SIMON JOHN COX v. PAUL DESMOND SCANLON

LDPD 2769/2005

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Application No. LDPD 2769 of 2005

________________

________________

_________________

J U D G M E N T

_________________

Background

1. In this case, I have to decide whether I should allow a family with 3 young children or a family with 2 dogs to stay in a house known as No. 49 Sheung Sze Wan, Clearwater Bay (Lot 788A, DD230), New Territories, Hong Kong (“the House”).

2. The Applicant purchased the House in April 2005 subject to an existing tenancy.  The Respondent is the tenant and he resides in the House with his wife and 2 dogs under a two-year written tenancy agreement expiring on 30 September 2005.  The monthly rental is $20,000.00.

3. At the time of purchase, the Applicant was aware of the existence of the tenant and the tenancy agreement, but he was also aware that under the law he would be able to regain possession upon contractual expiry of the tenancy for his own use.  It is the Applicant’s case that he purchased the House with the intention to use it as a permanent home for himself, his wife Tracy and 3 young children, Dylan (aged 10), Courtney (aged 9) and Jordan (aged 5).  The House is the only property the Applicant ever bought in Hong Kong and he needed to reduce his monthly cash outgoings.  In this regard, the monthly mortgage repayments on the House ($41,124.00) are less than his own current rental expenses ($50,000.00).

4. According to the Applicant, he had consulted his solicitor specifically on the issue of whether he could regain possession upon contractual expiry of the tenancy, and the advice he received confirmed his understanding.  However, his solicitor also advised him, as a backup procedure, to serve a 12-month Transitional Termination Notice on the tenant, which he did on 1 October 2005.

5. The Applicant also contends that in May 2005 on two occasions, as a courtesy, he approached the Respondent to introduce himself and advise the Respondent well in advance of his intention to move into the House with his family upon expiry of the tenancy, so as to allow the Respondent to make his own plans with adequate forewarning of almost 5 months.  The Applicant also mentioned again in an email on 6 July 2005 that it was his family’s intention to move into the House after expiry of the tenancy.  On the first meeting with the Respondent, the Applicant also advised the Respondent that he intended to completely renovate the House, as the condition of the House was not suitable for his family.

6. The Respondent denies the Applicant’s allegation that he reasonably requires the House as a residence for himself and his family.  The Respondent also contends that in the circumstances of this case, it would be manifestly not just and equitable for the Tribunal to make an order of possession of the House in favour of the Applicant.

7. Thus, the issues that I have to decide are:-

(1)    Whether the Applicant reasonably requires the House as a residence for himself and his family; and

(2)    Whether it would manifestly not be just and equitable to make the order for possession.

Reasonable requirement

8. The Landlord and Tenant (Consolidation) (Amendment) Ordinance 2004 (16 of 2004) (“the Amendment Ordinance”) has changed the law in respect of continuation of tenancies.  A tenancy created after the commencement date of the Amendment Ordinance on 9 July 2004 will end upon expiry of the contractual term.  A tenancy created before 9 July 2004, which is the situation in the present case, will end upon expiry of a 12-month transitional termination notice served by the landlord on the tenant (sections 5 and 6 of the Amendment Ordinance).

9. However, section 7 of the Amendment Ordinance provides that:-

“(1) During the continuance of a tenancy as described in section 5(7), the Tribunal may, on the application of the landlord, make an order for possession of the premises to which the tenancy relates, or any part of them, notwithstanding that a transitional termination notice in respect of the premises has not been served, or has been served but has not expired, if the Tribunal is satisfied that the premises are, or that that part of them is, 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.

(2) The Tribunal shall not make an order for possession under subsection (1) if-

(a) 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 make the order; …”

10. The Respondent contends that an existing tenant is entitled to the protection of the Amendment Ordinance and that the tenancy would only be terminated upon expiry of a 12-month transitional notice served on the tenant.  This contention is obviously wrong.  It is clear from the wordings of section 7 that, whether or not a landlord has served a transitional termination notice, the landlord may still terminate the tenancy on the ground of self-use.  Thus, it does not matter at all that the Applicant has served such a transitional termination notice on the Respondent.

11. It should be noted that section 7 does not stipulate that the premises can be required by the landlord’s spouse or children under the age of 18.  However, if the landlord requires the premises as residence for himself, it must follow that his immediate family members like spouse and young children should also be allowed to stay in the premises with him.

12. The burden is on the landlord to satisfy the Tribunal that he reasonably requires the premises for his residence.  The Applicant has given evidence at the trial to support his contention that he requires the House as his permanent home.  I fully accept the Applicant’s evidence in this regard.  I have no doubt at all that the Applicant, his wife and his 3 young children are going to reside in the House when possession is obtained and renovation completed.

13. The Respondent, however, does not agree that the Applicant reasonably requires the House as a residence for himself and his family.  The Respondent contends that the Applicant should have planned his repossession of the House with the 12-month transitional period in mind.  The Respondent gave evidence that although the Applicant had informed him that he would repossess the House after the contractual tenancy expired, the Applicant did not specify that he wanted to have possession back immediately upon expiry of the contractual tenancy.  The Respondent also contends that the Applicant wants to repossess the House because the rent received from the Respondent is below the market rent.

14. I do not accept the Respondent’s contentions in this regard.  I accept the evidence of the Applicant that he all along thought that he would be able to recover possession upon expiry of the contractual tenancy.  The 12-month notice was only a backup plan as advised by his solicitor.  Thus, he had planned everything with a view to obtaining possession soon after the contractual tenancy ended.  He did not intend to wait for the 12-month notice to expire at all.  The Applicant explained in his evidence that he had to make a special arrangement with his own landlord to make sure that he could move out his present house with short notice and he had to pay a higher rent for that arrangement.  If the Applicant had only intended to repossess the House after the 12-month notice, there is absolutely no reason for him to enter into such an arrangement with his landlord.

15. I also accept the Applicant’s evidence that he had informed the Respondent clearly about his intention to repossess the House immediately after expiry of the contractual tenancy.  The Respondent admitted that he had started to find a new place to live in May 2005.  If he was not sure that he had to move out in October 2005 when the contractual tenancy ended, I do not think that he would look for alternative accommodation so soon.

16. I do not agree with the Respondent that the Applicant wants to recover possession simply because the rental he receives is below the market rent.  There is just no reason at all for the Applicant to keep two houses, one by paying rent and the other by paying mortgage repayments.  When the rental he receives from the House is significantly lower than the mortgage repayments, the Applicant is perfectly entitled to reduce his monthly cash outgoings by moving into the House and terminating his own lease.

17. The Respondent also contends that since the Applicant is living luxuriously in a big house with 2 cars and a speedboat and the rented house is much nicer than the House, it is not reasonable for the Applicant to move into the House.  The Respondent submits that there is no necessity or urgency for the Applicant to reduce his cash outgoings when he can afford such a life style and send his 3 children to international school paying high school fees.  Alternatively, the Applicant can reduce his outgoings by other means.

18. I totally reject such arguments.  Although the Applicant earns very decent income as an accountant, it does not mean that he has no need to reduce his outgoings.  The fact that the Applicant has other expenses to take care of, such as the high school fees, supports his contention that he needs to reduce his outgoings.  Moving into the House is in fact the most direct, effective and sensible way to reduce his outgoings.  I see no reason at all that he has to resort to other means to reduce his outgoings as suggested by the Respondent.  The difference between the rental and the mortgage repayment is more than $20,000.00 per month.  In other words, the Applicant is losing over $20,000.00 each month.  There is clear necessity and urgency to cut such loss.

19. The Respondent also argues that it was the Applicant’s own choice in purchasing the House and putting himself into such a financial position.  I do not agree with this argument either.  As aforesaid, when he purchased the House, the Applicant expected that he could recover possession immediately after the contractual tenancy ended.  The present situation was caused by the Respondent in refusing to deliver possession after expiry of the contractual tenancy.  The Applicant would not be suffering this loss and in fact could save some money if he could move into the House.

20. Thus, I find that the Applicant has been very consistent in his intention to reside in the House soon after the contractual tenancy expired.  He has never intended to wait for the transitional notice to expire.   His requirement to use the House as his residence is both genuine and reasonable.  The Applicant has therefore satisfied me that he reasonably requires the House for occupation as his residence.

Manifestly not just and equitable

21. Before I can grant an order for possession, section 7(2) of the Amendment Ordinance requires me to consider whether in all the circumstances of the case, it would manifestly not be just and equitable to make the order.

22. It has been held in various cases that “manifestly unjust” means “thoroughly unjust”, “plainly, obviously and unmistakably unjust” or that it would cause an ordinary person who knew all the circumstances to throw up his hands in dismay at the thought of possession being ordered and exclaim “that cannot be right”: Chow Wing v. Yuen Chi-hung [1980] HKLR788; Lam Chuk-ying v. Chan Kwok-kwan [1981] HKLR 661 and Lusher v. Hilliard [1980] DCLR 25.  Although these cases were held before the Amendment Ordinance, I think the same principles should still apply to the interpretation of the Amendment Ordinance.

23. As can be seen from the above interpretations, mere inconvenience will not be sufficient to justify a refusal of the possession order.  It has also been held that the overriding factor is the right of the owner to exercise the privileges of ownership: Lam Chuk-ying v. Chan Kwok-kwan, supra.

24. The Respondent’s case is that he, his wife and two dogs, which are treated as his family members, have lived happily at the House for the past two years.  Prior to the Applicant’s purchase, they had every intention to renew the tenancy agreement.  They have fulfilled all the obligations under the tenancy agreement and have taken the greatest care to maintain the property.  In fact, they have improved the quality of the dwelling at great personal expense.  In May 2005, when the Respondent learned of the sale of the House to the Applicant, he endeavoured to find a new place to live and did enter into an agreement to buy a property in Pokfulam.  The property is subject to letting, but the sale and purchase will be completed on 28 February 2006 on a vacant possession basis.  Since the property is 9 years old and requires renovation, he and his family can only move into the property in July 2006.  It is difficult to get a short-term tenancy, which is less than a year, to accommodate his family including the two dogs as their temporary residence.  Even if they can get such a short-term tenancy, it will cost them twice on removal expenses, which will not be cheap in view of the large amount of furniture and other items they have.  The Respondent also produces medical evidence to show that his wife is suffering from anxiety and insomnia due to the present dispute and that if they were to separate from the two dogs, the two dogs’ behaviour would be adversely affected.

25. I do not find any of the circumstances advanced by the Respondent or the combination of them sufficient for me to say that it would “manifestly not just and equitable” to grant the order for possession.  All the matters raised are just inconvenience to the Respondent.  As aforesaid, inconvenience is not a ground to refuse the order for possession.

26. I do not believe that it would be so difficult to find a short-term tenancy to accommodate the Respondent and his family including the two dogs, before they move into the new flat in Pokfulam.  Apart from the flat in Pokfulam, the Respondent also owns a flat in Mid-Levels.  The flat in Mid-Levels is rented out and may be too small to accommodate the Respondent.  However, the Respondent should be able to rent another place in lieu of the House.  The rental for alternative accommodation would be more expensive than the current rental they are paying for the House.  However, the Respondent and his wife are also high-income earners.  They can certainly afford a higher rent for a temporary period, before they move into the new flat in Pokfulam, as well as the removal cost even if it would be doubled.  I do not think that it would be manifestly unjust or inequitable to ask the Respondent to incur these extra expenses.  After all, it was the Respondent’s own choice to purchase a new flat that is not ready available.  Although the Respondent has explained that it was difficult to find a suitable place to accommodate his family, particularly for the two dogs, I do not accept that it was impossible to find a suitable place at all.  If the Respondent could only find a tenancy for a year and cannot shorten it, the Respondent can always move into the new flat in Pokfulam later.  After all, they are prepared to spend almost half a year to renovate the new flat.

27. I do not think that there is any merit in producing the medical evidence of the Respondent’s wife and the dogs.  It is not uncommon for anyone to suffer from anxiety and insomnia in view of pending litigation, but that cannot be a ground to refuse a possession order.  The dog’s behaviour or health condition cannot outweigh the Applicant’s need for the House at all.

28. It is suggested by the Respondent that the Applicant purchased the House with a clear understanding that it was subject to tenancy, but as far as “manifest injustice” is concerned, the fact that the landlord purchased over the head of the tenant, knowing of his presence, carries little weight: Leung Kin-hung v. Cheng Mui [1982] HKLR 383; Mak Yee Hang v. Fung Yip Sang [1987] HKLR 1037 and Leston v. University of Hong Kong [1982] DCLR 1.

29. Thus, having considered all the circumstances of the case, I find that there is no ground to suggest that it would manifestly not be just and equitable to make the order for possession.  In other words, the order for possession ought to be granted.

Stay of execution

30. The Respondent asks for a stay of execution until July 2006 when the new flat in Pokfulam is ready for moving in after renovation.  There is absolutely no ground to stay execution for such a long time.  As aforesaid, the Applicant will suffer a great loss in maintaining two houses for such a long time.

31. I am only prepared to grant a stay of 28 days as agreed by the Applicant, but the stay will have a condition that the Respondent do allow the Applicant’s architect to view the House once on reasonable notice, so that the Applicant’s architect can start designing the House right away.

Costs

32. In applications like the present one, there is normally no order as to costs, unless a party has conducted the proceedings in a frivolous or vexatious manner.  There is no suggestion that any party has conducted the case in a frivolous or vexatious manner, so the normal costs order should apply.

Conclusion

33. By reasons as aforesaid, I hereby order that:-

(1)  The Respondent do deliver vacant possession of the House to the Applicant;

(2)  There be a stay of execution for possession for 28 days from today on the condition that the Respondent do permit the Applicant’s architect to inspect the House once on reasonable notice to the Respondent;

(3)  The Respondent do continue to pay rent/mesne profit to the Applicant at the rate of $20,000.00 per month until vacant possession of the House is delivered;

(4)  When the Applicant has obtained vacant possession of the House, the House has to be occupied by the Applicant, his wife and three children; and

(5)  No order as to costs.