CHILDWALL VALLEY CO. LTD. v. MRS MOIRA JAMES

Civil Appeal No. 185 of 1998

Headnote

Section 119J of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) requires the Lands Tribunal in determining the terms of a tenancy that the Tribunal is renewing to have regard to the terms of the current tenancy. Held that the Tribunal is entitled to disregard terms which do not have legal effect.

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

1998, No. 185
(Civil)

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J U D G M E N T

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Nazareth, V.-P.:

1. The appellant, Childwall Valley Co Ltd, represented by Dr Chan ("the landlord"), is the owner of Flat 206 at 78-80 Macdonnell Road. The respondent, Mrs Moira James, is the tenant.

2. The appeal arises out of a judgment given by the Lands Tribunal on 7 July and 4 August 1998. The Lands Tribunal rejected the landlord's claim for the inclusion in the new statutory tenancy it was granting to the tenant, of clause 4(k) which appeared in an earlier tenancy agreement. The landlord now appeals to this Court against that decision.

3. Paragraph 4(k) was in the following terms in an earlier tenancy agreement dated 13 September 1993:

"Submission to the Commissioner of

(k)

In accordance with Section 116(4) of Part IV of the Landlord and Tenant Rating, etc. consolidation Ordinance Chapter 7 this Agreement shall be submitted to the Commissioner of Rating and Valuation for endorsement to ensure vacant possession of the premises at the expiration of the tenancy, provided always that the Landlord shall be responsible for all costs in connection therewith."

The underlying facts can be stated, so far as they are relevant, quite shortly and can conveniently be taken from the first part of the Lands Tribunal judgment at p.3:

"The Applicant tenant first entered into a tenancy agreement (Exhibit A1) with the Respondent for a term of 2 years effective from 7th August 1991 at a monthly rent of $18,000. In 1993, the Applicant continued to lease the subject premises by entering into a second tenancy agreement ("the 1993/94 tenancy agreement" - Exhibit A2) for a term of 1 year commencing from 7th August 1993 at a rent of $22,000 per month. This time the subject premises were let fully furnished and the landlord was obliged by the terms of the tenancy to maintain and repair the premises, furnishings and fittings. Under clause 4(k) of the tenancy agreement parties agreed that this agreement be submitted to the Commissioner of Rating and Valuation for endorsement under Section 116(4) of the Ordinance. If so endorsed, the tenancy would be excluded from the application of Part IV of the Ordinance and the tenant would lose her security of tenure at the end of the 1-year contractual tenancy. However, the tenancy agreement had never been submitted to the Commissioner for his endorsement. As the tenancy had not been terminated by the landlord or otherwise in accordance with the provisions of Part IV of the Ordinance, the Applicant tenant continued to reside in the subject premises after the expiry of the 1-year contractional tenancy by paying the same rent of $22,000 per month and otherwise subject to the same terms as in the 1993/94 tenancy agreement. The Respondent landlord did not seek to terminate the tenancy by giving the tenant a prescribed notice of termination (Form CR101) until July 1997 when the Respondent gave the Applicant such a prescribed notice terminating the tenancy on 6th February 1998. The Applicant now applied to this Tribunal for a new tenancy."

4. Before proceeding to the other facts, it is helpful to set out the terms of the relevant provisions in the law. These are as follows. Section 116 of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) provides for the application of Part IV of the Ordinance (which provides to tenants of new tenancies of domestic premises a measure of security of tenure). Subsections (3) and (4) so far as relevant provide as follows:

"(3) This Part shall not apply to a tenancy entered into in writing for a term not exceeding 1 year which is endorsed by the Commissioner under subsection (4).

(4) When the Commissioner is satisfied that a tenancy mentioned in subsection (3) -

(a) ...

(b) is a tenancy (which is not a sub-tenancy) of premises -

(i) which are, in his opinion, fully furnished; and

(ii) in respect of which the landlord is obliged by the terms of the tenancy to maintain and repair the premises, furnishings and fittings;

...

and that the tenant ... understands the effect of excluding the tenancy ... from this Part, he may endorse the agreement to the effect that this Part does not apply to the tenancy ..."

5. I pause to say that it is not disputed that the tenancy at the stage the Lands Tribunal were addressing the matter, i.e. in July 1998, was a tenancy which was fully furnished and one which by its terms the landlord was required to maintain and repair the premises, furnishings and fittings.

6. It is also necessary to refer to s.119J:

"Other terms of new tenancy

The terms of a tenancy granted by order of the Tribunal under this Part (other than terms as to the duration thereof and as to the rent payable thereunder) shall be such as may be agreed between the landlord and the tenant or as, in default of such agreement, may be determined by the Tribunal; and in determining those terms the Tribunal shall have regard to the terms of the current tenancy and to all relevant circumstances."

I return then to the reasons for decision of the Lands Tribunal.

7. Having set out the history, Mr Poon, the member of the Lands Tribunal giving that part of the reasons, went on to address the matter of the proper rent and came to the conclusion that it should be $32,000 per month. Nothing turns on that.

8. He also decided that the appropriate term should be one year which, of course, brought it within s.116(3).

9. He then identified a point of law which he felt should be addressed by the presiding officer, she being the qualified member of the Tribunal. She addressed the matter and gave the decision of the Lands Tribunal on the point on 4 August. What she said was this:

"The hearing of the application on 7th July, 1998 was before a Member and a Presiding Officer because a question of law arose, for which a decision was required.

S.116(4) states:

'When the Commissioner is satisfied that a tenancy mentioned in subsection (3) -

(a) ...

(b) is a tenancy (which is not a sub-tenancy) of premises -

(i) which are, in his opinion, fully furnished; and

(ii) in respect of which the landlord is obliged by the terms of the tenancy to maintain and repair the premises, furnishings and fittings; ...

and that the tenant ... understands the effect of excluding the tenancy ... from this Part, he may endorse the agreement to the effect that this Part does not apply to the tenancy ...'

Under the section, the Commissioner of Rating and Valuation has to ensure the tenant understands the effect of excluding the tenancy from Part IV of Cap.7, then he 'may' endorse the agreement. This is a discretionary power. An endorsement would remove all benefits and protection afforded by part IV of the Landlord and Tenant (Consolidation) Ordinance Cap. 7.

Throughout the period from 1991 to the present, the Respondent landlord had taken no effective steps to carry out the term under Clause 4(k) of the tenancy agreement for endorsement. The term had never been effected, and should not be left in the agreement.

The order for the grant of a new tenancy was made under S.119D of the same Ordinance."

She then set out the text of s.119J and continued:

"The relevant circumstances in this application, where the parties are not in agreement as to the inclusion of the endorsement term, was that no endorsement had ever been effected for the whole of the previous tenancy period from 1991.

The decision is therefore made to remove this clause from the terms of the new tenancy."

Those were the Lands Tribunal's very clear reasons and its decision. Prima facie, the law seems to be plain and it seems to have been correctly applied. If one looks at s.119J, it can be seen that the Tribunal's role or powers as to the terms of the tenancy granted are there laid out. The terms of a tenancy to be granted by the Tribunal are to be such as may be agreed between the landlord and tenant so that if the landlord and tenant had agreed tenancy terms then the Tribunal was bound to reflect those in the new tenancy granted in pursuance of the application that had been made to it by the tenant. There was no such agreement. It was not suggested that there was such agreement. Therefore, the Tribunal had to determine the terms of the agreement and in determining those terms the Tribunal had to have regard to the terms of the tenancy then current and to all relevant circumstances.

10. What then were the terms of the current tenancy? From what I have said it will have been seen that the last written tenancy agreement was the 1993/4 tenancy. The tenant had upon its expiration held over and the terms therefore can be said to have been those in that tenancy agreement with necessary modifications. The 1993/94 tenancy agreement did contain clause 4(k). It is convenient to assume in favour of the landlord that clause 4(k) survived; but obviously it would survive in its unendorsed state. Now, what the Tribunal had to have regard to under s.119J was "the terms of the current tenancy". Although clause 4 (k) would upon that assumption have survived along with the other terms of the 1993/94 tenancy during the holding over period, it is plain from the provisions of Part IV, in particular s.116(3) and (4) that would have no effect until endorsed by the Commissioner of Rating and Valuation. Plainly it has never been endorsed. The landlord's representative, Dr Chan, admitted that before the Tribunal and he is not denying it before us. I will come to what he does say.

11. I turn now to the appeal provisions which are contained in the Lands Tribunal Ordinance and which provide quite clearly that an appeal to this Court from the Lands Tribunal lies only on a point of law. What then is the error of law that Dr Chan relies upon?

12. He submitted originally a Notice of Appeal in which his grounds are set out in the form of an affidavit. That was dated 28 July. Subsequently, he filed an Addendum. This was dated 25 September 1998. Between them they run to some 12 pages and contain much discursive material. For myself, having carefully studied the contents, I find it very difficult to extract any point of law. If there is any point of law, it might be this and I say that not only from having carefully read the contents of his Notice of Appeal and Addendum, but also from what he has told us today. Underlying many of his points and expressed in different ways is his contention that the 1993/4 tenancy agreement did contain clause 4(k) and that it is therefore to be included in the new February 1998 tenancy that the Lands Tribunal decided to grant. This submission wholly ignores s.116 and, indeed, s.119J which provides the jurisdiction of this Court. I repeat, what this Court and the Tribunal had to have regard to were the terms of the current tenancy, i.e. terms that were then in force, that had legal effect immediately before the Tribunal granted its February 1998 tenancy. Clause 4(k) had no effect. The landlord for the entire period of the successive tenancies had failed to apply for the clause to be endorsed. The Tribunal was perfectly entitled to remove it; more than that, it was the appropriate course to take. So the submission made by Dr Chan can be seen plainly to fail.

13. He nevertheless sought to rely on two factual matters. First, he says, that it was simply an administrative oversight on his part not to have sent the 1993/4 agreement to the Commissioner of Rating and Valuation for endorsement. This is neither here nor there. The fact is that he did not do so.

14. Second, he says, the tenant and her husband, as it were, tricked him into letting them have his original copy of the agreement and having obtained it, never returned it to him, using the pretext that it had been mislaid. This, again, in my view, is not a point of law. In any case it did not impress the Lands Tribunal which remarked in the course of the proceedings that Dr Chan could easily have provided a photocopy. However that may be, the fact remains that these grounds and all the other grievances Dr Chan mentioned do not alter the position that the clause 4(k) was never endorsed. They moreover are all points of fact and not law. His submissions, therefore, do not begin to meet the requirements of s.116, as the Lands Tribunal explained. The Tribunal was plainly entitled to omit clause 4(k) from the new tenancy as it did not form an effective part of the terms of the tenancy then current.

15. Upon that basis, there is no merit in the appeal. I find no necessity to address all the other many irrelevant points and grounds of appeal. I would dismiss the appeal.

Liu, J.A.:

16. The landlord/tenant relationship between the limited company and Mrs James was evidenced by a Tenancy Agreement which contained, among other provisions, Clause 4(k). Clause 4(k) enabled the landlord company under s. 116(4) of the Ordinance Cap. 7 to seek an exemption of the premises let from the application of Part IV of that Ordinance. On an application to grant a new statutory tenancy for the same premises under s. 119J, the Presiding Officer declined to include a clause, similar to Clause 4(k) in the new tenancy statutorily granted. Was she right? That is the only complaint before this court.

17. The landlord company could appeal only on a point of law. The Presiding Officer relied heavily on the "relevant circumstances" of the case as highlighted by the Vice-President. She was entitled so to do and the conclusion she reached cannot be said, in my view, to be unsupported or unjustified. The Presiding Officer was not wrong in law. She did not fall into error. The appeal clearly fails and I, too, would dismiss it.

Chan, CJHC :

18. I agree.

19. The parties cannot contract out of Part IV of the Landlord and Tenant Consolidation Ordinance, (Cap.7) unless and until their tenancy has been endorsed by the Commissioner of Rating and Valuation under section 116(4). The Commissioner is obviously the only authority entrusted with the power to make such endorsement. The Lands Tribunal's power under section 119J is quite different. Under that latter provision, the Lands Tribunal when granting a new tenancy upon an application under Part IV may, in default of an agreement between the parties, determine the terms of the new tenancy (other than terms as to the duration thereof and as to the rent payable thereunder) having regard to the current tenancy and to all the relevant circumstances.

20. I cannot accept the appellant's submission that the Lands Tribunal has usurped the power of the Commissioner. What the Lands Tribunal has done is to refuse to include the disputed term (clause 4(k)) in the new tenancy. It has not purported to exercise the power of the Commissioner under section 116(4).

21. Having considered the terms of the current tenancy and all the relevant circumstances in this case including the existence of the disputed term in the original agreement in 1991 and the fact that for the last 7 or 8 years, no active steps had been taken to have such clause endorsed by the Commissioner, I must say that the Lands Tribunal was not wrong in law in so reaching her conclusion.

22. For the reasons given by my Lords, I too would dismiss the appeal.