MANDARIN PRODUCTION LTD v. HOLT, LEE

LDPD 997/2017

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO 997 OF 2017

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REVIEW DECISION

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Background

1.  The applicant and the respondent are the landlord and the tenant of the premises respectively, situated at Flat E, 4/F, Block 1, Sai Kung Garden, 16 Chan Man Street, Sai Kung, New Territories, for a term of 2 years commencing from 16 September 2016 at a monthly rent of $12,000.

2.  By a Notice of Application dated 24 May 2017, the applicant applied for possession and claimed for arrears of rent and costs on the ground of failure and/or refusal of payment of the rent since 16 April 2017.  The respondent filed a Notice of Opposition dated 29 May 2017 denying the allegations and made a counterclaim for, inter alia, return of the rental deposit of $24,000.  In fact, it is not in dispute that the respondent paid a sum of HK$ 24,000 into the applicant’s bank account being the rent due on 16 April 2017 and 16 May 2017 respectively just 2 days before filing the Notice of Opposition, namely on 27 May 2017.

3.  Subsequently, a hearing was held on 9 June 2017 for the Application.  The applicant submitted at the hearing that since all the arrears of rent have been duly paid, it no longer asked for possession.  Instead, the applicant asked for discontinuation of the entire Application but since the arrears of rent were only paid after the commencement of this Application, the applicant, therefore asked for costs.  The respondent had no objection to the discontinuation but opposed the application for costs.

4.  Upon hearing the evidence and submissions from the parties at the hearing, I have made the following orders :-

(1) Leave be granted to the applicant to discontinue the Application; and

(2) The respondent do pay costs of the Application to the applicant, summarily assessed at $26,000, payable forthwith.

5.  The respondent was not satisfied with my decision on costs and therefore applied for a review on 29 June 2017.  Upon receiving such application for review, I decided to review my decision on costs pursuant to section 11A of the Lands Tribunal Ordinance, Cap. 17 and directed parties to submit further evidence and written submissions respectively.  And after considering the evidence and submissions from the parties (including those oral submissions at the hearing on 20 September 2017), I hereby decide that my decision on 9 June 2017 do stand and therefore confirm my orders accordingly.  I now give my reasons for this review decision below.

The Costs Decision on 9 June 2017

6.  At the hearing on 9 June 2017, although the respondent has put forward several grounds of objection against the application for costs, none of them were accepted.  I do not intend to repeat them in full here but just to give a brief summary of his argument.  The respondent argued that the parties should bear their own costs.  In support of his argument, he put forward the following grounds that: -

(1) at the time of the hearing, namely on 9 June 2017, all the rental arrears had already been duly paid and it was therefore unnecessary to instruct a lawyer to represent the applicant to appear at the hearing on 9 June 2017 to discontinue the Application;

(2) the respondent never deliberately failed or refused to pay the rent as it was just “late”.  The respondent explained that because the bank, which the applicant used, had no branch in Sai Kung area, and because the respondent lived and worked in Sai Kung area, it was inconvenient for him to travel a long way to pay the rent;

(3) the respondent had requested the applicant to collect the rent in person but the applicant never did;

(4) the applicant “altered” the method of payment of rent on 20 March 2017 by asking the respondent to send cheques to an “incomplete address” of the applicant;

(5) the applicant failed to give him “rent receipts” for several months; and

(6) the relationship between the applicant and respondent had deteriorated to such an extent that, at some point of time, the respondent thought that the applicant was effectively asking him to leave the premises without any compensation.

7.  In deciding the matter on 9 June 2017, I took consideration of the entire circumstances, including the grounds put forward by the respondent.

8.  It appeared to me that the applicant was an actual “successful party” of the Application and should therefore entitled to costs.  (see Nice Gain Enterprises Ltd and Another v Chinese United Establishments Ltd and Another HCCW 391/1994 (unreported, 5 October 1995) and Re China Solar Energy Holdings Ltd HCCW 108/2015 (unreported, 1 March 2016)).  In coming to my decision, it was my view that the commencement of the proceedings was reasonable as the outstanding rent was only paid after the service of the Notice of Application.  The payment made subsequent to the commencement of the proceeding was an obvious admission by the respondent that he was wrong not to pay rent in the first place.

9.  Despite the respondent’s “complaints”, particularly the alleged difficulty he claimed that he encountered in making the rental payment at the bank (which was the payment method particularly specified in the tenancy agreement under clause 5C), he nevertheless managed to pay them in full into the applicant’s bank account after the commencement of the proceedings.  This showed how contradicting the respondent’s explanation was. In fact, nowadays, it is common in Hong Kong that people do not always go to the bank personally for making payment.  Banks offer a wide range of services for making payment easily.  One could make payment even without having to leave one’s home, for example, phone banking or internet banking services. I therefore rejected his explanation.  

10.  The so-called “altered” method of rental payment (namely by sending cheques) was merely a suggestion by the applicant as an alternative when the respondent did not wish to go to the bank personally because of inconvenience.  I did not see how offering alternatives to the respondent was altering the method of payment.  The respondent could choose not to accept it.  No matter what the choice of the respondent was, this would not affect his contractual duty to pay rent on time. This explanation was also rejected.

11.  Furthermore, asking the applicant to come to the premises to collect the rent personally was not a reasonable request in the circumstances because I did not consider payment into the applicant’s bank account was so difficult that it could not be done for reasons given above.

12.  Failing to give rent receipts for some previous months was also not a reasonable ground for not paying the rent on time.  Furthermore, there was no dispute that the respondent was still enjoying the possession of the premises and not paying the rent on time was not fair to the applicant at all.

13.  In my view, none of the above explanations helped the respondent’s argument at all.  The explanations for failing to pay rent on time was simply unreasonable and unacceptable.

14.  Lastly, as legal representation in Lands Tribunal was allowed as of right, I did not see anything wrong with that.

15.  For all these reasons, I decided at the 9 June 2017 hearing that the respondent should be responsible to pay for the costs of the proceedings.

Summary Assessment of Costs on 9 June 2017

16.  As to quantum, the applicant submitted a Statement of Costs for Summary Assessment at the hearing claiming for $39,041.90.  The respondent was of the view that the costs was “extortionate” and felt that paying the legal costs of the applicant was “unfair and unjust”.

17.  According to the Tribunal’s record, the actual hearing took about 1 hour and 15 minutes including a short break. Parties mainly argued on the issue of costs liability.  Having read the Statement of Costs prepared by the applicant and heard submissions from parties, I took a “broad-brush” approach to assess the costs of the applicant.  

18.  According to the Statement of Costs, the time spent in preparation for the hearing and the work done by the applicant’s solicitors were generally acceptable, but since it was prepared on the High Court scale, in my view, it was therefore on the high side.  As this was a simple case for possession on the ground of failure/ refusal to pay rent, the outstanding sum was small and there was no complexity of the matter, costs assessed on District Court scale would be more appropriate.  I then summarily assessed the costs at $26,000.

Grounds of Review

19.  According to the written application for review dated 29 June 2017 filed by the respondent, he relies substantially on similar arguments which he advanced on 9 June 2017 with some further elaboration.

20.  The respondent argues that no order as to costs or a costs order in favour of the respondent should be made.  His argument includes: -

(1) the usual costs order should be “No order as to Costs” when the applicant withdrew the Application and the respondent “did not lose the case”;

(2) the applicant failed or refused to give receipts to the respondent causing difficulty in rental payments and causing the respondent to bear unnecessary risk;

(3) the applicant deliberately built “barriers” in communication between the applicant and respondent causing difficulty in their relationship;

(4) this litigation could have been avoided and was “an inappropriate and unnecessary claim to legal costs”;

(5) the Application could not be maintained and should be dismissed because of its failure to file the Notice of New Letting or Renewal, namely Form CR 109, pursuant to section 119L (2) of the Landlord and Tenant (Consolidation) Ordinance, Cap.7;

(6) this Tribunal shall not make any order as to costs against the respondent because the respondent has not conducted his case in a frivolous or vexatious manner (the respondent relies on section 119R of the Landlord and Tenant (Consolidation) Ordinance, Cap.7); and

(7) no reasonable opportunity was given to the respondent to consider the Statement of Costs at the hearing on 9 June 2017.

21.  I now deal with the above grounds of review one by one below.

The Usual Costs Order Should Be “No Order As To Costs”

22.  In reliance of the following authorities, namely何碧香v陳光輝CACV 187/1998 (unreported, 12 November 1998) and 梁淑芳 v趙惠明CACV 112/1999 (unreported, 22 September 1999), the respondent submits that “seldom is there any case listed in the judgments where a withdrawing party causes the opposition to have bared (sic) the legal costs”.

23.  I notice that, in both authorities, no possession orders were made because the outstanding rents were fully paid after the commencement of the proceedings but before the hearings proper.  And costs orders were therefore made in favour of the landlords.  On appeal, the judges below were criticised for failing to consider the entire circumstances in coming to the decision on costs, in particular the reasons why the tenants failed to pay rent.  The Court of Appeal then took consideration of the facts afresh and it was held that, on both occasions, the explanations put forward by the tenants for non-payment of rent were reasonable.  The Court of Appeal therefore varied the decisions on costs of the first instance by making no order as to costs.

24.  In my judgment, those decisions on costs were obviously correct and the issue was whether or not the tenant was able to give an acceptable explanation for non-payment of rent. Each case would, of course, turn on its own facts.

25.  In the present case, the situation is entirely different. I duly considered the explanations put forward by the respondent for non-payment at the hearing on 9 June 2017 but rejected them being unreasonable.  As I have already repeated my reasons for the rejection above, I do not intend to do so again here.

26.  All in all, this Tribunal has a complete discretion on costs. Generally speaking, when an applicant withdraws an application, it does not necessary follow that there must be “no order as to costs”.  Each case must be determined on its own facts.  During the hearing on 9 June 2017, I considered that the applicant was the actual “successful party” and the explanation provided by the respondent for the non-payment of rent was unreasonable.  Although technically the respondent “did not lose the case”, he was still liable to pay the costs because he was in breach of the tenancy agreement in failing to pay rent on time without good reasons.

The Applicant Failed or Refused To Give Receipts

27.  The respondent argues again during the review hearing that the failure or refusal to give rent receipts was a reasonable explanation for not paying rent.  The respondent relies on the authority of 梁淑芳 v趙惠明CACV 112/1999 (unreported, 22 September 1999).

28.  In 梁淑芳 v趙惠明CACV 112/1999 (unreported, 22 September 1999), the agreement for the method of payment of rent was to be made in cash in person and the Court of Appeal held that in such circumstances, a proper rent receipt was an important document for proof of payment.  In that case, since the landlord failed to give proper rent receipt every time when the tenant paid the rent in cash, it was held that it was reasonable, in those circumstances, that the tenant may refuse to pay rent.

29.  However, in the present case, the facts are entirely different.  First and foremost, I accept the evidence of the applicant adduced at the review hearing that rent receipts were duly given to the respondent, although some of them might be late (because the applicant was waiting for the bank statements to confirm payments) and one or two of them might be missing (probably lost in post).  I fail to see the factual basis for arguing that the applicant deliberately not giving rent receipts to the respondent at all.  In my judgment, this is entirely different from the facts in 梁淑芳 v趙惠明CACV 112/1999 (unreported, 22 September 1999) that no proper rent receipt was ever given at all.

30.  Secondly, although the respondent did suggest to the applicant to collect the rent in cash in person, this was never accepted by the applicant.  The arrangement of payment of rent was agreed in the tenancy agreement under clause 5C, namely paying into the applicant’s bank account.  There was absolutely no question about proof of payment because the bank would have proper records.  This is distinguishable from the Court of Appeal decision.

31.  In further support of his argument, the respondent submits that, without the rent receipts, he had difficulty to make claims for his “housing allowance”.  But apart from this mere assertion by the respondent, no evidence in both hearings has ever been adduced to prove the difficulty.  On the evidence before me, I have reason to believe that with the signed tenancy agreement and the bank deposit receipts as proof, it should be more than enough to show the monthly rental payment. In my judgment, there should be no difficulty for claiming the “housing allowance”.  I therefore reject this argument completely.

32.  During the hearing for review, the respondent further argues that there was in fact no agreement between the parties for the method of payment of rent, disregarding the fact that the parties have signed a written tenancy agreement dated 1 August 2016 with a clause 5C which stipulates the method of payment.  The respondent argues that since there was no meeting of the parties before signing the tenancy agreement, there was no discussion of the terms at all, and the entire transaction was only completed through the estate agent, therefore there was no agreement between the parties on the method of payment at all.  In my judgment, this must be wrong.  There was no dispute that the parties voluntarily signed the written tenancy agreement and the respondent accepted the terms, including the rental payment method, namely clause 5C.  He then moved into the premises as a tenant and started to pay the monthly rent.  On these facts, I am unable to see the basis of the respondent’s argument.  There is absolutely no doubt to me that the respondent has agreed to pay the rent in the manner as specified in clause 5C.  However, the respondent subsequently found it inconvenient to do so and purported to unilaterally change it by asking the applicant to collect the rent personally.  This is not fair to the applicant and I do not accept the respondent’s argument at all.

33.  The respondent also raises the point that the applicant is in breach of section 119RA of the Landlord and Tenant (Consolidation) Ordinance, Cap.7 for failing to give proper receipt and therefore it was reasonable for him not to have paid the rent on time.

34.  First of all, I have already found, as matter of fact, that the applicant did give receipts and therefore section 119RA of the Landlord and Tenant (Consolidation) Ordinance, Cap.7 is irrelevant.  Secondly, even if I were wrong in making such factual finding, I do not think this provision helps the respondent’s argument at all.  I agree with the applicant’s submissions that even if the applicant has failed to provide rent receipts, the only consequence stated in the relevant section is to be liable to a fine of HK$2,000.  Mere failure of providing rent receipts should not be used as an excuse for not paying the rent on time.

The Applicant Deliberately Built “Barriers”

35.  Apart from the issue of rent receipts, at the review hearing, the respondent also brings my attention to certain other incidents, which the respondent argues that I should take note in coming to my decision on costs, including the applicant’s failure or refusal:-

(1) to repair the toilet and the windows;

(2) to allow the estate agent to collect rent on its behalf;

(3) to respond to the request for changing bank for rental payment; and

(4) to respond to the request to collect rent in person.

36.  I acknowledge what happened between the applicant and respondent and do not intend to repeat the incidents in detail.  I consider that neither the applicant nor the respondent was particular helpful or co-operative to each other.  On this issue of building “barriers”, I disagree with the respondent that this was deliberately built by the applicant.  In my judgment, they both have something to be blamed for.  I am sure if the parties were to have a much more co-operative mind or attitude, problems would have been resolved with much lesser effort. In deciding the costs, I do not put much weight on these incidents at all.

37.  Furthermore, it is trait law that, in the absence of any express agreement to the contrary, a tenant’s obligation to pay rent is independent of any other terms of the tenancy agreement (Charmway Development Ltd v Long China Engineering Limited [2001] 3 HKC 515) and the applicant was reasonable and justified to take out this Application against the respondent for possession on the ground of non-payment of rent alone, even if the parties were still in dispute of many other issues as long as the respondent was still enjoying the possession of the premises.

This Litigation Could Have Been Avoided

38.  According to the respondent’s submissions, after the respondent received the demand letter and before receiving “The Notice of Application”, the respondent tried to settle the matter through email on 23 May 2017 agreeing to settle rental arrears.  This email was allegedly ignored by the applicant. On 24 May 2017, the respondent received “The Notice of Application” for the only reason being that rental was unpaid.

39.  The respondent submits that the applicant had no intention of settling the dispute of rental arrears with the respondent before the hearing took place. The applicant has made inappropriate court proceeding and taken advantage of the procedures.  The respondent suggests that if the applicant just contacted the respondent, this could have been settled in a simple, fast and efficient fashion.  The respondent further argues that the applicant deliberately persisted to abuse the procedures and to hire 2 solicitors to take action unnecessarily.

40.  The respondent further submits that all the correspondence between the parties since the commencement of the tenancy have never concerned rent.  This has never been a problem for the respondent and that is why the applicant has never had concern for the rental.  The applicant knew that it only needed to contact the respondent to get the rent, but it refused to do so.  It was the applicant’s choice to begin an unnecessary legal action with unreasonable and inappropriate legal costs.  It would therefore be fair for the applicant to bear its own costs.

41.  The applicant takes issue of the respondent’s argument above.  According to the applicant, it commenced this Application on 24 May 2017, more than one month after the outstanding rent became due on 16 April 2017.   At the time of commencement of this Application, the rentals for both April and May 2017 were still outstanding.  This legal action was also preceded by a letter before action issued by applicant’s solicitors on 18 May 2017.  The respondent simply failed to pay the monthly rent.

42.  Furthermore, the applicant submits that the respondent proceeded to file a Notice of Opposition making various counterclaims including return of deposits and compensation for “lost labour” and transportation.  Due to the filing of the Notice of Opposition on 29 May 2017, a Notice of Hearing was issued by the Tribunal on the same day, fixing a hearing to be held on 9 June 2017.  According to the applicant’s submissions, the hearing on 9 June 2017 was simply inevitable because of the stance of the respondent.

43.  In my judgment, the attempts made by the respondent for settling the matter was obviously “half-hearted”.  The evidence before me strongly suggests the respondent did not like the agreed method of payment under clause 5C of the tenancy agreement and purported to “re-negotiate” a new method with the applicant.  The applicant suggested to send cheques by post, but the respondent suggested otherwise by paying cash to the applicant in person.  Since the parties failed to come to any agreement, they must therefore observe the original agreed method of the payment under clause 5C. However, the respondent then stopped paying the rent, perhaps with a hope that the applicant would accede to his request to collect the rent by cash in person.  I have no doubt that the respondent wanted to have a settlement but only on his terms.  I therefore find that, given the respondent’s stance, any settlement is highly unlikely.  This therefore left the applicant with no other option but to commence this Application for possession and rent. I find that this litigation could not be avoided because of the stance of the respondent.

The Application Could Not Be Maintained and Should Be Dismissed

44.  The respondent relies on section 119L of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 that when a landlord fails to file a Notice of New Letting or Renewal, namely Form CR109, such landlord will not be entitled to maintain an action to recover rent under the tenancy agreement unless a notice relating to that tenancy agreement is endorsed by the Commissioner of Rating and Valuation.

45.  There is no dispute that before the commencement of this Application, no such endorsement was made.  However, the evidence shows that the Form CR 109 was endorsed after the commencement of these proceedings on 30June 2017, and according to the applicant’s submissions, it is unnecessary that the endorsement must be obtained before the commencement of the action since there is no such requirement in law.  So long as the landlord obtains the endorsement before the making of an order by this tribunal, the landlord should be allowed to recover any rent in arrears.  In support of its argument, the applicant relies on a decision of this Tribunal in Chung Hon Wah and Another v Cheung Lai Kuen and Another LDPD 3032/2009 (unreported, 14 May 2010).  In my judgment, the applicant must be right.  First of all, this was never an issue at the hearing on 9 June 2017 because the respondent did not raise it and secondly as long as the Form CR 109 is endorsed, it does not matter whether it was done before or after the commencement of an application. In other words, I disagree with the respondent’s submissions that the applicant could not maintain this Application.

Section 119R of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7  

46.  The respondent further relies on section 119R of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 which states 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.”

47.  The respondent argues that there is no evidence to suggest that he has conducted his case in a frivolous or vexatious manner and therefore according to this provision, he should not be liable to the costs of the applicant.

48.  In fact, a similar point was raised by the tenant in 梁淑芳 v趙惠明CACV 112/1999 (unreported, 22 September 1999) (which is an authority relied on by the respondent) and the Court of Appeal disapproved such an argument (at paragraphs 14 and 15 of the Judgment) for the simple reason that, in dealing with possession and rent disputes, this Tribunal was exercising its common law jurisdiction and was therefore not bound by the said statutory provision.  The Court of Appeal held that the judicial officers of this Tribunal has a complete discretion on costs, same as any other common law judges.

49.  The respondent’s argument is clearly misconceived and therefore should be rejected.

No Reasonable Opportunity to Consider the Statement of Costs

50.  The Statement of Costs for Summary Assessment prepared by the applicant was substantially a 1-page document.  This was submitted for my consideration at the hearing on 9 June 2017 and a copy was given to the respondent to consider and to make submissions if he so wished.

51.  In fact, during the hearing on 9 June 2017, the respondent did make some submissions on the Statement of Costs which I have already dealt with above and do not intend to repeat them here.

52.  For this review, the respondent further submits that, firstly, given the simple nature of this case, it is unnecessary for the applicant to engaged 2 solicitors.  Secondly, the respondent also criticises that insufficient time during the hearing on 9 June 2017 was given to the respondent to consider the Statement of Costs and for the Tribunal in making the summary assessment.  The respondent submits that it gave him an impression that the summary assessment was conducted “with haste” and therefore was most unfair and unjust for him. 

53.  First of all, it is difficult to comment on the impression given to the respondent during the hearing on 9 June 2017 but I am sure that proper summary assessment of costs was carried out.  The entire hearing took about 1 hour 15 minutes, although, most of the time, I was dealing with the issue of costs liability rather than quantum.  Before I came to the final decision on the quantum of costs, sufficient time was given to the respondent to consider the Statement of Costs prepared by the applicant and to make submissions which he did.

54.  Secondly, this Tribunal took a “broad brush” approach and therefore did not focus on the details of the statement.  In coming to my decision on quantum, I took consideration of the nature of the case, the reasonable time required to be spent by competent solicitors on this matter and the reasonable hourly rate charged by the solicitors.  I did not, however, pay too much attention on the fact that there was a supervising partner working together with a junior associate on this matter.  But, given my “broad brush” approach, I do not think that even if I were to take that into consideration, I would have come to a substantially different assessment.

55.  I am, now, given the opportunity in this review to consider the Statement of Costs again and after applying the principles above I am unable to see why $26,000 was not a reasonable assessment.

56.  The respondent also criticises me that in making the costs order, without giving him an opportunity to comment, added the words “payable forthwith” at the end.  In fact, the costs order made on 9 June 2017 was a final order and therefore, generally speaking, the applicant was entitled to enforce it immediately.  I do not see how adding those words would have made any difference.  I therefore agreed to add those words just to ensure the order was free from ambiguity.  This is just a matter of drafting and I do not see how unfair it was to the respondent.

57.  On the whole, there was nothing unfair or unjust about my summary assessment on 9 June 2017.  I therefore confirm my costs assessment.

Other Allegations

58.  I do not intend to deal all other allegations raised in the submissions of the respondent one by one as all of them lack factual basis. For example, the respondent alleges that in taking legal action against him, the applicant caused harassment to him and such action was in breach of section 119V (2) of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7.  In my judgment, this is obviously wrong.

59.  Another example is the issue of bank’s consent.  The respondent alleges that the property is subject to an “all monies mortgage” and bank consent for leasing the property is therefore required.  First of all, I do not follow the logic of the respondent’s argument and it is entirely without factual basis.  No terms of the mortgage were ever shown to me in support of such argument.  Secondly, even accepting the fact that it was a concern and the respondent has raised this concern before signing the tenancy agreement, but once the respondent has duly signed it and took possession of the premises, the respondent is taken to have accepted the tile of premises and therefore is estopped from challenging the same.  Thirdly, no evidence has ever been shown to me that there was any risk of the mortgagee bank taking possession of the premises.  There is simply no factual basis for this argument at all.

Conclusion and Orders

60.  The respondent fails to show any good reasons for me to vary my decision on 9 June 2017 and I therefore, after review, confirm the same.

61.  By reasons of the above, I hereby make the following orders:-

(1) the decision on 9 June 2017 be confirmed;

(2) the application for review by the respondent be dismissed; and

(3) the respondent do pay costs of the application for review to the applicant, to be taxed, if not agreed at District Court scale.