Kaley Ltd v. The Hong Kong Land Property Co Ltd

CACV000046/1990

BETWEEN

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Coram: Hon. Sir Derek Cons, V.P., Kempster, J.A., & Barnes, J.

Date of hearing: 12 September 1990

Date of delivery of judgment: 12 September 1990

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JUDGMENT

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Sir Derek Cons, V.P., delivered the judgment of the Court:

1. In the proceedings from which this appeal arises the Plaintiff is the tenant and the Defendant is the landlord of office premises. The lease in question is one for six years. Although dated the 6th December 1988, it took effect from the 1st June 1986. The rent to be paid is dealt with under Part I of the Third Schedule attached to the lease. For the purposes of this appeal, it may be taken as a fixed rent for the first three years, with the rent for the second three years to be agreed or determined according to the provisions of clause 2 of Part I. Provisions for rent free periods or one at a reduced rent do not affect the question we have to decide.

2. Clause 2 is in these words:

Subclauses (a) and (b) then set out the procedures for determining the rent; Subclause (c) provides that the decision of a surveyor or arbitrator appointed under the preceding sub-clauses shall be final; Subclause (d) provides for the adjustment of rent if the determination is made after the Rent Review Period has commenced; Subclause (e) sets out the criteria for the determination and is in these words:

There is nothing in Subclause (f) which is relevant for these proceedings.

3. Making use of the machinery in Subclauses (a) and (b) the landlord caused a surveyor to be appointed on the 7th June last year, but the parties were not in agreement as to the construction of clause 2 of the Schedule as to a matter which would vitally affect the consideration of the surveyor.

4. In due course the tenant took out a construction summons which was heard by Mayo J., and in which two questions were posed for his consideration. The first was:

We are not concerned with the second question. Mayo J. answered the first question in the affirmative and gave the 1st June as the relevant date, but the tenant was not satisfied with the judge's answer and now applies to set aside the construction which the judge adopted.

5. Mr. Chang, who appears for the tenant as he did below, has drawn our attention, indirectly at least, to the suggestion in Woodfall on Landlord and Tenant para. 1-0703/7 that the question is one purely of construction. That was accepted by the judge below and I accept it also. Taking that approach I would for myself, without hesitation, come to the conclusion that the judge was right. The relevant words of the lease, taken without the frills that surround them, are these:

When it comes to a pure question of construction it is often not susceptible to elaborate discussion, or sometimes any discussion at all. To my mind it simply follows naturally from those words that the intention of the parties was that the rent should be found as at the beginning of the Rent Review Period. It is normal to assess rent at the time of entering into a lease, and such construction would thus seem to be consonant with commercial reality.

6. Turning to the authorities to which Mr. Chang has referred us, we rind in Barnsley, Land Options pp. 277-278:

Mr. Chang accepts that Mr. Barnsley puts forward nothing in support of the proposition and that in substance it is no more than an expression of preference on Mr. Barnsley's own part.

7. We have been taken to the judgment of the English Court of Appeal in Glofield Properties Ltd. v. Morley [1989] 2 EGLR 118. For myself I cannot derive any assistance from that case, which turned on a lease with terms so different from the present. I merely note as a matter of interest in passing that Nourse L.J. commented that it would be

Mr. Chang has emphasised that the machinery provided by the present lease would prevent a decision's being made later than slightly over four months from the commencement of the Rent Review Period and suggests that such would not be a significant delay. I would only observe that "significant" is a relative adjective, and that the property market in Hong Kong is far more volatile than that of the United Kingdom. Four months could, as perhaps the present case may show, be a very significant period.

8. Be that as it may, I find no assistance from the authorities and certainly nothing to detract from what I find to be the natural construction of the terms of the lease, which is in accordance with that found by the judge below. I would therefore dismiss the appeal.

Kempster, J. A.:

9. I agree. As a matter of construction the words in clause 2(e) of the Third Schedule to the lease in question quoted by My Lord, the Vice President, point inevitably to the conclusion which he, like the judge below, has reached.

Barnes, J.:

10. I think that the judge below was right and I agree that the appeal should be dismissed.

Representation:

Denis Chang, Q.C. and Benjamin Yu (M/s. Kao, Lee & Yip) for the Plaintiff/Appellant

Robert Tang, Q.C. and Malcolm Merry (M/s. Deacons) for the Defendant/Respondent