RAMADOUR INDUSTRIES LTD v. BULLEN CHRISTIAN ANTHONY

LDPD 2025/2016

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO. LDPD 2025 OF 2016

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JUDGMENT

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1.  This is an application by the applicant for recovery of possession of the premises situated at Lot No 337 in Demarcation District No 4, 43 Lo Tik Wan, Lamma Island, Hong Kong (“the Premises”) on the ground that the tenancy agreement with the respondent (“the Tenancy Agreement”) expired on 31 August 2016 but the respondent failed to quit and deliver up vacant possession of the Premises to the applicant.

2.  By reference to the Tenancy Agreement which was dated 28 August 2014, the Premises were let by the applicant to the respondent for residential purpose from 1 September 2014 to 31 August 2016 at a monthly rent of HK$8,000 per calendar month exclusive of Government Rates and Rent and Management Fees payable in advance on the 1^st day of each calendar month.

3.  By reference to the Notice of Application dated 3 October 2016 (as amended) [1], the applicant also claims for the arrears of rent/mesne profits, government rent and rates from the respondent as follows:

	Arrears of 11 months’ rental from 1 July 2015 to 31 August 2016 ($8,000.00 x 11)*		HK$88,000.00
Less:	Part payment received on:
	16 October 2015	(HK$8,000.00)
	16 October 2015	(HK$1,296.00)
	30 November 2015	(HK$8,000.00)
	7 December 2015	(HK$2,000.00)
			(HK$19,296.00)
			HK$68,704.00
Add:	Arrears of Government rent and rates
	From 1 April 2015 to 30 June 2015	HK$648.00
	From 1 July 2015 to 30 September 2015	HK$648.00
	From 1 October 2015 to 31 December 2015	HK$1,728.00
	From 1 January 2016 to 31 March 2016	HK$1,728.00
	From 1 April 2016 to 30 June 2016	HK$824.00
	From 1 July 2016 to 31 August 2016	HK$555.30	HK$ 6,131.30
			HK$74,835.30
Add:	Mesne Profits from 1 September 2016 to a date of delivery up of vacant possession		HK$8,000.00	per month
	Arrears of Government rent and rates from 1 September 2016 to date of delivery up of vacant possession		HK$ 274.67	per month

* The respondent paid a sum of $24,000, an equivalent of 3 months’ rent on 5 October 2015 pursuant to an Order by the Tribunal in an earlier action LDPD 1912/2015.

4.  In response, the respondent filed an Interlocutory Application dated 6 October 2016 seeking to extend the time to file the Notice of Opposition because he had to seek legal advice on the legal implication and other grounds for opposing the present application in light of his ongoing appeal against an earlier judgment of the Tribunal in LDPD 1912/2015. More particularly, the Court of Appeal, in CACV 19/2016, has ordered a stay with no conditions.

5.  Thus, following a hearing on 18 October 2016, I granted leave to the respondent to file and serve the Notice of Opposition on or before 1 November 2016.

LDPD 1912/2015

6.  Indeed, LDPD 1912/2015 concerned a 2^nd application by the applicant against the respondent for recovery of possession of the Premises because of non-payment of rent as may be discerned from the schedule at §3 above. At the conclusion of the hearing on 15 October 2015, the Tribunal ordered the respondent to (1) deliver vacant possession of the Premises to the applicant but subject to a stay of execution until 29 October 2015; and (2) pay the applicant arrears of rent / mesne profits, rates and Government rent, and costs but no 2^nd relief against forfeiture was granted. On 21 December 2015, the Tribunal confirmed its judgment upon review.

7.  The respondent has appealed against this judgment seeking in particular a 2^nd relief against forfeiture though relief against forfeiture for non-payment of rent had been granted once by the Tribunal not too long ago on 25 June 2015 in a previous action LDPD1047 of 2015.

Notice of Opposition

8.  With leave granted on 18 October 2016 as afore-mentioned, the respondent filed his Notice of Opposition on 1 November 2016.

9.  In gist, the respondent disputed his liability for payment of rental and/or government rent and rates as contained in the schedule at  at§3 above as “he may be entitled to equitable set off and further equitable intervention with respect to the alleged contract termination date.”

10.  The respondent further avers, alternatively or not, that the present application by the applicant is duplicitous, vexatious and an abuse of process since LDPD 1912/2015 and CACV 19/2016 has not been finally determined. He emphasized once again that there was an unconditional stay of execution by the Court of Appeal on 29 January 2016.

11.  On the other hand, the respondent counter-claims damages for the applicant’s breach of the implied/express term of the Tenancy Agreement namely that the applicant must maintain structural and exterior components of the building and maintain exterior plumbing.

12.  In the alternative to the above, the respondent further avers that he may be entitled to forthcoming legal costs in LDPD 1912/2015, HCMP 98/2016 and CACV 19/2016 given that he was given unconditional leave to appeal and had therefore a reasonable prospect of success within meaning of the new test threshold for leave applications and favourable cost consequences.

13.  The respondent also submitted at §4 of the Notice of Opposition that :

“Since the commencement of the Tenancy in July 2011 the Applicant has never contributed to any repairs to the premises (including exterior repairs) or surrounding grounds including the septic tank, related plumbing and slope maintenance. The respondent has had to carry out emergency repairs in addition to regular maintenance over the years.”

14.  Further, on 18 November 2016, the respondent submitted an Affidavit, purporting to give more particulars of the breach of the implied/express term of the Tenancy Agreement as follows:

“2)  When my wife and I moved in, in July 2011 the house was full of medical records, including boxes of x-rays. This is consistent with what our neighbour told us about the previous owner, namely that he was a medical doctor. It was patently obvious that the house had not been lived in for a long time. My wife and I were keen to get into the area and to look for a house to purchase. The first Tenancy Agreement included permissions (from the Applicant) for repairs and basic supplies including water mains. There were problems with the roof, balconies and windows. What was not apparent was a drainage problem, a septic tank problem and structural issue with the wall surrounding the top floor windows and doors. There were also wiring problems.

3)  Although I understand that I had contracted (agreed) to carry out certain repairs at my expense which included replacing the balcony railings and slabs, replacing broken bathroom sinks and plumbing, installing new water mains and repairing the roof, I did not expect the wall to crack around the windows and doors on the 2^nd floor or the septic tank to also crack and leak onto the beach and major re-wiring.

4)  My calls and requests for help from the Applicant were met with sympathy and some degree of understanding but it never resulted in a single visit or site inspection and offer to share expenses.

5)  I don’t think it is right that the applicant not contribute anything to repairs of a capital nature and something they will benefit from far beyond the end of the tenancy.

Repair Works / Costs (not contemplated in the Tenancy Agreement)

6)  The repairs in which I sought permission to undertake were repairs that were apparent from one site inspection. Of course in hindsight I might not have proceeded with a tenancy had I known that the septic tank was poorly constructed and prone to leak onto the beach, the ground floor front wall had a structural defect (sagging) causing the terrace doors to crack and leak. Further the upstairs walls also sagged causing all of the windows and balcony doors on the front façade to crack and leak. We also found that none of the electrical outlets had earth wires, and only one of 4 air-conditioner units worked.

7)  September – October 2011; installed earth wire to vital outlets, including bedrooms and kitchen area. Also replaced MCCB boxes and installed new earth leakage breakers. My wife, our helper and myself completed the work in a month working in the evenings and weekends. Approximately 15 full days of work. Could not get a quote as no electrician interested in coming out to the remote area.

8)  May 2012; overflow pipe (septic tank) collapsed. Required laying of new overflow pipe including excavation (2 meters), drilling and setting pipe into tank, resurfacing of terrace. Total of 3 days work carried out by me and one domestic helper. Approximate costs if done by a contractor; $20,000.

9)  Replacement of terrace windows and doors due to cracked leaking frames and substantial flooding after typhoons. Repaired replaced all sliding doors in September 2015. Five

days to repair including new sliding doors, glass and frame with helper. Approximate cost with outside contractor $30,000.

10)  November 2015: Septic tank leaking onto the beach. Repaired required pumping out both sink drain tank and toilet soak away tank, cleaning, rendering of inner walls and sealing with epoxy sealer. Total of 6 days work carried out by me and one domestic helper. Verbal estimates obtained from local contractors in main village were $30,000 to $40,000.”

Submission of Respondent on 18 November 2016

15.  Just some 15 minutes before the hearing on 21 November 2016 commenced, the respondent produced a further submission also dated 18 November 2016 seeking to strike out the present proceedings on the ground of abuse of process by the applicant or to ask the Tribunal to adjourn the present proceedings sine die for substantial argument or have the present proceedings stayed pending the result of CACV 19/2016.

16.  In gist, this further submission is based on the ground that both LDPD 1912/2015 and CACV 19/2016 concerned the expiry (forfeiture) of the Tenancy Agreement and is under appeal to the Court of Appeal which should have exclusive jurisdiction in, inter alia, ordering possession of the Premises to the applicant.

17.  It is also the submission by the respondent that the Court of Appeal has also the power to deal with the equitable set-off, mesne profits and costs etc. By filing this present application, the applicant is attempting to oppress the respondent with the same matters that the Court of Appeal will deal with.

Discussion

18.  Insofar as LDPD 1912/2015 or CACV 19/2016 is concerned, I agree with Mr Cheng Yuk Hey Ken (“Mr Cheng”) for the applicant that they are related to the applicant’s earlier claim for recovery of possession of the Premises on a different ground, namely the respondent had defaulted in paying rent and the respondent sought a 2^nd relief against forfeiture.

19.  In the present proceedings where the applicant is claiming for recovery of possession of the Premises mainly on the ground that the Tenancy Agreement had expired, I fail to see any grounds raised by the respondent could prevent the Tenancy Agreement from coming to its end on 31 August 2016.

20.  That leave and a stay of execution of the judgment in LDPD 1912/2015 was granted to the respondent unconditionally to pursue CACV 19/2016, which is heavily emphasised by the respondent, is totally unrelated to the present claim by the applicant on a different ground of lease expiry. The referral to Far East Land Holdings v Empire Asian Limited, HCA 1246/2010 (reported as [2011] 4 HKLRD 472) by the respondent regarding granting a 2^nd relief against forfeiture is wholly irrelevant in the present application.

21.  Even in Wong Yuk Ying v Chan Pui Shan May, CACV 265/2013 (unreported, dated 4 March 2016) where the tenancy agreement contained a clause suggesting a one-month notice to terminate the tenancy, the Court of Appeal stated at §28 as follows:

“In my view, there is nothing in the clause which has the effect of somehow prolonging a fixed term tenancy. As the learned authors of Megarry and Wade, The Law of Real Property, 8^th ed. put it: “Expiry is the default method of termination of a fixed term tenancy; at common law, the tenancy ends when the fixed term expires” (p.810, para.18-002).”

22.  And in陳燕群對黃金海, CACV 223/2007 (which is reported as [2008] 1 HKCLRT 27), a case which had dragged on for a few years when the respondent in that case had continued to use the property thereof without making any payment to the landlord before the Court of Appeal’s final determination, the Court of Appeal remarked that it would not be difficult for the Lands Tribunal to rule that the tenant in that case had defaulted in paying rent since 1 December 2003. The tenant’s claim for damages and compensation was brought before the District Court, not the Lands Tribunal. Therefore, the Lands Tribunal only had to deal with the landlord’s application for the recovery of rent in  arrears and repossession of the property. In considering the landlord’s application, the Tribunal was not bound to consider and should not have considered the question of deducting part of the rent in arrears.

23.  More importantly, the Court of Appeal ruled that as regards the tenant’s counterclaim, he was claiming for damages arising from the alleged breach of the tenancy agreement by the landlord there. If the counterclaim succeeded, the landlord would be liable to pay compensation, but it did not mean that the tenant could continue to reside in or occupy the property without having to pay any rent or outgoings. Therefore, in relation to the landlord’s action for recovery of rent in arrears and repossession of the property, the tenant had failed to raise a defence recognized by the law. For this reason, the Lands Tribunal should have proceeded with the trial of the landlord’s application as scheduled. See §§35-40 of the judgment.

24.  As submitted by Mr Cheng, the forfeiture in LDPD 1912/2015 is now suspended by court proceedings but when the Tenancy Agreement expired by effluxion of time, the respondent has no legal right  to remain at the Premises refusing to deliver vacant possession to the applicant. The case of Johnson v Gore Wood & Co [2002] 2 AC 1 relied on by the respondent does not assist him because he is not “vexed twice in the same manner.”

25.  I refuse to strike out the present proceedings or to adjourn the present proceedings as sought by the respondent.

Counter-claim or Equitable Set-off

26.  In relation to the purported counter-claimby the respondent in the present case, it is obvious that most of the complaints recited at §14 above were related to the previous tenancy agreement and not to the Tenancy Agreement under consideration. When the Tenancy Agreement commenced on 1 September 2014, a tenant like the respondent here must have taken the Premises as he found it.  Neither the landlord or the tenant is bound to provide the other with a better home than there was to start with[2].

27.  Furthermore, in Charmway Development Ltd v Long China Engineering Ltd [2001] 3 HKC 515 at p.519D-I, Chu J (as she then was) recited the common law principle that the covenant to pay rent is independent of the other covenants or obligations under a lease. It is generally of no defence in saying that the tenant is not obliged to pay rent or the landlord is not entitled to rent by reason of alleged breach of the tenancy agreement on the landlord’s part. The principle applied to the facts of that case where the obligation of the tenant to pay rent was not expressed to be subject to or conditional upon compliance by the landlord of its obligations thereunder. The same is true for the Tenancy Agreement.

28.  It has been held in黃英對譚炳新, HCMP 2049/2000 (unreported, dated 1 August 2000), 陳燕群對黃金海, supra and Ngai Ngok Pang & Another v Lee Syn Yuk, Michelle, LDPD 3030/2012 (unreported, dated 10 May 2013) that under section 8 of the Lands Tribunal Ordinance, the Lands Tribunal does not have jurisdiction to entertain such counterclaim by the respondent. I agree with these authorities that the Lands Tribunal does not have jurisdiction to entertain its claim for damages.

29.  Even when section 8 of the Lands Tribunal Ordinance was amended in 2008 to award damages solely, as well as in addition to rent and mesne profits, it was explained to the Legislative Council that the amendment did not seek to empower the Lands Tribunal to award damages that may go beyond its jurisdictional limit on the types of cases it can entertain.[3]

30.  In spite of the above, a tenant who suffers damages (albeit unliquidated damages) due to a landlord’s breach of his obligation to repair may claim an equitable set-off against the landlord’s claims for arrears of rent and mesne profits if there was an adequate connection between the claim for rent and the cross-claim for damages (British Anzani (Felixstowe) Ltd v International Marine Management (UK) Ltd [1980] 1 QB 137).

31.  It is patently obvious that the respondent and his family had continued to reside at the Premises despite the so many problems he alleged and the respondent even proceeded to sign the Tenancy Agreement on 28 August 2014. There are no particulars of any relevant loss or damage apart from his own estimates or hear-say quotes. There is no evidence that the respondent has himself paid for any repairs, and more importantly that he has suffered any damage for his inability to use any part of the Premises for any period of time during the years of the Tenancy Agreement due to the structural defects alleged.

32.  In the circumstances, I take the view that there would be no defence of set-off to the claims for arrears of rent and mesne profits.

Conclusion

33.  Having considered all the above, particularly as the respondent is still occupying the Premises, I find the respondent should deliver vacant possession of the Premises and be liable to pay arrears of rent/mesne profits as well as the Government rent and rates until delivery up of vacant possession.

34.  In 永華電子實業有限公司 對 陳樹雄經營三雄行, HCMP 1951/2012 (unreported, dated 16 November 2012), the Court of Appeal held that in appropriate case, the Tribunal may enter judgment even at the first hearing.  I hereby do make my order as follows:

(1)  The respondent do deliver vacant possession of the Premises to the applicant;

(2)  The respondent do pay the applicant arrears of rent/mesne profits as well as the Government rent and rates as stated in the schedule at §3 above until delivery up of vacant possession.

Costs

35.  As costs follow the event, I also ordered the respondent to pay the applicant's costs of this application. In this regard, the applicant has provided a Statement of Costs for Summary Assessment in the sum of $19,862.  Having reviewed the figures as contained in the Statement, I consider the sum of $19,862 reasonable and order therefore accordingly.  

[1] By means of a Summons dated 15 November 2016 which I allowed in the hearing on 21 November 2016, the applicant has amended his claims for the arrears of rent/mesne profits, government rent and rates for the period.

[2] See Quick v Taff-Ely Borough Council [1986] QB 809.

[3] See for instance, the response by the Judiciary to the Bills Committee on Civil Justice (Miscellaneous Amendments) Bill 2007 in September 2007:

http://www.legco.gov.hk/yr06-07/english/panels/ajls/papers/aj1127cb2-430-2-e.pdf