|
LDPE 1060 - 1062/2013
(Consolidated)
IN THE LANDS TRIBUNAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
APPLICATION NO. LDPE 1060 of 2013
________________________
| BETWEEN |
SHUN HO ENERGY DEVELOPMENT COMPANY LIMITED |
Applicant |
|
and |
|
|
GOLDEN CROWN INDUSTRIES LIMITED |
Respondent |
________________________
APPLICATION NO. LDPE 1061 of 2013
| BETWEEN |
WINLAND ENTERPRISES LIMITED |
Applicant |
|
and |
|
|
GOLDEN CROWN INDUSTRIES LIMITED |
Respondent |
________________________
APPLICATION NO. LDPE 1062 of 2013
| BETWEEN |
UNITED MERIT DEVELPMENT LIMITED |
Applicant |
|
and |
|
|
GOLDEN CROWN INDUSTRIES LIMITED |
Respondent |
________________________
(Consolidated pursuant to the Order made by Member W. K. LO dated 22nd November 2013)
| Before: Mr. Lawrence PANG, Member, Lands Tribunal |
| Date of hearing: 13 & 28 February 2014 |
| Date of Judgment: 14 March 2014 |
__________________
JUDGMENT
__________________
Background
1. The applicants are the owners of Shop C, Shop D and Shop E (each inclusive of its open yard) respectively all on Ground Floor of Kim Wo Building, 162-172 Ngau Tau Kok Road, Kowloon (collectively referred to as “the Premises”). They will be identified individually as the 1st applicant, the 2nd applicant and the 3rd applicant respectively:
|
Action No. |
Name of Applicant |
Premises |
|
LDPE 1060/2013 |
Shun Ho Energy Development Company Limited
(1st applicant) |
Shop E (including its open yard), Ground Floor, Kim Wo Building |
|
LDPE 1061/2013 |
Winland Enterprises Limited
(2nd applicant) |
Shop D (including its open yard), Ground Floor, Kim Wo Building |
|
LDPE 1062/2013 |
United Merit Development Limited
(3rd applicant) |
Shop C (including its open yard), Ground Floor, Kim Wo Building |
2. The Premises will be individually referred to as “Shop C”, “Shop D” and “Shop E” as the case may be.
3. The applicants filed the captioned applications to the Lands Tribunal all on 25 October 2013 for recovery of possession of the Premises on the ground that the respective tenancy agreements with the respondent, the tenant of the Premises, expired on 12 August 2013. The applicants also apply for order for mesne profits till the date of delivery of vacant possession of the Premises and costs.
4. Whereas the applicants all belong to the group of companies controlled or managed by Winland Group Limited, a property investment company in Hong Kong, pursuant to three Summons, one for each application, taken out by the respondent on 19 November 2013, an Order was made by the Lands Tribunal on 22 November 2013 so that the three applications are consolidated as one action and be tried together at the same time.
5. The Premises were originally let by the applicants to the respondent under three respective tenancy agreements commencing on 13 August 2007 for a term of 3 years which expired on 12 August 2010 save for an option to renew by the respondent for a further term of 3 years. According to the applicants, the option for renewal was duly exercised by the respondent and fresh tenancy agreements were entered into between the parties for a term of 3 years commencing from 13 August 2010 to 12 August 2013 (“the 2010 tenancy agreements”) which contained similar terms as before except the option to renew. All along, the Premises have been occupied jointly as an amusement game centre.
The Applicants’ case
6. The applicants rely principally on the evidence of Ms Fok Fung Yin (“Ms Fok”), one of the leasing managers of Winland Enterprises Limited (ie the 2nd applicant) which is the leasing agent of the other applicants. Ms Fok filed her witness statement dated 20 December 2013. She has worked for the 2nd applicant for some 20 years and more than 10 years as a Leasing Manager.
7. According to Ms Fok, it has been the practice of the applicants to enquire an existing tenant whether it would have interest to enter into formal tenancy agreement even upon renewal of the existing tenancy. It was on this basis that the 2010 tenancy agreements were created. As there was no option of renewal exercisable by the respondent in 2013, the applicants would pass the file of the Premises to its leasing agent, such as the 2nd applicant, to seek a new tenant. For this reason, the 2nd applicant performed its role as a leasing agent by issuing Notices of Expiry of Tenancy (in Chinese)[1] to the respondent approximately 1 month in advance (respectively dated from 9 July 2013 to 12 July 2013) of the expiry of the existing tenancies on 12 August 2013. There is however no such requirement as contained in the 2010 tenancy agreements.
8. Each of such Notices of Expiry of Tenancy however contained a Reply Slip which invited (“請”) the respondent to return by 20 July 2013 (for Shop E), 23 July 2013 (for Shop D) and 22 July 2013 (for Shop C) respectively (hereinafter referred to as “the deadlines”) stating whether it would agree to the new terms of tenancies as proposed (“提出”) in the Notices of Expiry of Tenancy or not to renew the tenancies.
9. By reference to such Notices of Expiry of Tenancy, the terms proposed included:
(a) New rent commencing from 13 August 2013 [Clause 1(1)];
(b) New term of 36 months [Clause 1(3)];
(c) Increase in rental deposit [Clause 1(4)];
(d) A necessity to attend the office of the leasing agent of the applicants to sign the formal tenancy agreement [Clause 1(6)];
(e) Payment of an administration fee to the 2nd applicant together with half of the stamp duty of the tenancy agreement [Clause 1(7)].
A copy of the Notice of Expiry of Tenancy for Shop E, for instance, is attached at Annex A.
10. Clause 3 of the Notices of Expiry of Tenancy stated that should the respondent fail to return the Reply Slips to the corresponding applicants by the deadlines, the respondent is deemed to have relinquished the renewal of the tenancy.
11. Ms Fok stated the position of the applicants was that they would wait for the reply of the respondent until the deadlines passed so that time and costs might be saved in looking for new tenants. In the meantime, the leasing agent would also post the new terms and conditions of the proposed tenancy for marketing the Premises in every possible way, for instance, to seek better offers in the market, if any, so as to enable the applicants to consider and make informed decision. Ms Fok said it would be normal practice for a leasing agent to do that.
12. Ms Fok also stated that even if the respondent did return the Reply Slips in time, the respondent would be required to enter into formal tenancy agreements as it had usually been the case and make the necessary payments as stated in the Notices of Expiry of Tenancy. Ms Fok suggested that there may be some other important terms, such as whether option to renew be granted and on what renewal rentals, that must be negotiated before entering into a renewal tenancy between the landlord and tenant. Ms Fok maintained that the return of the Reply Slips was a crucial step for the applicants to ascertain the wish of the respondent in renewing the tenancies for the Premises or otherwise. Even by then the applicants would only consider the respondent as one of the potential tenants among any other may be.
13. Ms Fok said in mid-August 2013 (or earlier in late July 2013 as conceded by her when being cross examined by Mr Jason LH Wong (“Mr Wong”), counsel for the respondent), ie when the deadlines had passed, one Mr Lee who claimed to be the representative of the respondent called on her several times repeatedly requesting the applicants to reduce the renewal rentals for the Premises as stipulated in the Notices of Expiry of Tenancy. She made it very clear that she had no authority to make any decision on rentals since she was only a leasing manager of the leasing agent commissioned by the applicants and all she could do was to pass all proposed offers raised by the respondent to the applicants for consideration. When Mr Lee finally said the respondent agreed to the rentals unreduced, she might have uttered “哦” or “OK” but bearing in mind her position, she would also have indicated to Mr Lee that she would only pass the proposal of the respondent to the applicants for their final decision rather than making decision in their stead.
14. Ms Fok maintained that if the applicants agreed to the proposal for renewal, she would have asked her colleagues to draft and engross a fresh tenancy agreement and invite the prospective tenant ie the respondent to attend her office for signing the formal tenancy agreement. According to her, no agreement had ever been reached between the applicants and the respondent, no such draft tenancy agreement had been prepared and not to say there existed no arrangement for signing the formal tenancy agreement. None of her colleagues had contacted the respondent regarding the aforesaid at all.
15. On the other hand, as the deadlines for return of the Reply Slips had passed and there was no sign of the respondent leaving the Premises, the applicants issued letters by registered mail to the respondent on 24 August 2013 to demand delivery of vacant possession of the Premises to the applicants by 26 September 2013. Ms Fok received then the Reply Slips (undated) signed by the respondent, agreeing to the increased rentals as stipulated in the Notice of Expiry of Tenancy. As regards that the date in the Reply Slips was left blank by the respondent, Ms Fok considers that this was intentional.
16. Further to the applicants’ letter dated 24 August 2013, the applicants again sent letters dated 12 September 2013 to the respondent requesting the respondent to deliver up vacant possession of the Premises in accordance with the terms of the 2010 tenancy agreements.
17. Meanwhile, on or about 22 August 2013, the applicants issued debit notes (“the Debit Notes”) to the respondent requesting the latter to pay mesne profits (which were labelled as “rental” in accordance with Clause 27 in Part 1 of the 2010 tenancy agreements and Clause 5 of the Notices of Expiry of Tenancy) to the applicants for the use and enjoyment of the Premises[2].
18. Clause 27 In Part 1 of the 2010 tenancy agreements stated:
“租客必須於租約期滿日或終止租約遷出日下午五時前將承租物業交吉予業主, 過時須以一天市值租金(上述租金為下限)計算.”
ie market rent was required to be payable if the tenant holds over the Premises when the tenancy has expired.
19. Clause 5 of the Notices of Expiry of Tenancy stated:
“台端如於租約期滿日未將上述物業交還業主或代理人, 業主有權按市值租金, (上述租金為下限計算), 租客須按新租金交租.”
ie new rent based on market rent has to be paid if the tenant holds over.
20. Notwithstanding the demand was for the new rentals as stipulated in the Notices of Expiry of Tenancy, Ms Fok said she saw no urgent need for changing the term “rental” because such term had already been specified in the Notices of Expiry of Tenancy. She explained that this did not mean any new tenancy had been granted; it had been the applicants’ practice to issue debit notes approximately 10 days in advance to a tenant before the due date for payment of rent (ie on 1st of each month) as a reminder for the payment unless and until vacant possession of the premises has been duly delivered. As the month for the Debit Notes, ie September 2013, just followed the month of the expiry of the tenancies (on 12 August 2013), the applicants had not revisited the format and wordings in the Debit Notes in time as the Debit Notes had already been set in a fixed format in their accounting system. Ms Fok suggested that in normal circumstances, upon expiry of an existing tenancy, the existing tenant would not occupy the rented property and no misunderstanding would occur.
21. Ms Fok conceded that sometime in early October 2013[3], she discovered the misunderstanding as alleged by the respondent in the Debit Notes. She then on 9 October 2013 arranged letters to be sent to the respondent together with Revised Debit Notes trying to clarify that the Debit Notes should not be regarded as renewal of the 2010 tenancies and the respondent was requested to deliver up the vacant possession of the Premises forthwith.
22. In closing, the applicants submit that the respondent did not have any right to renew the 2010 tenancy agreements according to the terms and conditions thereof and that the respondent had failed to return the Reply Slips before the deadlines and pay
1) all outstanding increased deposits;
2) administration fee; and
3) half share of the stamp duty of the new tenancy agreements, if any,
which were crucial terms for renewal of the tenancies even if the Reply Slips had been returned by the respondent before the deadlines. Neither the applicants has reached any agreement for new tenancies with the respondent.
The Respondent’s case
23. Mr Wong, counsel for the respondent, argues that the 2010 tenancy agreements have not been terminated and more particularly there has been an agreement between the applicants and the respondent by which the 2010 tenancy agreements have been renewed for a further term of 3 years.
24. Mr Lee Ying Wai Lawrence (“Mr Lee”), the Attendant Manager (場務經理) of the respondent filed his witness statement dated 18 December 2013[4]. Mr Lee has been responsible for managing the daily affairs (including the personnel shift arrangement, accounts entries, bills and rent payments) of two amusement game centres on behalf of the respondent, one being the Premises and the other in To Kwa Wan though the respondent runs a third in the Western District. Mr Lee would stay at the Premises in the morning and visit the one in To Kwa Wan in the afternoon on daily basis. In his absence, an accounting officer would be responsible for receiving the mail, for instance.
25. Mr Lee testified that he received on or about 22 July 2013 the applicants’ Notices of Expiry of Tenancy dated from 9 July 2013 to 12 July 2013 which, apart from stating the respective tenancies were going to expire on 12 August 2013, contained terms for renewal. After discussing the matter with a Ms Tang, a director of the respondent, Mr Lee reverted to Ms Fok by phone[5] the next day to express the respondent’s intention to renew the tenancies at lower rentals than those stipulated in the Notices of Expiry of Tenancy:
(i) $30,000 for Shop C instead of $33,300;
(ii) $30,000 for Shop D instead of $33,300; and
(iii) $35,000 for Shop E instead of $39,000.
26. According to Mr Lee, Ms Fok promised to consider and call him back for discussion. There were 2 ensuing telephone conversations between Mr Lee and Ms Fok for negotiation on the amount of renewal rentals in late July/early August 2013.
27. Meanwhile, the applicants had issued debit notes dated 22 July 2013 for the rentals for August 2013, requesting the new rentals as stipulated in the Notices of Expiry of Tenancy for the period from 13 August 2013 to 31 August 2013. The respondent only paid the old rent under the 2010 tenancy agreements by cheques on 5 August 2013 because no agreement on the new terms had been agreed.
28. On or about 12 August 2013, Ms Fok called Mr Lee saying the applicants would not concede to the respondent’s proposal for reduction of the rentals stipulated in the Notices of Expiry of Tenancy.
29. On or about 13 August 2013, Mr Lee called Ms Fok again confirming that since the applicants would not agree to any reduction of the rentals, the respondent would accept the terms as proposed in the Notices of Expiry of Tenancy. Ms Fok then replied “OK” by which, the respondent submits, the applicants and the respondent had reached an agreement that the applicants would grant renewal of the tenancies for a fixed term of 3 years commencing from 13 August 2013. Mr Lee testified that Ms Fok also confirmed that she would arrange the new tenancy agreements to be signed by the respondent and the respondent was required to pay the difference in rental deposits, administration fees and half share of stamp duty upon signing thereof.
30. Relying and acting upon the agreement and pending the formalization of the new tenancy agreements, on or about 14 August 2013, the respondent signed and chopped with company chop the Reply Slips for the return to the applicants by ordinary post.
31. On or about 22 August 2013, the respondent received the Debit Notes requesting the respondent to pay the new rentals for September 2013 (as well as the balance of the new rentals for August 2013) which the respondent did pay by cheques on 5 September 2013 accordingly, on the understanding that agreement has been reached on the new tenancies. The applicants cashed in the cheques on 9 September 2013.
32. A couple of days later, Mr Lee called Ms Fok for enquiry if the new tenancy agreements were ready and it was replied by Ms Fok that the document was being prepared and would be available for signing in 2 or 3 days.
33. About the same time, the respondent received letters from the applicants dated 24 August 2013 demanding delivery of vacant possession of the Premises on 26 September 2013. Mr Lee made an enquiry phone call to Ms Fok who said she would look into the matter and about half an hour later replied that this was owing to certain misunderstanding from the Leasing Department and Mr Lee could ignore the demand. It was only based on this assurance did the respondent make payments for the new rentals for September 2013 as requested by the Debit Notes dated 22 August 2013[6].
34. Then Mr Lee received letters from the applicants dated 12 September 2013 again demanding delivery of vacant possession of the Premises on 26 September 2013. The respondent was taken by surprise. When Mr Lee called up Ms Fok again, he was told that her boss would no longer renew the 2010 tenancy agreements. Mr Lee protested and stated that agreements had been reached already. This was followed by letters from the respondent’s solicitors, Messrs Huen & Cheung, Solicitors, dated 24 September 2013, stating that agreements had been reached, inter alia, by conduct of the parties.
35. In further reliance and acting upon the agreement, therefore, the respondent did on or about 7 October 2013, sent its cheques for the payment of the new rentals and management fee for the month of October 2013 to the applicants by ordinary post. This time, the applicants did not issue the debit notes; neither did the applicants cash in the cheques or return them to the respondent.
36. Notwithstanding that the applicants purported to correct on 9 October 2013 that all the new rentals received were mesne profits, Mr Wong submits that the applicants are estopped from denying the existence of the renewed tenancies. Mr Wong further submits that, at all material times, the respondent has been and was ready and willing to pay the increased rentals and the difference in rental deposits.
Did the Notices of Expiry of Tenancy constitute offers of New Tenancies?
37. This case raises a short point on whether the respondent and the applicants had ever come into a binding new agreement for new tenancies at the material time.
38. According to the respondent, only on or about 22 July 2013 did Mr Lee receive the Notices of Expiry of Tenancy dated from 9 July 2013 to 12 July 2013 which contained proposal of new terms of tenancies and requested the respondent to reply by 20 July 2013 (for Shop E), 23 July 2013 (for Shop D) and 22 July 2013 (for Shop C) respectively to agree the new terms of tenancies or not to renew the tenancies. Mr Lee on behalf of the respondent phoned up Ms Fok of the applicants on or about 23 July 2013, trying to negotiate for lower rentals.
39. An offer whether it is called by the name of proposal or suggestion is simply an expression of willingness to contract made with the intention that it is to become binding on the person making it as soon as it is accepted by the person to whom it is addressed : see Chitty on Contracts, 31st edition, Vol 1, para 2-003. However, by reference to the Reply Slips at the bottom of the Notices of Expiry of Tenancy, while Mr Tang Sik-ho (“Mr Tang”) who appears for the applicants had initially termed the Notices of Expiry of Tenancy qualified offers, he submits they appear more like an invitation to treat rather than an offer. Mr Tang refers to the definition of “Invitation to Treat” in Chitty on Contracts, 31st edition, Vol 1, para 2-008 as follows:
“A communication by which a party is invited to make an offer is commonly called an invitation to treat. It is distinguishable from an offer primarily on the ground that it is not made with the intention that it is to become binding as soon as the person to whom it is addressed simply communicates his assent to its terms. A statement is clearly not an offer if it expressly provides that the person who makes it is not to be bound merely by the other party’s notification of assent but only when he himself has signed the document in which the statement is contained.”
40. It is trite that the statement of terms does not necessarily make an offer. In this particular case, although the terms of new tenancies, if any, were stipulated in the Notices of Expiry of Tenancy, the Reply Slips at the bottom left in blanks the end date of the tenancies and more particularly the amount of rental. Having regard to the representation submitted by the applicants,[7] I agree that the purpose of the Reply Slips was simply to invite the respondent to make a “formal application” as in Gibson v. Manchester City Council[8].
41. If I am wrong on this, the attempts by the respondent to negotiate for lower rentals had rejected, and so terminated the original offers (if they are deemed so) by the applicants. In the event that the Notices of Expiry of Tenancy constituted offers of terms of new tenancies, the respondent did not like it. Then, even if the story of Mr Lee be heeded, on or about 23 July 2013, Mr Lee’s expressing of the “respondent’s intention to renew the tenancies at lower rentals than those stipulated in the Notices of Expiry of Tenancy” amounted to counter-offers (and hence rejections) rather than “mere exploratory” enquiries. Thus, once the offers by the applicants had been terminated, it could no longer be accepted, for instance, by the respondent returning the Reply Slips on or about 14 August 2013 (instead of after 24 August 2013 as asserted by Ms Fok).
42. During cross-examination by Mr Wong, counsel for the respondent, Ms Fok gave evidence (and Mr Tang later conceded) that the applicants did not take it seriously that the respondent had to return the Reply Slips by 20 July 2013 (for Shop E), 23 July 2013 (for Shop D) and 22 July 2013 (for Shop C) respectively because the applicants never considered that they were offers for acceptance; even if the respondent returned the Reply Slips before the deadlines, Ms Fok said she still needed the applicants’ confirmation before she would instruct the Leasing Department to prepare the formal tenancy agreements[9]. On re-examination, Ms Fok stated that the Notices of Expiry of Tenancy merely provided certain “convenience” or advantage to the respondent over the other potential tenants in the sense that it would be easier for the respondent to make an offer by simply filling out and return the Reply Slips. Thus although there was dispute on whether the applicants had really posted the Notices of Expiry of Tenancy from 9 July 2013 to 12 July 2013 or much later as Mr Lee only received them on about 22 July 2013[10], it is not disputed that there was no obligation on the part of the applicants to make an offer for renewal under the 2010 tenancy agreements.
43. Thus, whether or not the respondent received the Notices of Expiry of Tenancy on 22 July 2013 or earlier, the fact is the respondent could not return the Reply Slips before the deadlines and even if they constituted offers in the legal sense, the offers had lapsed. Ms Fok admitted that she had never raised this point with Mr Lee over the various telephone calls because she was content to receive offers from the respondent or otherwise for new tenancies. Nevertheless, although the Notices of Expiry of Tenancydid not contain any express provision to the effect that time was of the essence thereof, considering “the nature of the subject matter of the contract” and “the surrounding circumstances”[11], I decide that time was necessarily of the essence for such renewal of tenancies in case the Notices of Expiry of Tenancy were to be taken as offers. The further negotiations between Ms Fok and Mr Lee on 13 August 2013 or beyond should be independent of the Notices of Expiry of Tenancy.
Did Utterance of “OK” Constitute as Acceptance?
44. Indeed, the respondent heavy relied on the utterance of “OK” by Ms Fok to the terms proposed by Mr Lee for the respondent on or about 13 August 2013 over the phone as a matter of acceptance. But as Lord Hoffmann observed in Investors Compensation Scheme Ltd v. West Bromwich Building Society (No. 1)[12] which has been applied frequently by the Hong Kong Courts:
“ The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax.”
45. Here, the applicants’ submission is consistent with the general rule that in cases where a lease is to be granted everything remains in negotiation until there is an exchange of lease and counterpart[13]. This intention of the applicants was, according to my finding, expressed in Clause (1)(6) of the Notices of Expiry of Tenancy. I agree with Ms Fok’s representation that the word “OK” was just part and parcel of the whole conversation and should not be taken out of context. Ms Fok might, as suggested by Mr Lee, have repeated the terms of his proposal over the phone but consistent with what she said as stated in §42 above, on a balance of probabilities, I believe the evidence of Ms Fok that she would have also said she would only pass the proposal to her boss, ie the applicants for decision.
46. Here, Mr Wong refers to Donwin Productions Limited v. EMI Films Limited[14], stating that parties may make a preliminary arrangement which may be an enforceable agreement pending the completion of a fuller and more complete written agreement. But as pointed out by Lord Loreburn in Love and Stewart v. S Instone & Co[15] which was also cited in the judgment, this begs the question where there was any contract at all where I find none in the present case based on the evidence.
47. The fact that the respondent returned the Reply Slips on or about 14 August 2013 (if such is true) also demonstrated that the respondent itself did not consider the utterance of “OK” by Ms Fok be conclusive and binding; most possibly, the respondent considered the offers of the applicants, if they be, were still open for acceptance. However, by law once the offer was rejected by the respondent as explained above, the respondent could not unilaterally revive it by saying that it had later accepted it. Illustrations of this principle can be found in cases such as Hyde v. Wrench[16] and Norfolk County Council v. Dencora Properties Ltd[17].
48. The respondent may of course regard the proposal to Ms Fok on or about 13 August 2013 over the phone as an offer for renewal of the tenancies. According to Ms Fok, however, even if she had uttered “OK” over the phone, she should also have indicated to Mr Lee that she would only relate the respondent’s proposal to the applicants for their final decision rather than making decision in their stead offhand. The version for the respondent is Ms Fok confirmed that she would arrange the new tenancy agreements to be signed by the respondent and the respondent was required to pay the difference of rental deposits, administration fees and half share of stamp duty upon signing thereof. While Ms Fok denies having made such statement, “(i)n the context of landlord and tenant, where the parties contemplate that their agreement will be put into writing and signed, it will be readily implied that there was intended to be no contract until the written agreement is signed[18].
49. As explained in §45 and §48 above, I rule that the mere utterance of the word “OK” did not constitute acceptance of the respondent’s proposal. At most, “OK” was mere acknowledgement of the respondent’s proposal and the terms, if agreed, were subject to the formal contract and the payment of the administration fee and the increase in rental deposits, etc.
50. In respect of the latter, Mr Lee affirmed during cross-examination that Ms Fok had told him that these payments would be made payable by the time when the formal tenancy agreement was ready. His version was however premised on the basis that a binding agreement had already been confirmed by Ms Fok’s mere utterance of “OK”. Mr Lee also drew reference to his experience in dealing with Ms Fok in the renewal of tenancies in 2010, for instance, where the 2010 tenancy agreements were not signed until 14 September 2010 (for Shop C and Shop E) and 18 August 2010 (for Shop D) when the tenancies should have commenced on 13 August 2010[19]. Here, Mr Tang reminded him that the renewal of the tenancies in 2010 was the result of the respondent’s duly exercising an option in the previous tenancy agreements and therefore there was no urgent need in signing the formal tenancy agreements. In contrast, in 2013, the 2010 tenancy agreements were due to expire with no option of renewal by the respondent. During cross- examination, Ms Fok agreed the delay in 2010 might be owing to the practice that the tenancy agreements would be signed first by the respondent, which would then be returned to the applicants to sign and date. In any event, unlike the 2010 scenario, there is no evidence of any new tenancy agreement forthcoming for signature.
51. While the above should have disposed of the matter, I would like to say more on the argument by Mr Wong that Ms Fok had the apparent or ostensible authority to bind the applicants.
52. In her witness statement, Ms Fok stated her role was analogous to a leasing agent for handling the leasing affairs of the properties held under Winland Group Limited. During the examination-in-chief and the cross examination, Ms Fok consistently maintained that she had no authority to sign any tenancy agreement and any proposal of terms of new tenancies had to be related back to her boss for final decision. This is understandable bearing in mind Winland Group Limited owned a large portfolio of properties for rental purposes which fact was not challenged otherwise by the respondent. More importantly, as submitted by Mr Tang in his closing submission, Ms Fok had on no occasion held herself out as having authority other than getting offers and communicating them to her boss or the applicants. To this I agree and therefore would not dwell on the authorities relied on by Mr Wong.
Estoppel
53. The respondent relies, as an alternative, on estoppel on the basis that Debit Notes were sent by the applicants on 22 August 2013 requesting the respondent to pay the new rentals which the respondent did pay on 5 September 2013. However, the fact that the applicants had issued the Debit Notes to the respondent and received payment thereof does not necessarily mean new tenancy agreements have been created. Whether estoppel will actually be available to a party relying on it will depend on the facts of the case.
54. In Dreamgate Properties Ltd v. Arnot[20], Dreamgate acquired the freehold of business premises from Eton College. The premises had been subject to a series of leases to Mr Arnot, the last of which was one dated 20 May 1983 but would have expired in September 1993 prior to the sale by Eton College to the plaintiff in January 1994. However, after the expiry, Eton had demanded and accepted a quarter’s rent from Mr Arnot. In proceedings for possession, Mr Arnot argued that a new tenancy had been created as a result of Eton College’s demand for and acceptance of rent for the quarter following the lease’s expiry. Mr Arnot relied upon the following matters:
1) The property had been sold subject to the 1983 lease;
2) In a letter dated 16 March 1994, Dreamgate had sought to rely upon one of the landlord’s rights contained in the 1983 lease; and
3) A notice to quit had been served by Dreamgate in March 1994 expressly referring to Mr Arnot as a quarterly tenant.
However, the English Court of Appeal did not consider that this was sufficient to infer the creation of a new tenancy. It considered it relevant that the rent demand had been generated by a computer rather than as a result of any conscious decision and, therefore, did not indicate that landlord’s intentions. Mr Arnot failed to provide evidence of a new lease. Moreover, Eton would not have imperilled a sale to a third party by granting a new lease. The referral in the notice to quit to Mr Arnot as a quarterly tenant could not assist Mr Arnot if in fact no such tenancy had been granted.
55. In the present case, I agree with Ms Fok that the Debit Notes had to be generated in advance before the due date for payment of rent to the tenant as a reminder for the payment unless and until vacant possession of the Premises has been duly delivered. I also agree with Ms Fok that for managing a portfolio of properties like the applicants or indeed the Winland Group, such a practice was reasonable.
56. As stated in §27 above, the applicants had on 22 July 2013 issued debit notes for the rentals for August 2013, requesting the new rentals as stated in the Notices of Expiry of Tenancy from 13 August 2013 to 31 August 2013. Mr Tang refers to Clause 27 In Part 1 of the 2010 tenancy agreements which states: “租客必須於租約期滿日或終止租約遷出日下午五時前將承租物業交吉予業主, 過時須以一天市值租金(上述租金為下限)計算.” whereby market rent was required to be payable if the tenant holds over the Premises when the tenancy has expired. Mr Tang also refers to Clause 5 of the Notices of Expiry of Tenancy which states: “台端如於租約期滿日未將上述物業交還業主或代理人, 業主有權按市值租金, (上述租金為下限計算), 租客須按新租金交租.” whereby new rent based on market rent has to be paid if the tenant holds over. According to Mr Tang therefore when the Debit Notes referred to “New Rent” for the period from 13 August 2013, it did not suggest a new tenancy agreement was in place; it cannot be the case that tenancies would be automatically renewed if the respondent failed to respond by the deadlines or the Notices of Expiry of Tenancy would have been devoid of any practical purpose. I agree.
57. As for the Debit Notes issued on 22 August 2013 for September 2013, ie the month just followed the expiry of the tenancies (on 12 August 2013), Mr Tang argues the same is true.
58. During cross-examination by Mr Wong, Ms Fok maintained she did not see the urgency to revise the format and wordings in the Debit Notes until early October 2013 after she had found the misunderstanding from the respondent and had consulted her legal department. In any event Ms Fok submitted the Debit Notes had already been set in a fixed format in their accounting system which might not be able to be revised in time.
59. Whereas Mr Lee suggests that when he received the letters from the applicants dated 24 August 2013 demanding delivery of vacant possession of the Premises, he was assured by Ms Fok that her company had made a mistake and he might ignore it. Ms Fok denies having made such or similar statement at all and the probability of this denial is strengthened by the presence of her signature on the letter of 24 August 2013 sent on behalf of the 2nd applicant; there is no evidence to assume she would lightly disclaim the validity of her letter sent one or two days before as a mistake by her company. In contrast, Mr Lee’s version is incredible or contradicted by contemporaneous documents or circumstances; these letters of 24 August 2013 were so conflicting with his understanding from the Debit Notes dated 22 August 2013 or the response from Ms Fok (if his version were to be believed) that he should have tried to put the record straight or made a written protest. He could not put up any evidence apart from mere assertion.
60. While it is the applicants’ position that the Debit Notes of 22 August 2013 did not have any implication of new tenancies, the respondent can point to no other evidence of a new tenancy agreement. All allegations by Mr Lee as regards what Ms Fok said in §32 and §33 above were firmly denied by Ms Fok during cross-examination. The applicants did not send any further Debit Notes to the respondent “by mistake”.On the contrary, the applicants had on 9 October 2013 sent letters to the respondent together with Revised Debit Notes clarifying that any payment made should be regarded as mesne profits instead of rentals for new tenancies; the letters also stated the Debit Notes previously sent could not be regarded as renewal of the 2010 tenancies and the respondent was requested to deliver up vacant possession of the Premises forthwith on 26 September 2013.
61. Mr Wong for the respondent tries to distinguish the present case from the Dreamgate stating, for instance, somebody did initial on the Debit Notes as well as the Official Receipts sent on 23 August 2013 (for Shop E) and 26 August 2013 (for Shop C and Shop D) for the August 2013 payments. Having regard to the circumstances, I still agree with the English Court of Appeal in Dreamgate, supra, that the fact that the Debit Notes were generated in their accounting system from computer is material to an objective judgment of the applicants’ intentions. Also, Mr Wong drew my attention to the small pre-printed statements at the lower right hand corner of the Debit Notes which stated:
“ATTENTION
1. The Tenant shall be liable to pay all administration charge, legal fee, Court fee, travelling expenses, document reproduction expenses and other expenses incurred by the landlord for the recovery of all the expenses including but not limited to rental arrears.
2. To avoid late Payment Charge, the Tenant is advised to contact our Leasing Department at ….if the Tenant does not receive (i) our Debit Note 5 days before rental payment due date; or (ii) our Official Receipt 12 days after the payment cheque is sent.
3. If the Tenant fails to pay the rent or any other sum on time, the Landlord shall be entitled to collect from the Tenant the Late Payment Charge as below:…..”
This is as such only a double-edged weapon which reinforces my view that these Debit Notes though having been initialled did not point unequivocally to the conscious mind of the applicants of accepting a new tenancy. Like Dreamgate, neither Mr Lee nor the respondent gives any other evidence of new tenancy agreements having been created. The respondent fails to discharge its burden to make good its claim.
62. Mr Wong also refers to Baxter v. Eckersley[21] where the landlord was “estopped” from claiming possession of a dwelling house by reason of requesting increases of rent. Firstly, I find that the increases of the rent were deemed to have effect of rendering the tenancy under the protection of the Increase of Rent and Mortgage Interest (Restriction) Act, 1920. Secondly, the landlord there had received the increased rent for four years. The present case here is nothing comparable to this case.
63. The payments made by the respondent on 7 October for the new rentals and management fee etc were neither here nor there. Consistent with the applicants’ submission, there was no demand/debit note for the rentals received by the respondent. Again, there is also no evidence that the parties had discussed the time of repayment of the increase in rental deposits and not least the administrative fee.
64. In law there is of course a huge difference between a contract which is based on an offer and acceptance and an estoppel (in the present case a promissory estoppel) which without going into details is based on a representation and reliance of the representation. However in the present case, it makes no difference to the legal position whether the situation is based on contract or on estoppel because the fundamental point is that there must be an offer or representation made by one party for the other party to accept or relied upon. Where I find no such offer or representation based on the evidence, in my view, no new tenancy agreement has been created after the 2010 tenancy agreements expired on 12 August 2013. Neither can the respondent’s argument on estoppel be substantiated.
Mesne Profits
65. Although the applicants are applying for mesne profits to be paid by the respondent, Mr Tang has not submitted any evidence on this. On the other hand, Mr Tang confirms that the respondent has up to the trial been paying the amounts as specified in the Notices of Expiry of Tenancy, ie $33,300 per month for Shop C, $33,300 per month for Shop D and $39,000 per month for Shop E since 13 August 2013; Mr Wong also confirms that the respondent has been ready to pay such amounts.
66. Therefore, I would adopt the amounts being paid by the respondent for the Premises as mesne profits.
Staying of the Order for Possession
67. In view of the above, I am going to grant order for vacant possession of the Premises in favour of the applicants. However, I was in the end of the proceedings advised by the parties that they had an agreement that in case I shall make such order, I shall allow a period for the respondent to reloate its operation, and particularly to obtain a licence as required under the Amusement Game Centres Ordinance, Cap. 435. Nevertheless, they could not come into agreement on the length of the period; while the applicants are content to allow one month, the respondent requests three months.
68. In劉一鳴對林露詩, CACV 205/2006 (unreported, dated 13 March 2007), the Court of Appeal has made clear that the purpose of the stay of execution of the order for possession is merely to allow a grace period for the tenant who had held over to move away from the premises instead of to allow him to find an alternative premises. In this regard, Mr Wong for the respondent has submitted that there are some 70 games machines at the Premises and it might take some time to arrange an orderly removal. However, I have already ruled that the 2010 tenancy agreement had expired on 12 August 2013 and there exists no renewal of tenancies. Balancing the circumstances of the matter, therefore, I shall allow a stay of two months.
Costs
69. Both parties agree that costs should follow the event. Whereas the applicants are not legally represented, Mr Tang submits that the applicants are asking for costs in the sum of $30,000[22]. Bearing in mind the principles as stated in Vol 1 para 62/28A of Hong Kong Civil Procedure 2014, I find this sum of $30,000 as requested by the applicants reasonable.
Order
70. This is my order:
1. The respondent do deliver vacant possession of the Premises to the applicants;
2. This order for vacant possession be stayed until 14 May 2014;
3. The respondent do pay the 1st applicant mesne profits at the rate of $39,000 per month for Shop E from 13August 2013 until delivery up of vacant possession;
4. The respondent do pay the 2nd applicant mesne profits at the rate of $33,300 per month for Shop D from 13August 2013 until delivery up of vacant possession;
5. The respondent do pay the 3rd applicant mesne profits at the rate of $33,300 per month for Shop C from 13August 2013 until delivery up of vacant possession;
6. Costs order nisi to be made absolute within 14 days that the respondent do pay the applicants the costs of these applicationsLDPE 1060/2013, LDPE 1061/2013 and LDPE 1062/2013 together summarily assessed at $30,000.
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Lawrence Pang |
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Member
Lands Tribunal |
The applicants, appeared in person
Mr Jason L H Wong, instructed by Huen & Cheung, for the respondent
Annex A
[1] Each of such Notices of Expiry of Tenancy bore Ms Fok’s signature thereon
[2] Indeed, debit notes dated 22 July 2013 for the rentals for August 2013 were also issued to the respondent requesting the new rentals as stipulated in the Notices of Expiry of Tenancy for the period from 13 August 2013 to 31 August 2013. See §27 below.
[3] The respondent’s solicitors, Messrs Huen & Cheung, Solicitors, sent letters to the applicants dated 24 September 2013, claiming the 2010 tenancy agreements had been renewed for a further term of 3 years commencing from 13 August 2013 on the ground that, inter alia, the respondents had paid the new rents as demanded by the Debit Notes of 22 August 2013.
[4] Despite the date, this witness statement was agreed to have been exchanged simultaneously with that of Ms Fok.
[5] This took place on 23 July 2013 which was incidentally the deadline for reply for Shop D whereas the deadlines for Shop C and Shop E had already lapsed on 22 July 2013 and 20 July 2013
[6] The receipts for the payments made as enclosed in the letter of 9 October 2013 had already been “revised” for mesne profits instead of “rental”.
[7] See particularly §§11-12 above
[8] [1979] 1 WLR 294
[9] This is consistent with her answer to Mr Wong’s query that the return of the Reply Slips was not mentioned in the letters of 24 August 2013 and 12 September 2013.
[10] Mr Lee had to look after the Premises as well as another amusement game centre run by the respondent in To Kwa Wan day-to-day. He conceded during cross-examination that he may not be the first person who received correspondence and particularly during his absence, letters would be received by an accounting officer on site. In any event he has failed to produce any evidence that the Notices of Expiry of Tenancy were not posted on 9 July 2013 to 12 July 2013 or only received by the respondent on or about 22 July 2013. By reference to section 8 of the Interpretation and General Clauses Ordinance, Cap. 1, I would have ruled that such services or notices shall be deemed to have been delivered in the ordinary course of post soon after 9 July 2013 to 12 July 2013.
[11] See United Scientific Holdings Ltd v. Burnley Borough Council [1978] A.C. 904 at 929, 945 & 961
[12] [1998] 1 WLR 896 at 913C
[13] See Hollington Brothers Limited v. Rhodes [1951] 2 TLR 691, 694 per Harman J
[14] The Times, 9 March 1984
[15] (1917) 33 TLR 475
[16] (1840) 3 Beav 334
[17] English Court of Appeal, judgment dated 9 November 1995.
[18] See Halsbury’s Laws of Hong Kong, Vol. 17(1) (LexisNexis, 2007 Reissue) para. 235.049
[19] In respect of the tenancy agreements which commenced on 13 August 2007, they were signed on 19 August 2007, ie only a few days late.
[20] [1998] 76 P&CR 25
[21] [1950] 1 KB 480
[22] Mr Tang admits he is a qualified solicitor but he is not acting in that capacity in the proceedings on behalf of the applicants.
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