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CACV000046/1990
| IN THE COURT OF APPEAL |
1990, No. 46
(Civil)
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BETWEEN
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KALEY LIMITED
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Plaintiff
(Appellant)
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AND
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THE HONG KONG LAND PROPERTY CO. LTD.
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Defendant
(Respondent)
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Coram: Hon. Sir Derek Cons, V.P., Kempster, J.A., & Barnes, J.
Date of hearing: 12 September 1990
Date of delivery of judgment: 12 September 1990
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JUDGMENT
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Sir Derek Cons, V.P., delivered the judgment of the Court:
1. In the proceedings from which this appeal arises the Plaintiff is the tenant and the Defendant is the landlord of office premises. The lease in question is one for six years. Although dated the 6th December 1988, it took effect from the 1st June 1986. The rent to be paid is dealt with under Part I of the Third Schedule attached to the lease. For the purposes of this appeal, it may be taken as a fixed rent for the first three years, with the rent for the second three years to be agreed or determined according to the provisions of clause 2 of Part I. Provisions for rent free periods or one at a reduced rent do not affect the question we have to decide.
2. Clause 2 is in these words:
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"The rents in respect of the premises (and if applicable any additional premises taken by the Tenant under the terms of Clause 8 of this Lease) for each successive three year period ("Rent Review Period") throughout the term of years hereby granted and any extension thereof, the first of such Rent Review Periods commencing on the First day of June 1989, shall be the open market rent to be agreed or determined as follows:-" |
Subclauses (a) and (b) then set out the procedures for determining the rent; Subclause (c) provides that the decision of a surveyor or arbitrator appointed under the preceding sub-clauses shall be final; Subclause (d) provides for the adjustment of rent if the determination is made after the Rent Review Period has commenced; Subclause (e) sets out the criteria for the determination and is in these words:
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"The surveyor shall be required to determine the sum which in his opinion represents the open market rent for the premises as if the premises were being let with vacant possession on the open market for a term equal to the whole of the said term without reference to any other adjustments of rent during the said term but otherwise having regard to all issues which in the sole opinion of the surveyor appear relevant subject to Subclause (f) immediately following." |
There is nothing in Subclause (f) which is relevant for these proceedings.
3. Making use of the machinery in Subclauses (a) and (b) the landlord caused a surveyor to be appointed on the 7th June last year, but the parties were not in agreement as to the construction of clause 2 of the Schedule as to a matter which would vitally affect the consideration of the surveyor.
4. In due course the tenant took out a construction summons which was heard by Mayo J., and in which two questions were posed for his consideration. The first was:
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"whether in determining the open market rental for the Rent Review Period, the Surveyor should adopt a particular date for the purpose of his determination, and if so, what the relevant date is." |
We are not concerned with the second question. Mayo J. answered the first question in the affirmative and gave the 1st June as the relevant date, but the tenant was not satisfied with the judge's answer and now applies to set aside the construction which the judge adopted.
5. Mr. Chang, who appears for the tenant as he did below, has drawn our attention, indirectly at least, to the suggestion in Woodfall on Landlord and Tenant para. 1-0703/7 that the question is one purely of construction. That was accepted by the judge below and I accept it also. Taking that approach I would for myself, without hesitation, come to the conclusion that the judge was right. The relevant words of the lease, taken without the frills that surround them, are these:
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"The rent in respect of the premises ... for each successive three-year period ... shall be the open market rent ... as if the premises were being let with vacant possession on the open market for a term equal to the whole of the said term ..." |
When it comes to a pure question of construction it is often not susceptible to elaborate discussion, or sometimes any discussion at all. To my mind it simply follows naturally from those words that the intention of the parties was that the rent should be found as at the beginning of the Rent Review Period. It is normal to assess rent at the time of entering into a lease, and such construction would thus seem to be consonant with commercial reality.
6. Turning to the authorities to which Mr. Chang has referred us, we rind in Barnsley, Land Options pp. 277-278:
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"What is the appropriate date for assessing the market rental value - the review date, the date of actual agreement or determination, or some other date? Clearly this is an important question for both parties, yet review clauses do not always deal with this point satisfactorily; ... when the clause offers no guidance on the relevant date, the rent should be assessed in accordance with values prevailing at the time of the parties' agreement or the independent surveyor's decision." |
Mr. Chang accepts that Mr. Barnsley puts forward nothing in support of the proposition and that in substance it is no more than an expression of preference on Mr. Barnsley's own part.
7. We have been taken to the judgment of the English Court of Appeal in Glofield Properties Ltd. v. Morley [1989] 2 EGLR 118. For myself I cannot derive any assistance from that case, which turned on a lease with terms so different from the present. I merely note as a matter of interest in passing that Nourse L.J. commented that it would be
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"contrary to the whole purpose of a rent review provision that the reviewed rent should be fixed by reference to values prevailing at a date significantly later than the start of the period in respect of which it is payable." |
Mr. Chang has emphasised that the machinery provided by the present lease would prevent a decision's being made later than slightly over four months from the commencement of the Rent Review Period and suggests that such would not be a significant delay. I would only observe that "significant" is a relative adjective, and that the property market in Hong Kong is far more volatile than that of the United Kingdom. Four months could, as perhaps the present case may show, be a very significant period.
8. Be that as it may, I find no assistance from the authorities and certainly nothing to detract from what I find to be the natural construction of the terms of the lease, which is in accordance with that found by the judge below. I would therefore dismiss the appeal.
Kempster, J. A.:
9. I agree. As a matter of construction the words in clause 2(e) of the Third Schedule to the lease in question quoted by My Lord, the Vice President, point inevitably to the conclusion which he, like the judge below, has reached.
Barnes, J.:
10. I think that the judge below was right and I agree that the appeal should be dismissed.
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(Sir Derek Cons)
Vice President
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(M.E.I. Kempster)
Justice of Appeal
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(E.C. Barnes)
Judge of the High Court |
Representation:
Denis Chang, Q.C. and Benjamin Yu (M/s. Kao, Lee & Yip) for the Plaintiff/Appellant
Robert Tang, Q.C. and Malcolm Merry (M/s. Deacons) for the Defendant/Respondent
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