MAXSON SERVICES LTD v. EVER CONCORD INVESTMENT LTD

LDMP 5/2003

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS APPLICATION NO. 5 OF 2003

_______________

_______________

________________

J U D G M E N T

_________________

1. This is an application for determination of rent under Part IV of the Landlord and Tenant (Consolidation) Ordinance, Chapter 7(hereinafter known as "the Ordinance") in respect of Penthouse No. D on the 5th and 6th Floors and a portion of the Roof and car parking spaces Nos. 26 & 27 on the lower ground floor of Altadena House, No.27 Barker Road, the Peak (hereinafter referred to as "the Subject Premises"). The Applicant is the tenant and represented by Mr. Yeung Wai Chung, solicitor of Bosco Tso & Partners. The Respondent is the landlord and represented by Miss Chan Wai Man. Miss Chan is the Respondent 's employee and had handled matters related to the tenancy of the Subject Premises to the Applicant. Both parties had enlisted the service of valuation surveyors to assess the rental.

The Background

2. The Subject Premises were held under a two years tenancy commencing on 6th November 2000 and at a monthly rent of $190,000 exclusive of management fee and rates. The landlord was responsible for government rent. The tenancy expired on 5th November 2002.

3. Before the expiry of tenancy, the Respondent served the CR101 Form [a form prescribed under the Landlord and Tenant (Consolidation) Ordinance, Chapter 7 for service to tenant for termination of tenancy] on the Applicant specifying the Respondent's intention to terminate the tenancy on 5th November 2002. The Respondent also specified in its Form CR101 that it would not object to the Applicant's application to the Lands Tribunal for a new tenancy if the Applicant indeed so wished to. An application was filed on 6th May 2002 but for unknown reason, the Applicant withdrew it on 3rd December 2002. Instead of pursuing for the grant of another two years tenancy, the Applicant served notice on 3rd December 2002 to the Respondent notifying the termination of the tenancy on 5th January 2003.

4. The Respondent accepted this termination and received the monthly rent of $190,000 from the Applicant. The Applicant was nevertheless unable to deliver vacant possession of the Subject Premises to the Respondent on 5th January 2003. The Subject Premises were finally handed over to the Respondent on 30th January 2003.

The Issues in Dispute

5. (a) The Applicant's View

The Applicant considered that it had no obligation to pay the rent of $190,000 per month for the period of occupation after 5th November 2002 although this was the monthly rent paid before expiry of the two years tenancy expired on 5th November 2002. The Applicant's first witness, Ms Wong Siu Ling, Irene, testified in the Tribunal on 9th June 2003 that when she paid the sum of $190,000 to the Respondent, she meant it an interim amount pending the two parties' mutual agreement on the final amount or, otherwise, the determination by the Tribunal. She quoted her letter to the Respondent on 4th November 2002 and the few correspondence from the Applicant's former legal representative, Vincent T.K.Cheung, Yap & Co. to the Respondent between 3rd December 2002 and 8th January 2003 in support of her argument. The contents of these letters all indicated that the sum of $190,000 was paid pending the agreement of the two parties on the level of rent or otherwise, the assessment of the Lands Tribunal.

6. The Applicant also disputed the amount to be deducted from its deposit held by the Respondent, for the repair works, which the Respondent considered to have been performed unsatisfactorily by the Applicant. The Applicant considered that it had already made good the damages in terms of quality and standard [being above those of the original]. The mere slight difference in fashion should not amount to a breach of the provisions of the tenancy agreement and therefore, the amount of deduction made by the Respondent was inappropriate. The Applicant's second witness, Mr. Mo Chi Wai, had also testified in this connection.

7. The Applicant's solicitor opined that the rent payable for the period after 5th November 2002 be determined by the Lands Tribunal and emphasized that it was within the purview of the Lands tribunal to so determine. In support of his argument, he cited s.119NA in Part IV of the Landlord and Tenant (Consolidation) Ordinance, Chapter 7. He had in fact so stated in his Form 22 filed on 8th April 2003.

8. As to the amount payable for the period between 6th January 2003 and 30th January 2003 [which is the date of delivery of vacant possession of the Subject Premises to the Respondent], in his view, it is not rent but the mesne profits which is the compensation that should be paid to the Respondent for the loss of use of the subject premises in that period. Since it is the compensation to the Respondent, the amount of mesne profits payable should also be the market rent instead of $190,000, which was the rent, fixed more than two years ago. He considered that the market rent be less than $190,000, in view of the declining rental market that has been sustaining since years ago. He was also of the view that despite the period for rent assessment being less than three months, in assessing the market rent of the Subject Premises, regards should have had to s. 119NA(ii) of the Ordinance, which provides the legal basis that it should be the rent for a two years tenancy.

9. (b) The Respondent's view

The Respondent did not agree that the Lands Tribunal had a role in the present case. It held the view that $190,000 per month was the amount of rent agreed with the Applicant and should apply throughout the period after 5th November 2002. Its representative, Miss Chan Wai Man advised the Tribunal that the letters sent to the Respondent by the Applicant's former solicitor were just the result of a change in the Respondent's mind.

10. The Respondent was of the view that if the Tribunal accepted to determine the rent for the period after 5th November 2002, it should assess the rent for the actual duration of the period but not as the Applicant's solicitor asserted, for a two years tenancy. In this regard, the Respondent recommended that the assessment of its valuation expert in the sum of $188,700 per month be followed.

11. The Respondent also considered that the Applicant had not complied with the provisions of the tenancy agreement in performing the repair to the damages caused to the Subject Premises upon vacation, i.e. the Applicant had failed to repair on a strict like with like basis.

The Tribunal's View

12. (a) The Issues to Tackle

The first issue that should require adjudication is whether the subject application is a matter that the Tribunal needs to deal. As and when this has been resolved and the Tribunal has accepted that it is a matter for the Tribunal to deal, then there should be an adjudication on whether the rent should be assessed on a two years tenancy basis as provided under s. 119NA(ii). Before adjudication on whether s. 119NA(ii) is applicable, any deliberation on the two valuation experts' rental valuations is pre-mature. Finally, it is the issue of repair that requires a decision.

13 (b) The Analysis

The Applicant's legal basis of application is very clear and beyond doubt based on the Applicant's Form 22. The application is based on s.8 (5) & (9) of the Lands Tribunal Ordinance, Chapter 17 and s.119NA of the Landlord and Tenant (Consolidation) Ordinance, Chapter 7 as indicated in its caption and contents. Some confusion, however, did arise in that in both the solicitor's opening and final submissions, he has quoted the previous letters sent to the Respondent by the Applicant's former solicitor, Vincent T.K. Cheung, Yap & Co. These letters were sent, inter alia, intending to explain the purpose of paying the $190,000 after 5th November 2002. In these letters, s. 119N appeared to be the basis of explanation when one read between the lines. The same confusion came up again in his same opening and final submissions where the solicitor has also expressed that the Applicant's case fitted neatly with s. 119N [i.e. an application for a new tenancy has been made and a notice of termination has been sent to terminate the tenancy within three months from which the application is finally disposed of]. The Tribunal, however, does not consider that such mentioning in respect of s.119N in the open and final submissions has adequately altered the legal basis of application, i.e. s.119NA. Even if it were true that the Applicant's case fitted neatly with s. 119N, it should not matter. The focus and test remain rested with s. 119NA [i.e. the authority cited in Form 22], which is as follows: -

"(1) Where a tenant remains in possession of any premises after the date on which the current tenancy would, apart from section 119N, have come to an end by virtue of a notice given under section 119(1) or under section 119A(5) and the Tribunal does not, for any reason, make an order for the grant of a new tenancy, the tenant shall be liable to pay rent, as determined by the Tribunal under subsection (2), for the period from that date until the tenant delivers up vacant possession to the landlord.

(2) The Tribunal may, on the application of the landlord or the tenant, determine the rent payable by the tenant under subsection (1) and the Tribunal shall determine that rent as the rent it would have determined if it had ordered the grant of a new tenancy of the premises for a term of two years and otherwise on the same terms as the terms of the current tenancy.

(3) This section shall have effect in any proceedings pending in the Tribunal on 10 June 1983."

14. Examining sub-section (1) of s.119NA, the Tribunal finds that to qualify for determination of rent by the Lands Tribunal, there ought to be a notice given under s. 119(1) or s. 119A(5) and the Tribunal does not make an order for the grant of a new tenancy. In the present case, there was a notice given under s. 119(1) but the Tribunal has never refused to make an order for the grant of a new tenancy. The Tribunal simply has not been given an opportunity to consider the application [for a new tenancy]. The case that the Tribunal does not make an order for the grant of a new tenancy therefore, has not arisen [during the final submission, the solicitor was asked to consider whether his client's case could meet this particular requirement of s. 119NA(1) but his advice was that it could]. Therefore, the Tribunal has no jurisdiction to determine the rent. Since the Tribunal has no jurisdiction to determine the rent, it follows that the Tribunal needs not consider the rest of the issues above raised. The Tribunal therefore, should dismiss the subject application.

15. Costs

Both parties have requested that costs be granted to their favour. The Applicant's solicitor emphasized that the Tribunal has discretion under the Lands Tribunal Ordinance, Chapter 17 to make order on costs. This is indeed the case under s. 12 but the Tribunal is of the view that in the case of conflict with the Landlord and Tenant (Consolidation) Ordinance, Chapter 7, the latter Ordinance should prevail. In accordance with s.119R of the latter Ordinance, costs should not be granted against a party unless that party has conducted the case in a frivolous and vexatious manner. As the Tribunal has not found that either party has conducted the case in such manner, the Tribunal does not feel the need to make any order on costs.

[Notes: Both parties have raised no objection to the judgment being written in either Chinese or English]

Orders

1. The application on 8th April 2003 be dismissed; and

2. No order as to cost.