AHN, EUNSUN v. WO KWOK WAI AND ANOTHER

LDPD 152/2024

[2024] HKLdT 31

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO. LDPD 152 OF 2024

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BETWEEN

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DECISION ON REVIEW

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1.  This case originated from the Applicant’s application for recovery of possession of Flat D on 9^th Floor, Block A, Comfort Gardens, No 60 King’s Road, Hong Kong (“the Premises”) on the ground that the Respondents, as tenants of the Premises, breached the user clause in the tenancy agreement dated 24 August 2023 (“the Tenancy Agreement”).

2.  I handed down my judgment on 11 March 2024 (“the Judgment”) dismissing the Applicant’s application on the ground that she failed to serve a warning notice under section 58(1) of the Conveyancing and Property Ordinance, Cap 219 (“section 58 requirement”) on the Respondents.

3.  The Applicant on 21 March 2024 applied for a review of the Judgment pursuant to section 11A of the Lands Tribunal Ordinance. In support of this application for review (“Application for Review”), the Applicant filed an affirmation (“the Affirmation”) “seeking enforcement of a writ of possession for Comfort Garden due to the tenant’s persistent disregard for the court’s directives and the terms of our rental agreement.” The Applicant further affirmed that since the Judgment, she had served a termination notice in compliance with the section 58 requirement. Despite this, the Respondents still “failed to demonstrate an understanding of the breach of the contract implications or shown any willingness to rectify the situation…”

4.  With respect, the Applicant appears to have failed to understand the section 58 requirement which begins by

“A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice …” (underline added)

5.  That is, the cause of action against the Respondents, for instance, on 1 February 2024, could not accrue because the Applicant by that time, according to para 32 of the Judgment, had not yet served the warning notice (as opposed to a termination notice as alleged by the Applicant). The Applicant cannot remedy the lack of section 58 requirement retrospectively by serving a fresh warning notice.

6.  There is therefore no ground for review of the Judgment.

7.  In the Affirmation, the Applicant also complaint that the Respondents persisted in their breach of the user clause even after the Judgment was handed down. With respect, this cannot be an excuse nor an alternative ground for review.

8.  But this should not be understood as a tacit approval of the Respondents’ breach, if any. The Applicant may, if she wishes, serves a new warning notice that complies with the section 58 requirement, and if and only if the Respondents fail, within a reasonable time thereafter, to remedy the breach of the user clause in the Tenancy Agreement, the Applicant can commence and file a new application for recovery of possession of the Premises. Having said that, I refrain from commenting on whether the “Termination by notice” dated 19 March 2024 as attached to the Affirmation has satisfied the section 58 requirement because it might be the subject of a new action. The Applicant should seek independent legal advice if she considers it necessary.

9.  Of course, as stated at §41 of the Judgment where I cited the remark of the English Court of Appeal in Magnic Ltd v Mahmood Ul-Hassan [2015] EWCA Civ 224 that “If . . . [t]he defendants’ conduct in this case amounted to a conscious disregard of the terms for relief which the court had imposed then it would be much more difficult to argue that the refusal of further relief was wrong in principle …”

10.  During the course of hearing on 29 February and 4 March 2024, I have indicated that once the Tenancy Agreement was signed and came into effect, the terms and conditions as reserved in the Tenancy Agreement have become binding on the landlord and tenant till its expiry subject to the exercise of the break clause as reserved in the Tenancy Agreement[1]. Certainly if there be a breach by one of the parties during the period, the innocent party may accept the repudiation and seek damages from the party who breaches the Tenancy Agreement.

11.  For instance, Clause 7 of the Tenancy Agreement states as follows:

“The Tenant shall pay to the Landlord the Security Deposit set out in Schedule I for the due observance and performance of the terms and conditions herein contained and on his part to be observed and performed. Provided that there is no antecedent breach of any of the terms and conditions herein contained, the Landlord shall refund the Security Deposit to the Tenant without interest within 30 days from the date of delivery of vacant possession of the Premises to the Landlord or settlement of any outstanding payment owed by the Tenant to the Landlord, whichever is later…” (underline added)

12.  In Well Century Holdings Limited v Leung Kam Yu [2003] 2 HKLRD 882, a tenancy agreement provided that if the rent shall be unpaid for 15 days after becoming due, or if the tenant thereof failed to observe or perform any term or condition as reserved, the landlord would be entitled to re-enter upon the subject of the tenancy agreement whereupon the tenancy would be absolutely determined, but without prejudice to the right of the landlord in that case in respect of any breach by the tenant of any terms, conditions or stipulation contained in the tenancy agreement. The Court of Appeal referred to the above as “the forfeiture remedy” and upheld the decision of the Court of First Instance that the landlord in that case could pursue both the forfeiture remedy and the common law remedy in respect of the mesne profits and other charges until the property in that case was re-let and the difference (if any) between the rent and other charges under the tenancy agreement and those under the re-letting till the original date of expiry of the tenancy agreement.

13.  Therefore, if the Respondents persisted in the breach of the user clause as alleged, a return of the Security Deposit is out of the question; the Applicant, in that case, may withhold or even forfeit the Security Deposit as the case may be under Clause 7 of the Tenancy Agreement.

14.  In the Judgment at §§42-45, I have touched on the Water Leakage Problem alleged by the Respondents.

15.  On the one hand, in Well Century Holdings Limited, supra, the Court of Appeal stated at §64 as follows:

“A breach of the covenant for quiet enjoyment can be of many types. A serious breach may entitle the tenant to rescind, but less serious breaches would only sound in damages…”

16.  On the other hand, the Water Leakage Problem should be the subject of a separate legal action if any party wishes to pursue. It may or may not be entitling the Respondents to rescind the Tenancy Agreement. The result depends on the finding on liability and/or seriousness of the problem.

17.  Lastly, the Applicant alleged that the 2^nd Respondent had obstructed her attempts to monitor the use and/or occupation of the Premises. Indeed, similar concern was raised by the Applicant in the hearing on 29 February 2024 and 4 March 2024 when the 2^nd Respondent’s reported to police about the Applicant or her employee loitering around the premises in breach of section 160(3) of the Crimes Ordinance, Cap 200. But as I explained during the hearing, the nature of the subject-matter of the alleged offence should be considered on a case by case basis[2] and the prosecution, if any, has to prove that the Applicant was loitering deliberately which caused another person reasonably to be concerned for his own safety or well-being.[3] Again, the Applicant should seek independent legal advice if she consider it necessary.

Conclusion

18.  As stated in §6 above, I dismiss the Application for Review by the Applicant.

Costs

19.  As this decision is made on papers without a hearing pursuant to the Practice Directions issued by the President of the Tribunal: Review No 1/2009, I make no order as to costs.