HUI FUNG v. LAU KIN

[English Translation – 英譯本]

CACV 30, 31 & 32/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 30-32 OF 2000

(ON APPEAL FROM LDNT NOS. 341, 342 & 343 OF 1999)

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BETWEEN

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JUDGMENT

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Hon Leong JA:

1. The Appellant Hui Fung is a tenant of Flats A, L and J, 1^st Floor, Chung Yeung Mansion, 8-14 Cannon Street, Causeway Bay, Hong Kong. The Respondent Lau Kin is the landlord of those three premises. On 6 January 1999, the parties entered into 3 tenancy agreements, the terms of which are the same apart from differences in the description of the subject premises. The terms that are relevant to these proceedings are reproduced below:

2. Clause 1:

The Tenant hereby rents from the Landlord … [particulars of the subject premises] … from 7 January 1999 to 6 January 2001, with one year being fixed tenancy and the other year being open tenancy (for a total of 24 months), at a rent of HK$15,180 per month payable in advance, and the rental does not include rates at $497 per month and management fees at $552. (In case of adjustment, the adjusted figure will prevail.)

Note: The parties agree that, during the rental period from 6/1/2000, the Tenant is entitled to fix a new rent with the Landlord, and the rent cannot exceed $15,180.

3. Clause 18:

The Tenant is entitled to terminate this tenancy 12 months after the commencement of the rental period, but the Tenant shall in advance give 1 month’s notice or make 1 month’s payment in lieu of notice to the Landlord and shall give vacant possession of the premises to the Landlord in time, and then this agreement will be formally terminated.

4. On 24 June 1999, the Appellant applied to the Lands Tribunal for “a grant to me of a new tenancy of the above premises commencing on 7 January 2000”. He also suggested that the prevailing market rent apply to the new tenancy. The application was made by way of Form CR 103 pursuant to section 119A of Part IV of the Landlord and Tenant (Consolidation) Ordinance. Subsequently, on 14 October 1999, the Appellant served Form CR 22 pursuant to section 117(1) of the said Ordinance, “requesting the prevailing market rent” and “applying for a new tenancy”. The Respondent opposed the applications for a new tenancy on the ground that each tenancy agreement between the parties “should expire only on 6 January 2001”.

5. Part IV of the Landlord and Tenant (Consolidation) Ordinance applies only to domestic premises. At the hearing of the applications before the Lands Tribunal, neither party raised the issue of whether the premises were used for residential purposes. Both parties seemed to have agreed that the relevant premises and tenancies were governed by Part IV of the said Ordinance. Accordingly, the only issue at the hearing was whether the Appellant was to be granted, pursuant to Part IV of the said Ordinance, a new tenancy at the prevailing market rent commencing on 7 January 2000.

6. Member Lo of the Lands Tribunal refused the Appellant’s application. In his Reasons for Decision dated 18 February 2000, he stated that the term of each existing tenancy was for 24 months. He took the view that, unless the Appellant chose to serve one month’s notice on the Respondent to terminate the tenancy pursuant to Clause 18 of the tenancy agreement, the tenancy would not expire until 6 January 2001. As the Appellant had not exercised his option and the original tenancy had not come to an end by effluxion of time, the Tribunal was unable to determine the new rent.

7. The stated ground of appeal is “according to the tenancy, upon expiry of the one-year fixed tenancy, a new rent can be determined and calculated by reference to the market rate”. At the appeal hearing, the Appellant indicated that he is merely requesting that a new rent for the remaining term of 12 months be determined by reference to the market value, on condition that the new rent is not to exceed $15,180.

8. Mr Liu, Counsel for the Respondent, submits that the Appellant’s application does not satisfy the requirement under section 119A(2). Section 119A provides as follows:

(1)     A tenant under a current tenancy may make a request to the landlord for a new tenancy.

(2)     A tenant’s request for a new tenancy shall be for a tenancy beginning with such date, not more than 7 nor less than 6 months after the making of the request, as may be specified therein: Provided that the date shall not be earlier than the date on which, apart from this Part, the current tenancy would come to an end by effluxion of time or could be brought to an end by notice to quit given by the tenant.

(3)    A tenant’s request for a new tenancy shall not have effect unless it is made by notice in the specified form given to the landlord.

9. Mr Liu submits that, as stated in Form CR 103, the Appellant is seeking a new tenancy that begins on 7 January 2000. This date is clearly earlier than the date of expiry of the existing tenancy. Mr Liu submits that the latter part of the proviso to section 119A(2) of the Landlord and Tenant (Consolidation) Ordinance, i.e. “the date on which [the tenancy] could be brought to an end by notice to quit given by the tenant”, only applies to periodic tenancies and not to the Appellant’s fixed tenancy. Even if it applies, the Appellant has not served a notice to quit. For these reasons, Member Lo was correct in refusing the Appellant’s application.

10. In my view, the term of each tenancy in question is a fixed-term tenancy commencing on 7 January 1999 and expiring on 6 January 2001. Although Clause 1 of the tenancy agreement refers to “one year being fixed tenancy and the other year being open tenancy”, the agreement expressly states that the term of the tenancy is 24 months. At the same time, Clause 18 of the agreement confers upon the tenant the right to terminate the tenancy before its expiry, on condition that, 12 months after the commencement of the rental period, the tenant terminates the tenancy by giving one month’s notice or paying rent in lieu of notice. In my view, the Appellant’s tenancy is for a term of 2 years, but after one year he can choose to terminate the tenancy. If he does not choose to do so, the rental for the remaining 12 months will be determined by reference to the market value, provided that the amount shall not exceed the current rental.

11. This being the case, the Appellant can exercise the right to terminate the tenancy under Clause 18 only after 6 January 2000, by serving a notice to quit on the Respondent.

12. On 24 June 1999, the Appellant requested the Lands Tribunal to grant him a new tenancy commencing on 7 January 2000. The commencement date of the new tenancy fails to comply with section 119A(2) as it is neither the date on which the current 2-year tenancy would come to an end by effluxion of time nor “the date on which [the currency tenancy] could be brought to an end by notice to quit given by the tenant”, the reason being that the Appellant is not entitled to terminate the tenancy at any time during the first year of the tenancy, whether it be on 24 June 1999 or at any other time within that year. Furthermore, the Appellant has not served any notice to quit or notice of termination of tenancy. His application to the Lands Tribunal cannot serve as a valid notice to quit or notice of termination of tenancy. The application fails to comply with the provisions of sections 117 and 119A.

13. Nor can the Appellant unilaterally apply to the Lands Tribunal for determining the rent of the “open tenancy”. This is because, pursuant to the provisions under Part IV of the Landlord and Tenant (Consolidation) Ordinance in respect of the determination of rent, it is only when the Lands Tribunal has ordered a landlord to grant a new tenancy to a tenant, and the parties have not reached an agreement on the new rent and have therefore referred the issue to the Lands Tribunal pursuant to section 119K, that the Lands Tribunal may accept the application and determine the new rent. This is different from the provisions under Part V of the Ordinance, which governs non-domestic premises, in that section 127A of Part 5 empowers the Lands Tribunal to entertain and determine any dispute between a landlord and a tenant as to rent.

14. As Member Lo has refused to order the Respondent to grant a new tenancy to the Appellant, he has not erred in refusing to determine the new rent under the open tenancy. In my judgment, the appeal should be dismissed.

Hon Woo JA:

15. In my judgment, the appeal should be allowed. As I am dissenting from my two learned friends, I should elaborate on the reasons for my judgment.

16. These three appeals, which involve the same parties and the same nature and grounds of appeal, can conveniently be dealt with together.

17. The three cases stem from three applications made by the Applicant to the Lands Tribunal, namely LDNT 341/1999, LDNT 342/1999 and LDNT 343/1999. They all involve premises known as Flats 1A, 1L and 1J of Chung Yeung Mansion, 8-14 Cannon Street, Causeway Bay, Hong Kong, of which the Applicant is the tenant and the Respondent the landlord.

18. The tenancies of these premises are based on three tenancy agreements. Apart from the description of the address of the subject premises, the three agreements have the same contents and they all contain the following two provisions which are relevant to the present case.

19. Clause 1 provides as follows:

… from 7 January 1999 to 6 January 2001, with one year being fixed tenancy and the other year being open tenancy (for a total of 24 months), at a rent of HK$15,180 per month payable in advance, and the rental does not include rates at $497 per month and management fees at $552. (In case of adjustment, the adjusted figure will prevail.) Note: The parties agree that, during the rental period from 6/1/2000, the Tenant is entitled to fix a new rent with the Landlord, and the rent cannot exceed $15,180.

20. Clause 18 provides as follows:

The Tenant is entitled to terminate this tenancy 12 months after the commencement of the rental period, but the Tenant shall in advance give 1 month’s notice or make 1 month’s payment in lieu of notice to the Landlord and shall give vacant possession of the premises to the Landlord in time, and then this agreement will be formally terminated.

21. In respect of each of the tenancies, by Form CR 103 (i.e. Notice of Request for a New Tenancy) dated 24 June 1999, the Applicant requested a grant of “a new tenancy commencing on 7 January 2001” and “requested the prevailing market rent”.

22. By Form CR 104 (i.e. Notice by Landlord of Opposition to a New Tenancy) dated 21 August 1999, the Respondent notified the Applicant of his opposition to a new tenancy.

23. On 10 October 1999, the Applicant, by means of Form 22, applied to the Lands Tribunal “requesting the prevailing market rent” and “applying for a new tenancy”. Subsequently, the Respondent issued Form 7 opposing the application, on the ground that the tenancy agreement provided that the tenancy was to expire on 6 January 2001.

24. The three applications were heard together before Member Lo of the Lands Tribunal (hereinafter “Member Lo”) on 7 January 2000. After hearing, Member Lo dismissed all the three applications but did not make any order as to costs.

25. On 25 January 2000, the Applicant issued a Notice of Appeal against Member Lo’s decision. The only ground of appeal as stated in the Notice is that “according to the tenancy, upon expiry of the one-year fixed tenancy, a new rent can be determined and calculated by reference to the market rate”.

26. At the commencement of the appeal hearing, the Respondent applied to serve a Respondent’s Notice out of time. The Notice sets out the following two additional reasons in support of the Tribunal’s decision:

(1)     The relevant [premises] are used as a guesthouse and are therefore governed by Part V and not Part IV of the Landlord and Tenant (Consolidation) Ordinance. The Applicant’s applications for new tenancies, which are made pursuant to Part IV of the said Ordinance, are accordingly invalid.

(2)     Assuming that the tenancies are governed by Part IV of the Landlord and Tenant (Consolidation) Ordinance, the date of commencement of the new tenancies as requested by the Applicant is earlier than the date on which the current tenancies would come to an end by effluxion of time, and this fails to comply with the requirement of section 119A(2) of the said Ordinance. The Applicant’s applications for new tenancies are accordingly invalid.

27. These two additional reasons received no mention whatsoever in Member Lo’s Reasons for Decision. Additional reason (2) involves a question of law which the Respondent is entitled to raise and argue before us whether the Respondent’s Notice is allowed to be filed out of time. On the other hand, additional reason (1) rests upon the basis that the relevant premises are used for non-domestic purposes and hence not governed by Part IV of the Landlord and Tenant (Consolidation) Ordinance (hereinafter “the Ordinance”). The forms used by the parties in relation to the applications for new tenancies, including CR 103, CR 104, Form 22 and Form 7, are forms prescribed under Part IV. In the Form 22 completed by the Applicant, the premises are indicated to be for “domestic” purposes; in the Form CR 104 completed by the Respondent, the following paragraph appears: “The units being rented are used for commercial purposes. In the units there are settings and facilities designed for use as a guesthouse as well as furniture and items that can be used to earn profits. There are four rooms with bathroom en suite. As soon as the tenancies take effect, the units can be operated as a guesthouse and can be rented out for profit. And it has been extremely difficult to obtain a renewal of tenancy in recent months, and the premises, well equipped with decoration and facilities for use as a guesthouse, are very rare and are the best commercial premises available.” The only other evidence pertaining to the use of the premises can be found in the three tenancy agreements between the parties. Clause 4 of each agreement states that “the abovenamed premises are rented purely for residential purposes”, and Clause 21 states that “the Tenant only has the following persons as residents/abovenamed companies as occupiers: can be used as a guesthouse. If the premises are not used by the abovenamed persons or companies, the Tenant shall be in breach of the agreement, in which case the Landlord is entitled to re-possess the premises immediately without resort to the tenancy tribunal and the Tenant shall immediately move out of the above premises without objection.” This shows that, under the three tenancy agreements, the subject premises may be used solely for residential purposes or as a guesthouse. There is no evidence at all regarding the actual purpose put to the premises by the tenant or the dominant purpose of the premises. Therefore, the purpose of the premises was not regarded as an issue between the parties and was not addressed in Member Lo’s Reasons for Decision. The premises were simply deemed to be domestic premises and Part IV of the Ordinance was used as the basis for decision. For this reason, if the Respondent’s Notice were allowed to be filed out of time, the Respondent would also have to be allowed to argue on and adduce fresh evidence in respect of facts which were not in dispute before the Lands Tribunal (i.e. whether the premises are used for residential purposes). This would not only be unfair to the Applicant but would also take away the basis on which the Tribunal heard and determined these three cases. Furthermore, the Respondent has in our view failed to provide sufficient reasons to support a decision to allow him to file the Respondent’s Notice out of time. We therefore refuse his application to file the Notice out of time. We will also deal with the present appeal on the basis that Part IV of the Ordinance applies.

28. In the Form 22 (Notice of Application) dated 10 October 1999, the Applicant made two requests, namely for the prevailing market rent and for new tenancies. Member Lo refused the applications, which means that he refused the applications for the prevailing market rent and for new tenancies.

29. In the Reasons for Decision of 18 February 2000, Member Lo had this to say:

6.      In my view, the three tenancy agreements, the contents of which are identical, provide that each tenancy is for a term of 24 months from 7 January 1999 to 6 January 2000 [sic, for 2001]. Although Clause 1 of each agreement expressly states that “one year [is for] fixed tenancy and the other year [is for] open tenancy”, this does not alter the fact that all the three tenancies are for a term of 24 months, i.e. until the expiry of 24 months from the commencement of each tenancy or until the tenancy is terminated at the request of the tenant (i.e. the Applicant) in accordance with Clause 18 of the agreement. The parties agree that the Applicant has not sought to terminate the three tenancies by giving the landlord (Respondent) one month’s notice or making one month’s payment in lieu of notice in accordance with Clause 18.

7.     In my view, Clause 18 merely gives the Applicant an option so that, after 12 months from the commencement of each tenancy, he may request to terminate the remaining term of the tenancy. The parties agree that the Applicant has not exercised the option.

Furthermore, I am of the view that the Note to Clause 1 of each agreement is in conflict with the provision regarding the original term of tenancy and rent. As the original term of tenancy has not come to an end or otherwise terminated, the tenant cannot possibly fix a new rent with the landlord. I therefore dismiss the Applicant’s three applications. I do not make any order as to costs.

30. This shows that the main reason given by Member Lo for dismissing the three applications is that each of the tenancy agreements between the parties is for a 24-month tenancy which does not come to an end until 6 January 2001 by effluxion of time. Although Clause 18 of each agreement allows the Applicant to terminate the tenancy, it is agreed that the Applicant has not sought to terminate the three tenancies by giving the landlord one month’s notice or making one month’s payment in lieu of notice in accordance with Clause 18. Therefore, the 24-month term of each tenancy is still subsisting. For this reason, Member Lo concluded that there is no legal or factual basis for the Applicant’s applications to the Lands Tribunal on 10 October 1999 for new tenancies.

31. In my judgment, the reasons given by Member Lo for refusing the applications for new tenancies are misconceived. Section 117(1) of the Ordinance provides as follows:

(1)     A tenancy shall not some to an end unless terminated in accordance with this Part; and a tenant may apply to the Lands Tribunal for a new tenancy —

(a)     if the landlord has given notice under section 119 to terminate the tenancy; or

(b)     if the tenant has made a request for a new tenancy under section 119A.

Section 119A provides as follows:

(1)     A tenant under a current tenancy may make a request to the landlord for a new tenancy.

(2)     A tenant’s request for a new tenancy shall be for a tenancy beginning with such date, not more than 7 nor less than 6 months after the making of the request, as may be specified therein: Provided that the date shall not be earlier than the date on which, apart from this Part, the current tenancy would come to an end by effluxion of time or could be brought to an end by notice to quit given by the tenant.

(3)    A tenant’s request for a new tenancy shall not have effect unless it is made by notice in the specified form given to the landlord.

(4)     A tenant’s request for a new tenancy shall not be made if the landlord has already given notice under section 119 to terminate the current tenancy, or if the tenant has already given notice to quit or notice under section 119B; and no notice under section 119 shall be given after the making by the tenant of a request for a new tenancy.

(5)     Where the tenant makes a request for a new tenancy in accordance with this section, the current tenancy shall, subject to sections 119M(2) and 119N, terminate immediately before the date specified in the request for the beginning of the new tenancy.

(6)     Within 2 months of the making of a tenant’s request for a new tenancy, the landlord may give notice in the specified form to the tenant that he will oppose an application to the Tribunal for the grant of a new tenancy; and any such notice shall state on which of the grounds mentioned in section 119E the landlord will oppose the application.

32. “Notice to quit” is defined in section 115 of Part IV of the Ordinance as a notice to terminate a tenancy given in accordance with the express or implied provisions of that tenancy. It is therefore obvious that the notice that the tenant is required to give to the landlord in exercise of the right to terminate the tenancy under Clause 18 of the agreement is covered by the notice to quit within the meaning of sections 115 and 119A of Part IV of the Ordinance.

33. It follows that if the Applicant has already given a notice to terminate the tenancy in accordance with Clause 18, he is debarred by section 119A(4) of the Ordinance from making a request for a new tenancy. However, the Applicant’s applications to the Lands Tribunal are obviously made on the basis of sections 119A(1) and 117 of the Ordinance. As Clause 18 of each agreement empowers the Applicant to terminate the tenancy, the request that he made to the landlord on 24 June 1999 for new tenancies was made in accordance with section 119A(1) and (2) of the Ordinance. The date of commencement of the new tenancies being requested (7 January 2000) is neither more than 7 nor less than 6 months after the making of the request. Nor is that date earlier than 6 January 2000 being the date on which, apart from Part IV, the current tenancies could be brought to an end by notice to quit given by the Applicant (tenant) in accordance with Clause 18. What the Applicant did is in full compliance with the requirement of section 119A. Had he first issued a notice to quit in accordance with Clause 18 or section 119B of the Ordinance, he would have been debarred by section 119A(4) from making a request for a grant of new tenancies.

34. Member Lo refused the Applicant’s applications for new tenancies on the ground that the Applicant had not sought to terminate the three tenancies by giving one month’s notice to the landlord pursuant to Clause 18. This is tantamount to compelling the Applicant to terminate the three tenancies in accordance with Clause 18 and then apply to the Lands Tribunal for new tenancies. In such a case, the application would inevitably be refused by reason of section 119A(4) of the Ordinance. This would put the Applicant in a dilemma.

35. On the other hand, although the three tenancies are for a term of 24 months and will not come to an end until 6 January 2001, Clause 18 of each tenancy agreement confers upon the Applicant the right to terminate the tenancy, which is in accord with section 119A(2) of the Ordinance. Therefore, it is not necessary for the Applicant to terminate the three tenancies before he applies to the Lands Tribunal for a grant of new tenancies. However, Mr Liu, Counsel for the Respondent, takes issue with this. He submits that the Applicant’s applications for new tenancies do not meet the requirement under section 119A(2). He says:

(1)     The commencement date of each new tenancy that the Appellant (i.e. the Applicant) requests cannot be earlier than the date on which the current tenancy would come to an end by effluxion of time. The current tenancy will come to an end on 6 January 2001 by effluxion of time. The Applicant requests a new tenancy that begins on 7 January 2000. This date is obviously earlier than the date on which the current tenancy would come to an end by effluxion of time.

(2)     A basic principle of tenancy is: a tenant shall not exercise the right of early termination of a tenancy so as to enable him to apply for a new tenancy.

36. The text of section 119A(2) is set out hereinabove. Mr Liu argues that “the date on which the current tenancy could be brought to an end by notice to quit given by the tenant” under section 119A(2) is directed at periodic tenancies and not fixed-term tenancies. The case of Garston v. Scottish Widows Fund & Life Assurance Society [1998] 2 EGLR 73 has been cited in support of the above argument.

37. Garston is an English Court of Appeal case that involved commercial premises and not domestic premises. The tenancy before the Court was one with a fixed term of 20 years. Clause 7 of the tenancy agreement provided that the tenant could, 10 years after the commencement of the tenancy, terminate the tenancy by giving the landlord not less than 6 months’ notice in advance. The Court of Appeal held that the tenant was not entitled to terminate the tenancy by means of Clause 7 and then apply to the court for a grant of new tenancy in order to reduce the rent payable during the remaining 10 years of the tenancy as set out in the agreement. The judgment of the Court of Appeal was based on section 26(1) and (2) of the Landlord and Tenant Act 1954, which was applicable to premises used for commercial purposes. Having explained section 26(1) and (2), the Court of Appeal stated that the objective of that section was to ensure that commercial tenants could continue to use the rented premises despite the expiry or termination of tenancy; a commercial tenant could not make use of that section to terminate the tenancy to which he had agreed and then continue to possess the subject premises on a tenancy with different terms (including a reduced rent). The Court of Appeal held that the tenant could apply to the court for a new tenancy only when the original tenancy had come to an end by effluxion of time.

38. In my judgment, Garston only concerns the interpretation of section 26(1) and (2) of Landlord and Tenant Act 1954, which is only applicable to commercial tenancies. The case is not directly relevant to the issue in the present case. Furthermore, section 26(1) and (2) of Landlord and Tenant Act 1954, being materially different from section 119A of the Landlord and Tenant (Consolidation) Ordinance, is not applicable to Hong Kong. Apart from ensuring that tenants may continue to rent the relevant premises, Part IV of the Ordinance also aims to enable tenants to request the Lands Tribunal to determine the prevailing market rent. This is at variance with the objective of the provision in the English Act. Garston is also distinguishable from the present case on the facts, in that the tenancy agreement in that case did not provide for the rent for the second 10-year term of the tenancy.

39. Looking at the matter from another perspective, the phrase “the Tenant is entitled to fix a new rent with the Landlord” in Clause 1 of each tenancy agreement does not ensure that the parties will reach an agreement on the new rent. At law, this condition subsequent may be regarded as unenforceable for being uncertain, with the result that the remaining one-year term of the tenancy is rendered invalid. It follows that the agreement takes effect as creating a tenancy for only one year as opposed to two years, and the tenant is entitled to request the Lands Tribunal to grant a new tenancy.

40. Section 119A(6) provides that a landlord who intends to oppose a tenant’s application for a new tenancy must give notice in the specified form to the tenant and state in the form on which of the grounds mentioned in section 119E the landlord will oppose the application. In the Form CR 104 dated 21 August 1999, the Respondent gave the following reasons for opposing a grant of a new tenancy:

The units being rented are used for commercial purposes. In the units there are settings and facilities designed for use as a guesthouse as well as furniture and items that can be used to earn profits. There are four rooms with bathroom en suite. As soon as the tenancies take effect, the units can be operated as a guesthouse and can be rented out for profit. And it has been extremely difficult to obtain a renewal of tenancy in recent months, and the premises, well equipped with decoration and facilities for use as a guesthouse, are very rare and are the best commercial premises available.

41. And in Form 7, the Respondent gave the following reason for opposing a new tenancy:

The tenancy agreement which I entered into with the tenant does not come to an end until 6 January 2001. I therefore oppose the tenant’s application for a new tenancy.

42. None of these reasons is a ground set out in section 119E for opposing an application for a new tenancy.

43. Furthermore, I am of the view that Member Lo’s decision of refusing the Applicant’s request for determination of the prevailing market rent is not supported by adequate reasons and wrong in law. Member Lo held that the Note to Clause 1 of each tenancy agreement was in conflict with the provision regarding original term of tenancy and rent because, the original term not having expired or been terminated, the tenant could not possibly fix a new rent with the landlord. Clause 1 of each agreement provides that the tenancy is for two years from 7 January 1999 to 6 January 2001, but also expressly states that one year is a fixed tenancy and the other year is an open tenancy. The Note to Clause 1 expressly states that the parties agree that the tenant is entitled to fix with the landlord a new rent for the term of tenancy after 6 January 2000 and that the rent is not to exceed $15,180. And Clause 18 provides that “[t]he Tenant is entitled to terminate this tenancy 12 months after the commencement of the rental period …”. This shows that, although the Applicant is entitled to terminate, in accordance with Clause 18, the remaining term of tenancy after 12 months from the commencement of the tenancy, he is also entitled to continue to rent the premises and also to fix with the landlord a new rent which is not higher than the original rent. The Applicant does not have to exercise his right under Clause 18 to terminate the tenancy before he fixes a new rent with the Respondent. Clause 1 itself provides for the term, rent and other expenses, and the Note merely states the parties’ agreement that the tenant is entitled to fix with the landlord the rent for the period after 12 months from the commencement of the tenancy, and that the new rent is not to exceed the original rent. This Note is not in conflict with Clause 1 and does not require the tenant to exercise his right under Clause 18 to terminate the tenancy before he fixes a new rent with the landlord. For these reasons, I consider that Member Lo’s refusal of the Applicant’s request for determination of the prevailing market rent is neither legitimate nor reasonable.

44. In my view, Clause 1 and the Note thereto should be construed as follows. Each agreement provides that the tenancy is for a term of 24 months from 7 January 1999 to 6 January 2001. The first year, i.e. up to 6 January 2000, is a fixed tenancy with a stated rent of $15,180 excluding rates and management fees. During the term of the fixed tenancy, neither party can vary any of the terms of tenancy. The Note provides that the parties agree that the tenant is entitled to fix with the landlord the rent for the open tenancy, i.e. for the one year after 6 January 2000, and the new rent cannot exceed the original rent of $15,180.

45. In the Form CR 103 served on the Respondent, the Applicant “requests the prevailing market rent”, which means requesting the Respondent to determine a new rent for the rental period after 6 January 2000. This met with the Respondent’s opposition by means of Form CR 104. How should the rent after 6 January 2000 be dealt with? This question can easily be resolved if the law allows the Lands Tribunal to determine the new rent upon request of the tenant or the landlord.

There are provisions in Part IV of the Ordinance on the question of rent. Section 119A(5) provides as follows:

(5)     Where the tenant makes a request for a new tenancy in accordance with this section, the current tenancy shall, subject to sections 119M(2) and 119N, terminate immediately before the date specified in the request for the beginning of the new tenancy.

46. In other words, under section 119A(5), when the Applicant issued Form CR 103 on 24 June 1999 requesting the landlord to grant a new tenancy, the current tenancy would terminate on 6 January 2000 being the date immediately before the date of commencement of the new tenancy (7 January 2000).

47. Section 119NA provides 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 2 years and otherwise on the same terms as the terms of the current tenancy.

48. As Member Lo did not make any order for the grant of a new tenancy, he should have determined, in response to the tenant’s application, the rent payable by the Applicant in accordance with section 119NA(2). Furthermore, if Member Lo ordered the grant of a new tenancy and the parties were unable to agree on the rent payable, the rent should, pursuant to section 119K, be determined by the Tribunal or by a valuation surveyor appointed by the Tribunal to be a prevailing market rent. Therefore, whether the Tribunal did or did not order the grant of a new tenancy, it would have to determine the new rent in accordance with section 119K or 119NA(2), as the case may be. In my judgment, Member Lo erred in failing to determine the rent in accordance with either of those two sections.

49. In summary, I hold that Member Lo did not have sufficient reasons for refusing the Applicant’s two applications. He should have ordered the grant of a new tenancy to the Applicant and determined the rent payable thereunder. The term of the new tenancy should follow what has originally been agreed, i.e. for a term of 12 months from 7 January 2000 to 6 January 2001. The new rent should be determined in accordance with section 119K but should not exceed the original rent as stated in the agreement.

50. For the above reasons, the appeal should be allowed and the three cases be remitted to the Lands Tribunal to be dealt with in accordance with this judgment.

51. My two learned friends take the view that the appeal should be allowed, although for different reasons. Cheung J considers that the circumstances of the present case does not fall within section 119A(2) of the Ordinance. In his view, that section only applies to fixed-term tenancies and periodic tenancies, and the tenancies in the present case are neither fixed-term nor periodic. With respect, I do not agree. Section 119A(1) expressly allows the tenant of a current tenancy to request the landlord to grant a new tenancy. Section 119A(2) provides that the commencement date of the new tenancy being requested “shall not be earlier than the date on which, apart from this Part, the current tenancy […] could be brought to an end by notice to quit given by the tenant”. I have clearly explained earlier on that, as the Applicant is entitled to terminate each tenancy agreement by serving a notice to quit in accordance with Clause 18 of the agreement, the terms of the three agreements are in accord with the provision of section 119A(2). The abovementioned two types of tenancies to which, in Cheung J’s view, that section applies are merely the more usual types of tenancies, and that section does not expressly state that it is not applicable to the type of tenancy in the present case. If Cheung J’s view were valid, then having a one-year open tenancy would be more disadvantageous to a tenant than not having it in that, on Cheung J’s judgment, the Applicant would not be protected by Part IV of the Ordinance and would not be able to apply to the Lands Tribunal for determination of a new rent. The Note to Clause 1 of the agreement would also become useless. The parties would not be able to agree on a new rent for the rental period after 7 January 2000, and the laws of Hong Kong — in particular, the law under Part IV of the Ordinance which serves to protect tenants — would not assist them in resolving the dispute. This would run contrary to the objectives and purpose of the Ordinance.

52. Leong JA, on the other hand, is of the view that, under Clause 18 of each tenancy agreement, the Applicant is not entitled to terminate the tenancy until 12 months after the commencement of the tenancy. When the Applicant made a request on 24 June 1999 for a grant of a new tenancy, he had not right to terminate the current tenancy in accordance with Clause 18, and therefore the requirement of section 119(2) was not met. In my view, however, on a correct interpretation of Clause 18, the Applicant is entitled to terminate the remaining term of tenancy after 12 months from the commencement of the tenancy. Only this interpretation would be consistent with the provision of “one year being fixed tenancy and the other year being open tenancy” in Clause 1 of the tenancy agreement. Leong JA’s interpretation of Clause 18 has not taken into account the agreed provision of “one year being fixed tenancy and the other year being open tenancy”. If his interpretation of Clause 18 were correct, there would in effect be no “open tenancy”. The reason is that the tenant would not be entitled to terminate the tenancy until after 6 January 2000, and under Clause 18, the tenant has to terminate the tenancy by giving one month’s notice in advance or making one month’s payment in lieu of notice; if he had to give one month’s (i.e. one whole rental month’s) notice and he could only serve one month’s notice after 6 January 2000 (i.e. the earliest on 7 January 2000), the date on which the termination took effect would certainly be after 7 February 2000; and because he had to satisfy the legal requirement of giving one whole rental month’s notice, the earliest date on which the termination took effect would be 6 March 2000. Accordingly, the term of the open tenancy would only be 10 months instead of one year. In my view, therefore, the correct interpretation of Clause 18 is that the tenant is entitled to give one whole month’s notice in advance on or before 6 December 1999 so as to terminate the tenancy on 6 January 2000 being 12 months after the commencement of the tenancy. This takes into account both the provision of “one year being fixed tenancy and the other year being open tenancy” and the Note to Clause 1 by which the parties agree that the tenant is entitled to fix a new rent with the landlord for the rental period after 6 January 2000.

Hon Cheung J:

The issue of the term of tenancy

53. The first issue in the present case is the issue regarding the rental period as stated in each of the tenancy agreements. Clause 1 reads:

from 7 January 1999 to 6 January 2001, with one year being fixed tenancy and the other year being open tenancy (for a total of 24 months)

The Note to Clause 1 reads:

The parties agree that, during the rental period from 6/1/2000, the Tenant is entitled to fix a new rent with the Landlord, and the rent cannot exceed $15,180

Clause 18 reads:

The Tenant is entitled to terminate this tenancy 12 months after the commencement of the rental period, but the Tenant shall in advance give 1 month’s notice or make 1 month’s payment in lieu of notice to the Landlord and shall give vacant possession of the premises to the Landlord in time, and then this agreement will be formally terminated.

54. In my judgment, each tenancy is for a term of 24 months from 7 January 1999 to 6 January 2001. This period has been made clear in the agreement. The agreement makes mention of one year being fixed tenancy and the other year being open tenancy. The terms “fixed tenancy” and “open tenancy” are commonly used terms as opposed to legal terms that bear specific legal meanings. In the present case, the so-called “open tenancy” means that the tenant is entitled to terminate the tenancy 12 months after the commencement of the rental period; that is to say, the tenancy can be terminated after 7 January 2000 if the tenant gives one month’s notice or makes one month’s payment in lieu of notice. However, basically the tenancy is still for a term of two years.

The issue in the present case

55. The fundamental issue in the present case is: given this is a tenancy for a term of two years which will not come to an end until 6 January 2001, can the tenant make a request on 24 June 1999 for a new tenancy commencing on 7 January 2000?

New tenancy

56. The tenant relies on Part IV of the Landlord and Tenant (Consolidation) Ordinance (hereinafter “the Ordinance”) and applies for new tenancies and determination of a new rent.

57. Section 117 provides as follows:

117.  Continuation of tenancies and grant of new tenancies

(1)     A tenancy shall not some to an end unless terminated in accordance with this Part; and a tenant may apply to the Lands Tribunal for a new tenancy —

(a)     if the landlord has given notice under section 119 to terminate the tenancy; or

(b)     if the tenant has made a request for a new tenancy under section 119A.

58. Pursuant to section 117, each of the tenancies shall not come to an end upon its expiry on 6 January 2001 unless the landlord has given notice of termination of tenancy in accordance with section 119. Under section 119(2), such notice has to be given not more than 7 nor less than 6 months before the date of termination. Under section 119B, the tenant may also give to the landlord, not later than 1 month before the date of expiry of the term of tenancy, a notice that the tenant does not desire the tenancy to be continued. In the present case, the landlord has not given any notice of termination of tenancy. Nor has the tenant given any notice under section 119B or served any notice of termination of tenancy pursuant to Clause 18 of the tenancy agreement. In fact, prior to the hearing before the Lands Tribunal on 7 January 2000, the parties could not possibly give any notice of termination under section 119 or 119B because at that time they simply could not rely on those two sections to terminate a tenancy which would not come to an end until 6 January 2001. Section 119A(4) also makes it clear that a tenant shall not request for a new tenancy if the landlord or the tenant has already given notice of termination.

Section 119A

59. The application for grant of new tenancies is made pursuant to section 119A. Section 119A(1) allows a tenant under a current tenancy to make a request to the landlord for a new tenancy, which means that the tenant may make the request before the expiry of the current tenancy. Under section 119A(2), the new tenancy shall begin on a date not more than 7 nor less than 6 months after the making of the request. Put simply, if the tenant makes the request on 1 January 2000, the date of commencement of the new tenancy cannot be earlier than 6 June 2000 or later than 1 July 2000.

60. The proviso to section 119A(2) provides as follows:

… the date shall not be earlier than the date on which, apart from this Part, the current tenancy would come to an end by effluxion of time or could be brought to an end by notice to quit given by the tenant.

61. The tenant’s notice of request for each new tenancy is dated 24 June 1999. He requested that the new tenancy begin on 7 January 2000. This date is earlier then the date on which the current tenancy would have some to an end by effluxion of time and therefore in conflict with the first limb of the proviso to section 119A(2).

62. The issue now is whether the second limb of the proviso applies. This involves the question of when the tenant may terminate the tenancy by serving a notice to quit. In the present case, prior to the hearing before the Lands Tribunal, the tenant could only serve a notice pursuant to Clause 18 of the tenancy agreement, which allows the tenant to terminate the tenancy 12 months after the commencement of the rental period. This means that a notice of termination cannot be issued until 7 January 2000 or thereafter, i.e. after the first year of the rental period. A notice issued on that date shall only take effect on 7 February 2000, and hence the date of commencement of the new tenancy as requested by the tenant in the present case does not satisfy the requirement of the second limb of the proviso either.

Interpretation of the Ordinance

63. Even if the tenant were allowed to give notice of termination of tenancy one month before 7 January 2000, in my view he still could not request the grant of a new tenancy under section 119A. A provision in an Ordinance is not to be interpreted solely by reference to the literal meaning of the wording of the provision. The intention and effect of the whole Ordinance have to be taken into account as well. Part IV envisages a request by a tenant to the Lands Tribunal for grant of a new tenancy in anticipation of the expiry of the current tenancy. Where, however, the current tenancy has not yet come to an end, there is simply no room for the tenant to rely on Part IV. Where a fixed-term tenancy allows the tenant to terminate the tenancy by giving notice to that effect, but the tenancy has not in fact been terminated, it will be superfluous and contrary to the intention of the Ordinance if the tenant is still entitled to apply to the Lands Tribunal for a new tenancy.

Two types of tenancies

64. In my view, the dates of termination referred to in the proviso to section 119A(2) involves the date of termination of two distinct types of tenancies, namely a fixed-term tenancy and a periodic tenancy. The former includes a contractual provision allowing the tenant to terminate the tenancy within the rental period. The latter arises in a situation where a fixed-term tenancy has come to an end and the parties continue to let and rent the subject premises but have not fixed an exact date of termination of the tenancy; in other words, the parties continue with the tenancy on a monthly or annual basis without defining the exact rental period. A fixed-term tenancy comes to an end by effluxion of time. A periodic tenancy comes to an end when the landlord or the tenant gives notice of termination of the tenancy. The proviso only makes mention of the date of termination pursuant to the notice issued by the tenant but not of the date of termination pursuant to a notice issued by the landlord because this is not relevant: where the landlord has given notice of termination, the tenant cannot make a request for a new tenancy.

65. In my judgment, as can be seen from the wording of sections 119 and 119B, Part IV of the Ordinance deals exclusively with the above two types of tenancies. A notice of termination, whether given by the landlord or by the tenant, must involve either of these two types of tenancies. It is true that “notice to quit” is defined under section 115 as a notice to terminate a tenancy given in accordance with the express or implied provisions of that tenancy, and this includes the one-month notice under Clause 18 of the tenancy agreements in the present case. However, the proviso to section 119A(2) is plainly directed at the above two types of tenancies. Viewing Part IV as a whole, its intention is not to allow the tenant to rely on section 117 to request a new tenancy by reason of his being entitled to terminate a fixed-term tenancy. For this reason, the “date on which the current tenancy could be brought to an end by notice to quit given by the tenant” under the proviso does not apply to the tenancy agreements in the present case. The tenant could not make a request for a new tenancy at a time earlier than 6 or 7 months prior to 6 January 2001.

English legislation

66. Section 119A is essentially modelled on section 26 of the English Landlord and Tenant Act 1954. In Garston and Others v. Scottish Widows’s Fund and Life Assurance Society [1998] 1 WLR 1583, Rattee J said:

(1)   The dates of commencement of a new tenancy referred to in the proviso to section 26(2) (i.e. the equivalent of the proviso to section 119A(2)) involves two types of tenancies:

i)   a fixed-term tenancy;

ii)  upon expiry of the fixed-term tenancy, a continuation of the tenancy renewable on an annual basis.

(2)   Each of the dates mentioned in the proviso refers only to the date on which one type of tenancy comes to an end.

(3)   On (1)(i), the date of termination of the tenancy is the date on which it comes to an end by effluxion of time. On (1)(ii), the date of termination of the tenancy is the date on which it is terminated by notice.

(4)   In respect of a fixed-term tenancy, even where the tenant is entitled to terminate the tenancy within the rental period, the date of commencement of the new tenancy cannot be earlier than the date on which the current tenancy would have come to an end by effluxion of time.

(5)   It is not the intention of the legislation to allow the tenant to terminate a tenancy on the one hand and request a grant of a new tenancy on the other hand.

The above propositions were upheld by the English Court of Appeal.

67. Section 26(2) expressly refers to the two types of tenancies mentioned by Rattee J, whereas section 119A(2) does not do so. Nevertheless, the principles in Garston are in my view applicable. In fact, the two types of tenancies that I discussed above are the only two types of tenancies that Part IV deals with, and the legislative intent mentioned by Rattee J is applicable to the present case.

Determination of the new rent

68. What the tenant in the present case requests is in fact not a new tenancy, but a determination by the Lands Tribunal of the new rent. However, nothing in Part IV allows a tenant to make a stand-alone application for determination of a new rent. Section 119K does not apply because it rests upon a condition precedent that the Lands Tribunal has granted a new tenancy, which is not satisfied here. Although section 119C allows the parties to refer the rent for determination where they are unable to agree on the rent, that section does not apply here because it requires a current tenancy and the parties thereto have agreed to grant a new tenancy to the tenant, which is not the case here. Each tenancy in the present case is for two years and the parties have not made any agreement on future tenancy. Nor does section 119NA applies. This section allows the Lands Tribunal to determine the rent payable by a tenant where it refuses to order the grant of a new tenancy. However, its application is conditional upon “a tenant remain[ing] in possession of any premises after the date on which the current tenancy would […] have come to an end by virtue of a notice given under section 119(1) or under section 119A(5)”. The tenant cannot rely on section 119(1) at this stage. Nor has each tenancy been terminated under section 119A(5) because the tenant simply cannot rely on Part IV and apply for a new tenancy.

69. On the question of whether the tenant may apply to other courts for determination of a new rent, I do not propose to make any comment here and it is for the tenant to seek legal advice in that respect. 

70. At the commencement of the appeal hearing, Counsel for the landlord raised the issue of whether the real purpose of the premises in question is domestic or commercial. Part IV of the Ordinance only applies to domestic premises. However, at the hearing before the Lands Tribunal, the landlord never argued that Part IV did not apply, and the Presiding Officer made his decision on the basis of Part IV. In fact, Counsel for the landlord subsequently withdrew his submissions on the purposes of the premises in question.

Appeal dismissed

71. In my judgment, there is nothing improper in the Presiding Officer’s decision. The appeal is accordingly dismissed.

Hon Leong JA:

72. The appeal is dismissed with costs.