Greenville Converting Ltd. v. Fukasi Ltd.

LDNT440/2000

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Application No.: LDNT No. 440 of 2000

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JUDGMENT

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Background

(1) The Applicant is the tenant and the Respondent the landlord of the subject premises known as Flat B on 1st Floor and Car Parking Space No. 27 on Lower Ground Floor, Pinecrest, No. 65 Repulse Bay Road, Hong Kong ("the subject premises"). In the Notice of Application (Form 22) filed to the Tribunal on 8th December 2000 as amended on 22nd December 2000, the Applicant stated that the subject premises was held under a tenancy ("The Tenancy") for a term commencing from 25th December 1998 to 24th December 2000 at a monthly rent of $50,000. The Applicant applied for a new tenancy. The Respondent did not file any notice of opposition.

(2) During the hearing on 23rd March 2001, the Applicant in his opening proposed that the prevailing market rent (PMR) under the new tenancy for the subject premises should be $52,509 per month, exclusive of rates and management fee. The Respondent proposed that the PMR should be $71,000 as shown in the valuation report prepared by an expert witness and filed by the Respondent. The Respondent also produced a copy of the Form CR101 dated 7th June 2000 ("June 2000 CR101") served by the Respondent to the Applicant, terminating the tenancy on 10th December 2000. A copy of the Form CR102 served by the Applicant to the Respondent was also produced. They were marked as Exhibits R1 and R2. The Respondent submitted that based on the said Forms CR101 and CR102, the commencement date of the new tenancy should be 11th December 2000, the day following the termination date specified in the said Form CR101. The Applicant responded that since the expiry date of the existing tenancy was actually 24th December 2000, the commencement date of the new tenancy should be 25th December 2000. The hearing was adjourned for the parties' further consideration of the term of the new tenancy.

(3) After the short adjournment, the Respondent advised the Tribunal that they agreed to change the commencement date of the new tenancy to 25th December 2000, as suggested by the Applicant. However, the Applicant informed the Tribunal that after seeking advice from his lawyer, he maintained that the June 2000 CR101 was invalid. For that reason, the existing tenancy had not been duly terminated under the Landlord & Tenant (Consolidation) Ordinance ("the Ordinance"). The Applicant applied to the Tribunal for a preliminary ruling on this point before proceeding further with the hearing of the new tenancy application. The Respondent objected to the Applicant's application and said that the Tribunal should continue with the full hearing of the application, including the hearing on the terms of the proposed new tenancy. The Tribunal decided that in view of the objection raised by the Respondent, the Tribunal should continue to hear the application in full.

(4) The hearing continued on 20th April 2001 and 23rd May 2001. Mr. Wong Kang-wah Patrick, the representative of the Applicant gave evidence himself in person. He produced a large number of documents, marked as Exhibits A1 to A23. The Respondent called for the evidence of an expert witness, Mr. Thomas Poon, Chartered Surveyor. Mr. Poon produced his valuation report (Exhibit R5), a sheet showing his analysis of car park prices (Exhibit R6) and a number of photographs (Exhibits R7 to R10)

(5) In this Judgment, the Tribunal has to decide, firstly, on the issue raised by the Applicant, as to whether the Form CR101 dated 7th June 2000 was invalid and hence the existing tenancy had not been duly terminated under the Ordinance.

Events leading to the Application by the Applicant for a new tenancy

(6) It was common ground that the Applicant as the Tenant had signed a tenancy agreement on 19th November 1998 ("Tenancy Agreement") with Beauty Sky Holdings Limited ("Beauty Sky"), the former owner of the subject premises, the Respondent's predecessor in title as the Landlord. In Part I of the Schedule to the said Tenancy Agreement, the Term of the Tenancy was described as-

"TWO (2) YEARS from the 1st day of December 1998 to the 30th day of November 2000 both days inclusive." (see Exhibit R5, Appendix 7)

Under Part II of the said Tenancy Agreement, the Rent of $50,000 Hong Kong Currency per calendar month (exclusive of Rates and Management fee) is to be paid "in advance without any deduction whatsoever on the 1st day of each and every calendar month."

(7) The Applicant submitted that the former landlord, Beauty Sky had agreed with the Applicant to postpone the commencement date of the Tenancy Agreement from 1st December 1999 to 25th December 1998. The Applicant produced a letter dated 12th January 1999 from Messrs. Liu Chan & Lam, the then solicitors acting for the Applicant in the tenancy transaction, to Messrs. Y.C. Lee, Pang & Kwok, the solicitors acting for Beauty Sky at that time. They read:

" We refer to the above and are instructed to confirm that our respective clients have agreed to treat 25th December 1998 as the commencement date of the Tenancy notwithstanding the fact thet the Tenancy Agreement has been signed.

According, the rent day for payment of rent shall be the 25th day of each calendar month commencing from 25th December 1998."

(8) The Respondent served a Form CR101 dated 7th June 2000 ("June 2000 CR101") to the Applicant, terminating the Tenancy on 10th December 2000. The Applicant responded by way of service of a Form CR102. The Applicant also sent a letter dated 31st October 2000 to the Respondent reminding the latter that "the Expiry Date of the above Tenancy Agreement was revised to December 24, 2000 according to the letter which our Solicitor, Liu, Chan and Lam, Solicitors & Notaries, faxed to the original Landlord's Solicitor dated January 12, 1999."

(9) In response, the Respondent produced a letter dated 25th November 2000 from Messrs. Y.C. Lee, Pang & Kwok, the then solicitors for Beauty Sky, that Beauty Sky "only agreed to treat 25th December 1998 as the commencement date of the tenancy but the tenancy still expired on 30th November 2000."

The expiry date of the original Tenancy and the validity of the June CR101

(10) The Applicant submitted that because the former owner Beauty Sky could not give vacant possession as originally agreed, both parties at that time in 1998 consented to postpone the commencement date of the Tenancy to 25th December 1999, leaving the 2-year term unchanged. This consent was evidenced in writing by the tenant's lawyer to the landlord' lawyer. Should Beauty Sky only have consented to change the commencement date, leaving the expiry date unchanged, Beauty Sky should have declared at that time that the term of the Tenancy was not for two years, and should also have demanded to amend the original duration of the Tenancy (stated as "from 1st December 1998 to 30th November 2000 both days inclusive"). Since Beauty Sky as the former Landlord had not put forward that demand at that time, the duration of the Tenancy should remain unchanged, for two years. Given the unchanged 2-year term and the changed commencement date of 25th December 1998, it follows that the expiry date of that Tenancy should be 24th December 2000.

(11) The Applicant also submitted that the monthly rental period of both the former owner, Beauty Sky, and the new owner, the Respondent, were the same, from the 25th day of each month to the 24th day of the following month. If it were the former owner, Beauty Sky's original consent to waive the rent for the period from 1st December 1998 to 24th December 1998 but to maintain the original expiry date of 30 November 2000, the former owner should have stated that intention in the first rental receipt. However, the former owner did not choose to do that.

(12) The Applicant further submitted that the former owner had never asked to amend the "Duration" of "TWO (2) YEARS" as stated in Part I of the Schedule to the Tenancy Agreement. For the above reasons, the Applicant submitted that the June 2000 CR101 was invalid since the date of termination stated in that form was earlier than the expiry date of the Tenancy. Finally, the Applicant submitted that after they realized during the hearing on 23rd March 2000 that the June 2000 CR101 was invalid, they asked the Tribunal not to grant any new tenancy to the Applicant, notwithstanding that it was the Applicant who had applied by way of Form 22 for a new tenancy.

(13) On the other hand, the Respondent submitted that since it was the Applicant who alleged the existence of a collateral contract between the Applicant and Beauty Sky, the burden of proof is on the party which alleged the existence of that collateral contract. In "Universal Dockyard Ltd. v Trinity General Insurance Co. Ltd. [1989] 2 HKLR 160, PC, the Court held,

"Collateral contracts, the sole effect of which were to vary or add to the terms of the principal contract, had to be strictly proved; and not only the terms of such contracts, but also the existence of an animus contrahendi on the part of all the parties, had to be clearly shown."

(14) The Respondent in their written submission further submitted that "It is apparent from the Respondent's Letter that the previous landlord, Beauty Sky, has not agreed to a change of the expiry date of the tenancy. In fact, the Applicant's Letter itself did not even mention the postponement of expiry date of the Tenancy Agreement which is one of the most important terms of the Tenancy Agreement, neither a request nor a confirmation to postpone, which is now alleged by the Applicant. Had the parties' common intention been to postpone the expiry date, it is most unreasonable that the Applicant only instructed its solicitors to confirm the commencement date of payment of rent and not the expiry date of the Tenancy Agreement. In the circumstances, the Applicant's Letter cannot be taken as evidence suggesting postponement of expiry date of the Tenancy Agreement. The Applicant has failed to prove the common intention of all the parties and the terms of the alleged collateral contract regarding the expiry of the Tenancy Agreement."

(15) The Respondent further submitted that "the fact that the Applicant paid rent on the 25th day of every calendar month commencing from 25th December 1998 does not necessarily mean that the tenancy had to be terminated on the 24th December 2000. The tenant could always apportion the rental payment upon termination of the tenancy. The Applicant's argument thus falls away."

(16) Accordingly, the Respondent submitted that the June 2000 CR101 having been duly issued and served on the Applicant is valid and binding on the Applicant. As a result, the Tenancy Agreement of the subject premises had been duly terminated on 10th December 2000, which was the date of termination stated in the June 2000 CR101.

Determination by the Tribunal

(17) In Part I of the Schedule to the Tenancy Agreement, the duration of the tenancy ("TWO (2) YEARS") agreed between the Applicant and Beauty Sky was stated in the beginning of that part of the said Schedule. This was followed by the commencement date and then the expiry date of the Tenancy. This shows the importance that the parties, when entering into that Tenancy Agreement, gave to the Duration of the Tenancy.

(18) From the correspondence produced by the parties, although the Applicant first raised the issue of the change of commencement date and the expiry date of the tenancy, it was agreed by the Respondent that the commencement date of the Tenancy had been changed to 25th December 1998. Therefore, the fact that the commencement date of the Tenancy was in fact amended to December 1998 requires no further proof from either party. This fact must also be accepted by the Tribunal.

(19) Therefore, given that the commencement date of the Tenancy was agreed to be amended to 25th December 1998, and that there was no direct evidence from around the time of commencement date of the Tenancy that the parties had agreed to amend the Duration of the tenancy, which was an important term of the Tenancy Agreement, the Tribunal decides that it would only be logical and reasonable to accept the Applicant's submission that the expiry date of the Tenancy had to be changed. If we simply treat the date of 25th December 1998 as the agreed, revised commencement date of the Tenancy and accept that the "Duration of TWO (2) YEARS" term had not been changed, the expiry date must necessarily be changed to 24th December 2000. This is the direct consequence of the agreed change of the commencement date but no mention or evidence of any change of the Duration of the tenancy.

(20) Section 119 (Termination of tenancy by the landlord) of the Ordinance provides that:-

"(1) Subject to section 119N, the landlord may terminate a tenancy by a notice given to the tenant in the specified form stating the date of termination. (See Form CR101)

(2) Subject to subsection (3), a notice under this section shall not have effect unless it is given not more than 7 nor less than 6 months before the date of termination.

(3) (a) In the case of a tenancy which, apart from this Part, could have been brought to an end by notice to quit given by the landlord, the date of termination shall not be earlier than the earliest date on which, apart from this Part, the tenancy could have been brought to an end by notice to quit given by the landlord on the date of the giving of the notice under this section."

(21) In the circumstances, since the Tribunal accepts the Applicant's submission that as the June 2000 CR101 was invalid, the Applicant's application for a new tenancy has to be dismissed.

(22) Since the application for a new tenancy has to be dismissed, there is no need to consider further the determination of the prevailing market rent and the other terms for the new tenancy to be granted under the Ordinance.

(23) Section 119R (costs) of the Ordinance provides that

"In any proceedings under this Part, the Tribunal shall not make any order as to costs against a party unless that party has conducted his case in a frivolous or vexatious manner."

Since there was no evidence that either party has conducted this case in a frivolous or vexatious manner, I accordingly make an order nisi, to be made absolute in 14 days' time, that there be no order as to costs.

(24) Orders

1. Application by the Applicant for a new tenancy be dismissed;

2. It is hereby declared that the Respondent by the service of Form CR101 dated 7th June 2000, failed duly to terminate the current tenancy and the Applicant may therefore continue to reside in the suit premises thereunder subject to paying the monthly in advance the current rent of $50,000 per month (exclusive of rates and management fee) and otherwise complying with the terms of the tenancy;

3. The Tribunal makes an order nisi, to be made absolute in 14 days' time, that there be no order as to costs for this new tenancy application.