LDPD 2239/2019
[2020] HKLdT 28
IN THE LANDS TRIBUNAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
APPLICATION NO. LDPD 2239 OF 2019
__________________________
BETWEEN
LIU JINCHENG
Applicant
and
MICHAEL PETER SCHMIDT
Respondent
__________________________
Before:
Mr. Lawrence PANG, Member of the Lands Tribunal
Dates of Hearing:
13 July 2020
Date of Judgment:
4 August 2020
________________
JUDGMENT
________________
Background
1. By a tenancy agreement dated 1 March 2019 which is in both English and Chinese (“the Tenancy Agreement”), the applicant as the landlord let to the respondent as the tenant the premises at House No 29 and 2 Car Parking Spaces, Boulevard de Fontaine, The Beverly Hill, No 23 Sam Mum Tsai Road, Tai Po, New Territories, HONG KONG (“the Premises”) for a term of 2 years from 1 March 2019 to 28 February 2021 at a monthly rent of $48,800 inclusive of management fee, Government rates and Government rent. The Tenancy Agreement is also inclusive of a schedule of furniture and fixtures provided by the applicant.
2. More particularly, the centre of the present dispute arose from a break clause which states at Schedule I to the Tenancy Agreement as follows:
“Within the term of the tenancy, either party shall be entitled to terminate this Agreement earlier than as herein provided by serving not less than two two month’s Rent in lieu to the other party. This tenancy agreement is for a period of 2 years plus 1 year optional extension.”
3. Clause 4 in Schedule II to the Tenancy Agreement also states as follows:
“From the effective date of this agreement, the Tenant can no longer deduct the rent by any reason. If there are other appeals, it can be resolved by legal way.”
4. Clause 10 of the Tenancy Agreement also provided the following treatment of the former swimming pool at the Premises:
“After the negotiation between the two parties, it is agreed that within 3 months, the Landlord would fill the existing swimming pool in the garden and change it into a lawn or a floor of floor tiles. After that, the tenant can no longer make any request, objection or complain to the garden, the swimming pool and related facilities.”
5. It is understood that the Tenancy Agreement was entered into in settlement of an earlier rental dispute[1] arising from a former tenancy agreement dated 20 September 2017 in respect of the letting of the Premises for a term of 2 years from 1 October 2017 to 30 September 2019. In this former tenancy agreement, Clause 4 in Schedule II to the Tenancy Agreement was absent and the break clause was not exercisable before 13 months into the tenancy inclusive of 1 month’s written notice.
6. In the Notice of Application filed to the Tribunal on 11 December 2019, the applicant applied for recovery of possession of the Premises on the ground that the Tenancy Agreement expired on 30 November 2019 and for recovery of rent as the respondent had failed to pay rent from 1 October 2019. This is also an application for order for mesne profits payable to the date of delivery of vacant possession of the Premises and costs.
The Opposition
7. The respondent filed a Notice of Opposition on 23 December 2019 giving a series of grounds which can be summarized as follows:
8.1 Non-payment of rent
8.1.1 Rent had not been paid since 1 October 2019 because of the malfunctioning of the air-conditioning system on 3rd floor as a result of which, the secretary of the applicant (hereinafter referred to as “Nancy”) sent a WhatsApp message to the respondent on 14 September 2019 as follows:
“Large amount of cooling gas has been filled, but it cannot solve the problem and would cause other problem.
On my side, once I received your messages, I did report them to my boss and people had been sent to try to fix the problems many times even though I didn’t answer your messages. Kindly note we don’t have people stand by for immediate service.
You have already known that the problem is worse. The whole aircon system need to be fixed or replaced including the pipes indoor or outdoor. It would take about 2-3 weeks.
Since there are many problems in the house, we both sides have been got annoyed… We would like to take back the premises in Mid Nov. An official 2 months advance termination notice will be issued soon. We don’t mind your moving without 2 months advance notice.
For not being able to use the 3rd floor area of the 2 months because of aircon problem, an amount of the rent by ratio could be deducted .” (emphasis added)
8.1.2 The respondent complained that the applicant failed to give any statement about the “pro-ratio-amount” that could have been a base for any negotiations. The respondent therefore made a “very fair calculation” on 2 October 2019 as shown in the table below and deducted against the rents for the months of October and November. The respondent said he would continue paying the adjusted rent for December and January until there would be a clarification by court.
st floor
nd
rd
rd floor
BALANCE
HKD -32325
th October 2019HKD -32325
8.1.3 Following a termination notice served by Pan Guoqiang (“Mr Pan”) on behalf of the applicant on 25 September 2019[2] , Nancy did respond on 24 October 2020:
“Our termination notice was given in the tenancy agreement. Your termination date is not accepted by us[3] . Please keep our termination date, move out from the house and hand over back to us on or before 30 Nov, 2019.
Your calculation of the deduction is not accepted. The garden area cannot be included. The acceptable deduction for air-conditioner problem on the third floor is not more than $5,000 x 2 months. The payment would not be made until house is handed over back to us.”
8.1.4 The respondent complained in the Notice of Opposition as follows:
“The very first and only information by landlord regarding the amount of deduction, stated with 5,000 HKD for 2 months only, was given very late (more than 5 weeks!!! after offering the pro-ratio deduction; and 20 days after tenant sent his calculation table). Furthermore, the amount of the deductible sum of money offered by the landlord had nothing to do with a comprehensible calculation and corresponded much more to a spontaneous arbitrary fee, which at no time covered the tenant’s personal and financial damage and could not be accepted.”
8.2 Termination Notice
8.2.2 The respondent complained that on signing the Tenancy Agreement on 28 February 2019, there was no signature of the applicant but there was a signature of Mr Pan on his behalf. There was no authorization letter from the applicant attached to the Tenancy Agreement. Mr Pan did not provide the respondent with a power of attorney even when sending the termination notice.
8.2.3 When an authorization letter was provided to the respondent on 25 September 2019 (8 days after the first and the invalid termination letter dated 17 September 2019), it was in English but the respondent doubted if the applicant could speak English. The respondent complained that the proof of the applicant’s signature was missing and even when a copy of the applicant’s passport was sent a few days later, the respondent suggested that the signatures were not identical. The respondent alleged that the documents were not issued by the applicant himself.
8.3 Abuse of the 2-month Clause
8.3.2 The respondent explained that the 2-month break clause in Schedule 1 of the Tenancy Agreement was inserted owing to the schooling situation of his 11-year old son whose education was based on a German homeschooling system whereby every year his son was required to undertake a development examination. Depending on his results, either he would be allowed to continue the German home schooling, or he would be recommended to return Germany to attend a local school.
8.3.3 The respondent complained that during the negotiation for settlement of LDPD 175/2019 (which was attended by Mr Pan on behalf of the applicant), the applicant took the opportunity to ask for a similar 2-month termination option in case no rent was payable by the tenant. While the latter was hand-written on a memorandum as the base for the Tenancy Agreement, the judge did query whether the latter should be stated more precisely in the memorandum. At that moment, the respondent answered that it was clear enough without knowing that the applicant planned to misuse this clause at a later stage of tenancy. The respondent emphasized that at the moment, he was in an “exceptional situation of severe mental and emotional stress” as he appeared for the first time in a foreign court and in a foreign language (ie English) and he could not but come to a settlement failing which the situation of his family would remain unresolved.
8.3.4 Yet, on 10 October 2019, the respondent purported to send to the applicant a termination notice whereby he would handover the Premises on or before 31st January 2020.
8.3.5 On 21 October 2019, the respondent wrote further to Mr Pan and Nancy as follows:
“Regarding your “reminder letter”, received on 18 October, we would like to answer as follows:
1. We don’t accept your termination notice, dated Sept 25, 2019, for formal and other reasons. Further explanation will be given at court.
2. The termination date is 31st January 2020. We will vacate from the premises on or shortly before this date.
3. Still and repeatedly, we offer you the out-of-court settlement to de-escalate the situation and continue the lease after repairing the known damages on the old lease conditions.
4. There was no settlement of the open amount of 32,325 HKD (due date 10th October 2019) to our account. We kindly remind you to settle it asap.”
8.3.6 And on 28 November 2019, the respondent wrote to the applicant, Mr Pan and Nancy as follows:
“As we already informed you before, we do not accept your way of termination, so we will not handover the premises on 30th of November. We wait for your legal steps and will meet you at the court soon.
We would like to expressly emphasise that we are always and still willing to pay our rent in time, as we did it throughout our whole rental period.
However, since we don’t know the result of the court decision yet, we are going to continue paying the rent initially for the following 14 days first (half month) adjusted in proportion on the base of the calculated unusable areas. The second half of the month we will pay based on the date and result of the court hearing.
December rent (adjusted): 31,675 HKD
Open amount you owe to us based on the proportional adjustment of rent: 650 HKD
50% (half month) of December rent: 31,675 – 650 = 31,025 ÷ 2 = 15512.50 HKD
We will transfer the amount of 15512.50 HKD to your account in the first 3 days of December.”
8.4 Reason for Termination Scandalous and Outrageous
8.4.2 The respondent accused the applicant of his unwillingness to repair a broken air-conditioner for the 3rd floor as his real reason for issuing the termination notice. See the WhatsApp message cited in para 8.1.1 above.
8.4.3 The respondent stated that the 3rd floor area was the most important part of the house which includes 2 bedrooms and the home office for his family. Without a working air-conditioner, the temperature inside 3rd floor could reach over 40o degree causing strong headache and dizziness of the residents. As a result, the respondent stated that his family had to rearrange their living structure: children had to change their sleeping places, the study room of his son had to be rearranged to a working place and sleeping room for the respondent himself. This had a negative impact on the respondent as he and his wife, who were both working from home, were losing their own office room.
8.5 The respondent also stated in retrospect, he got the impression that the applicant was not really interested in a long-term tenancy relationship of 2 years + 1 year option with him when signing the Tenancy Agreement. The respondent pointed out for instance that the applicant failed to provide a functioning remote control for switching the air-conditioner on, the applicant had delayed replenishing the former swimming pool to a flat area as an outdoor space until the last day and even when it was completed, it appeared in poor workmanship and had led to flooding afterwards, the applicant had delayed in attending to the falling plaster on the ceiling of the 2 bedrooms on the 3rd floor ceiling after heavy rain[4] etc. The respondent particularly referred to an e-mail message from Nancy dated 27 May 2019 which, inter alia, contained the following:
“If you do not feel comfortable by living in such a house which continues having problems and we could not 100% meet your request, you are better find another place to move. We will not mind. An apartment would has less problem.”
8.6 The respondent stated that he could not find a comparable, equivalent rental property on the current rental market in Hong Kong and would therefore be forced to move back to Europe prematurely and unintentionally.
Respondent’s Absence in Hearing on 13 July 2020
9. There was scheduled a pre-trial review on 10 June 2020. But on 8 June 2020, the respondent sent a fax to the Tribunal stating that because of the coronavirus, he was unable to fly from Germany back to Hong Kong to attend the hearing. The earliest date that he could come back was 1 July 2020.
10. Then on the pre-trial review on 10 June 2020, the respondent was absent[5] . As I considered the parties should be ready for trial, I set down the trial on 13 July 2020.
11. And on 8 July 2020, the Tribunal received from the respondent a fax dated 8 July 2020 stating that he could not attend the trial because of travel and quarantine restrictions owing to the prevailing coronavirus situation. Towards the end of his letter, the respondent stated:
“Taking the above circumstances into account, I would ask you to allow an exception in this case and to take my arguments and evidence into account even without my presence.”
12. The trial therefore proceeded accordingly.
Respondent’s Liability to Pay Rent
13. In Worldwide Flight Services Holdings SA Royal Caribbean Cruises Limited and Neo Crown Limited v Kai Tak Cruise Plaza Limited & Another , CACV 393/2018 (reported as [2019] 4 HKLRD 56), the Court of Appeal affirmed at §21 the long established common law principle that a tenant’s covenant to pay rent is regarded as independent of all other covenants or obligations under a lease.
14. Earlier, in paragraphs 18-19 of Charmway Development Limited v Long China Engineering Limited , HCA 54/2001 (reported as [2001] 3 HKC 515) where Hon Chu J (as she then was) stated:
“18. Under the common law, the covenant to pay rent has been regarded as independent of the other covenants or obligations under a lease, including, for example, the covenant for quiet enjoyment: Edge v. Boileau and Others [1885] 16 QB 117, see also Taylor v. Webb [1937] 2 KB 283. A tenant’s obligation to pay rent is not independent upon the compliance by the landlord of its obligation under the lease.
19. There is therefore no room for the defence asserted by the plaintiff to the counterclaim, namely, it is not obliged to pay rent or the defendant is not entitled to rent by reason of the alleged breaches of the Tenancy Agreement on the defendant’s part.”
15. Under common law, there is also no implied warranty on the part of a landlord that the premises let are in a reasonably fit state for habitation, or that it may be lawfully used for the purpose for which it was let. See Edler v Auerbach [1950] 1 KB 359 and Fortune Global Development Ltd v Shung Cheong Food Trading Ltd , HCA 1786 of 1999 (unreported, dated 18 March 2002). Such clause on abatement or suspension of rental, if any, must be expressly stated in the tenancy agreement before it can be applicable.
16. More particularly, in the present case, it is expressly stated in Clause 4 in Schedule II to the Tenancy Agreement that: “From the effective date of this agreement, the Tenant can no longer deduct the rent by any reason…” Unfortunately, Nancy on behalf of the applicant advised the respondent on 14 September 2019 that: “For not being able to use the 3rd floor area of the 2 months because of aircon problem, an amount of the rent by ratio could be deducted.”
17. As stated in §8.1.2 above, the respondent prepared his own calculation against the rents for the months of October and November. By reference to this calculation, the respondent assigned 50% of the unit rental on terrace, garden, garage, roof etc[6] . Thus, assuming the respondent could not make use of the 3rd floor at all, the most that he could deduct pursuant to Nancy’s advice was $10,850 per month.
18. On the other hand, the respondent had no right to deduct any rental for his inability to use the garden area. By the Tenancy Agreement, he had agreed that the Landlord would take time to fill the existing swimming pool in the garden; the applicant only “delayed the full construction period until the last day”. There is no provision in the Tenancy Agreement for the deduction of rent or set off during the works period.
19. Indeed, Nancy made a reply on 5 October 2019 which inter alia contained the following:
“1. All terms and conditions in the tenancy agreement are clear. So far, we don’t need any court hearing.
2. We are surprised that you keep on querying on the validation on the termination notice. Mr Pan was the person who was authorized to sign the tenancy agreements (2 agreements). Are you querying on the validation of the tenancy agreement too?
3. The proportion you are calculating, it is not acceptable:
- Garden area cannot be included.
- The 3rd floor is not completely unable used.”
20. Likewise, I cannot agree that the respondent or his family could not make use of 3rd floor at all when the air-conditioning system was not functioning. In the absence of evidence to the contrary, I would only allow a deduction of rental up to $10,000 per month for 2 months only. Similarly, I find the respondent has no right or excuse to adjust the deposit (for 2 months).[7]
Termination Notice served on 25 September 2019
21. As the break-clause of 2 months’ notice was specifically provided in the Tenancy Agreement, the applicant was entitled to serve the termination notice on 25 September 2019. I have reviewed the court recording on 26 February 2019 and found no mentioning of Mr Pan for the applicant having restricted the service of termination notice to the respondent not paying his rental[8] . Neither can I find such a provision on the hand-written memorandum dated 26 February 2019 attached to the Notice of Opposition by the respondent[9] .
22. The termination notice was served by Mr Pan “(f)or and on behalf of the (applicant)” on 25 September 2019 as follows:
“Dear Mr Schmidt,
We are hereby giving you two month’s advance notice to terminate the Tenancy Agreement of the captioned premises on 30 Nov 2019. Please kindly vacate from the premises and deliver it to the landlord on or before 30 Nov 2019.
Should you have any query, please contact me at phone 9639xxxx or Ms Nancy Chen, at phone 9490xxxx or email at nancy@xxxxx.com.hk.”
23. Again, I cannot find any defect in this termination notice. Mr Pan had authority to attend the Tribunal hearing on behalf of the applicant on 26 February 2019 which resulted in the signing of the Tenancy Agreement. At the very least, Mr Pan had the ostensible authority from the applicant.[10] Once it was served, it was binding on both parties and therefore the Tenancy Agreement came to an end on 30 November 2019[11] . To the extent that the respondent or his family remained at the Premises, they were trespassers from 1 December 2019 onwards and mesne profits had to be payable to the applicant.
24. While the respondent alleged that he was in an “exceptional situation of severe mental and emotional stress” when signing the memorandum on 26 February 2019 or the Tenancy Agreement, according to Chitty on Contracts , 33rd edition (2018), para 3-054:
“A person who signs a document may not be permitted to raise the defence of non est factum where he has been guilty of negligence in appending his signature. It was formerly held in a number of cases, of which the leading one was Carlisle and Cumberland Banking Co v Bragg that negligence was only material where the document actually signed was a negotiable instrument, for there was not otherwise any duty of care owed by the person executing the document to an innocent third party who acted in reliance on it. But these cases were much criticised, both by the courts and by writers, and they were eventually reconsidered by the House of Lords in Saunders v Anglia Building Society , above. Bragg’s case was overruled, and it was held that no matter what class of document was in question, negligence or carelessness non est factum . This does not depend on the principle of estoppel but on the principle that no man can take advantage of his own wrong.”
25. Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states.[12] More particularly, the memorandum was signed in settlement of a court hearing likened to a consent summons.
Rent paid by the Respondent
26. According to a schedule prepared by the applicant, the payment record for the respondent since 1 October 2019 is as follows:
27. Thus, a total of HKD $314,437.50 was outstanding. This is equivalent to 6 months’ rent/mesne profits plus HKD $21,637.50 or working backwards, after appropriation of payments, it appears that the respondent had not paid rent since February 2020 plus an outstanding of $1,637.50 (after deduction of $20,000.00)[13] .
Jurisdiction of Lands Tribunal
28. To the extent that the respondent is intending to make a counterclaim against the applicant as alleged by him, the Tribunal has no jurisdiction. In 黃英對譚炳新 , HCMP 2049/2000 (unreported, dated 1 August 2000) and Chan Yin Kwan v Wong Kam Hoi , CACV 223/2007 (reported as [2008] 1 HKCLRT 27) and Ngai Ngok Pang & Another v Lee Syn Yuk, Michelle , LDPD 3030/2012 (unreported, dated 10 May 2013), the courts ruled that the Lands Tribunal does not have jurisdiction to entertain any counterclaim by the respondents.
29. Even when section 8 of the Lands Tribunal Ordinance was amended in 2008 to award damages solely, as well as in addition to rent and mesne profits, it was explained to the Legislative Council that the amendment did not seek to empower the Lands Tribunal to award damages that may go beyond its jurisdictional limit on the types of cases it can entertain.[14]
30. More particularly, in Ngai Ngok Pang& Another v Lee Syn Yuk, Michelle , supra, His Honour Judge Ko was of the following view:
“15. The Lands Tribunal may only, in an application for possession or ejectment, make an order for the payment of damages in respect of breach of a condition of the tenancy (see section 8(8) of the Lands Tribunal Ordinance, Cap 17). A counterclaim is generally treated as an independent action (see Hong Kong Civil Procedure 2013 , paragraph 15/2/4). Since the respondent is not also counterclaiming for possession or ejection, the Lands Tribunal does not have jurisdiction to entertain her claim for damages.”
Judgment
31. Having reviewed the above therefore, I make an order as follows:
(1) The respondent do deliver vacant possession of the Premises to the applicant;
(2) The respondent do pay the applicant arrears of mesne profits comprising
(i) Balance of arrears from 1 January 2020 to 31 January 2020 in the sum of $1,637.50.
(ii) Arrears of mesne profits from the 1 February 2020 until delivery up of vacant possession, at the rate of $48,800 per month.
Costs
32. Thus the applicant is successful in this application. The general rule is that costs should follow the even t and the applicant seeks costs. Accordingly, I order that the respondent should pay the applicant the costs of this application which is summarily assessed at $1,000.
Lawrence Pang
Member, Lands Tribunal
The Applicant, represented by Mr Pan Guoqiang, appeared in person
The Respondent was absent
[1] LDPD 175/2019.
[2] There was an earlier termination notice by the applicant dated 17 September 2019 but it was challenged by the respondent as it was only served 2 days later, requiring the termination on 17 November 2019.
[3] On 10 October 2019, the respondent purported to send to the applicant a termination notice whereby he would handover the Premises on or before 31st January 2020.
[4] The respondent wrote an e-mail to Nancy on 24 August 2019 stating that “the ceiling is alright.”
[5] During the hearing, Mr Pan alleged that the respondent was present in Hong Kong as he made an incident complaint to the police 11 days ago.
[6] In Land Compensation & Valuation Law in Hong Kong , 2nd Edition (1999), Judge Cruden (as he then was) stated at p 266 as follows:
“The increase in the number of town-houses with the exclusive use of gardens appears to have reduced the extent of increases in rent gardens previously commanded. The amount allowed for a garden will vary depending on its size, access, situation, view, privacy and other factors. Additionally monthly sums allowed for gardens have been $3,000: Mass Transit Railway Corporation & Ors v Hsu and Sons Ltd ; $3,500: Sentry Holdings (Asia) Ltd v Cali Enterprises Ltd [1983-85] CPR 140; McDonald v Chan King Lune LT 23/83 . A number of decisions contain observations that an increase of rent in the region of 10% will often be appropriate to make allowance for the provision of a garden.”(underline added)
[7] That is the respondent’s calculation of $17,125 x 2 = $34,250.
[8] His Honour Judge Wong was clarifying this particular provision of break clause as stated in the settlement memorandum with the parties from the hearing from 15:50 to 16:14.
[9] Attachment F and also Exhibit A3.
[10] See Wisecal Limited v Conwell International Limited & Another , CACV 176/2010 (as reported in [2011] 4 HKLRD 275.
[11] In Tayleur v Wildin (1868) LR 3 Ex 303, Kelly CB said at §305 as follows: “… it is clear that, whether the notice to quit is given by the landlord or the tenant, the party to whom it is given is entitled to insist upon it, and it cannot be withdrawn without the consent of both.” See also Ngai Ngok Pang & Another v Lee Syn Yuk, Michelle , CACV 96/2013 (unreported, dated 6 November 2014).
[12] Ming Shiu Chung & others v. Ming Shiu Sum & others (2006) 9 HKCFAR 334 at paragraphs 84-87, [2006] 2 HKLRD 831.
[13] See para 20 above.
[14]
http://www.legco.gov.hk/yr06-07/english/panels/ajls/papers/aj1127cb2-430-2-e.pdf