TOP NEW LTD v. HEI HEI F & B HOLDINGS LTD t/a HEI HEI HOT POT CHEF

LDPE 1281/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO LDPE 1281 OF 2014

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JUDGMENT

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1. This is an application for recovery of possession. At the beginning of the hearing, the parties finally agreed on the date of vacation and the amount of rent or mense profits payable by the respondent. However, they could not agree on costs.

2. Both parties consider that its respective side is the prevailing party and therefore should be awarded with costs.  In the circumstances, although there was settlement of the major issues, the tribunal had to hear their respective grounds and evidence before liability for payment of costs could be decided.

3. Further to the hearing, the parties submitted their respective written closing submissions and written responses to the closing submission on 17 March 2015 and 24 March 2015 respectively. I subsequently ordered the judgment be reserved on 30 March 2015.

The Applicant’s Case

4. The applicant, owner of the premises known as15^th Floor, H8, No 8 Hau Fook Street, Tsimshatsui, Kowloon (the “Suit Premises”), filed an application to the tribunal on 30 December 2014 against the respondent for recovery of possession of the Suit Premises and order for mense profits and costs.

5. There was a tenancy between the applicant as landlord and a tenant, Chan Ho Pong (“Mr Chan”), for a fixed term of 3 years from 16 March 2012 to 15 March 2015 at the monthly rental of $60,000 with an option to renew for another 2 years (“Tenancy Agreement”).

6. The applicant submitted that, in September 2014, Mr Chan had allowed the respondent to occupy and operate its business at the Suit Premises without any knowledge, consent or permission of the applicant. The applicant considers that the respondent had then been in unlawful occupation and use of the Suit Premises.

The Respondent’s Case

7. The respondent filed a Notice of Opposition on 13 January 2015.  The respondent contended that representative of the applicant had verbally agreed to the assignment of Mr Chan’s interest in the Tenancy Agreement to the respondent.  The respondent also contended that it had paid rent, management fee and Government rates on time and therefore it had not occupied the Suit Premises unlawfully.

8. Mr Alan Ho (“Mr Ho”), counsel for the respondent, further submitted that the respondent’s case is supported by (1) Parol Evidence Rule; (2) Doctrine of Promissory Estoppel; (3) Part Performance; and (4) Waiver by Estoppel.  Mr Ho also submitted that the respondent had mere privilege or a licence to use the Suit Premises.

The Disputes

9. Although Mr Ho had raised a number of legal principles, Mr Wong Cho Lik (“Mr Wong”), counsel for the applicant, submitted that as a matter of fact the applicant had not made any promise of leasing the Suit Premises to the respondent and accepting the respondent to use the Suit Premises, and since Mr Chan had already withdrawn from occupation, the respondent could not rely on mere privilege or a licence to use the Suit Premises. Mr Wong also submitted that doctrine of estoppel is not applicable in the present case.

10. In summary, the disputes between the parties at the hearing are as follows: -

(1)  Whether the applicant had made a promise to the respondent that an option to renew for 2 years would have to be included in the new tenancy agreement and the respondent could still rent the Suit Premises from 1 September 2014 to 15 March 2015 at $60,000 per month;

(2)  Whether there was acquiescence or a waiver by the applicant in enforcing its legal right; and

(3)  Whether the respondent was conferred upon mere privilege or a licence to use the Suit Premises.

Any Promise made by the Applicant?

11. The director of the respondent, Ng Wai Yiu (“Mr Ng”), alleged that the director of the applicant, Lie Lai Heung (“Ms Lie”), had promised him in a phone conversation on 20 August 2014 that an option to renew for 2 years would have to be included in the new tenancy agreement and the respondent could still rent the Suit Premises from 1 September 2014 to 15 March 2015 at $60,000 per month.

12. Ms Lie alleged that she had not made such promise, but she admitted that the parties had discussed about the new tenancy. In any event, it is not disputed that the parties had once attended the office of Wong, Fung & Co. on 29 August 2014 to further discuss about the new tenancy but no new tenancy agreement was signed.

13. In the witness statement of Mr Ng, he admitted the following facts and events: -

(1)  Paragraph 11: “In the afternoon on or about 20^th August 2014, Lie contacted me about the terms, clauses and the new monthly rental fee of HK$125,000 via whatsapp messages……”

(2)  Paragraph 12: “On the same day (20^th August 2014) during night time, because Lie emphasized that the current open market monthly rental fee should be at HK$125,000 for the renewal of leasing the Premises initiating from 16^thMarch 2015 for 2 year, she and I negotiated it by phone…..”

(3)  Paragraph 14: “On or about 25^th August 2014 at around 11:33:13am, by means of whatsapp messages, Lie informed me that the new tenancy agreement of the Premises produced by the solicitors of the Applicant would be finished in 2 days, and that the terms and conditions were based on the previous whatsapp messages on 20^th August 2014 in paragraph 12.  And the signing of the new tenancy would be subject to the signing of the Surrender Agreement by Chan…..”

(4)  Paragraph 16: “On or about 27^th August 2014, I contacted Lie through whatsapp messages.  Apart from asking about the progress of the new tenancy agreement of the Premises produced by the solicitors of the Applicant, I suggested to raise the proposed monthly rental fee to HK$75,000 commencing from 16^th March 2015 onwards up to 2 years.  But she rejected.  Lie said that if the Respondent intended to take the possession and the lease of the Premises (頂租), the Applicant would like to fulfill the terms and conditions of the original tenancy agreement with Chan first. Any negotiation of the new rental fee would be discussed later……”

(5)  Paragraph 17: “Because I thought that there would be a surveyor report to be conducted for valuation of the rental fee of the premises and the clause of “option to renew” would be included in the tenancy agreement of the Premises produced by the solicitors of the Applicant, I entrusted Lie to make the latter arrangement for the signing of the new tenancy agreement of the Premises.”

14. Since the respondent relies on an oral promise made by the applicant as its defense, the respondent has the burden of proof.  Nevertheless, except for the mere allegation of Mr Ng that there was an oral promise made by the applicant; the expectations of Mr Ng; and the assumptions submitted by Mr Ho, the respondent had not provided any other proof in this regard. 

15. On the contrary, as revealed from the witness statement of Mr Ng and the whatsapp messages between the parties, after 20 August 2014 when the applicant had already made an oral promise as alleged by the respondent, the applicant had been insisting on no option or a higher monthly rental from 16 March 2015. Further, the parties had then continued to negotiate for a new tenancy.

16. On the other hand, although Mr Ho also contended that Ms Lie had named the payment for the period of 1 – 15 September 2015 as “rent” in her whatsapp messages and this could infer there was an oral promise, I accept Mr Wong’s submission that it is unrealistic to expect laypersons, like Ms Lie and Mr Ng, to be able to integrate legal terminologies (e.g. mesne profits) into their day-to-day conversations. 

17. On balance of probabilities, I believe that there was no oral promise made by the applicant as alleged by the respondent.

18. In addition, since Mr Ng admitted in cross-examination that it was not the respondent’s intention to enter into a tenancy for as short as 6 months from September 2014 to March 2015 only because that made no commercial sense, I do not believe the respondent had once accepted a 6-month tenancy only without an option to renew.

19. Although Mr Ho had further submitted in the closing submission that “It is inherently probable to deduce that there was an oral promise between PW1 (Ms Lie) and DW1 (Mr Ng) over the alleged phone conversation that any negotiation on the renewal of the rental fee of the Premises can be discussed subject to payment of HK$60,000 for using the Premises between 1September 2014 and 15 March 2015 punctually.”, this additional oral promise as newly deduced by Mr Ho was not supported by evidence in the witness statements of the respondent.

20. On the contrary, in the witness statements of the respondent, both Mr Ng[1] and Ms Ho Yi Man Judy[2] (“Ms Ho”) admitted, after Mr Ng made a proposal to Ms Lie at the meeting on 29 August 2014 that the respondent could run its business until 2 months before the expiry date of 15 March 2015 and any further negotiation of the renewed rent from 16 March 2015 would be dealt with subject to the then current open market rent to be assessed by a surveyor, Ms Lie had just promised she would discuss or negotiate with Mr Ng later only.  If there was an additional oral promise on 20 August 2014 as submitted by Mr Ho, I consider Mr Ng would not make the said proposal on 29 August 2014.  In any event, the reply of Ms Lie is consistent with the evidence.

21. Further, it is the belief of Mr Ng that the rent upon renewal would be assessed by a surveyor and this belief is inconsistent with the newly deduced oral promise that the parties would negotiate the rent upon renewal.

Any Acquiescence or Waiver?

22. Since I find that there was no promise made by the applicant, the performance of the respondent might just be its unilateral actions only.  However, the respondent submitted that the applicant had not only actively gave its bank account to the respondent at the meeting on 29 August 2014 notwithstanding unsuccessful negotiation, and was also acting to accept the repeated rent payments by the respondent, especially the first two payments on 1 September 2014 and 15 September 2014 respectively, without informing the respondent to stop any payment or taking enforcement actions immediately.

23. It is an undisputed fact that Ms Lie had given its bank account to Mr Ng in a whatsapp message when they attended the meeting at the office of Wong, Fung & Co. on 29 August 2014.  While Mr Ho submitted that the intention and conduct of Ms Lie in this connection are questionable, Ms Lie explained that this was to show the sincerity of the applicant for the new tenancy agreement. However, except for the mere allegation of Mr Ng, there was no other evidence that the applicant had requested the respondent to make rent payment.

24. In fact, after the applicant provided its bank account to the respondent on 29 August 2014 and before the respondent made the 1^st payment on 1 September 2014, the respondent in a whatsapp message on 31 August 2014 had enquired whether Ms Lie had any decision, and Ms Lie replied that “the Applicant would continue with the original tenancy agreement with Chan”[3], or “the Applicant would intend to follow the terms and conditions of the original tenancy agreement with Chan”[4]. Further, in a whatsapp message submitted by the respondent (20/9/14 14:16:15), Ms Lie had just stated that the debit note was “sent to 15/F attention to Mr Chan”, not the respondent. 

25. Before the solicitors of the applicant, Edmund Cheung & Co., sent a letter to the respondent on 10 October 2014 which stated the respondent as a trespasser, the respondent had already made two payments on 1 September 2014 and 15 September 2014. Mr Ho submitted that once the negotiation on 29 August 2014 was unsuccessful the applicant should have informed the respondent not to pay any fee into the applicant’s account, and even after 2 payment receipts were sent to the applicant, the applicant was silent deliberately and had still not informed the respondent to stop payment. Mr Ho further submitted that in such circumstances the applicant had already waived to enforce its legal right and acquiesced to use of the Suit Premises by the respondent.

26. Ms Lie stated that she was not in Hong Kong between 5 September 2014 and 22 September 2014 and also between 25 September 2014 and 2 October 2014.  Ms Lie also stated that at the outset in or about September 2014 she was unsure whether Mr Chan and Mr Ng or the respondent indeed belonged to the same entity.  Since she did not know how to deal with the then situation, she had instructed lawyers to follow up on the matter.

27. Given that Ms Lie was away from Hong Kong for most of the time in September 2014, she had instructed lawyers to follow up on the matter and the solicitor of the applicant had then taken action on 10 October 2014, I consider that the applicant had not delayed to take enforcement actions nor had accepted the payments made by the respondent.  Although the respondent contended that Ms Lie had still communicated with Mr Ng through whatsapp messages between the period of 11 - 20 September 2014 and she could also informed her instructing lawyer through long-distance call or delegate this task to her subordinates when she was not in Hong Kong, I consider all these could not infer the applicant had delayed the enforcement actions deliberately or accepted the payments made by the respondent.  In view of the backgrounds in the present case and my finding that there was no promise given by the applicant, I consider on balance of probabilities the applicant had no intention to delay the enforcement actions and accept the payments made by the respondent.

Any Privilege or licence to Use the Suit Premises?

28. Mr Ho submitted that the respondent was conferred upon mere privilege or a licence to use the Suit Premises by Mr Chan and had no interest in its favour, then there had been no subletting or assigning.  Mr Ho quoted the cases Jackson v Simons [1923] 1 Ch. 373 and Mean Fiddler Holdings Limited v London Borough Islington [2003] EW Civ 16 to illustrate that if Mr Chan had retained legal possession of the Suit Premises at all material times and had not shared occupation with the respondent, Mr Chan had then remained as the tenant of the Suit Premises and the respondent all along was not a trespasser or unlawful occupier.

29. Mr Ho further submitted that Mr Chan had just transferred his business to the respondent only, but not the legal interest in land and occupation of the Suit Premises, and then the respondent would operate another catering business taking full responsibility for revenues, advertising and the administration burden.  Further, Mr Ng had informed Ms Lie in a whatsapp message on or about 15 October 2014 that Mr Chan was a company secretary of the respondent since 1 September 2014 and was one of the salaried staff of the respondent.  Given that Mr Chan was an internal staff of the respondent, Mr Ho submitted it is assumed that Mr Chan would share a business or profits with the Respondent.

30. I agree with Mr Ho’s submission that whether there is a sharing of the occupation of the premises is a question of fact and the main question is whether a third party had been allowed to have a share of control of the premises as to amount to a sharing of occupation.

31. However, I do not accept that Mr Chan had retained control and occupation of the Suit Premises even though he was an internal staff of the respondent.  Without any further evidence, I do not believe that an employee would retain legal possession and full control of rented premises at all material times or would share a business or profits with his employer.  In fact, the applicant and the respondent were discussing about a new tenancy and Mr Chan had also attended the meeting between the parties on 29 August 2014.  Even if Mr Chan had never completely withdrawn from the occupation and use of the Suit Premises, it does not mean the Suit Premises had remained in the management, control and possession of Mr Chan at all material times.

32. I accept Mr Wong’s submission that, looking at the provisional agreement for the transfer of business between Mr Chan and Nr Ng, Mr Chan was selling off all the interests in his business, and the factual matrix in Jackson v Simons and Mean Fiddler Holdings Limited v London Borough Islington bears no resemblance to the circumstances in the present case too. 

33. Further, I note the transfer of business was subject to the successful assignment of the Tenancy Agreement to Mr Ng.  With reference to this provisional agreement, I consider Mr Chan then had no intention to retain legal possession and control of the Suit Premises.  I also note in the whatsapp messages between Mr Ng and Ms Lie that Mr Ng acting for the respondent had tried to negotiate for a new tenancy and had not been acting clearly for Mr Chan to deal with the Tenancy Agreement though Mr Chan had already appointed Mr Ng as his attorney on 1 September 2014.

Conclusion

34. Since I find that there were no promise of a new lease and occupation of the Suit Premises by the respondent, no acquiescence or waiver by the applicant in enforcing its legal right and no mere privilege or licence for the respondent to use the Suit Premises, I accept the respondent had been in unlawful occupation of the Suit Premises.

35. The parties agree that costs should follow the event.  Since the applicant had valid grounds to file the application for recovery of possession and it is entitled to such order, the respondent should pay the applicant’s costs of this application.

Order

36. Costs of this application be to the applicant, to be taxed if not agreed on the District Court scale, with certificate for counsel.