MILLION FORTUNE INDUSTRIES LTD v. AMJAD NADEEM

LDPD 1268/2022

[2023] HKLdT 71

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO LDPD 1268 OF 2022

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BETWEEN

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J U D G M E N T

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Background

1.  The applicant is the landlord of Flat 6, 2/F, Haiphong Mansion, 99-101 Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong (“the Premises”).

2.  By a written tenancy agreement dated 21 November 2013 (“the Tenancy Agreement”), the Premises were let to the respondent, Mr Amjad Nadeem, for a term of 3 years from 14 November 2013 to 13 November 2016 at the rent of $24,800 per month.

3.  It is an express provision that the tenancy has an optional 3-year term from 14 November 2016 to 13 November 2019 at the rent of $27,776 per month.

4.  The tenancy continued after the initial 3-year period as well as after the optional 3-year period. Thus, it became a monthly tenancy from 14 November 2019 onward.

5.  A Mr Ateeq-ur Rehman (“Mr Rehman”) was all along the occupier of the Premises. Mr Rehman in fact signed on the Tenancy Agreement on behalf of the respondent as the tenant.

6.  At the trial, a Mr Nasir Mahmood (“Mr Mahmood”) represented the respondent and he has no dispute that although the respondent was the tenant of the Premises, Mr Rehman occupied the Premises at all material times.

7.  According to Mr Rehman, he used the Premises for commercial purpose as a food supply chain and the applicant was fully aware of that usage. The applicant, however, insists that the respondent rented the Premises for residential purpose only as stipulated in the Tenancy Agreement.

8.  For the purpose of the present trial, the usage of the Premises is irrelevant as the only remaining dispute is concerning the amount of the outstanding arrears of rent/mesne profits.

9.  At the time when the applicant commenced the present proceedings on 7 October 2022, the applicant also claimed for possession of the Premises. The ground for possession was that the applicant gave a one month written notice to the respondent on 14 July 2022 to ask the respondent to give back possession on 13 August 2022.

10.  Before the present proceedings, the applicant had commenced another proceedings at the Lands Tribunal (ie LDPD 1027/2022) on 15 August 2022 to recover possession and outstanding arrears of rent against the respondent as in the present proceedings. The previous proceedings were dismissed by the Tribunal because the applicant was absent at the call-over hearing on 27 September 2022. Instead of seeking reinstatement of the previous proceedings, the applicant commenced the present proceedings for the same claims.

11.  In the present proceedings, the respondent failed to file any Notice of Opposition at first and the applicant obtained a default judgment against the respondent under Rule 15 of the Lands Tribunal Rules on 2 December 2022. The respondent applied to have the default judgment set aside on 6 January 2023, and the Tribunal set aside the default judgment on 31 January 2023.

12.  Thereafter, Mr Rehman on behalf of the respondent filed a Notice of Opposition on 20 March 2023, but the respondent simply stated in the Notice of Opposition that they object to the applicant’s claim and are defending the case. The respondent did not give any ground for disputing the applicant’s claim in the Notice of Opposition.

13.  Nevertheless, Mr Rehman in his witness statement filed on the same day as the Notice of Opposition, ie 20 March 2023, raised the defence that the applicant had agreed to reduce the rent on two occasions. The first occasion was on 17 September 2019 and the rent was reduced to $20,000 per month. The second occasion was in the month of March 2020 and the rent was reduced to $17,000 per month. Thus, the respondent was paying the reduced rent every month as agreed with the applicant.

14.  At the trial of the present proceedings, it was no longer necessary for me to deal with the possession claim as Mr Rehman had given back the keys of the Premises to the applicant on 13 January 2023. However, Mr Rehman still had some items including a refrigerator left at the Premises after he gave back the keys. Both parties agreed that Mr Rehman removed all the items only on 8 February 2023. Thus, the date of delivery up of vacant possession was on 8 February 2023, and the arrears of rent/mesne profits should be calculated up to 8 February 2023 as agreed by both parties.

15.  The main disputes in this case are therefore whether the applicant had agreed to reduce the rent on two occasions as the respondent alleges.

Payments made by the respondent

16.  First of all, the applicant has prepared a table to give the particulars of all the payments made by the respondent from 28 November 2016 to 1 August 2022 and the outstanding arrears of rent as at 13 September 2022, which is marked as Exhibit “A4”.

17.  The outstanding arrears of rent as at 13 September 2022 was stated to be $557,696 in Exhibit “A4”. However, the applicant’s first witness, Ms Li Kin Yung (“Ms Li”), in her witness statement (Exhibit “A1”) clarified that the outstanding arrears of rent for the period from 14 November 2016 to 13 September 2022 is in the total sum of $529,920, and the arrears of rent/mesne profits from 14 September 2022 onward is at $27,776 per month.

18.  The respondent has no dispute with the contents of Exhibit “A4”, or the calculation made by the applicant, save that there were two agreements to reduce the rent as aforesaid.

19.  It should be noted that the respondent did not make any allegation that the rent was reduced from $27,776 to $24,800 for the period from November 2016 to August 2019 by agreement. The respondent simply went on paying the old rent as in the first 3 years.

20.  Since there is no defence raised in respect of this period from November 2016 to August 2019, the respondent is clearly liable to pay back the balance arrears of rent for this period to the applicant in accordance with the terms of the Tenancy Agreement, ie the rent should be $27,776 per month. When the respondent was paying only $24,800 per month for this period, there is clearly a shortfall of $2,976 per month.

The first agreement

21.  According to Mr Rehman’s witness statement, it seems that the first agreement to reduce the rent was made on 17 September 2019. However, when I asked Mr Rehman (who is the only witness for the respondent at the trial) about when the agreement was actually made, he said that the agreement was made one or two days before 17 September 2019 through two telephone calls between him and Mr Chan Chi Wing (“Mr Chan”), who is the second witness for the applicant.

22.  According to Mr Rehman, Mr Chan was a staff of Ms Li who ran an estate agency and the respondent rented the Premises through this estate agency. Mr Chan was the person he contacted all along in respect of the tenancy matters. When he asked Mr Chan to reduce the rent to $20,000 for 6 months during the first phone call, Mr Chan said he would come back to him. Mr Chan did come back with the second phone call on the same day and agreed that the rent could be reduced to $20,000 per month.

23.  On the other hand, Ms Li, giving evidence on behalf of the applicant, denied that there was such an agreement, and the respondent simply paid $20,000 on 17 September 2019 and the subsequent months until 8 April 2020 when the rent paid was further reduced to $17,000. Ms Li also denied that Mr Chan was her staff, but just the applicant’s estate agent.

24.  Likewise, Mr Chan denied that the applicant had agreed to reduce the rent and he stressed that he had never received authorisation or instructions to deal with reduction of monthly rent with the respondent on behalf of the applicant.

25.  The applicant also produced two video recordings of the meetings in the office of the estate agency, one between Mr Rehman and Ms Li and the other between Mr Rehman and Mr Chan, both on 3 September 2022. It is clear from the video recordings that both Ms Li and Mr Chan never acknowledged that they had agreed to reduce the rent.

26.  In fact, because of the respondent’s failure to pay full rent each month, the applicant has refused to issue monthly rental receipt to the respondent since 14 November 2016.

27.  Both parties produced copies of some WhatsApp messages to support their own contentions. However, the applicant has lost most of the WhatsApp messages and cannot produce a full set of the messages. On the other hand, the respondent still has a full set of all the WhatsApp messages, but Mr Rehman produced only some parts of the messages at first.

28.  As I found that the WhatsApp messages are important contemporaneous evidence, I requested the respondent to produce a complete set of the WhatsApp messages. However, it was only after I made repeated requests and adjourned the proceedings a few times before the respondent could produce more of the WhatsApp messages.

29.  According to the WhatsApp messages between Mr Rehman and Mr Chan, it is clear to me that there was no agreement to reduce the rent as alleged by the respondent.

30.  First of all, according to the message from Mr Rehman to Mr Chan on 2 September 2019, Mr Rehman was requesting Mr Chan to reduce the rent for 30% for 3 months due to the riot that led their business going down for about 50%. The reply messages from Mr Chan to Mr Rehman on the same day and subsequent days on 3, 6, 9 10, 11, 12, 13 and 16 September 2019 all show that the applicant did not agree to reduce the rent but chased for overdue rent.

31.  In particular, the messages on 13 September 2019 show clearly that the applicant was chasing Mr Rehman for rental payment and Mr Rehman replied, “Trying wait today tomorrow can deposit 20k”. Then, on 16 September 2019, Mr Chan informed Mr Rehman that the applicant called again and said there was still no entries. Mr Rehman replied that he would check again, and Mr Chan requested Mr Rehman to send the bank advice by WhatsApp.

32.  If the respondent’s case were correct, the first agreement to reduce the rent would have been agreed on 15 or 16 September 2019, being 1 or 2 days before 17 September 2019. However, there was nothing mentioning about the first agreement in those messages. Mr Rehman was merely mentioning that he was “trying” and could “deposit 20k”.

33.  Then, on 17 September 2019, Mr Rehman sent the bank advice for payment of $20,000 on 17 September 2019 to Mr Chan by WhatsApp. Again, there was no mentioning of the first agreement. In fact, the reply from Mr Chan on the same day is most telling. He replied, “thx for part. payment”. This reply completely contradicts the respondent’s case. If there were already an agreement to reduce the rent to $20,000, Mr Chan would not have said that it was only part payment. Mr Rehman also did not refute Mr Chan’s claim that it was part payment thereafter.

34.  On 30 September 2019, Mr Chan again asked Mr Rehman to attend the overdue rental of the Premises and said “the bal. of last month is yet to pay”. Again, Mr Rehman did not mention anything about the first agreement to reduce rent. Instead, Mr Rehman replied on 4 October 2019 and said, “Need to wait few days to some Amount”.

35.  Moreover, on 30 January 2020, when Mr Rehman sent the bank advice for payment of $20,000 on 30 January 2020 to Mr Chan by WhatsApp, Mr Chan still replied, “Thx. for the partial payment. What about the balance?”

36.  Thus, I do not find that Mr Rehman’s allegation of the first agreement to reduce the rent to $20,000 has any truth in it.

The second agreement

37.  As to the second agreement, Mr Rehman’s evidence is that in the month of March 2020, he went to the office of the estate agency and talked to the landlord, and the landlord agreed verbally with him that the respondent could pay $17,000 per month.

38.  The applicant denies there was this verbal agreement in March 2020. The video recordings mentioned above also show that Ms Li made the denial on 3 September 2022.

39.  Again, the WhatsApp messages are important contemporaneous evidence to show whether the respondent’s allegation of the second agreement to reduce the rent to $17,000 is true or not.

40.  After considering the WhatsApp messages, I also came to the conclusion that there was no such verbal agreement to reduce the rent to $17,000 as alleged by the respondent.

41.  The WhatsApp message on 5 March 2020 still shows that Mr Chan informed Mr Rehman that the landlord said the respondent had not made the overdue rental and it was long overdue. Then, on 6 March 2020, the WhatsApp message shows that the respondent gave a cheque of $20,000 to Mr Chan for him to bank in. So the alleged second agreement could not have been made prior to 6 March 2020.

42.  Subsequent to 6 March 2020, the WhatsApp messages in March 2020 do not show that there was this second agreement to reduce the rent to $17,000. Instead, these messages only mentioned that “there is still no rental payment” and “the landlord will take action for re-possession”.

43.  On 8 April 2020, Mr Rehman sent a bank advice for payment of $17,000 to Mr Chan by WhatsApp and asked Mr Chan to check. Mr Chan replied, “Thx”. There is no mentioning that Mr Rehman and the landlord had agreed in March 2020 to reduce the rent to $17,000 at all. According to Mr Chan, he replied “Thx” just as a matter of courtesy and not for any other purpose.

44.  The same happened in the subsequent months. Mr Rehman just sent the bank advice for payment of $17,000 each month and Mr Chan replied “Thx”. Mr Chan gave the same explanation that the reply was given merely as courtesy.

45.  Then, on 6 January 2021, Mr Chan sent a message to Mr Rehman saying, “The landlord said there is a short paid amount of $1000 each month for the last 2 months. Pls make back the short payment for $2,000. Rental you made should be no less than $17000.”

46.  Then Mr Rehman replied, “We are trying to complete” and “Next month will try to make 17k very less Business”.

47.  These messages indicate that the respondent had to pay “no less than $17,000”. It does not mean that the rent was reduced to $17,000. It just shows that the applicant was prepared to accept part payments of not less than $17,000 at that time. According to Ms Li’s evidence, the applicant did not take out any application against the respondent for a long time because the respondent was still paying some amounts each month and she thought she could ask the respondent to pay back all the outstanding balance sums at the time when the tenancy agreement ended.

48.  On 4 and 6 October 2021, Mr Chan sent the message that “The rental is again due. Pls make it $17,000” to Mr Rehman by WhatsApp. The respondent relies on these messages to say that the rent was agreed at $17,000. I am sure that such a reading is taken out of context. As aforesaid, the previous messages already showed that the applicant was prepared to accept not less than $17,000. Thus, in asking Mr Rehman to make it $17,000, it just means that he cannot pay less than $17,000.

49.  I have no doubt at all that there was no such agreement to reduce the rent to $17,000 as alleged by the respondent.

Credibility of the witnesses

50.  Apart from the WhatsApp messages, which clearly and strongly support the applicant’s case that there was no agreement to reduce the rent, I also find Mr Rehman not being a credible witness. In giving his evidence at the trial, he could not give clear and firm answers on the details of the two agreements he alleges. It occurs to me that he was making up the details in the witness box as he went along.

51.  Most importantly, when I asked him to produce all the WhatsApp messages as a full set, he chose to select only certain parts of the WhatsApp messages to produce. It was only after I made repeated request and had to adjourn the proceedings a few times, he finally disclosed all the messages. It is clear that he chose those parts that he thought were beneficial to his case to produce, but they were taken out of context. Thus, his evidence on the two agreements are not credible at all.

52.  On the other hand, I find both Ms Li and Mr Chan to be credible witnesses as they gave their evidence in a very straightforward and consistent manner. I accept their evidence that there were no agreements to reduce the rent as alleged by Mr Rehman.

53.  I also accept Ms Li’s evidence in explaining the applicant’s delay in bringing the proceedings against the respondent when there had been a shortfall of the rent paid for a long time. Ms Li explained that she thought she would claim all the outstanding rent in one go when the tenancy ended, but she could not make a claim in the year 2020 because the Tribunal closed for business for many months due to the pandemic. This is true because the Tribunal did not open for business from 29 January 2020 to 3 May 2020. Thereafter she went back to the Mainland and could not return to Hong Kong until sometime in March or April 2021.

54.  After she had returned to Hong Kong, it took her a while to gather the records and calculate all the outstanding arrears of rent owed by the respondent. Hence, and also partly due to her laziness, she did not take any action against the respondent until 15 August 2022 when she commenced the previous proceedings in LDPD 1027/2022. She was absent at the hearing on 27 September 2022 because she was hospitalised. Thus, she commenced another action, ie the present proceedings, after the previous proceedings were dismissed and when she had been discharged from hospital.

55.  I accept Ms Li’s explanation and find them reasonable and credible. This can explain why there was a long lapse of time from the time when the shortfalls occurred to the time when the proceedings were commenced. In other words, this long lapse of time does not make the applicant’s case on the two alleged agreements less credible.

Conclusion

56.  In the circumstances, I find that the applicant’s claim for arrears of rent/mesne profits is established and the respondent has no defence to the applicant’s claim.

57.  I therefore make the following orders:-

(1) The respondent do pay the applicant:-

(a) outstanding balance of arrears of rent/mesne profits from 14 November 2016 to 13 September 2022 in the total sum of $529,920; and

(b) arrears of rent/mense profits at the rate of $27,776 per month from 14 September 2022 to 8 February 2023;

(2) Costs order nisi: The respondent do pay the applicant costs of the proceedings herein to be taxed on District Court Scale if not agreed; and

(3) The aforesaid costs order nisi shall become absolute if both parties do not make application for costs within the next 14 days.