ABDOOLALLY EBRAHIM & CO., (H.K.) LTD. v. FORMALEX LTD.

CACV 378/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 378 OF 2000

(ON APPEAL FROM NEW TENANCY
APPLICATION NO. LDNT 43 OF 2000)

___________________

J U D G M E N T

___________________

Hon Rogers VP :

1. This is an appeal from a judgment of the Lands Tribunal dated 4 August 2000. The appeal is on a point of law.

The background

2. The applicant entered a tenancy agreement with the respondent, acting through Tai Hing Management Limited on 21 April 1998. The tenancy agreement related to a residential flat No. 41E in Block 3 of Estoril Court together with the Car Parking Space No. 233. The rent was fixed at $110,000. It was to be payable in advance on the 16th day of each month.

3. In the court below there was no dispute that the rent was paid late at least for the months of July to December 1999. For convenience there is reproduced here the agreed facts relating to the delayed rental payments.

4. By Form CR 101 dated 11 October 1999 the respondent served notice of termination of the tenancy. The form notified the tenant that the tenancy would be terminated on 15 April 2000. It then required the tenant to notify the landlord whether the tenant was willing to give up possession. Finally it stated :

"You are informed that ...

(2) I would oppose an application to the Lands Tribunal for the grant of a new tenancy on the following grounds :

The tenant has persistently failed to pay rent on due date(s), causing unnecessary annoyance, inconvenience or disturbance to the landlord and technically in breach of the Tenancy Agreement."

5. On 20 October Tai Hing Management Limited sent the applicant a letter in the main part relating to the repair of the air conditioning unit. The last sentence of the main paragraph read :

"While on time rent payment of the Tenant is another matter, any delay in payment will constitute as an action of the breach of the Agreement."

6. On the 16 November 1999 the applicant served notice that it would not give up possession of the premises at the date of termination and that it intended to apply to the Lands Tribunal for the grant of a new tenancy. On 16 February 2000 application was made by Form 22 for the grant of a new tenancy. That was opposed. A Notice of Opposition was filed on Form 7 dated 29 February. The basis of that was, first, that the tenant had persistently failed to pay the rent punctually on the due dates. As particulars of that there was set out the table set out above. The second basis upon which a new tenancy was opposed was that the tenant had requested the landlord to be responsible for the repair charges to the air conditioner contrary to the provisions of clause 5(f) of the tenancy agreement.

The hearing before the Lands Tribunal

7. On 6 July 2000 the matter came before the Lands Tribunal. At that hearing the respondent sought to amend the Form CR 101 by the inclusion of the following :

"... and/or keep the air conditioning plant at the premises in good clean tenantable substantial and proper repair and condition and/or to maintain the said air conditioning plant, and further or alternatively thereby ..."

between the words "date(s)", and "causing unnecessary". The respondent also sought to add three paragraphs to the Form 7 : first, to plead that the failure to pay the rent within 15 days from the respective due dates was a breach of clause 5(a) of the tenancy agreement; secondly, that the failure to keep the air conditioning plant in good clean tenantable substantial and proper repair and condition was a breach of clauses 2(e) and 5(a) of the tenancy agreement; and, thirdly, that the failure to repair and/or maintain the air conditioning unit was a breach of clauses 5(a) and 5(f) of the tenancy agreement.

8. The Lands Tribunal held that the notice, Form CR 101 could not be amended. For that reason it also refused the application to amend the notice of opposition.

9. The Lands Tribunal also noted that the letter dated 20 October 1999 was subsequent to the service of the notice CR 101 on, or shortly after, 11 October. The Tribunal then went on :

"Thus at the time when the Respondent purported to terminate the above-said tenancy by serving Form CR 101 on the Applicant and relied on the ground stated on the said notice for opposing the Applicant's application for a new tenancy, that ground did not exist at all, because up to that time, there had not been any warning in writing whatsoever, but section 119E(1)(d) expressly provides that no ground shall be established under paragraph (d) of section 119E(1) unless the annoyance, the inconvenience or disturbance had continued after a warning in writing had been served on the tenant."

This appeal

10. On this appeal the respondent appeals both the decision of the Lands Tribunal that the Form CR 101 and Form 7 could not be amended and the ruling that the landlord had failed to establish any ground under section 119E(1) of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 ("the Ordinance").

11. In order to determine the matters raised on this appeal it is necessary first to consider the provisions in Part IV of the Ordinance which apply to this tenancy. Section 117(1) reads :

"A tenancy shall not come to an end unless terminated in accordance with this Part; and a tenant may apply to the Lands Tribunal for a new tenancy -

(a) if the landlord has given notice under section 119 to terminate the tenancy; ..."

12. Section 119 relates to termination of the tenancy by the landlord. The relevant subsections read :

"(1) Subject to section 119N, the landlord may terminate a tenancy by a notice given to the tenant in the specified form stating the date of termination. (See Form CR 101)

(2) Subject to subsection (3), a notice under this section shall not have effect unless it is given not more than 7 nor less than 6 months before the date of termination."

(4) A notice under this section shall not have effect unless it requires the tenant, within 2 months after the giving of the notice, to notify the landlord in the specified form whether or not, at the date of termination, the tenant will be willing to give up possession of the premises comprised in the tenancy. (See Form CR 102)

(5) A notice under this section shall not have effect unless it states whether the landlord would oppose an application to the Tribunal under this Part for the grant of a new tenancy and, if so, also states on which of the grounds mentioned in section 119E he would do so.

13. Thus under subsection (1) a tenancy may be terminated by notice. The notation in subsection (1) to Form CR 101 is to a form which is prescribed by the Commissioner of Rating and Valuation. In fact the present form was gazetted in 1981 under the authority of the then section 120 of the Ordinance. This has now been replaced by section 119X, but nothing seems to turn on that.

14. It is relevant to observe at this point, first of all that the termination of the tenancy is simply by notice. The termination of the tenancy is not dependent upon the proof of, or even the allegation of, the existence of any grounds. Indeed subsection (5) makes it clear that a tenancy may be terminated in circumstances where the landlord would not oppose an application for the grant of a new tenancy.

15. If the landlord states in the notice that he would oppose an application for the grant of a new tenancy he must state of the grounds under section 119E on which he "would" rely. Three points are relevant here. The first is that the word "would" looks to the future. The second is that the landlord merely has to state the ground, he does not have to establish it, prove it or even provide full particulars. The third point, which is really linked to the first, is that the statement of a ground of opposition does not trigger any proceedings or bind the landlord to make an opposition : simply if the landlord does not state the ground he cannot later rely on it. In essence, therefore, it is a notice to the tenant that the landlord reserves the right to rely on that ground in opposing the grant of a new tenancy.

16. A tenant whose tenancy has been terminated by a notice under section 119(1) may then apply for a new tenancy. That is, of course, the effect of section 117(1). The tenant may only do so if he has given notice that he will not be willing at the date of termination to give up possession of the premises : that is the effect of section 119D(2). Section 119D(3) prohibits a tenant from applying for the grant of a new tenancy less than 2 months after the landlord serves a notice under section 119.

17. If the tenant does apply for a new tenancy then the landlord may oppose the application for a new tenancy. The proceedings are then governed by the Rules made under the Lands Tribunal Ordinance, Cap. 13. Rule 68 provides that proceedings shall be commenced by the applicant filing a notice of application substantially in accordance with Form 22. A copy of the notice has to be served by the applicant on the respondent not later than 7 days after it is filed.

18. Rule 69 provides :

"The respondent shall, if he wishes to oppose the application, within 14 days of service of the notice of application upon him file with the Registrar, and serve a copy on the applicant, a notice of opposition substantially in accordance with Form 7, stating the grounds thereof and that he wishes to be heard."

19. Rule 70 (2) provides :

"The respondent shall, in his notice of opposition, state the facts relied upon by him in sufficient detail to enable the applicant to know the case he has to meet."

20. The provisions of rule 70(2) can thus be contrasted with the broad terms of section 119(5) which merely requires the statement of the grounds on which the landlord would oppose a tenant's application.

21. The grounds on which opposition can be based are to be found in section 119E (1) of the Ordinance which reads :

"The grounds on which a landlord may oppose an application under section 117(1) are such of the following grounds as may be stated in the landlord's notice under section 119, or, as the case may be, the notice under section 119A(6) -"

The relevant subsection for the purposes of this case in subsection (d) :

"(d) the tenant has caused unnecessary annoyance, inconvenience or disturbance to the landlord or to any other person :

Provided that no ground shall be established under this paragraph unless the Tribunal is satisfied that the annoyance, inconvenience or disturbance had continued after a warning in writing had been served by the landlord on the tenant causing the same;"

Subsection (3) of section 119E provides that :

"For the purpose of subsection (1)(d), a tenant who persistently fails to pay rent as and when it falls due may be regarded as causing unnecessary inconvenience to the landlord."

22. The effect of all these provisions is therefore as follows. The tenancy can be bought to an end by notice served under section 119. The tenancy is terminated without reasons, but the landlord must state whether he would oppose an application for the grant of a new tenancy and on which ground he would do so. Provided the tenant serves a notice stating that he is unwilling to give up possession of the premises he can, after a lapse of two months, apply to the Lands Tribunal for a new tenancy. If the tenant does apply for a new tenancy the landlord can oppose the application on one of a number of grounds which are set out in 119E. Although the grounds upon which the landlord may oppose an application have to be stated in the notice under section 119 the notice of opposition is not the CR 101, which is a form prescribed by the Commissioner of Rating and Valuation, but is form 7, a form provided for under rule 69 of the Lands Tribunal Rules.

23. The effect is therefore, that it is the notice of opposition on form 7 which governs the opposition to the grant of the new tenancy. Although the grounds must be the same grounds as are stated in the section 119 notice, the opposition stems not from the section 119 notice but from the notice of opposition form 7.

24. In the passage cited above taken from the judgment dated 4 August 2000, the Lands Tribunal treated the form CR 101 as being the basis of the opposition for the tenant's new tenancy. The words "at the time" were underlined in the judgment. It is of course evident that the Form CR 101 was dated and served in October 1999 whilst the notice of opposition was dated 29 February 2000.

25. As can be seen from the table above the rent due in the months of July, August and September were paid late as were the rents due in October, November and December 1999. Those last 3 rents were paid after the service of the CR 101 notice and after the letter of 20 October was sent. On the basis of subsection (3) late payment of rent may constitute "causing unnecessary inconvenience to the landlord".

26. Mr Chiu on behalf of the respondent in a careful and precise submission argued that the opening words of the proviso in section 119E(1)(d) should be read as an exclusion of evidence. His submission was that provided at the time of trial the respondent could prove that as a matter of fact the inconvenience (i.e. the delayed rental payments) had continued after a written warning, it did not matter that that continuation took place after service of the CR 101.

27. In my view the correct construction of section 119E(1)(d) is that the proviso constitutes more than just an exclusion of evidence it requires that the annoyance must have been one that continued after a warning. It seems to me that when the landlord serves his notice of opposition, his grounds for refusal of a new tenancy must be complete and they must be set out in detail. They must be one of the grounds which were set out in section 119E. One of those grounds is "causing unnecessary inconvenience to the landlord". When the proviso refers to "the ... inconvenience", it must be referring to the same inconvenience which is referred to in the first part of 119E(1)(d). Furthermore, the use of the word "had continued" (in classical grammar referred to as the pluperfect) in combination with the remaining words "after a warning" also indicates a series of events entailing annoyance, followed by a warning, followed by a continuance after a warning, followed by a notice of opposition.

28. Whilst I consider that the construction of section 119E is clear, I am fortified in that conclusion by some of the remarks which were made the speeches in Betty's Cafés Limited v. Phillips Furnishing Stores Limited [1959] AC 20. In particular, for example, Lord Denning at page 50, Lord Keith at page 46 and Lord Morton at page 42. No doubt the court will also consider the position as at the time of the hearing in relation to whether the tenant has improved or aggravated his position. Nevertheless, the grounds of complaint must, in my view, be complete as at the date of the notice of opposition, which is the time when the landlord joins issue with the tenant on the tenant's claim to a new tenancy.

29. The House of Lords was, in the Betty's case construing the Landlord and Tenant Act 1954. The provisions of that Act related to business tenancies but were for the present purposes at least comparable to the present ordinance.

30. It is to be noted though, that the time of service of the CR101 form is not the relevant time for the existence of the circumstances that would satisfy the proviso in Section 119E(1)(d). As I have already indicated, in so for as the CR 101 notice is required to state the grounds on which the landlord would oppose the application for the grant of a new tenancy it is merely giving the tenant advance notice of the landlord's intention should the tenant be minded to apply for a new tenancy. The letter of the 20 October 1999, insofar as it relates to the late payment of rent does not, on its face, constitute a warning: as explained more fully in the judgments of Mr Justice Keith and Mrs Justice Le Pichon it is simply a reminder to pay the rent on time. At one stage, I had been troubled as to whether the CR 101 form might not in itself constitute a warning sufficient to satisfy the proviso in Section 119E(1)(d). My doubts in relation to the CR 101 form have however been resolved for the reasons set out in the judgment of Mrs Justice Le Pichon.

31. In my view, therefore, the respondent is not in a position to aver that there has been unnecessary inconvenience constituted by a series of late payments that have continued after a warning.

32. The other matter raised on the appeal was as to whether the notice CR 101 could be amended. The primary ground upon which Mr Chiu relied was that under Rule 12 of the Lands Tribunal Rules, sub-rule 1 related to a party making an amendment to a document filed or lodged in any proceedings. Under that sub-rule the party could make that amendment prior to the hearing. In contrast it was pointed out that sub-rule 3 did not specify that the document had to be filed or lodged in any proceedings, but read, "The tribunal may at any time amend any document upon application of a party or of its own motion."

33. The interpretation of rule 12 seems to me to be dependent upon reading the whole rule. Sub-rule 1 permits a party to make an amendment to a document filed or lodged in any proceedings if he makes it before the hearing. Sub-rule 2 restricts that power to make an amendment and requires leave to be obtained in a number of circumstances including, for example, if an amendment has already been made to that document. Sub-rule 3 gives an overriding discretion to the tribunal to make an amendment, clearly in situations where sub-rule 2 would prevent a party making an amendment of his own motion. In my view, the words "any document" in sub-rule 3 relate to documents which are filed or lodged in any proceedings.

34. Were an unlimited construction to be given to the words "any document" in sub-rule 12(3), it would be totally indeterminate. This is highlighted by the fact that form CR 101 is prescribed under powers under the Ordinance and not by powers derived under the Lands Tribunal Ordinance or the Rules. Indeed if a power of amendment to Form CR 101 were permitted under this rule, it would seem to me that the rule would go beyond the powers of making the rules under section 10(3) of the Lands Tribunal Ordinance which restricts the powers of making rules to rules prescribing the practice and procedure to be followed in any proceedings before the tribunal or in any appeal from a decision of the tribunal insofar as no provision is made therefor in the ordinance. Neither do I consider that a rule which had the effect of permitting amendments to CR 101 would come within subsection 10(3)(f) which relate to provisions generally for the better operation of the Ordinance.

35. I would therefore dismiss this appeal. I would make an order nisi that the respondent should have the costs of the appeal.

Hon Keith JA :

The principal issue raised in the appeal

36. The principal question in the appeal is as follows: where the landlord's ground of opposition to an application for a new tenancy is the persistent failure on the part of the tenant to pay rent as and when it fell due, can that ground be regarded as "established" if a warning in writing about that persistent failure (a) had not been given by the date on which the landlord's notice under section 119(1) of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) ("the Ordinance") in Form CR101 had been given, but (b) had been given by the date on which the tenant's application for a new tenancy was heard by the Lands Tribunal, and the persistent failure on the part of the tenant to pay the rent as and when it fell due had continued after that warning had been given but before the hearing in the Lands Tribunal?

37. In Betty's Cafés Ltd. v. Phillips Furnishing Stores Ltd. [1959] AC 20, the House of Lords had to consider the statutory scheme in Part II of the Landlord and Tenant Act 1954 on which the relevant provisions in the Ordinance were based. Even though Part II of the 1954 Act applies to business tenancies, section 119E of the Ordinance, which specifies the grounds on which a landlord may oppose a tenant's application for a new tenancy, follows the structure of section 30 of the 1954 Act. In the Betty's Cafés case, the House of Lords held that the ground on which a landlord may oppose a tenant's application for a new tenancy had to have existed, not merely at the date of the hearing, but also at the date of the notice in which the landlord had stated the grounds on which the tenant's application for a new tenancy would be opposed.

Thus, the Betty's Cafés case does not help to provide the actual answer to the critical question which the appeal raises. Its ratio - that the ground of opposition must have existed at the date of the landlord's notice of opposition - merely shows what the answer should be, once the court has identified, as a matter of construction, what the constituent elements of the relevant ground of opposition are. That in turn depends on whether the proviso to section 119E(1)(d) is a constituent element of the ground of opposition, or merely a fact which has to be proved to the Lands Tribunal's satisfaction at the hearing? In other words, is the ground of opposition contemplated by section 119E(1)(d) merely the tenant's persistent failure to pay rent as and when it falls due - the facts which the proviso requires to be proved merely being facts which may have occurred after the notice of opposition has been given? Or is the ground of opposition contemplated by section 119E(1)(d) the tenant's persistent failure to pay rent as and when it fell due, and a similar persistent failure after a warning about it had been given?

38. This issue was touched on by Judge Cruden in Tsui Wing Chung v. Ho Anna [1994] 2 HKC 629. Judge Cruden said at p. 634B:

".... the mandatory preliminary warning letter, preceding the necessary subsequent default, as required by section 119E(1)(d), was not sent until .... well after the ... Form CR101 .... was served. I therefore hold, as a matter of law, that it is not open to the [landlord] at the hearing, to oppose the grant of a new tenancy under section 119E(1)(d) ...."

He was therefore assuming that the proviso was a constituent element of the ground of opposition in section 119E(1)(d). The views of Judge Cruden, whose intellectual prowess and wide familiarity with this area of the law are undeniable, are worthy of great respect, but these observations were obiter, and having regard to what the issues in the case were, I rather doubt whether Judge Cruden was addressed on the topic. I propose to treat Judge Cruden's observation merely as an assumption on his part, and not a considered conclusion on a difficult branch of the law - especially as he gave no reasons for making the assumption which he did.

39. The language of section 119E(1)(d). If it had been the intention of the legislature to make the contents of the proviso a constituent element of the ground of opposition, it would, I think, have used very different language. Section 119E(1)(d) would have read:

".... the tenant has caused unnecessary annoyance, inconvenience or disturbance to the landlord or to any other person, and that annoyance, inconvenience or disturbance has continued after a warning in writing had been served by the landlord on the tenant causing the same ...."

By describing the ground as simply the causing of unnecessary annoyance, inconvenience or disturbance, and then adding a proviso specifying a limitation on the circumstances in which the ground may be established - rather than using language of the kind which would unambiguously have made it clear that the warning in writing and the continuance of the persistent failure to pay rent on time after such a warning constituted an integral element of the ground of opposition - the legislature has, in my view, used language much more consistent with the contents of the proviso not being a constituent element of the ground of opposition. Moreover, I regard the use of the word "established" as significant as well. Its use suggests that the contents of the proviso relate to matters which have to be proved to the satisfaction of the Lands Tribunal if the Lands Tribunal is to find that the ground of opposition has been made out.

40. At one stage, I was attracted to the argument that the use of the pluperfect - "had continued" - in the proviso supported the view that the warning letter had to have been served, and the persistent failure to pay rent on time had to have continued, before the giving of the notice of opposition. But on reflection, I do not think that the use of the pluperfect does that at all. What it shows is that, although the persistent failure to pay rent on time had to have continued after the warning letter, it did not have to have continued right up to the date of the hearing in the Lands Tribunal.

41. I accept that the "inconvenience" referred to in the proviso must be the same "inconvenience" as that referred to in the body of section 119E(1)(d). However, what is being referred to in both is the type of inconvenience, namely the inconvenience caused by the tenant's persistent failure to pay rent on time, rather than the inconvenience caused by a failure to pay particular instalments of rent on time.

42. The effect of according to section 119E(1)(d) a construction benevolent to the tenant. The landlord's notice in Form CR101 must be given "not .... less than 6 months before the date of termination": see section 119(2). If, before that notice is given, there has to have been

(a) a persistent failure to pay rent on time, followed by

(b) a warning in writing of the kind contemplated by the proviso, followed by

(c) a further persistent failure to pay rent on time,

it is likely that many months of failure to pay rent on time will have to elapse before the notice in Form CR101 can be given. Since the notice in Form CR101 has to be given not less than six months before the date of termination, the tenant would be able to escape being denied a new tenancy on the ground of a persistent failure to pay the rent on time unless that persistent failure had begun a long time before the giving of the notice in Form CR101.

43. I appreciate that, even on a construction of section 119E(1)(d) benevolent to the landlord, the failure to pay rent on time had to have begun sufficiently long before the notice in Form CR101 for that failure to be regarded as persistent, but a construction of section 119E(1)(d) benevolent to the tenant pushes back even further the date on which the tenant's persistent failure to pay the rent on time must have begun. That would increase the period during which the tenant's persistent failure to pay rent on time could not be relied upon by the landlord as a ground for opposing a new tenancy. I do not believe that that can have been the intention of the legislature. After all, statutory provisions ought to be construed, if possible, in a way which does not create anomalies or injustices.

44. Conclusion on the construction issue. For these reasons, which are for the most part a reproduction of the compelling arguments of Mr M. C. Chiu for the landlord, I agree with Rogers V-P that the Lands Tribunal erred in law in its construction of section 119E(1)(d), and I would hold that the ground of opposition in section 119E(1)(d) is satisfied if it is proved to the Lands Tribunal's satisfaction that

(a) by the date of the landlord's notice of opposition in Form CR101, the tenant had persistently failed to pay rent on time, and

(b) by the date of the hearing in the Lands Tribunal, a warning in writing of the kind contemplated by the proviso to section 119E(1)(d) had been served on the tenant, and the tenant had continued persistently to fail to pay the rent on time.

However, that does not automatically mean that the tenant should have been refused a new tenancy. Section 119E(3) provides:

"For the purpose of subsection (1)(d), a tenant who persistently fails to pay rent as and when it falls due may be regarded as causing unnecessary inconvenience to the landlord." (Emphasis supplied)

In other words, it is for the Lands Tribunal to determine whether, in the circumstances of the particular case, a tenant who persistently fails to pay rent on time should be treated as causing unnecessary inconvenience to the landlord. But for one problem, I would therefore have remitted the application back to the Lands Tribunal for the Lands Tribunal to decide that issue.

45. The warning letter. The problem relates to the warning letter, because the warning in writing relied upon by the landlord had to have been a warning of the kind contemplated by the proviso to section 119E(1)(d). The Lands Tribunal assumed that the letter given by the landlord in the present case contained such a warning. The only material part of the letter which is said to contain the warning reads:

"While on time rent payment of the Tenant is another matter [i.e. unconnected with what the previous part of the letter referred to], any delay in payment will constitute as an action of the breach of the Agreement."

I make due allowance, of course, for the fact that the author of the letter was not writing in his or her first language, but what the letter means, and what the tenant could reasonably have understood it to mean, was that the tenant's failure to pay rent on the dates provided for in the tenancy agreement would amount to a breach of the tenancy.

46. The proviso to section 119E(1)(d) speaks of a "warning". Not a reminder, but a warning. In normal English usage, a warning is a notification to the recipient that steps (which may or may not be specified) will or may be taken if certain things do or do not happen. In the context of the proviso to section 119E(1)(d), the warning meant a notification to the tenant that if the tenant continued persistently to fail to pay the rent on time in the future, the landlord's ground of opposition to the grant of a new tenancy will have been established. The critical feature of the notification is to put the tenant on notice as to what will happen if he continues persistently to fail to pay the rent on time. The mere fact that it would constitute a breach of the tenancy agreement did not notify the tenant of what the consequence of that breach would be.

47. It has not been contended on behalf of the tenant that the Lands Tribunal was wrong to proceed on the assumption that the letter given by the landlord contained a warning of the kind contemplated by section 119E(1)(d). But it will be open to the tenant to take that point on any remission of the application to the Lands Tribunal. Since the point can only be answered in one way, I have reached the conclusion that it would not be right to remit the application back to the Lands Tribunal. It follows that I would not disturb the order of the Lands Tribunal dismissing the landlord's opposition to the grant of a new tenancy on the ground specified in section 119E(1)(d).

The air-conditioning plant

48. From the ground of the tenant's persistent failure to pay rent on time, I turn to whether the Lands Tribunal erred in law in failing to permit the landlord to rely on any other ground specified in section 119E(1) for opposing the grant of a new tenancy. The opening words of section 119E(1) show that the landlord was only entitled to oppose the tenant's application to the Lands Tribunal for a new tenancy on the grounds set out in its notice of opposition in Form CR101. Thus,

(a) no ground asserted in the landlord's Form 7 could be relied upon if that ground had not been stated in the landlord's Form CR101, and

(b) although the landlord had the power to amend Form 7 before the hearing pursuant to r. 12(1) of the Lands Tribunal Rules, Form 7 could not be amended to enable the landlord to rely on a ground not stated in Form CR101.

The only ground of opposition in Form CR101 in its original form was the tenant's persistent failure to pay the rent on time. The only new ground which the landlord wanted to amend Form CR101 for was the tenant's failure to

"keep the air conditioning plant at the premises in good clean tenantable substantial and proper repair and condition and/or to maintain the said air conditioning plant ...."

Thus, whether the landlord could rely on this ground depended on whether a notice in Form CR101 can be amended.

49. In my view, the Lands Tribunal did not err in law in concluding that it cannot be amended. It cannot be amended by the landlord under r. 12(1) of the Lands Tribunal Rules, because it is not "a document filed or lodged in any proceedings". It is a free-standing document, by which the landlord notifies the tenant of the termination of the tenancy, and identifies the grounds on which the landlord will oppose an application for a new tenancy. The document identifying the grounds which is capable of being filed or lodged in any proceedings is Form 7. Nor can Form CR101 be amended by the Lands Tribunal under r. 12(3) of the Lands Tribunal Rules. That is because the words "any document" in r. 12(3) have to be construed as meaning "any document filed or lodged in any proceedings". If it was otherwise, there would be no limit whatever on the documents which the Lands Tribunal could amend. It could even amend the correspondence between the parties. In this respect, I agree entirely with Rogers V-P that a power in the Lands Tribunal to amend literally any document could well have been ultra vires the powers of the Chief Justice in section 10(3) of the Lands Tribunal Ordinance (Cap. 17) to make rules for the practice and procedure of the Lands Tribunal.

Hon Le Pichon JA :

50. I agree that this appeal should be dismissed.

51. Part IV of the Landlord and Tenant (Consolidation) Ordinance, Cap.7 deals with new tenancies of domestic premises. Tenancies subject to Part IV do not come to an end unless terminated in accordance with the provisions of that Part. In the present case, the landlord/appellant served its notice (CR101) under section 119 on 11 October 1999 to terminate the tenancy. It also stated (as it was required to do by section 119(5)) that it would oppose an application for a new tenancy, specifying section 119E(1)(d) as the ground it would rely on should an application be made.

52. Pursuant to section 119(4), the tenant/respondent duly notified the landlord on 16 November 1999 that it was unwilling to give up possession. On 16 February 2000, the tenant applied for a new tenancy. This was opposed by the landlord by a notice of opposition (Form 7) dated 29 February 2000. Pursuant to section 119E(1), the ground relied on in Form 7 had to be the same as that stated in the landlord's CR101. The matter then came before the Lands Tribunal on 4 August 2000. The Tribunal held that the landlord failed to establish the ground stated in its CR101 because the proviso to section 119E(1)(d) had not been satisfied at the date CR101 was issued and served, i.e., inter alia, that no warning letter as required by the proviso had been sent prior to the issuance of CR101. On 20 October 1999, that is to say after CR101 had been served on the tenant, the landlord wrote to the tenant as follows :

"... While on time rent payment of the Tenant is another matter, any delay in payment will constitute as an action of the breach of the Agreement."

The proceedings below proceeded on the assumption that this was the warning letter for the purposes of the proviso to ground (d).

53. The main issue which arises is the true construction of section 119E(1)(d) and in particular the effect of the proviso. The provision reads :

"(1) The grounds on which a landlord may oppose an application under section 117(1) are such of the following grounds as may be stated in the landlord's notice under section 119, or, as the case may be, the notice under section 119A(6) -

...

(d) the tenant has caused unnecessary annoyance, inconvenience or disturbance to the landlord or to any other person :

Provided that no ground shall be established under this paragraph unless the Tribunal is satisfied that the annoyance, inconvenience or disturbance had continued after a warning in writing had been served by the landlord on the tenant causing the same;"

Under section 119E(3), for the purposes of subsection (1)(d), a tenant who persistently fails to pay rent as and when it falls due may be regarded as causing unnecessary inconvenience to the landlord.

54. The landlord relied on the tenant's persistent failure to pay rent as and when it fell due as constituting "unnecessary inconvenience" within section 119E(1)(d). It is common ground that for three months prior to the landlord's notice, namely July, August and September 1999, the tenant had failed to pay the rent due on time. The landlord's notice terminating the tenancy was served on 11 October 1999. On those facts, prima facie, it would appear that there had been "persistent" failure on the part of the tenant to pay rent as it fell due which, by reason of section 119E(3), may constitute "unnecessary inconvenience" so as to entitle the landlord to state in its CR101 that it would oppose an application for a new tenancy on ground (d).

55. What then is the effect of the proviso to ground (d)?

56. At a minimum, in order to satisfy the proviso, not only must the landlord have served a warning in writing on the tenant regarding the unnecessary inconvenience in question, such inconvenience must have continued despite the warning. Where the parties differ is whether (as is the tenant's position) all that (viz. late payment of rent causing unnecessary inconvenience, written warning, continuing late payments) had to take place before the landlord could state ground (d) as the ground it would be relying on to oppose an application for the grant of a new tenancy in its CR101, or whether (as is the landlord's position) the requirements of the proviso merely go to the nature and quality of evidence necessary to persuade the Tribunal not to exercise its discretion in favour of the tenant such that it would be sufficient for the written warning and continuing inconvenience to have occurred between the date of the landlord's CR101 and the hearing by the Tribunal. I prefer the latter construction for the following reasons.

57. CR101 does a number of things. It terminates the tenancy. It states whether or not an application for a new tenancy would be opposed and if so, on which of the grounds mentioned in section 119E(1). I agree with the Vice President that nothing in Cap. 7 requires the landlord to establish or prove the ground it states in its CR101 at the time it is issued and/or served. There are no proceedings on foot at the time of the service of a CR101. Whether or not a new tenancy should be granted is dependant on the tenant successfully making an application for a new tenancy which the landlord may oppose by filling a Form 7 notice of opposition.

58. In considering whether or not to exercise its discretion to grant a new tenancy, the court would take into account events occurring between the date of the CR101 and the hearing. As Lord Somervell observed in Betty's Cafés Limited v. Phillips Furnishing Stores Limited [1959] AC 20 at 48, the tenant may after the notice opposing the application for a new tenancy has been given (i.e. the Form 7 notice) have improved or aggravated his position as a payer. The tenant's subsequent conduct would undoubtedly have a bearing on the exercise of the discretion. A fortiori, so must the tenant's payment record both pre and post the CR101. The Tribunal would thus be concerned with the tenant's conduct so far as material prior to the date of the notice terminating the tenancy up to and including the date of the hearing.

59. The next relevant factor is the date at which the landlord has to "establish" the ground(s) relied on to the satisfaction of the Tribunal. In this connection, section 119G(1) provides as follows :

"(1) If the landlord opposes an application under section 117(1) on grounds on which he is entitled to oppose it in accordance with section 119E and, subject to section 119F, establishes any of those grounds to the satisfaction of the Tribunal, the Tribunal shall not make an order for the grant of a new tenancy."

It seems to me that the reference point must be the date of the hearing. That is logical since that is when the discretion vested in the Tribunal has to be exercised and, as noted above, the tenant's conduct during the intervening period and in particular after the written warning would be a relevant factor to be taken into account. The logic of having to 'establish' the ground(s) on some different date such as the date of CR101 is not readily apparent.

60. That the relevant time for 'establishing' the ground relied on is the hearing date appears to be supported by ground (b) of section 119E which like ground (d) also has a proviso :

"(b) the premises or any part thereof are reasonably required by the landlord for occupation as a residence for himself, his father, his mother or any son or daughter of his over the age of 18:

Provided that the Tribunal shall not refuse to grant a new tenancy by reason only of this ground if-

(i) in the case of a tenancy, the tenant satisfies the Tribunal that in all the circumstances of the case, it would manifestly not be just and equitable to refuse to grant a new tenancy; or

(ii) in the case of a sub-tenancy, the Tribunal is satisfied, in all the circumstances of the case, including the question whether other accommodation is available for the principal tenant or the sub-tenant, greater hardship would be caused by refusing to grant a new tenancy than by granting one;"

Again the Tribunal has a discretion to exercise and in considering whether and how to exercise it, it has to consider the matters set out in paragraphs (i) and (ii). The relevant time for taking these matters into consideration is when the discretion is to be exercised, i.e. at the hearing.

61. Finally, if it had been the intention of the legislature that the written warning as well as the continuation of the conduct complained of had all to come about before ground (d) could be considered a "live" ground, that could have been achieved by the simple expedient of substituting the word "and" for "provided that no ground shall be established under this paragraph unless the Tribunal is satisfied that". Significantly, that was not what was done. The way paragraph (d) was drawn points to the proviso not forming part of the ground itself but relating only to matters that have to be "established" at trial.

62. In my judgment, it was open to the landlord to state ground (d) as the ground it would rely on to oppose an application for a new tenancy so long as prior to the service of the CR101 terminating the tenancy there had been persistent failure on the part of the tenant in paying the rent when due. But in order to succeed in establishing that ground, it is incumbent on the landlord to satisfy the Tribunal that prior to the hearing, (whether or not also before the date of CR101) a written warning had been served on the tenant and the tenant had continued to persist in failing to pay the rent due on time.

63. The purpose of the proviso was undoubtedly to afford the tenant a measure of protection. Its practical effect is that the tenant's conduct in continuing to cause unnecessary inconvenience after receiving the written warning can be none other than deliberate and intentional, with knowledge of the likely consequences. Accordingly, in my view, the warning contemplated must be sufficient to bring home to the tenant that the grant of a new tenancy would be at risk if he were to persist in causing unnecessary inconvenience by not paying rent punctually.

64. In the normal course, given the conclusion I have reached, the matter ought to be remitted back to the Tribunal for adjudication. However, I agree that it would not serve any useful purpose in the present case. Whilst no point had been taken as to the adequacy of the landlord's letter dated 20 October 1999 to the tenant as a warning letter of the kind contemplated by the proviso to ground (d), the tenant would not be estopped from taking the point at any rehearing. I also consider it to be unanswerable were the application to be remitted back to the Tribunal.

65. As to whether CR101 could itself constitute a warning for the purposes of the proviso to ground (d), I have come to the conclusion that it could not. A warning is meant to convey to the recipient that certain consequences would follow should he persist in certain conduct. The purpose is to afford the recipient an opportunity to avoid those consequences by taking heed of the warning and altering his conduct accordingly. All the CR101 did was to inform the tenant that any application by it for a new tenancy would be opposed on the ground that it has caused unnecessary inconvenience by having persistently failed to pay the rent when due. There was nothing to suggest that different consequences would follow should it take heed of the warning.

66. The other issue which arises in this appeal is whether the CR101 could be amended. I agree with the judgment of the Vice President and Keith JA that the words "any document" in rule 12(3) of the Lands Tribunal Rules must be limited to documents "filed or lodged in any proceedings". CR101 is not such a document and rule 12(3) is of no assistance to the landlord.

67. For these reasons, I would dismiss the appeal with costs.