Tse Siu Hoi v. Lee Dick Gold and Jewellery Ltd
Read the full judgment text of LDPE 1132/2014 on BabelCite. This LDPE judgment was delivered on 27 August 2015.
1. This is an application in which the applicant is applying for
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LDPE 1132/2014 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION APPLICATION NO. LDPE 1132 OF 2014 _________________
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__________________ JUDGMENT Background 1.This is an application in which the applicant is applying for
2.By a tenancy agreement in English which was prepared by Messrs Raymond Chan, Kenneth Yuen & Co, Solicitors (hereinafter referred to as “Raymond Chan”) dated 11 June 2004, the Premises were let by Silver Joyce Investment Limited (“Silver Joyce”), the predecessor in title of the applicant, to the respondent for a term of 4 years from 25 June 2004 to 24 June 2008. 3.When the tenancy agreement above referred to expired, Silver Joyce and the respondent entered into a new tenancy agreement dated 10 July 2008 (hereinafter referred to as “the 2008 agreement”), this time prepared by Lung Sum Estate Agency. This tenancy agreement in Chinese appears in a standard form and contains, inter alia, the following provisions:
4.That is, according to clause 1, although the 2008 agreement was expressed to be for a term of two years from 25 June 2008 to 24 June 2010 at a monthly rent of $28,000, clause 12, the contents of which were added, according to the respondent, by a Ms Chan of Lung Sum Estate Agency (“Ms Chan”), stated there would be a renewal of the term for two further years from 25 June 2010 to 24 June 2012 at a monthly rent of $30,000. On the other hand, a summary of the 2008 agreement at the back stated the tenancy agreement was for a term between 25 June 2008 to 24 June 2012. 5.Clause 2 of the 2008 agreement may be classified as tenant’s covenants
6.It is undisputed that, despite the latter provision, there was no new written tenancy agreement when 25 June 2010 arrived. 7.Subsequently, Silver Joyce and the respondent only entered into a new tenancy agreement dated 17 July 2012 (hereinafter referred to as “the 2012 agreement”), again in Chinese and in standard form prepared by Lung Sum Estate Agency, according to the respondent, through Ms Chan but of a slightly different version. 8.By reference to the copy of the 2012 agreement provided by the respondent (which is not disputed), clause 1 states the tenancy agreement was for a term of two years from 1 July 2012 to 30 June 2014 at a monthly rent of $55,000; the summary at the back as regards the length of the term has been left blank however[1]. Clause 2 is the same as that of the 2008 agreement. In contrast to the 2008 agreement, however, clause 12 of the 2012 agreement is as follows:
9.That is, the 2012 agreement was stated to be for a term of 2 years fixed and 2 years open the meaning of which becomes now the subject of dispute between the applicant and the respondent. Of particular difference from the 2008 agreement, this clause 12 is standard printed save the words “兩” ie “two” which were inserted in handwriting. 10.Also, a clause 13 has been added in handwriting as follows:
11.In English, I translate it as “the above term(s) of the tenancy should be the same as in the previous one”. 12.Then the following events occurred leading to the present application:
Issues for determination by the Tribunal 13.The parties agree the primary issue of this application is whether the respondent is entitled to remain in possession of the Premises until 30 June 2016 as a lawful tenant. 14.Then the parties agree the following secondary issues:
Whether the 2012 agreement was validly reached by Silver Joyce and the respondent? 15.In fact, the applicant does not contend the 2012 agreement was not validly reached. He only contends that the 2012 agreement was only from 1 July 2012 to 30 June 2014 and no more. Whether the 2012 agreement contained an option to renew? 16.As I stated in §9 above, the real dispute between the parties is the interpretation of clause 12 of the 2012 agreement: 「兩年梗約兩年生約。」 17.In Hui Fung v Lau Kin [1995-2000] HKCLRT 472 (“Hui Fung”), each tenancy in dispute contained a clause 1 similar to the 2012 agreement:
18.At §8 of the judgment, Leong JA affirmed the Tribunal’s view that the term of each tenancy in dispute was a fixed-term tenancy commencing on 7 January 1999 and expiring on 6 January 2001. Although the tenancy agreement referred to “one year being fixed tenancy and the other year being open tenancy”, the agreement expressly stated that the term of the tenancy was 24 months. He came to this view because he found clause 18 of such tenancy provided a break clause giving the tenant the right to terminate the tenancy before its expiry, on condition that, 12 months after the commencement of the rental period, the tenant could in advance give one month’s notice or pay rent in lieu of notice. 19.Cheung J (as he then was) agreed at §51 of the judgment that each tenancy is for a term of 24 months from 7 January 1999 to 6 January 2001 which was manifestly clear in the agreement. He also remarked that the terms “fixed tenancy” and “open tenancy” are commonly used terms as opposed to legal terms that bear specific legal meanings. He explained further that the so-called “open tenancy” meant that the tenant was entitled to terminate the tenancy 12 months after the commencement of the rental period; that is to say, the tenancy could be terminated after 7 January 2000 if the tenant gave one month’s notice or makes one month’s payment in lieu of notice. Basically the tenancy was still for a term of two years. 20.Although Woo JA (as he then was) dissented, his view that the tenant was entitled to apply for a new tenancy under section 119A of the Landlord and Tenant (Consolidation) Ordinance[2] was based on a note to clause 1 which stated: “The parties agree that, during the rental period from 6 January 2000, the tenant was entitled to fix a new rent with the landlord, and the rent cannot exceed $15,180”. Woo JA however commented that this note did not ensure that the parties would reach an agreement on the new rent. At §35, he remarked “(a)t law, this condition subsequent may be regarded as unenforceable for being uncertain, with the result that the remaining one-year term of the tenancy is rendered invalid. It follows that the agreement takes effect as creating a tenancy for only one year as opposed to two years …” 21.Woo JA also had an another view that the open term in clause 1 was in conflict with clause 18 (which is lacking in the 2012 agreement here). He tended to modify clause 18 so that the tenant was entitled to give one whole month’s notice in advance on or before 6 December 1999 so as to terminate the tenancy on 6 January 2000 being 12 months after the commencement of the tenancy. 22.In Itec Food Limited v Gleeville Company Limited [2001] 1 HKLRD 850 (“Itec Food”), there was a provisional tenancy agreement which stipulated as follows:
23.Thereafter, when the formal agreement was further negotiated between solicitors for both parties, a break clause was inserted so that after first two years had lapsed, the tenant could give a six months' notice of termination in writing and put an end to the tenancy. But then the landlord changed its mind and intended to amend the clause so that that the tenancy was for a term of two years only, after which, the tenant would have an option to renew the tenancy for another two years at market rental. The term of the tenancy was amended in turn to two years, commencing from 16 December 1999 and expiring on 15 December 2001. 24.When this case was heard before Yam J in the Court of First Instance, counsel for the landlord referred to certain evidence of the tenant's agent, a Mr Yau and submitted that the original intention was for two years with an option to renew for another two years. Yam J first held that this piece of evidence was not admissible and the parties should stand or fall on the wordings of the provisional tenancy agreement. In any event, the evidence of Mr Yau actually supported the tenant's version as the original draft was "from 16th December 1999 to 15th December 2001 (死約)" (which meant fixed term) and "from 16th December 2001 to 15th December 2003 (生約)" (which meant a break clause in favour of the tenant the plaintiff herein for the second two years of lease). Yam J affirmed that the dominant rule of interpretation was to take the natural meaning of the words. There was no indication in the provisional agreement that the tenancy was a two-year tenancy with an option to renew. The term of the tenancy was stated to be from 16 December 1999 to 15 December 2003, making it a four-year tenancy. Therefore, it could not be interpreted as entitling the landlord either to charge or to re-negotiate the tenancy for a market rental after the expiration of the first two years. The term "死約" meant the tenant could not terminate the tenancy and the term "生約" on the contrary meant the tenant was entitled to terminate by giving notice. 25.Then in鄭秀枝及另一人 v陳愛玲, HCSA 44/2002 (unreported, dated 18 December 2002) (“Cheng Sau Gee”), the tenancy in dispute was for a term of 2 years from 1 September 2000 to 31 August 2002 during which the tenant could not determine the tenancy. However, the tenancy agreement also stipulated that one year was fixed term and the other year was open term, the rental for the two years remaining unchanged「一年實約，另一年生約，兩年租金不變」. Deputy High Court Judge Andrew Cheung (as he then was) considered the terms「實約」,「死約」or「生約」are not new to the property rental market; he considered terms such as「實約」and「死約」 meant the tenancy term should be fixed whereas the term 「生約」meant the tenancy term would be flexible and subject to early termination. 26.In this case, there was a clause stating that: 「租客在租期期滿，如欲繼續租用物業，必須給予業主一個月之事前書面通知續租，另訂新租約方能生效」, a clause which is very similar to clause 2 of the 2012 agreement where I translate in §5 above as upon expiry of the tenancy term, should the tenant wish to continue to rent the property, he has to inform the landlord by a 1-month prior written notice, but any renewal being effective only upon formulation of a new tenancy agreement. Deputy Judge Cheung considered this clause only applied when the two-year (ie including both the fixed and open term) expired but would not affect the early termination during the open term. See §13 of the judgment. 27.In Cheung Chung Wing v Chan Oi Ling, HCSA 59/2002 (unreported, dated 16 July 2003) (“Cheung Chung Wing”), the tenancy in question stated that the term was for 2 years from 5 June 2000 to 4 June 2002. Following this, like Cheng Sau Gee, supra, there was also a statement: 「一年實約，另一年生約，兩年租金不變」. Similarly, it had a clause 2 which stated:
which is nearly the same as that in the 2012 agreement or very similar to that in Cheng Sau Gee, supra. 28.Deputy High Court Judge Johnson Lam (as he then was) concurred with Deputy Judge Cheung in Cheng Sau Gee, supra, as regards the interpretation of such clause. (See §11 of the judgment.) Deputy Judge Lam also concurred with Yam J in Itec Food, supra, as regards the term 「生約」 which should mean conferring upon a right to terminate a tenancy during the open term. (See §14 of the judgment.) Nevertheless, Deputy Judge Lam found conflicting terms in the tenancy agreement and therefore concluded that a contract and the contractual terms must be construed by reference to the relevant background against which the contract was made, citing, for instance, Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896 at p 912-913. 29.There was also a case before the District Court in 陳火光v 周建邦經營常春藤書店, DCCJ 4975/2005 (unreported, dated 28 July 2006) (“Chan For Kwong”) where the above cases were referred to and analysed. In this case, the provisional tenancy provided the first two years of the tenancy were fixed whereas the further two years of the tenancy were open (租期:首兩年為“吉約”，次兩年為“生約” with the following rentals:
30.According to the applicant in this case, when the fixed term expired and if the tenant would like to take up the open term, once the option was made, he should abide by the full term with no further right to determine the tenancy. 31.At §137 of the judgment, Deputy District Judge K W Wong (as he then was) considered the tenancy did not expressly state the term was for 4 years and at §138, he remarked that if the open term was interpreted as providing the tenant with the right of termination, there was no provision as to how this could be done. Moreover, there was a remark no (2) that should the tenant wish to continue to rent the property, he was given the pre-emption. Therefore, the term “open tenancy” there could not be interpreted as conferring upon the tenant the right to determine as he had argued. Deputy Judge Wong gave judgment in favour of the landlord. 32.More lately, in 張佩芳v 劉少珊, LDPD 1304/2011 (unreported, dated 29 July 2011) (“Cheung Pui Fong”), the tenancy provided for a term of 2 years subject to one year being fixed and the other being open「一年梗約、一年活約」. There was no provision as to how the open tenancy could be terminated. The applicant relied however on the verbal agreement and the interpretation of the estate agent to suggest that either party could give a 1-month notice to the other party to determine the open tenancy. Member Lo of the Lands Tribunal agreed that such interpretation was correct because this was the common parlance in the property market. 33.Having reviewed the above precedents, the open term as stated in the 2012 agreement can have the following meaning:
34.At first glance, the first interpretation appears to be the correct answer, especially as Member Lo said in Cheung Pui Fong, the term「兩年梗約兩年生約」would usually be given such a meaning in the property market. This is particularly supported by the majority view in Hui Fung, the rulings in Itec Food and Cheng Sau Gee. 35.However in Hui Fung, the tenancy was expressed to be for the full term and there was a clause 18 that provided a break clause giving the tenant the right to terminate the tenancy before its expiry. In comparison, the 2012 agreement only provides a term of 2 years instead of a term of 4 years; neither does it include a break clause. 36.In Itec Food, the landlord did argue that open term conferred upon the tenant a right to renew the tenancy but Yam J found otherwise from evidence. Once again, the tenancy there was expressed to be for a full term of 4 years. The latter was also the case in Cheng Sau Gee. 37.More particularly in Cheung Chung Wing, although Deputy Judge Lam concurred with Yam J in Itec Food that the term 「生約」 would usually mean conferring upon a right to terminate a tenancy during the open term, he concluded that a contract and the contractual terms must be construed by reference to the relevant background against which the contract was made. In the end, Deputy Judge Lam referred the case back to the Adjudicator of the Small Claims Tribunal for clarification. 38.In the present case, I find the terms of the 2012 agreement are conflicting as in Cheung Chung Wing. Firstly, as I mentioned above, the tenancy was stated for a term of 2 years only but another clause stated there would be 2 years fixed and another 2 years open. This renders the direct application of Hui Fung, Itec Food, Cheng Sau Gee and Cheung Pui Fong not so apparent. This is particularly the case when the additional clause 13 suggests the tenancy should read the same as in the previous one, probably the 2008 agreement. 39.As stated in §4 above, the 2008 agreement also expressed the tenancy was for 2 years but the summary at the back of the agreement stated the term was as much as 4 years; clause 12 of the 2008 agreement stated clearly the rental for the later 2 years. All these are lacking in the 2012 agreement. 40.In giving evidence, Mr Li Kang Chi (“Mr Li”), the alter ego of the respondent, said during the negotiation of the renewal in 2012, he had intended the 2012 agreement to be the same as the 2008 agreement and written on a label[3] provided by Ms Chan that, like that in the 2008 agreement, in the second term, ie during the open tenancy, the rental would be $57,000 per month, ie an increase of $2,000. He alleged that when signing the 2012 agreement, Mr Yang was in a hurry and therefore such term was not added because of oversight. 41.It is trite that the one who alleges a certain thing exists should shoulder the burden of proof and it is regretted that neither Mr Yang of Silver Joyce nor Ms Chan are called to give evidence. It is also the case that pre-contract negotiations between the parties are not usually admissible as evidence, a view expressed by Yam J in Itec Food and by Lord Hoffmann sitting as a Non-Permanent Judge of the Hong Kong Court of Final Appeal in Jumbo King Limited v Faithful Properties Limited & Others (1999) 2 HKCFAR 279 at 296. Although the respondent tries to rely also on the letter of 8 April 2014sent by David YY Fung to Raymond Chan that alleged a telephone agreement for a renewal for 2 years, namely from 1st July 2014 to 30th June 2016, at a monthly rent of HK$57,000.00, such an agreement is inconsistent with what happened during the relevant period:
42.Mr Ko for the respondent places significant emphasis on clause 2 of the 2012 agreement (which is the same as clause 2 of the 2008 agreement) that there was an option exercisable by the respondent to renew or surrender the tenancy upon its expiry. However, I agree with the submission by Mr Lam for the applicant that clause 2, reading as whole, merely states the obligation of tenant to inform which at most is equivalent to an invitation to treat; it is not a right to be given to the respondent. Indeed, in Cheng Sau Gee, supra, Deputy Judge Cheung considered such a clause only applied when the full tenancy expired but would not affect the early termination during the open term in that case. 43.Recently, in Hung Cho Hing v趙麗紅, LDPE 190/2015, (unreported, dated 29 June 2015) (“Hung Cho Hing”), Deputy Judge Kot of this Tribunal arrived at a similar view on a clause similar to clause 2 of the 2012 agreement. She said at §24 of her judgment as follows:
44.To the extent that the open tenancy is argued as conferring upon a right to the respondent to renew the tenancy for another 2 years when the fixed tenancy expired, the 2012 agreement does not provide for a remark no (2) as in Chan For Kwong, supra. 45.Should there be a requirement for implying such an option clause into the 2012 agreement, I bear in mind the 5 conditions set out by Lord Simon in BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of Shire of Hastings (1978) 52 ALJR 20 (“BP Refinery”) at 26D:
46.This statement was applied by Ribeiro PJ in the Court of Final Appeal in Kensland Realty Limited v Whale View Investment Limited (2001) 4 HKCFAR 381 at §59. 47.In recent years, the courts have approached the implication of a term as part of the process of the interpretation of the contract as a whole. In Attorney General of Belize v Belize Telecom Limited [2009] 1 WLR 1988, Lord Hoffmann, giving the opinion of the Privy Council, adopted the same approach. 48.Although Lord Hoffmann was dealing with the question of whether a term should be implied into the articles of association of a company, rather than into a contract, he was clear that the process was the same for both and indeed for any written instrument. 49.At §§16-17 of the judgment, Lord Hoffmann said:
50.He stressed at §21 that the implication of a term is an exercise in the construction of the instrument as a whole so that the central question for the Court is whether the implication “would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean” 51.Then at §§26-27, Lord Hoffmann referred to the five conditions set out by Lord Simon in BP Refinery and said that the list should be “best regarded, not as series of independent tests which must each be surmounted, but rather as a collection of different ways in which judges have tried to express the central idea that the proposed implied term must spell out what the contract actually means, or in which they have explained why they did not think that it did so”. 52.In my view, it is neither reasonable nor obvious to a reasonable bystander there exists an option in favour of the respondent in the 2012 agreement. There is simply no mechanism for the exercise as spelt out in the 2012 agreement. The renewal at $57,000 per month as alleged for the open tenancy by the respondent, save for the telephone conversation as alleged on 7 April 2014 which I have dealt with in §41 above, has not ever appeared in the 2012 agreement. I agree with Mr Lam’s submission that if the respondent’s allegation as regards the negotiation of the 2012 agreement were correct, it would have been a very simple job for Ms Chan to write down the agreed rent for the period from 1 July 2014 to 30 June 2016 like what happened in the 2008 agreement. Having agreed to a contract through its own lack of prudence or failure in exercising due diligence, the respondent cannot turn around and argue that the 2012 agreement is not complete because there should be another term to be added. 53.In any event, Mr Lam pointed out that this allegation is inconsistent with paragraph 6 in the Notice of Opposition dated 24 November 2014 where the respondent suggested that Silver Joyce was not entitled to any increase rent for the renewal term. This paragraph is recited as follows:
54.In light of the above, I would adopt the view of Woo JA in Hui Fung that the open tenancy “may be regarded as unenforceable for being uncertain”, following which the remaining two-year term of the 2012 agreement is rendered invalid. I hold that the 2012 agreement takes effect as creating a tenancy for only two years and nothing more. 55.I also agree with Mr Lam for the applicant that “續租則另訂新約方生效力” at the end of clause 2 contradicts the suggestion by Mr Ko that clause 2 itself provides any implication of an option exercisable by the respondent to renew or surrender the tenancy upon its expiry. This finding concurs with that of Deputy Judge Kot in Hung Cho Hing, supra. 56.I do not consider clause 13 of the 2012 agreement can assist the respondent because what “上述租約條件” (the above terms of the tenancy) refers to is not clear from the document itself. If the phrase is referring to the length of the agreement, it is noted that the tenancy agreement in 2004 was for a fixed term of 4 years whereas the 2008 agreement was for 2-year fixed plus 2-year open. If the phrase is referring to clause 12 of the 2008 agreement, firstly the rental amount for the 2-year fixed tenancy is different; more importantly, it was silent on the amount of rental for the open tenancy. Inserting the renewal at $57,000 per month in the open tenancy is tantamount to re-writing it[4]. 57.Thus, I answer to the issue posed in the negative. Whether only the respondent had validly exercised the option to renew in the 2012 agreement that created a new tenancy? 58.As I have held that there is no option to renew as incorporated in the 2012 agreement, this is sufficient to dispose of this issue. See particularly §42 of the above. The respondent is a trespasser after 30 June 2014. 59.Even If I am wrong in respect of the above, I agree with Cheung Pui Fong that it is market practice that either party could give a 1-month notice to the other party to determine the open tenancy. 60.Furthermore, Mr Lam submits that if an option to renew otherwise exists in the 2012 agreement as alleged by the respondent, the demand for draft Tenancy Agreement by David YY Fung for the respondent is not compatible with an exercise of an option, a view similarly found in Polykote Coatings Manufacturing Company Limited v Grace Rehabilitaion Centre Limited, HCA 1477/2013 (“Polykote Coatings”). Here, To J said at §35 and §37 of his judgment dated 24 August 2015 that the letter intending to exercise an option must be precise and clearly understood by the recipient. In the present case, the last sentence of the letter of 17 February 2014 send by David YY Fung to Raymond Chan stated: “Please let us have your draft Tenancy Agreement for our approval in compliance with Clause 2 of the Agreement.” If an option to renew otherwise exists in the 2012 agreement as alleged by the respondent, why should the message conveyed in this letter suggested the respondent still wants to see if the terms of the renewal are agreeable. There should be nothing needed for approval. In this regard, I follow the judgment of To J in Polykote Coatings that the letter of 17 February 2014 cannot be construed as an exercise of an option to renew a pre-existing tenancy. Whether the acceptance of the respondent’s rental payments after expiry of the tenancy amounted to a waiver? 61.The respondent puts in evidence it had continued to deposit $57,000 per month into the account of Silver Joyce after 30 June 2014. However this does not necessarily amount to a waiver by Silver Joyce. 62.It is trite that there can be no waiver by the acceptance of rent which had already accrued prior to the forfeiture. Ever since Price v Worwood (1859) 4 H & N 512 at 516 :-
63.In Dreamgate Properties Ltd v. Arnot [1998] 76 P&CR 25 (“Dreamgate”),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:
64.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. I consider the same rationale should be applied to the present case. 65.Another similar incidence occurred in Shun Ho Energy Development Company Limited & Others v Golden Crown Industries Limited, CACV 161/2014 (unreported, dated 30 June 2015) where after the expiry the tenancies on 12 August 2013, the tenant held over and the landlords issued debit notes to the tenant for, inter alia, “rental” of the Premises for September 2013 and outstanding “rental” for 13 to 31 August 2013, at a new rate. The tenant did pay by cheques which were cashed by the landlords on 9 September 2013. The Court of Appeal, affirming the decision of this Tribunal that there was no estoppel, held that for there to be estoppel, the tenant must show a clear and unequivocal representation that there was a new tenancy agreement on the expiry of the old tenancies on 12 August 2013. 66.Also in Chan Kei Cheung Lloyd v Honest World Limited, DCCJ 576/2014 (unreported, dated 15 August 2014), Deputy District Judge Josephine Chow at §31 cited Halsbury’s Laws of Hong Kong, Vol 17(1), 2007 Reissue, [235.180] which stated that:
67.In the present case, I cannot find any evidence of mutual intention of the parties to create a tenancy. The unilateral act of the respondent to deposit $57,000 per month into the account of Silver Joyce after 30 June 2014 cannot amount to unequivocal evidence of a new tenancy. Neither did the David YY Fung’s notice to Silver Joyce on 17 February 2014 expressing the respondent’s intention to continue the tenancy entitle it to have a new/extended tenancy if he has no such right in the first place. Dreamgate is particularly comparable to the present case in that Dreamgate, like the applicant here, acquired the premises in question from the predecessor in title. Following the English Court of Appeal in that case, the notice to quit dated 29 September 2014 sent by Tam to David YY Fung could not assist the respondent if in fact no such tenancy had been granted. 68.I hold that there is no waiver by Silver Joyce for accepting such payments by the respondent. If the renewal did come into existence, whether the applicant should be bound by the said renewal that entitles the respondent to have exclusive possession over the Premises as a lawful tenant until 30 June 2016? 69.Again if I am wrong so that a renewal did come into existence by virtue of the respondent’s exercise on 17 February 2014, the respondent has become a tenant in equity pursuant to the option. 70.However, section 3(2) of the Land Registration Ordinance provides :
71.If therefore the option exists, the 2012 agreement would have become a registrable instrument and it had not been registered. In PC Fortune Company Limited & Another v Mastermind Asset Management Limited, CACV 89/2014 (unreported, 12 February 2015), the Court of Appeal, citing Markfaith Investment Limited v Chiap Hua Flashlights Limited [1990] 2 HKLR 84, [1991] 2 AC 43, held that the proviso of section 3(2) would not apply to an instrument insofar as the instrument created an option that extended the tenancy beyond 3 years. 72.The respondent here does not dispute that the applicant was a bona fide purchaser for valuable consideration but submits that the respondent’s equity interest was created before the applicant acquired his equitable interest through the agreement for sale and purchase on 3 April 2014. 73.In Power Alliance Investment Limited v Lau Kai Pui, HCA 815 of 2005 (unreported, dated 23 November 2005), a similar situation arose where the predecessor in title of the plaintiff granted to the defendant a 3-year tenancy plus an option to take a tenancy for a further term of 3 years. Recorder Benjamin Yu, SC (“Mr Yu”) held the view that the exercise of the option before the date of the provisional agreement for sale and purchase created a new legal relationship and therefore it would be arguable that the proviso should not be narrowly construed and could apply to an agreement for a lease for a term of not more than 3 years. Mr Yu however stated a caveat, ie had that predecessor in title entered into an agreement to grant a further 3-year lease at market rent before entering into a provisional agreement to sell…. 74.While Mr Yu said that “it would be arguable”, I consider the exercise of the option relates back to the tenant’s prior option which, according to the Court of Appeal in Wellmake Investments Ltd v Chan Yiu Tong [1996] 2 HKLR 44, [1996] 1 HKC 528 (“Wellmake Investments”) , was ‘null and void to all intents and purposes’ as under section 3(2) of the Land Registration Ordinance for want of registration prior to the date of the registration of the subsequent agreement for sale to the purchaser. A fortiori, when the option was exercised, it remained as an agreement for tenancy, which was an unregistered equitable interest. It is therefore also arguable that the purchaser is not bound by anything deriving from the unregistered option or the unregistered agreement for lease when the sale and purchase agreement or the assignment thereafter was subsequently registered; actual notice or constructive notices of the agreement for tenancy is irrelevant as per Wellmake Investments, supra and Kwok Siu Lau v Kan Yang Che [1913] 8 HKLR 52. 75.Notwithstanding the above, in the present case, both parties have by agreement appointed a valuation expert who has given his opinion that the market rents of the Premises were:
76.Thus, the rent of $57,000 alleged by the respondent under the option or the agreement for tenancy was some 15% lower than market rent and in my opinion, should not be regarded as rack rent for the purpose of the proviso to section 3(2) of the Land Registration Ordinance. 77.Also, under section 5(1)(a) of the Conveyancing and Property Ordinance,
78.Whereas under section 6(2) of the Ordinance,
79.The purported agreement for tenancy alleged by the respondent cannot satisfy this requirement of section 5(1)(a) and is not exempted by section 6(2) of the Ordinance because I consider the $57,000 per month alleged by the respondent is not the best rent. Mesne Profits 80.Here, the respondent agrees that if this Tribunal finds in favour of the applicant and rules that the respondent is a trespasser after 30 June 2014, the respondent would not dispute the mesne profits as assessed by the jointly appointed valuation expert. 81.Therefore, I hold that the respondent has to pay the applicant mesne profits at the rate of $67,500 per month from 1 October 2014 until delivery up of vacant possession. Orders 82.Having heard the submissions by the parties, I determine that the respondent is not entitled to remain in possession of the Premises after 30 June 2014 as a lawful tenant. Therefore I make the Orders as follows :
Costs 83.As regards costs, this tribunal fails to see why costs should not follow the event. I also hold that the last day of the trial on 13 August 2015 was useful in allowing the parties to clarify their positions and respond to the written closing submissions provided 3 days earlier. 84.Accordingly, I make a costs nisi that the respondent do pay the applicant’s costs of the application to be taxed at District Court scale if not agreed, with certificate for counsel. This is a costs order nisi. Unless any of the parties apply by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.
Mr Lam Siu Wah Joseph, instructed by Messrs Tam & Partners, for the
applicant Mr Anthony L W Ko, instructed by David YY Fung & Co, for the
respondent [1] Page 156 of Bundle. [2] This section or part of the Ordinance has been repealed by section 3 of the Landlord and Tenant (Consolidation) (Amendment) Ordinance 2004. [3] Such label as alleged has not been produced by the respondent. [4] The increase from $28,000 per month to $30,000 per month in the 2008 agreement represents an increase of 7.14% but an increase from $55,000 to $57,000 alleged by the respondent represents only an increase of 3.64%, ie something half of the increase specified in the 2008 agreement. |
Cases cited in this judgment
Further hearings and rulings under LDPE 1132/2014