JOHN RAYMOND WYTT v. YUE HING LAND INVESTMENT CO LTD

LDNT 24 OF 2001

 IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

New Tenancy Application No.: 24 of 2001

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J U D G M E N T

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1.  By serving a Form CR103 dated 11 July 2000 the tenant Applicant made a request to the Respondent landlord for a new tenancy which the latter refused.  On 19 January 2001 the Applicant took out these proceedings to apply for the granting of a new tenancy.  These proceeding could have proceeded smoothly but for the twists and turns of a parallel action in the High Court.   Now more than four years has elapsed since the filing of the Application.  The Respondent is no longer opposing the granting of the new tenancy.  There are three issues to be determined, the length of the term of the new tenancy, its commencement date, and the prevailing market rent.

2.  The Applicant is now simply asking for a term of two years to commence on 21 January 2001 on the same terms at a lower rent of $43,000 per month (inclusive of Government rent, rates, the water charges and the SMATV charges).

3.  The original tenancy is a fixed term of two years expiring on 20 January 2001.  A new tenancy of the same length of term and to commence immediately on the expiry of the original tenancy should be made unless there are special circumstances.  

4.  Mr. Hart for the Respondent submitted that, in the light of the recent amendments to the Landlord and Tenant (Consolidated) Ordinance, I should consider a date beyond 21 January 2001 so that there would not be any further dispute on the effects of the recent amendments on the new tenancy to be granted.  He elaborated on the dispute the Respondent feared and anticipated.   It was over the length of notice required to terminate the new tenancy. However he could not suggest a specific commencement date for me to consider.  As I understand him, it should be a reasonable period beyond 21 January 2001 depending on my interpretation of the amendment legislation on the length of notice required.

5.  I agree that the Tribunal should make the best endeavour to resolve not only the current but the potential dispute as well between the parties.  The Tribunal however cannot go beyond the relevance of the current dispute to meddle in the future dispute of the parties. 

6.  First of all, whatever view I might have on the length of required notice, it is not binding on the parties or on the Tribunal.   My view will not serve the purpose of resolving the potential dispute.  Secondly the other important question is the pecuniary interests of the parties.  If the new tenancy is to commence months after 20 January 2001, the effect is that the rent for these intervening months will be at the current rent.  In the event of the market rent being assessed at level lower than the current rent, which is very likely, the Applicant would suffer pecuniary loss.  This disadvantage might be overcome if the Respondent is willing to make concessions to provide for such event.  These concessions the Respondent was not willing to make, though Mr. Hart submitted it was not the likely increase in rental receipts that prompted the Respondent to suggest a commencement date beyond 21 January 2001.  However Mr. Hart also argued that the expert of the Applicant only gave a valuation of the market rent as at 20 January 2001 and that his valuation could not be adopted if the commencement date was months after that date.  That being the case, Mr. Hart seemed to suggest, it was up to the Applicant to prove what the market rent for the new tenancy should be or, putting his argument one step further, why the new rent should be different from that of the old tenancy.

7.  As I have said earlier a term of two years and a commencement date immediately following the expiry date of the old tenancy is the usual and proper one to made.  As such it would conform to the contractual spirit of the parties as far as possible and the intention of the Ordinance. To justify a departure from this practice requires special circumstances.

8.  It is unfortunate that this case has dragged on for such a long time.  From the limited facts available to me, it cannot be suggested that it is the Applicant to blame. Any departure from the usual practice must not be seen to penalise the Applicant for this long time lapse.  If the usual practice is departed from, the material date for the prevailing market rent would be on the commencement date some months beyond 21 January 2001. It is likely to be higher than that prevailing on 21 January. The Applicant would then be penalised.  Firstly it is because I would have to assess the market rent unassisted by the expert evidence called by the Applicant and which evidence is the only expert evidence I have heard at this hearing.  It is most undesirable.  In the circumstances of this case it would be most unfair to the Applicant, particularly when the Respondent did not indicate on which specific date the new tenancy should commence.  Secondly and more importantly, the Applicant would definitely and obviously been prejudiced in having to pay a higher rent.  In passing, I must point out that the Applicant is already prejudiced. Whatever rent I am to assess it to be, in practical terms he has lost the opportunity to exercise his option under the Ordinance to decline the new tenancy.  He has to pay for the assessed rent for the whole term of two years and continuing.

9.  These two factors, namely, the history of the matter as made available to me, and, the advantage of taking this opportunity to resolve a potential and future dispute concerning the length of notice, either standing alone or together do not entitle me to depart from the practice of granting a two years term to commence on 21 January 2001.  For this reason I am of the view that a new tenancy of two years commencing on 21 January 2001 should be granted.

10.  As to the prevailing market rent, the Respondent did not call any evidence. I have no reasons to doubt the integrity of the expert. He explained his valuation contained in his report.  Facts he relied on to give his valuation was either supported by evidence of the tenant or were within his knowledge as a surveyor in general practice.  

11.  Mr. Hart made some criticisms on his evidence.  He complained about the expert using hindsight to assess two main adjustments. One of which related to the construction disturbance and the other related to actual maintenance costs of the interior of the premises purportedly incurred under a tenant’s covenant in the lease.  It is right that these two matters occurred during the term of the new tenancy. Mr. Hart argued that the expert should give his valuation as if he was doing the valuation before the commencement of the new tenancy.  If the expert did just that, Mr Hart argued, he could not and should not have used these hindsight matters, namely the actual disturbance and the actual costs. I do not think there is any merit in this argument.  Adjustments of some sort had to be assessed in view of the fact that some degree of disturbance and the requirement for maintenance were foreseeable.  There is nothing wrong for the expert to use hindsight. After all he only tried to be as accurate as possible.  If he had not taken those matters into account, there would have been three possibilities.  He might have come up with the same adjustments.  In that event it would be futile for the Respondent to complain. The second possibility is that he might have come up with greater adjustments. Then I am sure it would be legitimate for the Respondent to discredit his estimates by referring to the hindsight matters and to argue that the accurate adjustments should be no more that those truly reflecting the actual disturbance and actual costs incurred. This argument that a foresight can only be as good as the hindsight will definitely be resorted to. Of course, the last possibility is that he might have come up with a lower figure. Unfortunately, the expert was not asked to give an estimate of those adjustments had he not taken into account the hindsight matters.  If I were to ask to make my own adjustments, I would have inevitably taken into account the hindsight matters and arrived at the same adjustments.   For these reasons and in the particular circumstances of the case, I accept these adjustments made by the expert.

12.  There is some merit in Mr. Hart’s criticism on the adjustment relating to the four months’ deposit. The 5% interest rate adopted by the expert appeared too high. He could not offer any satisfactory justification for it.  The rounding down in the course of his assessment is generous. These two factors can be conveniently dealt with together by adding back $1,000 to the final estimate of the expert. I therefore assess the rent to be $44,000

13.  The Applicant asked for interests on the refunds of excess rent paid.  I have no jurisdiction to grant such order and the refunds are not due until I order the repayment. I refuse an order for interests.  Mr. Francis helpfully handed up a draft order at the beginning of the hearing.  I make an order in terms with the consequential amendments as a result of the above findings.