Towers, Perrin, Forster & Crosby Inc v. Suvindra Ltd
Read the full judgment text of LDLA 57/1982 on BabelCite. This LDLA judgment was delivered on 10 December 1982.
1. The applicant has applied to the Tribunal pursuant to Section 117(1) of the Landlord and Tenant (consolidation) Ordinance, Cap. 7 for a new tenancy of the domestic premises being Unit B1 of Block B, Grosse Pointe Villa, No. 4 Stanley Village Road, Hong Kong.
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LDLA000057/1982 Landlord and tenant-part IV - date of commencement where parties agreed - proper date of commencement where not agreed - when application for new tenancy is "finally disposed of" - effect of review provisions extending time for appeal - fair market rent - Sections 119(1), 119N, 119M(4) Landlord and Tenant (Consolidation) Ordinance, Cap.7. IN THE LANDS TRIBUNAL OF HONG KONG
Coram: TRIBUNAL: His Honour Judge Cruden, Presiding Officer and M.W. Phillips, Esq., Member. Date of Judgement: 10 December 1982 ---------------------- JUDGMENT ---------------------- 1. The applicant has applied to the Tribunal pursuant to Section 117(1) of the Landlord and Tenant (consolidation) Ordinance, Cap. 7 for a new tenancy of the domestic premises being Unit B1 of Block B, Grosse Pointe Villa, No. 4 Stanley Village Road, Hong Kong. 2. The suit premises are owned by the respondent whose predecessor in title let them to the applicant for a period of 3 years from the 15th day of April 1979 at a rent of $15,000 per calendar month exclusive of rates. 3. On the 6th day of April 1982 the respondent gave notice to the applicant pursuant to Section 119(1) under statutory Form CR101 terminating the tenancy of the premises between the parties on the 14th day of October, 1982. The applicant on the 7th day of June 1982 served a cross-notice under Section 119(4), by way of Form CR 102, giving notice that it intended to apply to this Tribunal for the grant of a new tenancy. Application for a new tenancy was duly made and that application now comes before us. 4. The respondent does not oppose the grant of a new tenancy. In the event the only matters in dispute relate to the date of commencement of the new tenancy, the applicant's wish to have the option to terminate the new tenancy on 3 months notice and the new rent. Date of Commencement 5. The contractual tenancy expired on 14th day of April 1982. However, pursuant to Section 117(1) that tenancy is continued until it is terminated n accordance with the provisions of Part IV. There are several alternative ways by which a tenancy, during the period of statutory continuance, may be terminated under Part IV. One of those alternatives is for the landlord to give due notice of termination under Section 119. The respondent has done so. That notice states that the tenancy will terminate or the 14th day of October 1982. 6. The applicant submits that the earliest day on which the new tenancy can commence would be on the 15th day of October 1982. Counsel for the applicant went on to submit that it is arguable that the tenancy can only commence at a much later date, namely when in terms of Section 119N the application is "finally disposed of" which would include the expiration of any time for appealing. In that event the prior tenancy would, because of the concept of statutory continuance, extend until the expiration of time for appealing. It was further submitted that under Section 119I the Tribunal has no discretion to fix any other day of commencement for that provision provides that the new tenancy "shall begin on the coming to an end of the current tenancy." 7. The respondent submitted that the Tribunal should order the new tenancy to commence on the 15th day of April 1982 which was the day following the expiration of the prior contractual tenancy. It was submitted that the "current tenancy" referred to in Section 1191 means merely the contractual tenancy and does not include the period of statutory continuance under Section 117. In support of that submission we were referred to the definition of "current tenancy" in Section 115(1) which provides:
8. We were reminded that we made passing reference to this question in Nordic Asia Ltd. & Ors. v. Strawberry hill Development Ltd. & Anor. Appln No. 33/82 but that the question was not argued and there was no submission that the new tenancy should commence as early as on the expiration of the contractual tenancy. That was also a case where the contractual' tenancy had been extended under Section 117. On the facts of that case we fixed the date of commencement, for House 9 therein, on the day following the date of our order granting the new tenancy. 9. On the particular facts of this application the respondent under Section 119(1) gave notice to terminate the tenancy on the 14th day of October 1982. The respondent's powers of termination under Section 119(1) are however subject to the provisions of Section 119N. Section 119N applies where, as here, a notice to terminate has been given under Section 119(1) and the applicant has applied for a new tenancy under Section 117(1). In such circumstances the date of termination under the Section 119(1) notice, is only effective if that specified date is a date at least 3 months after the application is finally disposed of under the Ordinance. 10. Here the date of termination under the Section 119(1) notice, namely the 14th day of October 1982 is earlier than the date we heard this application, which was on the 18th day of October 1982. Clearly the effect of the notice would be to terminate the tenancy before the expiration of the 3 months period referred to in Section 119N (1)(c). 11. In the absence of agreement, it would seen that under Section 119N the date specified in the notice, namely the 14th day of October 1982 would have, on the instant facts, no effect. That date of termination is replaced by the statutory date of termination in accordance with the formula contained in Section 119N. Section 119N provides that in these circumstances the Section 119(1) notice shall have the effect of terminating the tenancy, not in terms of the date specified in the notice, but at a later date. That later statutory date of termination is expressed in Section 119N to occur:
The inclusion of the words " and not at any other time" makes it emphatically clear that the Legislature has given the Tribunal no discretion to fix the date of termination. 12. The "said period" refers to the period stipulated in Section 119N (1)(c) :-
13. When is an application "finally disposed of"? Section 119N(2) provides a statutory answer by providing that the words "finally disposed of" :-
14. So "finally disposed of" does not mean when the Tribunal after a hearing makes the order granting a new tenancy but a variable later date which, in any case, is not earlier than the expiration of the time limited for appeal. 15. To find out when the time for appeal expires involves at least two and probably three statutory steps. First, we must go to Section 119Q which provides for appeals under Part IV and limits them to errors of law. Section 119Q states that appeals shall be subject to the provisions of the Lands Tribunal Ordinance and any rules made thereunder. We must therefore secondly turn to those provisions where we find that Section 11 of the Lands Tribunal Ordinance, Cap. 17 stipulates that the time limited for appeals is "within 14 days." Parenthetically, it might be observed that while Section 119Q seems to envisage the simpler procedure of a notice of appeal on a point of law, Section 11 provides that any appeals must be under the more technical case stated procedure. 16. However, the 14 days limited for appeal under Section 11 and "any proceedings on or in consequence of an appeal" may not necessarily be exhaustive. For proceedings of the Tribunal under the Landlord and Tenant (Consolidation) Ordinance are also subject to other general provisions of the Lands Tribunal Ordinance. As to when an application under Part IV of the the former Ordinance is "finally disposed of" Section 11A is of particular significance. So thirdly we must consider the possible effect of Section 11A. 17. Section 11A empowers the Tribunal, either on its own motion or on application by a party, to review a prior decision and "reverse, vary or confirm it." Importantly, the time limited for review is 1 month, which is more than twice as long as the time limited for appeal. Hypothetically, after the Tribunal has heard an application, the following events may occur before the application, in terms of Section 119N, is "finally disposed of":-
18. It therefore appears that even where there is no review or appeal the proceedings are not "finally disposed of" until 1 month has expired after judgment for until then the possibility of a review remains. It is true that Section 119N merely refers to "appeals" and not to reviews. However, this is no doubt because our law draftsman has adopted Section 119N, without substantial amendment, from Section 64 of the English Landlord and Tenant Act 1954. In England there is no power of "review." Whether this at times controversial Hong Kong review power is a colonial relic or otherwise does not concern us for it clearly exists. 19. In our view, Section 119N is not open to the construction that it is only necessary to wait until the 14 day appeal period has expired and not until the longer 1 month review period has expired. For even though Section 119N does not expressly refer to reviews it does refer to appeals. The curious result of the longer statutory time for applying for a review is that a potential appellant who has failed to bring his appeal within 14 days can adopt the alternative tactic of bringing a review within 1 month. If the point he wishes to establish on appeal is not accepted on review, then he has another 14 days from the review hearing, to bring an appeal from the review decision. On that appeal he may advance the some point which initially he intended to raise on appeal but was frustrated from doing so as he had allowed the shorter appeal time to expire before taking any step. 20. We therefore consider that the reference to "appeal" in Section 119Q includes an appeal from a review decision. 21. This is again an area where assistance can be obtained by referring to the English Landlord and Tenant Act 1954 on which our Part IV is based. Commenting on the English Section 64 which largely corresponds with our Section 119N Woodfall Landlord and Tenant (28th Edn) para. 2-0672 observes:-
22. In England the limited effect of a notice ter urinating a tenancy under their equivalent of Section 119(1) has given rise to tenants exploiting the further statutory continuation of a tenancy under what in Hong Kong is Section 119N and in England is Section 64. As to that Woodfall observes at para. 2-0710
23. One example of such judicial comment was in Espresso Coffee Machine Co. Ltd v. Guardian Assurance Co. Ltd. (1958) 1 W.L.R. 900 where Harman J. commenting on the exercise by the tenant of his statutory rights similar to those now contained in our Part IV observed that the tenant:-
24. In Hong Kong as our Section 119N is basically the same as England's Section 64 it may be that similar problems will arise although the position in relation to rent, is fortunately different to the position in England. 25. In the absence of agreement, it does seem that the present application would not be finally disposed of, where there is no appeal or review, until 1 month has expired from the date of this judgment. As a new tenancy could not commence until 3 months after that 1 month has expired, the actual date of commencement of the new tenancy would not be until 4 months after the date of our judgment. If there were a review or appeal the date of commencement of the new tenancy would be even more distant. 26. If this is the position then no doubt in England, apart from the tactical manouvering Woodfall refers to, its causes few difficulties. For the English provisions are concerned only with business leases. Many of them are for durations of 5 or more years. The period before an application is "finally disposed of" and a new tenancy commences, would be relatively short, compared with the generally longer English tenancies. However, in Hong Kong, unlike England, the Tribunal is restricted under Section 119I to granting new tenancies for durations not exceeding 3 years. A large number of new tenancies, both by agreement and by order of the Tribunal, are for only 2 years. The longer Hong Kong period until an application is "finally disposed of" would proportionately be even longer in relation to our shorter durations and may well create difficulties. An indirect and cumbersome method by which the Tribunal could overcome any such difficulties would be to use its duration fixing powers under Section 119I. We could order a new tenancy for the otherwise determined duration, less the time or such part thereof as may be reasonable equal to the period that will elapse from the date of the order, until the application has been finally disposed of in terms of the Ordinance. 27. Turning to the question of rent, in the absence of agreement when does the new rent commence? Under Section 119M(4) the new rent is clearly payable from the date when the current tenancy comes to an end by the Section 119(1) notice. For Section 119M(4) provides:
28. The new rent therefore commences on the 15th day of October 1982. It seems to us that would also have been the commencement date if, in the absence of agreement, an order were made or a party appealed. It is true that in accordance with the position we have already adverted to, that in the absence of agreement a new tenancy could not commence earlier than 4 months after the date of the order, However, Section 119M(4) provides for the new rent to be paid from the date of termination specified in the Section 119(1) notice. We are satisfied that the statutory extension of the date of termination under Section 119N does not complicate the issue, for Section 119M(4) excludes the application of Section 119N from affecting the tenant's liability to pay the new rent. At least as far as the new rent is concerned, our Ordinance seems to have overcome some of the difficulties criticised by English commentators in respect of their Landlord and Tenant Act 1954. For while our section 119N is substantially the same as their Section 64, our Section 119M is significantly different to the comparable English Section 36. Section 36 does not have a provision similar to our Section 119M(4). 29. Our Section 119M(4) provides for the new rent to commence on the date of actual or purported termination under Section 119(1). Therefore while Section 119N, in the circumstances therein set out has the effect of postponing the date of commencement of a new tenancy for substantial periods, it does not also have the effect of postponing the commencement of the new rent. That possibility is excluded by the express reference in Section 119M(4) to Section 119N. So the position in Hong Kong, due to our different legislation, is not only different but perhaps also has more practical advantages. 30. These are important issues but we do not need to determine them in this application. For we are satisfied that in accordance with the fundamental principle of Part IV to encourage landlord and tenant to reach agreement without recourse to the Tribunal, it is open to the parties to agree upon a date of commencement as they may agree upon any other term. We are satisfied in this application that there is a sufficent measure of agreement. Under Form CR101 the respondent gave notice terminating the tenancy as at the 14th day of October 1982. It is true that he submitted at the hearing, that the new tenancy should commence on the 15th day of April 1982. However, having giving written notice of termination at the later date, it is not open to him now to attempt to backdate that termination to the 14th day of April 1982. The applicant on the other hand, submits that the earliest date of commencement should be on the day next following the date of termination specified in the respondent's Form CR101. This would be the same date as flows from the respondent's own notice. In these circumstances we are satisfied we should reflect this substantial measure of agreement, by ordering that the new tenancy shall commence on the 15th day of October 1982. Other terms 31. The parties are agreed that the duration of the new tenancy shall be for 3 years. The applicant sought a new clause in the tenancy agreement giving it the right to terminate the 3 year tenancy at any time during its duration on giving 3 months notice to the respondent. No evidence was called in support of this proposed variation, although it was indicated from the Bar that if the applicant's employee, who at present occupies the premises, were to leave Hong Kong this clause would assist the applicant to be earlier discharged from its obligations under the tenancy agreement. The respondent opposes the variation sought. 32. In Nordic Asia Ltd. & Ors v. Strawberry Hill Development Ltd. & Anor we emphasised that the onus is on the party seeking the variation to satisfy us that a variation should be ordered. We gave our reasons for coming to that conclusion. We need not repeat them here. For the same reasons, we refuse to grant the variation sought, for no reasons fur the variation have been adduced in evidence. New rent 33. The applicant submits that the fair market rent for the new tenancy would be $26,000 per calendar month exclusive of rates and management charges. The respondent submits that the fair market rent is $30,000 per calendar month exclusive of rates and management charges. 34. Both parties called chartered surveyors to give expert evidence in relation to a new tenancy commencing on the 15th day of October, 1982. In addition, as an indication of the earlier attitude of the parties, Mr. L. Narain, a director of the respondent, stated that when negotiations for a new tenancy commenced in March 1982 he offered a new tenancy at $38,000 per calendar month to which the applicant's occupant counter-offered $35,000 per calendar month. Mr. Narain went on to state that the occupant accepted the counter-offer but after placing the matter in the hands of his Company's solicitors he learned that the applicant was then no longer prepared to execute a new tenancy agreement at $35,000 per calendar month. 35. Mr. Williams, the valuer for the applicant, gave evidence on the basis of a new 3 year duration. Mr. Lui, the expert called by the respondent, based his evidence on a 2 year duration. Most of the comparables relied on by both valuers were for 2 year durations. None were for 3 years. The valuations of both valuers were silent whether they had made any adjustment for this difference in duration. We are satisfied that the evidence does not establish that there would be any variation in rent depending whether the duration was 2 or 3 years. We therefore propose to make no distinction between these two durations. 36. The premises are a duplex flat comprising part of the lower two floors of a three story residential development bounded on two sides by Stanley Gap Road and Stanley Village Boad with vehicular access to the latter road. An internal access road services the rear of the development and the two carports which are provided for each flat. The development comprises 4 blocks of which 3 are identical. The suit premises is within one of the latter blocks which are formed by two adjoining duplex flats occupying the ground and first floors with a third flat occupying the whole of the second floor above both of the duplexes. The duplex flats each have a small ground floor exclusive garden while the second floor flat has exclusive use of the roof which in the case of this particular block is used as a rooftop garden. 37. The suit premises living room is situate on the ground floor and sliding glass doors open out on to the garden. The kitchen, while small, is well supplied with cupboards and is also on the ground floor. To the rear of the kitchen are servant quarters and a rear porch which also provides separate access to an exclusive rear concrete paved yard of about 47 square metres. There is an internal staircase to the first floor which comprises 4 bedrooms and 2 bathrooms. There is excellent cupboard and storage space. Two of the bedrooms overlook the ground floor garden and have a view over Tai Tam Bay but this is partially obstructed by the trees and development on the other side of Stanley Village Road. The ground floor has no view of Tai Tam Bay. When considering the general environment of the suit premises we recognise that it forms part of a development which is very well designed and built to a high standard. On the other hand, as the development adjoins two major suburban roads and the lower floors have restricted views compared with other properties in this locality, its particular site does not do full justice to the design features. We might add that the suit premises themselves do not quite enjoy the same exclusiveness as typical three storey townhouses as they are overlooked by the upper storey flats. Nor does the suit premises have the benefit of additional facilities such as a communal swimming pool which was a feature shared by some of the comparables. 38. Mr. Williams comparables included 8 other Grosse Pointe Villa flats. Some were identical to the suit premises. The most recent lettings of identical flats were Flat A1 for 2 years from the 1st day of November 1981 at $28,000 per calendar month; Flat C2 for 2 years from the 1st day of January 1982 at $29,000 per calendar month; and Flat C1 for 2 years from the 1st day of April 1982 at $28,000 per calendar month. All the rents were exclusive of rates but inclusive of management charges which are currently $900 per calendar month. After relying on the comparables within Grosse Pointe Villa as the best available evidence and allowing for management charges as well as the fall in the market, Mr. Williams arrived at a rent of $26,000 exclusive of rates and management charges. From a base of $28,000 he allowed $1,000 for management charges and $1,000 for the fall in the market between April 1982 and October 1982. 39. Mr. Lui, the respondent's valuer's comparables were not in Grosse Pointe Villa but elsewhere in this locality. This approach was not only desirable but necessary because of the surprising consistency of rents since November 1981 for Grosse Pointe Villa duplex flats. The Grosse Pointe Villa comparables do not reflect the fall in the market evidenced elsewhere over the same period. Direct comparision with identical flats in the same block is usually the best evidence upon which a valuer can base his calculations. However, there will be cases where it is still desirable to go outside the same block, to check an initial analysis. This was such a case. Mr. Williams also included comparables in other developments but gave them less weight than Mr. Lui. We agree generally with his comments concerning them. 40. Mr. Lui's approach was initially based on adjustments of analysed unit rates leading him to apply a unit rate of $146 per square metre for the suit premises as at the 15th day of April 1982 which produced a rent of $33,000 per calendar month. For a new tenancy commencing on the 15th day of November 1982 Mr. Lui, taking into account falling and other market factors, reduced the rent to the $30,000 per calendar month mentioned earlier. The suit premises have an area of about 226.5 square metres. In arriving at that unit rate he appears to have ignored or underestimated, the effect of traffic noise on Pointe Grosse Villa compared with similar blocks elsewhere in Stanley. This is not only caused by the property's location at the junction of two main roads but because it is also the only property dividing those roads for some distance beyond the junction. The lack of view was also underestimated. If the view was comparable with that enjoyed by many other Stanley properties, it may have counterbalanced the disadvantage of traffic noise. However, the property suffers from the combined effect of both these disadvantages. When an adjustment down for these factors is made to Mr. Lui's later rent of $30,000 the resulting reduced unit rate is in the region of $123 to $125 per square metre. 41. After considering all these factors, including the whole of the evidence of the three witesses who were called, we determine the fair market rent of Unit B1 for a 3 year tenancy commencing on the 15th day of October 1982 at $28,000 per calendar month, exclusive of rates and management charges. There will be no order as to costs. Liberty to apply is reserved. DATED this 10th day of December, 1982.
Representation: Mr. Warren Chan instructed by Baker & McKenzie for the applicant. Mr. Frank Cheung of F. Zimmern & Co. for the respondent. |