Exxon Chemical Asia Pacific Ltd v. Cali Enterprises Ltd

Case No.LDLA 34/1983

Court

LDLA

Date—

Judge—

Case Document

100%Judiciary

LDLA000034/1983

Landlord and tenant Part IV - application for new tenancy - dispute in relation to terms - current tenancy terms may be varied only if good reason is shown - financial position of landlord or tenant no concern of Tribunal - Sections 117 and 119J Landlord and Tenant (Consolidation) Ordinance, Cap. 7.

IN THE LANDS TRIBUNAL OF HONG KONG

L.T. 34 of 1983

BETWEEN	EXXON CHEMICAL ASIA PACIFIC LTD	Applicant
	and
	CALI ENTERPRISES LTD	Respondent

Coram: TRIBUNAL: Sir Denys Roberts, President, M.W. Phillips, Esq., Member

Date: 2nd day August 1983.

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JUDGMENT

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1. The applicant is the tenant and the respondent is the landlord of premises known as Flat 12A, Manhattan Tower, 63 Repulse Bay Road, Hong Kong.

2. The applicant entered a lease with the respondent on 14th August 1978 for a term of 2 years at a monthly rental of $9,650 exclusive - i.e. the tenant was to bear the rates and maintenance charges. The rent bas since been increased to $15,178.80 per month.

3. The landlord terminated the current tenancy by serving notice in Form CR101 on the tenant on 28th December 1982. The tenant refused to quit by serving Form CR102 on the landlord on 4th January 1983. The landlord served Form CR105 on the tenant, requiring it to apply to the Tribunal. for a new tenancy, on 3rd March 1983.

4. The landlord, in Form CR101, stated that it would not oppose an application for the grant of a new tenancy.

5. The tenant applied to the Tribunal, by notice dated 26th April 1983, for a new tenancy.

6. The application was set down for hearing on 2nd August. At the outset of the bearing, however, the Tribunal was informed that the parties had agreed to a new tenancy being granted to the applicant for a period of two years, as from 1st July 1983, at a monthly rent of $29,000.

7. The agreed terms also provided that maintenance charges of $1,500 per month should be paid by the tenant and that there should be a "break clause", enabling the tenant to end the tenancy by giving 3 months' notice, at any time after the expiry of the first twelve months of the new tenancy.

8. The parties had not, however, been able to reach agreement on the terms of Clause 28 of the agreement, dealing with the amount of the deposit of rent to be paid by the tenant, and asked the Tribunal to decide the question, in accordance with Section 119J of Cap. 7, which provides that the terms of a tenancy granted by the Tribunal under Part IV shall be such as, in default of agreement between landlord and tenant, may be determined by the Tribunal.

9. Clause 28 of the current tenancy had provided for a deposit of $19,300. This was the amount of two months' rent at the inception of that tenancy.

10. Although the Clause contained no provision for the variation of the amount of the deposit, this was in fact increased, whenever the rent was varied, so as to amount to two months' rent. Thus both parties can be assumed to have considered that the tenant's obligation under the current tenancy was to deposit two months' rent.

11. Section 119J provides that, in determining the terms of a new tenancy, the Tribunal shall have regard to "the terms of the current tenancy and to all relevant circumstances".

12. It was argued on behalf of the tenant that a deposit of one month's rant should be sufficient, on the grounds that -

	(a)	the tenant is a multinational corporation with huge resources at its disposal, so that the landlord does not need the protection against the tenant's inability to payment which is the justification for deposits;
	(b)	if the landlord became insolvent, there was a danger that the tenant's deposit would not be available for repayment to the tenant, if the latter became entitled to it on the conclusion of the new tenancy.

13. Section 119J obliges us to "take account of the terms of the current tenancy". We interpret this as meaning that, in general, we should not vary the terms of the current tenancy unless good reason to do so is shown.

14. If it could have been established that the deposit of two months' rent is rare, we might have been disposed to consider a variation. But it is within the Tribunal's knowledge, from other applications, that a deposit of two months' rent is common.

15. So far as the second submission is concerned, we do not consider that the Tribunal should take into account the financial stability of a landlord, when dealing with applications under Part IV. To do so would involve us in hearing evidence, which no doubt would need to be of a detailed nature, as to the financial structure and profitability of a landlord and as to the possibility of him becoming bankrupt in the near future.

16. We therefore decline to investigate the financial condition of a landlord (or indeed of a tenant) as a relevant factor in deciding what deposit should be made under a new tenancy.

17. We order that a new tenancy be granted for Flat A12, Manhattan Tower, for a term of 2 years commencing on lst July 1983, at a rent of $29,000 per month, on the terms agreed between the parties; and that there should be included in the tenancy provision for the deposit by the tenant with the landlord of such amount as shall from time to time during the tenancy amount to two months' rent.

18. DATED this 2nd day August 1983.

(Denys Roberts)	(M.W. Phillips)
President	Member

Representation:

Mr. E. Radcliffe of Denton, Hall & Burgin for the applicant.

Mr. Peter Sit of Sit, Fung, Kwong & Co. for the respondent.