The Commissioner of Rating & Valuation v. Chan Ho Chin, Colin

HEADNOTE

Section 53A(5)(b) Landlord & Tenant (Consolidation) Ordinance - penalty for failure to comply with conditions for possession - duty of applicant asking for possession on the ground of rebuilding to supply accurate information to the Tribunal - conflict between Chinese version and English version of the section - implication of variation of conditions regarding penalty proceedings - inexcusable conducts.

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Application No. LDMR 48 of 2000

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J U D G M E N T

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1. On 28th June 1999, Judge Chow granted an order in Lands Tribunal LT 2723 to 2726 of 1996 giving Chan Ho Chin possession of Lot No.692 in Survey District No. 3 also known as No.79 Hoi Pong Road East, Lei Yue Mun ["the Site"] on the ground of rebuilding. Paragraph 2 of that order stipulated that the rebuilding work (including any demolition that is required) had to be commenced on 1st November 1999 and completed by 1st November 2000. These conditions were imposed pursuant to Section 53A (2) of the Landlord and Tenant (Consolidation) Ordinance Cap.7.

2. The Commissioner of Rating and Valuation monitored compliance with those conditions. During an inspection by Mr.Wai, an officer of the Rating and Valuation Department, on 2nd May 2000, he discovered that although the tenants had vacated from the premises and electric meters had been removed, demolition works had not been commenced. Photos were taken. The Commissioner therefore commenced the present proceedings seeking penalty pursuant to Section 53A(5)(b) of the Ordinance.

The relevant legislation: the two versions

3. Section 53A(5)(b) provides as follows,

"Where there is a breach of a condition imposed under paragraph (b) of subsection (2), the Tribunal may, on the application of the Commissioner,-

(i) where the applicant for an order for possession holds the premises under a Government lease or other tenancy from the Government, decree such breach to be a breach of covenant in the Government lease or of a condition or stipulation in the tenancy and a right of re-entry under the Government Rights (Re-entry and Vesting Remedies) Ordinance (Cap 126) shall accrue to the Government; or (Amended 29 of 1998 s. 5)

(ii) in any case, impose a penalty not exceeding the market value of the premises at the time of the imposition of the penalty."

4. There is a difference in the Chinese version of Section 53A(5)(b)(ii), the subsection reads as follows,

(b) 凡有違反根據第(2)款(b)段所施加的條件，則應署長申請，審裁處可─

(i) (如申請收回管有的命令的申請人根據政府租契或其他從政府取得的租賃而持有處所)判令該項違反屬違反政府租契契諾或違反租賃條件或規定，而《政府土地權(重收及轉歸補救)條例》(第126章)所賦予政府的重收權即產生；或 (由1998年第29號第5條修訂)

(ii) (如屬其他情況)判處罰款，但不得超過處所在判處罰款時的市值。

5. Instead of "in any case", the literal translation of the Chinese expression "(如屬其他情況)" should be "in any other case". I have brought this up at the hearing. Both parties submitted that I should apply the English version.

6. This section was enacted in English in 1981 (see Section 37 of Ordinance No.76 of 1981). The Chinese version was apparently introduced later pursuant to Section 4B of the Official Language Ordinance Cap.5.

7. Section 10B of the Interpretation and General Clauses Ordinance Cap.1 is relevant.

"10B. Construction of Ordinances in both official languages

(1) The English language text and the Chinese language text of an Ordinance shall be equally authentic, and the Ordinance shall be construed accordingly.

(2) The provisions of an Ordinance are presumed to have the same meaning in each authentic text.

(3) Where a comparison of the authentic texts of an Ordinance discloses a difference of meaning which the rules of statutory interpretation ordinarily applicable do not resolve, the meaning which best reconciles the texts, having regard to the object and purposes of the Ordinance, shall be adopted."

8. In the present case, the difference between the two versions could not be reconciled.

9. Cheung J. faced a similar problem in the context of the Estate Duty Ordinance in the case of Chan Fun Lan v. Lai Wai Chuen, HCMP No.4210 of 1996 . His approach was set out in his judgment,

"It is not possible to reconcile the two texts. The solution does not lie in giving effect to a text which favours one party as in the recent criminal case of R. v. Tam Yuk Ha (Mag. App. No. 9330/1996). This is not a workable approach because ambiguities of the two texts do not arise solely in criminal cases but in civil matters as well where there are two or more litigants. When the Court comes to the view that the authenticated Chinese text contains inaccuracies then it should not give effect to that text but should instead rely on the original legislation. This approach is justified because under s.4B of the Official Languages Ordinance where the Governor-in-Council has declared a text to be an authenticated text of an ordinance and it appears to him that there is any manifest error, omission or inaccuracy in that text, he may by order in the gazette correct that error and any such correction shall be deemed to have been incorporated in the text at the time when it was declared to be the authenticated text. One must bear in mind that the authenticated Chinese text started life simply as a translation of the original legislation and if there are errors in the translation, which are bound to arise in such a mammoth undertaking, such errors should not be given effect simply because under s.10B of the Interpretation Ordinance the two texts are said to be equally authentic."

10. I respectfully adopt the same approach, which is consistent with the submissions of the parties.

The case of the Respondent

11. Ms Esther Ho who appeared for the Respondent in the present proceedings admitted on behalf of the Respondent that actual demolition works had not been commenced on 1st November 1999. In an affirmation made by the Respondent filed in the Lands Tribunal LT Nos. 2723 to 2726 of 1996 on 27th June 2000 in support of an ex parte application for variation of the order of Judge Chow, he said in Paragraph 8 thereof that the demolition works were commenced in early June 2000.

12. The Respondent's case is that the delay in commencement of demolition works was mainly due to the difficulty in transportation of material to and from the Site. I should also mention that although Paragraph 4 of the order of Judge Chow of 28th June 1999 allowed the tenants to stay at the premises until 31st October 1999, two of them overstayed. Vacant possession of all the premises on the Site was only given to the Respondent on 3rd November 1999. Hence, the Respondent could not be expected to commence works on 1st November 1999.

13. On the authority of Secretary for Justice v. Sonics Development [1999] 2 HKLRD 477, Ms Ho submitted that the delay was excusable and the Respondent should not be penalized. She further submitted that the Lands Tribunal has in fact accepted the explanation of the Respondent because on 28th June 2000, Judge Chow granted an order on the ex parte application of the Respondent to extend the time for completing the rebuilding works to 1st June 2002.

The case of the Applicant

14. Mr.Ho Chi-sum, who appeared for the Commissioner, argued that once there was a breach of condition, the Tribunal must impose a penalty although the level of penalty would be a matter for the Tribunal in the exercise of its discretion. It could be nominal in a minor case.

15. On the facts of the present case, he submitted that the delay by the Respondent was inexcusable. The Respondent was aware of the transportation problem for some time even before he obtained the first order from Judge Chow.

16. With regard to the variation by Judge Chow, since it was made ex parte, the Commissioner was not given notice as to the same and Mr.Ho submitted that the variation did not bar the Tribunal from imposing a penalty. He drew an analogy with the extraction of premium by the Government when extending the time to a Government lessee to comply with a building covenant.

17. On the level of penalty, Mr.Ho submitted that it had to be set by reference to the market value of the Site. Based on the valuation report prepared by Ms Anita Ng which was admitted as evidence by agreement, the current market value of the Site on 2nd May 2001 was $551,000 on a vacant possession basis and $448,000 on an existing tenancy basis. He submitted that a figure in between the two was an appropriate penalty on the facts of this case.

My ruling on the law

18. In my judgment, the section clearly confers a discretion on the Lands Tribunal by the use of the word "may". This means that depending on the facts of the case before it, the Tribunal could decide whether to impose a penalty or not. I reject Mr.Ho's submission that the Tribunal only has a discretion in regard to the level of penalty but not in regard to a decision on whether to impose penalty. That clearly cannot be right.

19. Take the facts of the present case, the Respondent did not obtain vacant possession until 3rd November 1999. If that was the only delay, I cannot see any justification for the imposition of a penalty. Yet, according to Mr.Ho, the Tribunal would have no discretion and have to impose a penalty, although it could be a nominal one. I cannot accept that to be the intention of the legislature. I hold that in an appropriate case, the Tribunal can exercise its discretion by not imposing any penalty.

20. My conclusion is reinforced by reading subsection (5)(b) as a whole. It has to be remembered that the word "may" governs Section 53A(5)(b)(i) as well. The consequence for breach of condition under that limb is indeed very drastic: a right of re-entry being accrued to the Government. If Mr.Ho's construction of the word "may" is correct, the Tribunal will have no discretion in the matter but must decree accordingly. That again cannot be the intention of the legislature.

21. Turning to the case of Secretary for Justice v. Sonics Development [1999] 2 HKLRD 477, whilst it is correct that the facts of that case were different, I see no reason why the approach proposed by Deputy Judge Yung (as he then was) at p.479 D to F cannot be of general application,

"...the proper approach should be to take an overall view of the progress of the redevelopment ... If the delay is excusable, no penalty should be imposed."

22. Mr.Ho referred me to the dicta of Deputy Judge Yung at p.479A,

"However I cannot accept the submission that simply because the respondent is not at fault, it should not be punished. The purpose and intent of the penalty section would be defeated if the submission is right. A delinquent developer can easily avoid any penalty by selling the land to an innocent party or even to another company under its control."

In that passage, Deputy Judge Yung was dealing with the liability of an innocent successor (the respondent in the case before him) with regard to the delay on the part of its predecessor. I do not think the learned judge intended to hold that even when the whole period of delay was excusable, penalty should still be imposed. This is indeed obvious from the passages I cited in Paragraph 21 above.

23. Mr.Ho also cited the case of R. v. St. Margaret's Trust Ltd. [1958] 2 All ER 289. That was a case on the Hire Purchase and Credit Sale Agreements (Control) Order 1956. The context is entirely different from the one I have to deal with. I do not derive any assistance from that case.

24. In respect of the implication of the variation granted by Judge Chow in June 2000, Ms Ho agreed that it would not bar me from considering the merit of this application. However, she said it was a relevant matter which I should take into account.

25. It is indeed puzzling that the Respondent (or his solicitors) did not see fit to apply for variation as to the commencement date as well. At the time of the ex parte application, he was aware that works were not commenced in accordance with the original order. Ms Ho could not give me any explanation since the solicitor in her firm who handled the ex parte application had left the firm. Perhaps they thought that the completion deadline was more important and it would be sufficient to obtain a variation as to the completion date.

26. The variation was made pursuant to Section 11A of the Lands Tribunal Ordinance. Section 53A(2A) of the Landlord and Tenant (Consolidation) Ordinance provided that the usual one month's time limit for review shall not apply to the review in respect of the conditions imposed by the Lands Tribunal as to rebuilding other than in relation to payment of compensation. It means that there is no time limit for review. It was therefore open to the Respondent to apply for variation of the condition as to date of commencement of demolition works.

27. An application for variation for these conditions is normally made ex parte. The Commissioner is not notified and Mr.Ho also said that the Commissioner has no locus to appear. This is unsatisfactory. The Tribunal cannot monitor the progress of the rebuilding works by itself. The task was entrusted by the legislature to the Commissioner. The Commissioner could provide the Tribunal with relevant information in an application for variation. Of course, he could not do so if he was not notified of such application. This is perhaps an area which further thoughts should be given to in the future.

28. Bearing in mind that Judge Chow granted the extension of time for the completion of the rebuilding works, I am of the view that on the facts of this case, if an application for extension of the time for commencement of works has been made at the same time, such application would also be granted. I do not think it makes much difference (apart from possible implications on liability for costs of penalty proceedings) whether an extension for commencement of works was actually obtained.

29. However, the grant of such extension does not necessarily mean that the Tribunal must exercise its discretion by not imposing any penalty. Although whether the delay is excusable is a relevant factor in both applications, different considerations are involved. The penalty provision is for the punishment for conducts in the past. On the other hand, in the exercise of the power of review, the Tribunal is more concerned with the future, viz. when could the building be completed to satisfy the social purpose behind the legislative provisions as to rebuilding. I therefore hold that although the variation granted by Judge Chow is a relevant factor, it is not conclusive in my exercise of discretion under Section 53A(5)(b)(ii).

Whether the delay was excusable?

30. I now turn to the crucial question in the present case, viz. whether the conducts of the Respondent was excusable.

31. The Site is located at the northern side of Hoi Pong Road East, Lei Yue Mun. The vicinity is mainly occupied by village type houses and seafood restaurants. At the request of the Respondent, I have made a site visit in the morning of 19th June 2001 to familiarize myself with the accessibility to the site. I was told by a witness Mr.Shing (RW3) that in that aspect the situation has not been changed materially since 1999.

32. Hoi Pong Road East is a footpath. It is like the footpaths one find in fishing villages like Cheung Chau or Stanley. The footpath is quite narrow. Its width is about 2 metres. Vehicular traffic does not have any access. The nearest public road is Lei Yue Mun Path. At the end of that road, there is a small road with restricted accessibility to vehicles called Lei Yue Mun Prayer Road. On the day of site visit, we alighted from our vehicle at the end of that restricted road.

33. After that, it took about 10 to 15 minutes to walk along the footpath to reach the site. There were seafood restaurants along both sides of the footpath and fish tanks were placed outside some seafood stalls. It is obvious that it would not be possible for heavy machinery to be transported to the Site through this footpath. I also accept that it would be difficult to transport the debris from the demolition works by means of this footpath. There would certainly be strong objection from the operators of the seafood restaurants. Hence, land transport was infeasible.

34. Because of this problem, the Respondent's agent Mr.Shing could not find a contractor who was willing to undertake the job. According to the evidence of Mr.Shing, he started to contact contractors for the job in about mid-1999. Some contractors did not even bother to inspect the Site. In about November 1999, a Mr.Yip (RW2) was contacted and at first he explored the possibility of using some smaller machinery which he called "Cat" for transportation and removal of debris by means of the footpath. He brought along an operator of such machinery to inspect the Site and concluded that it was infeasible.

35. He then considered the option of sea transport. The Site was in fact at the water front. Before the Chinese New Year of 2000, he found a barge operator Mr.Leung who agreed to explore the possibility with him. Afterwards, it was found out that the depth of the sea along that stretch of water front presented a problem. One has to wait for high tide (and that occurred several days within a month) to permit the barge to anchor at a suitable place.

36. At the end, sea transportation was adopted. Yip said demolition works were commenced in March 2000. Initially, the works were carried out manually without any machinery. It progressed slowly and was halted after a while. Arrangement was made for a bulldozer to be transported to the Site by sea. The demolition works were completed in about August or September 2000.

37. From the photos taken by Mr.Wai on 2nd May 2000, very little (if any) had been done at the Site up to that date. In contrast, the photos taken on 26th June 2000 clearly showed that demolition works were in progress.

38. On the evidence before me, I find that actual demolition works were commenced in early June 2000. Works done at the Site prior to that date cannot be regarded as demolition works. Mr. Yip said some furniture and miscellaneous items were removed. They could only be regarded as preparatory works at the most. They were not construction works. Mr. Yip also mentioned removal of roof of the buildings. This is inconsistent with the photos taken by Mr. Wai and I do not accept such evidence.

39. There was also some delay caused by the fact that there was electrical wiring at the Site which supplied electricity to the neighbourhood. The Respondent wrote to CLP Power on 18th February 2000 and works were completed by CLP Power on 8th June 2000.

40. Whilst the delay could be accounted for, I am of the view that the Respondent was still at fault. Even taking the transportation and other problems into account, I find that the Respondent was dilatory in handling the matter. In my judgment, all these problems should have been known to the Respondent before he applied to the Lands Tribunal for an order for possession. In fact, the Respondent admitted in his testimony before me that he was aware of the problem as to transportation in early 1999. What he said he was unaware was that no contractor would take up the job. With proper planning, all these matters should have been taken care of with solutions at hand before application for possession was heard. These were not unforeseen problems. The Respondent simply did not find any solutions to the problems before he obtained the order for possession.

41. Before he obtained the order in June 1999, he seemed to leave everything to others and did not care very much as to how he could comply with the conditions to be imposed by the Tribunal. This is not a proper attitude. After the order was made, he again left the matter to Mr.Shing. He certainly could and should have done more to speed things up. He was legally represented and the implications as to the conditions to be imposed by the Lands Tribunal should have been explained to him both before and after the order was made. He should have presented to the Tribunal accurate and realistic information as to the commencement date of demolition works and completion date of construction work. The Tribunal relied on such information to set the conditions.

42. I do not for one moment accept that the Respondent has discharged his duty just by informing the Tribunal an estimate of the usual time required for construction of a typical village house without regard to the special circumstances of the case. Yet this is what the Respondent has done in this case. The Respondent submitted to the Tribunal at the hearing in June 1999 a letter dated 8th June 1994 prepared by an authorized person which stated that the construction period was only six months. This is misleading to say the least.

43. As I said, the Tribunal relied on the information provided by the Respondent to consider whether he was ready willing and able to carry out rebuilding works and if so what conditions should be imposed. The Tribunal has to ensure that tenants are not evicted from their homes prematurely. In the present case, the tenants had to vacate from their premises by 1st November 1999 whilst the Respondent was actually not ready to carry out demolition work until early June 2000. If the Respondent told the Tribunal in June 1999 that he still did not have a solution as to the transportation problem, the Tribunal may consider adjourning the matter until a solution could be offered.

44. Applying the approach of Deputy Judge Yung, looking at the overall progress of the redevelopment project, I find the conducts of the Respondent to be inexcusable. In this connection, I hold that it is relevant for the Tribunal to take into account of the conducts of the Respondent both before as well as after he obtained the order for possession.

The penalty

45. In the circumstances of this case, I decide to impose a penalty on the Respondent. I do not accept Mr. Ho's submission that an appropriate level of penalty is in between the two market values. The market value only set the maxima. The Tribunal must impose a penalty by reference to all relevant factors in the case before it. In the present case, the redevelopment project is a small one, the fault of the Respondent lies more in his failure to inform the Tribunal fully the relevant matters when he obtained the order for possession than in the delay after the order was made. This is not a case where the Respondent deliberately held up the rebuilding works and denied benefit therefrom. I also bear in mind that Judge Chow has varied the original order to extend the time for completion of building works to 1st June 2002. In my judgment, the appropriate penalty in this case is $20,000. I would also make an order nisi that the Respondent should bear the Applicant's costs of this application.