RISING DRAGON INDUSTRIAL LTD v. CHENG MEI LING

LDPD 168/2017

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO. LDPD 168 OF 2017

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J U D G M E N T

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Background

1.  On 24 January 2017, the applicant applied to the Tribunal for recovery of possession of the suit premises on the ground that the respondent, as tenant, had been underpaying her rent by $1,000 per month since the commencement of tenancy on 18 August 2016. By reference to the Notice of Application of even date, the applicantsuggests that the respondent had been relying on “an old, void tenancy agreement” in preference to “the current, valid tenancy agreement”.

2.  The origin of the dispute between the applicant and the respondent can be discerned mostly from the Notice of Opposition filed by the latter on 2 February 2017.

3.  The landlord and tenant relationship between the applicant and respondent began in 2014 before they negotiated a renewal of tenancy agreement on 5 March 2016 (“the March Tenancy”) by which the applicant let the suit premises to the respondent for a term of 2 years from 18 March 2016 at $18,000 per month (inclusive of management fee, Government rates and rent). There was also a break clause whereby either party was entitled to terminate the March Tenancy earlier by serving not less than 1 month’s written notice or by paying 1 month’s rent in lieu to the other party provided that the written notice could not be served before the expiration of the 12^th month of the term of the March Tenancy.

4.  The respondent stated that when she proceeded to stamp the March Tenancy, stamping was rejected by the counter staff of the Stamp Duty Office because the company chop of the applicant was missing on the March Tenancy. Then the stamping was put aside as the respondent thought that some remedial actions should be taken by the applicant regarding the condition of the suit premises. Notwithstanding this, the respondent had in March 2016 paid rental for 3 months (ie from 18 March 2016 to 17 June 2016) in the sum of $55,500[1] to the applicant as represented by Mrs Shelley Hood (“Mrs Hood”) who was residing in Singapore; according to the respondent, the payment was made in reliance on the March Tenancy before any rectification of the suit premises (as alleged by the respondent) had been carried out.

5.  Whereas the March Tenancy was not stamped within 1 month, Mrs Hood acting on behalf of the applicant blamed the respondent for the delay, saying that the respondent should bear the consequence of not stamping in time because late stamping would be subject to a penalty[2].

6.  Notwithstanding the above, following further negotiations, the respondent agreed in August 2016 to sign another tenancy agreement (“the August Tenancy”) but this time at a higher rent of $19,000 per month from 18 August 2016 to 19 August 2017 despite the term of the tenancy was stated to be for 2 years from 18 August 2016 to 19 August 2018.

7.  The respondent submitted that in September 2016 she signed 1 copy of the August Tenancy at the request of Mrs Hood on behalf of the applicant who promised another copy of the August Tenancy for the respondent to sign so that both the landlord and tenant would be given an original copy of the August Tenancy.

8.  The respondent submitted that she did not hear from the applicant until 17 December 2016 when a copy (instead of the original) of the August Tenancy stamped on 29 September 2016 was mailed to therespondent’s address. The respondent submitted that the applicant failed to discharge its obligation and promise to submit another copy of the August Tenancy for the respondent to sign. More particularly, the respondent complained that the instrument date of the August Tenancy had been amended by the applicant unilaterally as shown below without her consent; otherwise, without the amendment, the applicant would be late in stamping the agreement:

1^st SEP

“An Agreement made the 18^th day of AUG, 2016 between the Landlord and Tenant as more particularly described in Schedule 1 ……”

9.  This was the first time when the respondent was being asked for the $1,000 difference in rent for four months since August 2016.

10.  Of particular interest, there is again no company chop of the applicant on the August Tenancy which was nevertheless stamped on 29 September 2016. When the respondent made a complaint about the “double standard” to the counter staff at the Stamp Office, she was told that the stamping was done by the applicant via eTax. In such regard, the respondent followed suit by amending the instrument date of the March Tenancy from 5 March 2016 to 26 November 2016 and successfully had it stamped on 24 December 2016 via eTax. The respondent then informed the applicant about the change made to the March Tenancy and asserted that the March Tenancy prevailed.

11.  In the Notice of Opposition dated 2 February 2017, the respondent stated however that she was willing to observe the terms of the August Tenancy if the latter was not amended unilaterally by the applicant. “The applicant, not just the respondent should bear the consequence of not stamping the agreement in time. The Commissioner of Stamp Duty should not allow double-standard (counter stamping vs e-stamping) in stamping lease agreements.”

12.  It is also the respondent’s case that she had paid from 18 March 2016 to 17 June 2016 a monthly sum of $18,500 instead of $18,000 as stated in the March Tenancy; ie she had overpaid by $500 each month or a total sum of $1,500. The respondent therefore is applying for the refund of the $1,500 from the applicant.

13.  And should the Tribunal determine that the March Tenancy prevails over the August Tenancy, the respondent sought to request the applicant to return the excess rental deposits of $1,000 (being $37,000 - $36,000) arising therefrom.

The March Tenancy

14.  By reference to para [235.043] of Halsbury’s Laws of Hong Kong, Volume 36, Landlord and Tenant, 2^nd Edition, 2014:

“An instrument in proper form by which the conditions of a contract of letting are finally ascertained, and which is intended to vest the right of exclusive possession in the tenant at once is a lease which takes effect from the date fixed for the commencement of the term.”

15.  And in 鄧慧鳳訴孫樂維及另一人，HCSA 26/2008 unreported，dated 24 March 2009）, it was held that so long as the essential terms of a lease or tenancy (including the identity of the parties, the subject matter of the tenancy，the amount of rent payable and duration）are present, the lease or tenancy is enforceable in law.

16.  By reference to the e-mails produced in the hearing by Mr Darryl John Hood (“Mr Hood”) who appeared on behalf of the applicant, the respondent accepted the offer of terms of the March Tenancy on 5 March 2016 and Mrs Hood agreed on 10 March 2016 to post 2 signed hard copies of the tenancy for the respondent to sign following which the applicant will arrange the stamping. Mr Hood complained that neither had the applicant, he or Mrs Hood since then heard from the respondent regarding the signing of the tenancy though 3 months’ rental had been paid by the respondent. A fortiori, on 4 July 2016, Mrs Hood complained that the rental from 18 June 2016 had been in arrears although around 7 July 2016, the respondent paid a further $68,045 into the applicant’s account for 4 months’ rental save for a deduction of $3,955 being payment for repairing the microwave & cooking stoves and replacement of light bulbs.

17.  In view of the above, I am of the opinion that both parties treated the March Tenancy was binding despite the respondent having not reverted back to the applicant nor having the tenancy stamped. By reference to section 6 of the Conveyancing and Property Ordinance, Cap 219, the March Tenancy, being a tenancy for a term not exceeding 3 years, can be created by parol and not put in writing. Following then, for instance,  鄧慧鳳訴孫樂維及另一人supra, theMarch Tenancy took effect upon the respondent accepting the terms on 5 March 2016 or thereabouts notwithstanding that it was not stamped.

18.  More recently, in Poon Lone Leo v Lei Iok Chan, HCSA 49/2015 (unreported, dated 28 January 2016), it was also held that the existence of a tenancy can be determined based on the evidence of the parties.

19.  As regards stamping, by reference to section 15(1) of the Stamp Duty Ordinance, an unstamped tenancy cannot be received in evidence in any proceedings. However, it is subject to section 15(1A) for instance where the court may receive it as evidence upon the personal undertaking of a solicitor to cause the tenancy to be stamped in due course. Section 9 of the Stamp Duty Ordinance also allows late stamping subject to a penalty. Thus, an unstamped tenancy does not mean that it can have no effect in law until it is stamped.

20.  In the present case, the existence of the March Tenancy is without dispute and should have taken effect for a term of 2 years from 18 March 2016 ie the commencement date of the tenancy subject to the break clause aforementioned in §3 above.

The August Tenancy

21.  However it is the evidence of Mr Hood that the applicant attempted to determine the tenancy by serving a one month’s notice on 14 July 2016. Unfortunately the applicant could have no right to do so when the March Tenancy was effective and binding. To the extent that the applicant was relying on the non-payment of rent in time, statutory relief would be available to the respondent under section 21F(2) of the High Court Ordinance, Cap 4 which reads as follows:

“If, within the time prescribed by rules of court for acknowledging service of the writ by which the action was commenced, the lessee pays into court all the rent in arrear and the costs of the action, the action shall cease, and the lessee shall hold the land according to the lease without any new lease.”

22.  On the other hand, I have the evidence of both parties that the August Tenancy has taken effect since 18 August 2016 and I accept the submission of the applicant that it has superseded the March Tenancy even based on the evidence as submitted by the respondent herself: the respondent agreed to sign the August Tenancy voluntarily.

23.  Although the respondent suggests that she entered into the August Tenancy based on her mistaken belief or threat from the applicant that the latter could determine the March Tenancy or treat it as void and commence proceedings for forfeiture, the threat of civil proceedings, whether there is good foundation for the proceedings or not, does not amount to duressor other excuse that may permit the respondent to avoid the AugustTenancy.

24.  That the respondent has a congenital heart disease also would not affect the effectiveness of the August Tenancy even though she had disclosed it to Mrs Hood in aid of negotiating the tenancy³.

25.  Whereas the corresponding tenancies took effect immediately upon signing, the date of stamping is irrelevant; the more recent stamping of the March Tenancy does not gain any advantage over the stamping of the August Tenancy so long as evidence shows that the March Tenancy has been superseded. The March Tenancy cannot be resurrected by stamping.

26.  The respondent also pointed out that the break clause appearing on the August Tenancy was faulty because “it cannot be interpreted in the context of stamp duty paid for 1 year”. The break clause states that:

“Notwithstanding anything to the contrary hereinbefore contained, either party shall be entitled to terminate this Agreement earlier than as herein provided by serving not less than 13 months’ written notice or by paying 1 month’s Rent in lieu to the other party provided that the said written notice shall not be served before the expiration of the 12 month of the Term of Tenancy.” (underline added)

27. In this regard, I accept the evidence of Mr Hood that the applicant meant the rent of $19,000 would only prevail for 1 year and the break clause would facilitate the negotiation of a new rent after 1 year (ie 12 months); the writing of “13” months’ written notice was a mistake and it should be “1” instead. In any event, as I stated at §17 above, the August Tenancy, being a tenancy for a term not exceeding 3 years, can be created by parol and not put in writing. Whether the applicant had broken its promised to provide another copy of the August Tenancy for the respondent to sign is neither here nor there. Therefore, the mistake appearing in the break clause should not affect the legal effect of the August Tenancy at all.

28.  With regret, I agree there appears to be some confusion perhaps owing to e-stamping but again it will not affect the legal effect of the August Tenancy. In light of this, I shall remind the Registrar of the Tribunal to pass a copy of this judgment to the Secretary for Justice and the Collector of Stamp Revenue to determine if somebody has committed an offence under section 55 and/or section 59 of the Stamp Duty Ordinance and to take necessary action, if any.

Conclusion

29. In conclusion, I consider the August Tenancy is binding on the respondent who should make rental payments according to it subject to deduction of her overpayments earlier (as per her e-mail dated 11 December 2016), failing which she has to deliver vacant possession of the suit premises to the applicant.

Order

30.   I make the order as follows:

(1) Subject to paragraph (4) below, the respondent do deliver vacant possession of the suit premises to the applicant;

(2) The respondent do pay the applicant arrears of rent/mesne profits as follows:

(a) Balance of arrears of rent from 18 August 2016 to 17 December 2016 in the sum of $4,000;

(b) Arrears of rent/mesne profits at the rate of $19,000 per month from 18 December 2016 until delivery up of vacant possession,

subject to the deduction of the overpayment from March 2016 in the sum of $1,500;

(3) The respondent do pay the applicant the shortfall in deposits in the sum of $1,000;

(4) If the respondent should on or before 13 March 2017 (“Relief Expiration Date”) pay into the Tribunal all the arrears of rent/mesne profits as stated in paragraphs 2 and 3 above (including all arrears of rent/mesne profits due on or before the date of payment), the respondent be relieved from the forfeiture incurred herein, and the Tenancy Agreement be reinstated; and

(5) There be no order as to costs.