SEA KINGDOM PROPERTIES LTD. v. WONG KIN

- Headnote -

Lands Tribunal Appeal - Finding of presiding officer that there had been misrepresentation of material fact not supported by evidence - award of compensation to tenant under s53(8) Landlord and Tenant (Consolidation) Ordinance set aside on appeal.

IN THE COURT OF APPEAL

1994, No. 113
(Civil)

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J U D G M E N T

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Litton, J.A.:

1. This is a Lands Tribunal appeal. The appeal is brought by the appellant Sea Kingdom Properties Limited against an order made by the presiding officer of the Lands Tribunal, His Honour Judge Wesley Wong, on 10 June 1994 whereby he awarded compensation to the respondent in the sum of $37,500 under section 53(8) of the Landlord and Tenant (Consolidation) Ordinance. Section 53(8) reads:

"(8) Where a landlord has obtained an order for possession of the premises under subsection (2) and it is subsequently made to appear to the Tribunal that the order was obtained by the misrepresentation or concealment of material facts ..... the Tribunal .... may order the landlord to pay to the former tenant such sum as it thinks fit by way of compensation for damage or loss sustained by that tenant as a result of the order."

Background facts

2. The appellant Sea Kingdom Properties Limited are land developers. The respondent, Mr Wong Kin, was at one time the tenant of a building called How Yuk Building located at the corner of Argyle Street and Sai Yee Street in Kowloon; a building which in 1991 the appellant wished to demolish and rebuild.

3. The proceedings leading to the appeal now before us came about in this way. In November 1989 the appellant first applied to the Lands Tribunal for an order for possession under s53(2)(c) of the Landlord and Tenant (Consolidation) Ordinance on the ground that they intended to rebuild the premises. The tenants lodged notices of opposition. The applications were not heard until 8 May 1991. The appellants adduced evidence in support of their case to the effect that they had the intention and the ability to redevelop the site. By 10 May 1991 the appellants had adduced all the evidence and had closed their case. At that time the question of hoardings, covered walkways and gantries to protect the site had not been raised. Indeed, the appellants' architect had not then made any application under the Buildings Regulations for permission to erect such hoardings, to enable demolition work to commence. It appears that no one had at that stage given the matter any thought.

4. After the close of the appellants' case one of the tenants took a point of law in opposition to the application which necessitated an adjournment of the hearing. The case was not restored for hearing until November 1991. Eventually the proceedings between the appellants and the respondent were settled and the terms of settlement were made an order of the Lands Tribunal. The order is dated 26 November 1991.

5. The order for possession contained the following relevant conditions:

"Para 3 The above order including any orders forming part of the terms of settlement filed with the Tribunal is the subject to the following conditions:-

(a) ..........

(b) ..........

(c) Approved plan of the proposed new building to be lodged with the Tribunal within 14 days;

(d) Re-building work to be commenced on or before 1 May 1992.

(e) New building to be ready for occupation on or before 30 November 1994."

6. Pursuant to the consent order the respondent vacated the premises.

7. It is necessary for the purposes of this appeal to focus on para 3(d) of the order and in this context to have regard to s53A(2)(b) of the Landlord and Tenant (Consolidation) Ordinance which says:

"(2) Where the Tribunal grants an order for possession on the grounds mentioned in paragraph (c) of section 53(2), it may impose any reasonable condition on the landlord in relation to his intention to rebuild the premises and shall order that compensation be paid to the tenant and -

(a) .......

(b) that the rebuilding work (including any demolition that is required) be commenced, and the new building be ready for occupation, on the dates ordered."

8. Plainly the intention of the legislature in giving this power to the Tribunal is that the Tribunal should consider the interests of the tenants, to ensure that an order for possession will not be made unless the developer is reasonably in a position to commence the rebuilding and to complete it.

9. What in fact happened between 10 May, when the hearing was adjourned, and 25 November, when it was restored, was this. On 18 July the architect had applied to the Building Authority for permission to erect hoardings but on 13 September the Building Authority asked for revised proposals for reconsideration. It appears that the hoardings as proposed by the architect had intruded into Argyle Street and traffic flow would have been interrupted.

10. When the hearing before the Tribunal resumed at the end of November the architect thought that most of the problems, concerning a number of government departments, had been resolved in principle, but the revised proposals for the hoardings had not in fact then been resubmitted.

11. The revised plans were not eventually approved until 23 April 1992. The appellants then called for tenders for the demolition work. All this meant that the rebuilding works could not start on 1 May 1992 in terms of para 3(d) of the order of 26 November 1991.

12. On 11 June 1992 the appellants applied to the Tribunal seeking a variation of the terms of para 3(d) to extend the time to 1 November 1992 for the rebuilding work to commence, but this was refused by the Tribunal. The appellants therefore remained in technical breach of para 3(d) of the order.

Application for compensation

13. On 1 September 1993 the respondent took out his summons under s53(8) of the Ordinance for an order that the appellants pay him compensation for damage or loss sustained on the ground that the order of 26 November 1991 was obtained by misrepresentation or concealment of material facts. This summons was accompanied by an affirmation in which the allegation of misrepresentation or concealment was particularised as follows.

"10 ....... The applicants failed to obtain a permit to commence the demolition of the building and such information was passed to the applicant's agent on 13 September 1991. The permit to demolish the building was finally given by the relevant authority on 23 April 1992 and then the applicant started to call for tender to demolish the building.

11. The material fact that the refusal of the permit to demolish the building in September 1991 was never passed/disclosed by the applicant to the court in November 1991 and I verily believe that had the court have known such a material fact, the court might have refused to grant the order for possession in November 1991 and as a result, I might not be required to vacate the premises so early."

14. Pursuant to this claim the Tribunal awarded to the respondent a sum of $37,500 by way of compensation.

The appeal

15. The developers being dissatisfied with the award of compensation now appeals to this court under s68A of the Landlord and Tenant (Consolidation) Ordinance on the ground that the award of compensation is erroneous in point of law.

Section 53(8)

16. To establish liability under 53(8) the applicant must satisfy the Tribunal that the possession order was obtained by the misrepresentation or concealment of material fact. In other words the fact misrepresented or concealed must have a direct causative link with the possession order obtained.

The presiding officer's decision

17. Here, the presiding officer rejected the allegation of concealment made by Mr Wong Kin. He said that the non-disclosure was due simply to an oversight or inadvertence on the part of the architect and the appellant's officers. On the affidavit evidence this seems to me to be a valid finding.

18. The fact is that at that time the permission for the hoarding was considered by everyone concerned to have been a routine matter, unlikely to have any real impact on the progress of the proposed development. Assuming that the Tribunal had been told on 26 November 1991 that the first proposal of the architect for the hoarding had been rejected, what might the presiding officer have done? It is inconceivable that he would not have approved the settlement and declined to make the order for possession. At the most he might have reconsidered the date 1 May 1992 as the day for commencement of the rebuilding works. But that was still six months away and there was nothing to be gained by the developer in being too optimistic as regards that date. There is nothing before us to suggest that any representation made to the Tribunal regarding the question of the hoarding permit would have influenced his decision in any way: that is, the decision regarding the commencement date for rebuilding work under s53A(2)(b) of the Ordinance. No other terms of the order could have remotely been in issue.

Misrepresentation

19. There being clearly no concealment of any material fact in this case what room is there then for a finding of misrepresentation?

20. The way the presiding officer reached his conclusion is this. He said that when the appellants proved their case in May 1991 it was not envisaged that rebuilding works could not proceed, so there was no misrepresentation at that stage. But the situation changed on 13 September 1991 when the Building Authority rejected the hoarding plans; the appellants could not then have proceeded with demolition until the plans were approved. When the appellant appeared before the Tribunal on 26 November 1991 it had "represented" to the Tribunal that the situation proved by evidence in May had "remained unchanged"; this was in fact not so; "the situation had changed". This according to the presiding officer amounted to a material misrepresentation.

21. The presiding officer's statement that in May 1991 "it was not envisaged that rebuilding works could not proceed" is somewhat obscure. Plainly there was no representation made by or on behalf of the appellants that forthwith upon the making of the possession order they would proceed with the demolition. This was plainly not the situation and would have made nonsense of para 3(d) of the order were this so, as para 3(d) gave the appellants over six months to take that step.

22. In my judgment, the evidence before the presiding officer simply did not support his finding of misrepresentation. In May 1991 the question of the hoarding plans had simply not surfaced, because the application for approval had not yet been made. Therefore insofar as the appellants can be taken as having made any representation to the Tribunal in May 1991 it must have been to the effect that they hoped to start rebuilding soon. If pressed they would probably have said: "As soon as we have got the hoarding plans, not yet submitted, approved by the Building Authority, and tenders for demolition, not yet called for, accepted by our management." The "change in situation" which was the basis for the presiding officer's finding of misrepresentation was simply not there. At any rate not as he found it to exist.

23. It may well be that with the well-advertised accidents at demolition sites which have occurred recently in the territory, developers and authorised persons would now be far more mindful of the importance of proposals for hoardings covered walkways and gantries prior to demolition. It is certain that the Building Authority and the Lands Tribunal charged with statutory duties will be alert to the need for much closer scrutiny; and in the case of applications under s53(2)(c) of the Landlord and Tenant (Consolidation) Ordinance the Lands Tribunal will now be more aware of the possibility of delays in the commencement of demolition work. But we are concerned with the state of affairs in 1991. It seems clear on the evidence that at that time the disclosure of the slight set-back regarding the approval of the hoarding plans would have had no impact on the order for possession which the Tribunal was otherwise minded to make.

Conclusion

24. This is not a case which turns upon the assessment of the veracity of witnesses. On the evidence before the presiding officer, and particularly in the light of his own finding that there was no concealment, the finding of misrepresentation was in my judgment simply not one which was open to the presiding officer to make. There was accordingly an error in point of law. I would allow the appeal, and discharge the order for compensation made by the presiding officer.

Nazareth, J.A.:

25. I agree.

26. The context of the order appealed against must be seen for what it is: an application for possession of premises under s.53(2)(c) of the Landlord and Tenant (Consolidation) Ordinance, i.e. on the ground that the landlord intends to rebuild the premises. So the Tribunal's primary function was to satisfy itself of that intention.

27. Section 53A(2) for present purposes provides:

"Where the Tribunal grants an order for possession on the grounds mentioned in paragraph (c) of section 53(2), it may impose any reasonable condition on the landlord in relation to his intention to rebuild the premises and shall order that compensation be paid to the tenant and --

...

(b)that the rebuilding work (including any demolition that is required) be commenced ... on the dates ordered."

We are told and it is entirely understandable, given the context mentioned, that the Tribunal as a matter of practice does not concern itself with evidence of when the rebuilding work will commence. The matter of the date of possession is generally resolved by agreement between the parties. However well that may or may not work in practice, facilitated or otherwise by monetary adjustment, s.53A(2)(c) embodies a mandatory statutory obligation, and one that is plainly designed to enable the Tribunal to set a fair and proper date for possession. It cannot be right to disregard it in such fashion. However that may be, it is clear that in fact no consideration was given to the date of commencement of the rebuilding work, in particular the demolition of the old building. And that in consequence, not only did the appellant not make any representation as to the date of, or to being in a position to proceed with rebuilding, but even the occasion for such representation does not appear to have arisen. It is significant how the judge put it at p.6 of his judgment:

"The Applicant proved case in May 1991. At that time it was not envisaged that rebuilding work could not proceed. There was therefore no misrepresentation at that stage. However the situation changed since 13th September 1991 when the Building Authority rejected the hoarding plan. It is plain that the Applicant could not proceed with demolition until the hoarding plan was approved. When the Applicant appeared before the Presiding Officer on 26th November 1991 for an order for possession in respect of all applications it had represented to the Tribunal that the situation when it proved its case in May 1991 remained unchanged. As a matter of fact it was not. The situation had changed. It is on this basis that I find the Applicant had obtained the orders for possession by misrepresentation."

28. In fact, as I have already indicated, there was no representation at all in May 1991 on the point in question. To say the applicant represented to the Tribunal on 26th November 1991 that the May representation or situation remained unchanged is a non sequitur in the circumstances and fatal to the Tribunal's decision. There was simply no evidence upon which the finding of a misrepresentation could be made. The judgment in that respect is erroneous in point of law. For that reason also, I would allow the appeal and set aside the Order of the Tribunal.

Mayo, J.:

29. I also agree entirely. The Presiding Officer based his decision upon what he regarded was a misrepresentation by the Appellant in the context of S.53(8) of the Landlord & Tenant Ordinance Cap. 7. The main complaint made by the Appellant is that such a finding is inconsistent with the earlier finding in the Presiding Officer's judgment that the Appellant had not concealed material facts. It is difficult in the circumstances of this case to reconcile these two findings. Mr. Fung submitted that if the Appellant had not been guilty of concealment of material facts, it was difficult to see how the Appellants had made any misrepresentation to the Tribunal.

30. The initial hearing had taken place in May 1991 and the Appellants had concluded giving evidence concerning the Respondent on the 10th May. The Respondent had given his evidence on the 22nd May.

31. The application for possession had not concluded at that time as a number of other applications relating to other tenants in the premises were still outstanding. The application was resumed on the 25th November 1991, at which time the Appellant and the Respondent finalised terms of settlement which provided, inter alia, that vacant possession of the suit premises would be rendered up on the 29th February 1992 in exchange for the payment of the moneys referred to. These terms were embodied in an order the next day which also included a condition that rebuilding work should be commenced by the 1st May 1992.

32. The rebuilding work was not commenced until approximately three months after this date. It was the breach of this Order which was the main catalyst for the application which was made by the Respondent to the Tribunal against the Appellant which was the subject of the hearing before the Presiding Officer Wesley Wong, D.J.

33. The complaint which was made by the Respondent was that he need not have rendered up vacant possession on the 29th February 1992 if the redevelopment of the premises was to be delayed.

34. The Respondent contended that the Appellants should have disclosed to the Tribunal on the 25th November 1991, that they had been advised by the Building Authority that the plans which had been submitted for the permit to erect a Hoarding etc. to enable them to undertake demolition work had been refused. In fact what had happened was that the Highways Authority had raised various requisitions which necessitated the submission of revised plans.

35. There was uncontested evidence before the Presiding Officer that the Appellants had not regarded this as being a serious problem and that in September or November 1992 there were no grounds for believing that the resubmission of the said plans would lead to a delay such as to place in jeopardy the date for the commencement of the rebuilding work. It had not occurred to the Appellants that this was a matter which should be referred to the Tribunal on the 25th or 26th November.

36. Mr. Fung submitted that there had been no misrepresentation to the Tribunal. There had been no reference to the plans for the demolition work at all. Also it was not possible to argue that there was even any implied representation that the situation obtaining in May at the time of the hearing was the same as that which obtained in November. The fact of the matter was that the situation was exactly the same. No permit existed in May or November. It is difficult to fault the logic of this submission. If it is not possible to infer a representation to the effect that an existing state of affairs still existed, I do not think that it is possible to say that there has been any misrepresentation.

37. This must particularly be the case where the Presiding Officer has made a specific finding to the effect that the Appellant has not been guilty of any concealment.

38. In such a situation, it is evident that the Presiding Officer was in error in his interpretation of what might constitute a misrepresentation. His judgment cannot therefore be supported.

39. Before leaving this appeal, it is necessary to comment upon the breach of the condition that the rebuilding work must commence by the 1st May 1992. Having regard to the function which was being performed by the Tribunal, it would appear that the most important matter for it to be satisfied on, was the genuineness of the proposed redevelopment. So long as it was evident that the redevelopment would be proceeded with in the near future, the actual date for the work to commence was not a matter of the first importance.

40. It would not to be a matter of concern to the Tenants who had entered into a Consent Order with the developer that they would receive compensation on the basis of their rendering up vacant possession on the date agreed to. A short delay would accordingly not affect that. The critical matter for the Tribunal was for it to satisfy itself of the integrity of the developers' intentions. If there was a short delay, this would redound entirely to the Developers disadvantage.

41. This view of the matter would seem to be supported by the decision of the Rating & Valuation Department not to take action against the Appellant in respect of the breach. I agree that this appeal should be allowed.