

“5.    Savings in respect of Part IV

(1)   ………..

(2)   ………..

(3)   The term “the tenancy” as used in subsections (1)(c) and (d) does not include any new tenancy pursuant to Part IV on or after the commencement date.

(4)    The requirement in subsection (2) for a transitional termination notice in respect of a tenancy, and any such notice that has been issued in respect of a tenancy, ceased to apply if, on or after the commencement date –

(a)    the parties to the tenancy –

(i)     agree to some other period for notice of terminations; or

(ii)    alter any other term of the tenancy; or

…………………”

(Underline added)

Whether there was an agreement for extension of tenancy agreement or a new tenancy agreement after 28 February 2005

14. The Applicant pleaded that there was a new tenancy for several reasons: the parties orally discussed and agreed for a new short term tenancy of 3-month with the Respondent represented by a Ms. Ngai; there was a confirmed offer in writing dated 3 January 2005 from the Applicant followed by the issues of payment advice and receipt from the Applicant to the Respondent; the performance of the parties subsequent to the above said oral agreement including the continued occupation of the said 3-month period by the Respondent and the subsequent payments of agreed rents of $18,500 per month, including the additional rent of $2,500 for the month of December 2004 (as the Respondent had already purportedly paid prior to the oral agreement a rent of $16,000 for that month); and the continued payment of $18,500 per month for the months of March, April and May 2005 by the Respondent to the Applicant even after the expiry of the 3-month extension period.  However, the Applicant contended that the Respondent was estopped from denying the existence of the oral agreement several months after the completion of the 3-month extension period at 28 February 2005 (the letter from the Respondent’s solicitor being 7 July 2005).

15. Although Ms. Tina Cheng for the Respondent denied that Ms. Ngai of her company had ever been authorized to negotiate and agree with the Applicant for any extension of tenancy or a new tenancy around the original expiry date of 30 November 2004, the Respondent admitted that they did propose “to pay for HKD$18,500.- for the three months after expiry of the tenancy agreement to try look for another premises for rent.”  There was also no denial of the subsequent continued occupation of the Premises as a tenant, the subsequent receipts of the payment advice and receipt from the Applicant and their actual payments of rent to the Applicant detailed in paragraph 7 above.

16. There was a dispute as to whether the Respondent has received the letter dated 3 January 2005 from the Respondent to the Applicant which, according to Ms. Elaine Chow of the Applicant, set down all the agreed terms for the extension of tenancy agreement or the 3-month new tenancy agreement.  Ms. Elaine Chow admitted that in retrospect, the only omission on the part of the Applicant was not to insist on the signing back from the Respondent the said letter.  

17. Having considered all the evidence, I decide to agree with the Applicant that there was an agreement for the extension period hence altering the original term of the expired tenancy.  I find that whether Ms. Ngai was ever authorized to agree orally with the Applicant is not the necessary condition for finding in favour of the Applicant.  Even if Ms. Ngai did not agree anything with the Applicant, or that Ms. Ngai without obtaining the necessary approval wrongly agreed with the Applicant the terms for the 3-month extension period, this does not affect the Applicant’s case that the Respondent has by conduct complied with each and every term for the 3-month extension period.  A tenancy does not have to be in writing, unless it is for a term over 3 years.  Also, even if, as contended by the Respondent, that the Respondent had not received the letter dated 3 January 2005 from the Applicant, it does not help the Respondent’s case either.  This is because it was not disputed by Ms. Tina Cheng for the Respondent that after the original tenancy expired on 30 November 2004, the Respondent chose to stay on as a Tenant and the Respondent did propose “to pay for HKD$18,500.- for the three months after expiry of the tenancy agreement to try look for another premises for rent” and then paid the additional rent of $2,500 for the month of December 2005, and then $18,500 for the months of January and February 2006.

18. To conclude, based on the evidence of the Respondent’s witness as well as the Applicant’s witness, I find that there was at least oral contract for an extension of the originally expired tenancy agreement.  On this basis, and having regarding to section 5(4) of the the Amendment Ordinance, the Applicant is no longer required to serve onto the Respondent a Transitional Termination Notice upon expiration of this extension period.  Also, since the extension period was for a period of a fixed term of 3-month but with no specific provision on the service of notice to quit, I find that the fixed term should end upon expiry on 28 February 2006 and no further notice to quit from the Applicant is required.  

Whether any of the grounds pleaded by the Respondent was a valid ground to invalidate the new oral contract between the parties

19. It was the Respondent’s case that the Applicant deliberately withheld the security of tenure protection afforded to the Respondent by the Amendment Ordinance.  However, it is trite law that ignorance of any law is not a defence.  Also, in any contract negotiation, it is not a legal requirement that a party has to inform the other party the latter’s legal position under the law.  One only has oneself to blame if one is ignorant of any amendments or additions of the law.  For these reasons, I hold that the grounds pleaded by the Respondent to invalidate the new oral contract between the parties be dismissed.

Whether the Applicant has given any valid notice to quit to the Respondent

20. It was the Applicant’s case that although there was an agreed extension of lease or a new lease of 3-month commencing from 1 December 2004 and expiring on 28 February 2005, the Applicant has already served a valid notice to quit by the Applicant’s letter dated 19 July 2005.  However, I note that the said letter was dated 19 July 2005 whilst on page 2 of the letter, the Applicant advised the Respondent, “We hereby give you one month’s notice to quit and demand you to deliver vacant possession to us of the Property on or before 17 August 2005.  Your client is asked to contact our Real Estate Division at 2842-6148 to make all necessary arrangements”.  And on page 1 of the said letter, it was stated that the letter was sent “By fax 2868 3881 followed by post”. 

21. Therefore, even assuming that the other party’s solicitor received the said letter by fax on the same date of 19 July 2005, there was less than “one month’s notice” and hence, no valid 1 month’s notice to quit has ever been served. 

22. However, the Applicant’s solicitor in the letter dated 19 July 2005 clarified clearly that: -

(i)    the Applicant only recognised the Respondent as a licensee after 28 February 2005; and

(ii)   even though the Respondent paid $18,500 per month for the period from 1 March 2005 to 31 May 2005, the Applicant did not recognise the status of the Respondent as a month-to-month tenant after 28 February 2005. 

23. Having considered all the evidence, I agree that the Respondent became a licensee after 28 February 2005.  Since it is not necessary for the Applicant to give a full 1 month’s notice to quit to a former tenant who has become a licensee, the mistake in the counting of 1 month in the Applicant’s solicitor’s letter of 19 July 2005 is immaterial.

24. Summing up, I find that all the grounds of opposition raised by the Respondent fail.

Orders

25. I make the following orders: -

1.   The Applicant shall recover vacant possession of the Premises from the Respondent;

2.   The Respondent do pay the Applicant arrears of mesne profits from the 1 June 2005 to 28 February 2006 at the rate of $2,500 per month in the total sum of $22,500;

3.   The Respondent do pay the Applicant arrears of mesne profits from 1 March 2006 to the date of recovery of vacant possession at the rate of $18,500 per month (the Applicant has to set off the sum of mesne profits at the rate of $16,000 per month, or any other sum, that has been paid to the Respondent for the period of occupation from 1 March 2006);

4.   The Respondent do pay the Applicant the costs of this Application which is summarily assessed at $1,000;

5.   Payment out of the sum to the Applicant after payment of the same into the Tribunal by the Respondent;

 (Payments pursuant to this order should be made in cash, by cashier orders issued by banks in Hong Kong or by cheques drawn by firms of solicitors in Hong Kong.  This Tribunal does not accept any other mode of payment pursuant to this order.)