XCHRX LIANG HAU LIANG v. JIK SING CO. LTD.

HCSD 4/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE A STATUTORY

DEMAND NO. 4 OF 2000

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J U D G M E N T

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Introduction

1. This is an application to set aside a Statutory Demand dated 1 February 2000. The background facts leading to this application can be summarised as follows.

2. The Applicant (as tenant) entered into a tenancy agreement dated 5 November 1997 with the Respondent for a term of 2 years from 1 November 1997 to 31 October 1999 at a monthly rent of $33,500.00. A deposit of $108,000.00 was paid by the Applicant to the Respondent pursuant to the said tenancy agreement. On about 7 April 1999, the Applicant made a request for a new 2-year tenancy from 1 November 1999 to 31 October 2001 pursuant to s.119A of the Landlord and Tenant (Consolidation) Cap.7 by sending a Form CR103. This was agreed to by the Respondent. However, the parties failed to agree on the amount of monthly rent for the new tenancy.

3. On about 9 November 1999, the Lands Tribunal made an order for the grant of a new tenancy pursuant to s.119D(1) of Cap.7. The Lands Tribunal also determined the rent of the new tenancy to be $22,900.00 per month pursuant to s.119K(1) of Cap.7. Further, the Lands Tribunal ordered that all other terms and conditions of the new tenancy should remain unchanged. On about 22 November 1999, the Applicant filed an Interlocutory Application to review the said order. After a review hearing dated 7 December 1999, the Lands Tribunal revised the said order by deleting the part ordering that all other terms and conditions of the agreement should remain unchanged.

4. Under the provisions of Cap.7, when the Lands Tribunal makes an order for the grant of a new tenancy:-

(a) the duration of the new tenancy shall be such as may be agreed between the parties, or failing agreement, as may be determined by the Lands Tribunal to be reasonable: see s.119I thereof;

(b) the other terms of the new tenancy shall be such as may be agreed between the parties, and failing agreement, as may be determined by the Lands Tribunal having regard to the terms of the current agreement and all relevant circumstances: see s.119J thereof.

5. The second of the 2 aforesaid matters has not been agreed between the Applicant and the Respondent and is yet to be determined by the Lands Tribunal, the original hearing of 13 March 2000 for this determination having been adjourned because of the present application.

6. The Applicant argues that the Statutory Demand ought to be set aside because "on the evidence there is a genuine triable issue" as to his liability to pay the sum referred to in the Statutory Demand. In essence 2 such issues are raised: -

(a) Although the Applicant does not deny his liability to pay rent, he is entitled to have the said rent deposit of $108,000.00 set off against the claim for the rent despite clause 4(d) of the old tenancy agreement. This is because in law vacant possession has been delivered up by conduct on 9 November 1999 when the Lands Tribunal granted a new tenancy.

(b) In any event, the Respondent has failed to lodge a Form CR109 with the Commissioner for Rating and Valuation in compliance with s.119L(1) of Cap.7. Such a non-compliance will result in the Respondent not being able to maintain an action to recover rent under the new tenancy: see s.119L(2) thereof.

Is Issue (a) triable or arguable?

7. Clause 4(d) of the old tenancy agreement provides inter alia that:-

"..... The landlord will repay to the tenant the said deposit within 30 days after delivery of vacant possession of the said premises to the landlord and after full settlement of all outstanding payments in respect of the said premises payable by the tenant." (emphasis supplied)

8. The purpose of this clause is clear and easy to understand. It was intended to enable the landlord to have a reasonable time to ascertain whether the tenant has complied with the terms and covenants of the tenancy agreement. I therefore conclude that the phrase "delivery of vacant possession" in this clause refers to an actual handing over of the physical possession of the property to enable the landlord to do so.

9. It is undisputed that the Applicant has been in possession of the listed property up to now. For the above reasons, I find that the Respondent's obligation to return the rent deposit has not arisen yet. There is therefore no arguable case that the Applicant is entitled to a "counterclaim, set-off or cross-demand" in connection with this sum.

Is Issue (b) triable or arguable?

10. S.119L(1) contains 3 sub-paragraphs. It is common ground that sub-paras. (a) to (b) are inapplicable to the present case and the issue is whether sub-para. (c) is applicable. This sub-paragraph reads:-

"(1) Where the parties ... execute a lease or agreement for a new tenancy as determined by the Tribunal ..., the landlord shall lodge with the Commissioner [of Rating and Valuation] a notice in triplicate in the specified form signed by the landlord and the Commissioner shall endorse the fact of receipt on two copies of the notice and return one copy to the landlord and one copy to the tenant.

(2) Subject to s.51A(6), a landlord shall not be entitled to maintain an action to recover rent under an agreement mentioned in subsection (1) unless a notice relating to that agreement is endorsed by the Commissioner under that subsection."

11. It is again undisputed that no lease or agreement for a new tenancy has been executed yet because only the duration and the amount of rent of the new tenancy have been determined by the Lands Tribunal. The other terms and conditions are, as stated above, yet to be determined. In these circumstances, I disagree with the Applicant's argument that the Respondent has failed to comply with s.119L(1) of Cap.7 because when no lease or agreement for a new tenancy has been executed, the provisions of s.119L(1) or (2) are inapplicable.

Conclusion

12. For the above reasons, this application is dismissed.