Colgan Co Ltd v. Ethitrade Ltd
Read the full judgment text of LDLA 153/1983 on BabelCite. This LDLA judgment.
1. This application for orders for possession, payment of arrears of rent, mesne profits and incidental relief, has been brought by the applicant landlord in respect of domestic premises known as Flat 1B, 1st Floor, The Somerset, No. 67 Repulse Bay Road, Hong Kong. The premises were let to the respondent for a period of 2 years commencing on the 5th day of January 1983 at a monthly rent payable in advance of $54,000 exclusive of rates.
Cited by 2 cases
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LDLA000153/1983 Landlord and tenant - forfeiture - relationship of common law remedies to Part IV - where forfeiture proceedings for possession of premises issued tenancy is terminated on service of proceedings - rent payable to date of service - where tenant vacates before order for possession whether mesne profits payable from date of service to date of vacating or to date of order for possession - whether in addition to mesne profits and interest general damages are recoverable on claim solely based on forfeiture by landlord due to tenant's contractual default - Held: 1. Mesne profits payable from date of service to date of order for possession or to date of vacating whichever event last occurs; 2. General damages not recoverable - Sections 117(2) Landlord and Tenant (Consolidation) Ordinance, Cap. 7, and 10(8) and (9) Lands Tribunal Ordinance, Cap. 17. IN THE LANDS TRIBUNAL OF HONG KONG
Date: 19th day of November 1983 ---------------- JUDGMENT ---------------- 1. This application for orders for possession, payment of arrears of rent, mesne profits and incidental relief, has been brought by the applicant landlord in respect of domestic premises known as Flat 1B, 1st Floor, The Somerset, No. 67 Repulse Bay Road, Hong Kong. The premises were let to the respondent for a period of 2 years commencing on the 5th day of January 1983 at a monthly rent payable in advance of $54,000 exclusive of rates. 2. The application claims that neither rent at the rate of $54,000 per month nor management charges at the rate of $1,500 per month have been paid for the period commencing on the 5th day of June 1983 until the application was made on the 16th day of September 1983. On the 24th day of October, 1983 the respondent applied for an extension of time for filing a Notice of Opposition for a period of 14 days from the 22nd day of October 1983 which would have expired on the 5th day of November 1983. On the 24th day of October 1983 the applicant applied for an order for interim payment of rent and mesne profits. 3. On the 3rd day of November 1983 the parties appeared before me on these two interlocutory applications. In the event Counsel for the respondent informed the Tribunal that the respondent had vacated the premises on the 2nd day of November 1983 and was withdrawing its application for an extension of time. That application was withdrawn accordingly. 4. The applicant proceeded with its application for interim payment. The respondent agreed to pay arrears of rent and management charges down to the 29th day of September 1983 which, it was agreed, was the day notice of the application for possession was served on the respondent. From that day until the 2nd day of November 1983 when it alleged it vacated the respondent also recognised a liability for mesne profits. 5. However, the respondent would not concede that mesne profits were payable at the same rate as the rent payable under the tenancy agreement. According to the respondent, rents had fallen since January 1983 and if mesne profits were assessed for the period from the 29th day of September 1983 to the 2nd day of November 1983 it was anticipated that the rate payable would be less than $54,000 per calendar month. The respondent therefore wished the question of mesne profits to be adjourned for assessment. Mesne profits are, of course, a form of damages being compensation payable by the tenant to the landlord for wrongful possession. The amount of the current rent is usually an accurate as well as a convenient basis for assessment. However, particularly when the rental market is sharply fluctuating, this will not always necessarily be the position. 6. The applicant informed the Tribunal that on the hearing of the substantive application it would seek an order for possession in terms and would be entitled to mesne profits from the date of service of the application until the date of the order for possession. Further it wished to apply to amend the grounds of the substantive application. 7. In these circumstances, it was agreed that the remaining interlocutory application for interim payment should be adjourned to an early date before which the applicant's solicitor undertook to file the intended application for amendment, so that both matters could be disposed of at the same hearing. Counsel for the respondent had no objection to the following orders which were made before the application was adjourned:
8. When the matter was adjourned, it was anticipated that the parties would shortly thereafter seek an early hearing date to deal with the application for amendment and for the assessment of mesne profits. It also appeared that the latter assessment would probably be complicated by the parties disagreement over the period for which mesne profits were to be assessed. 9. However, before any adjourned hearing date was sought, the respondent on the 7th day of November 1983 filed a further interlocutory application seeking an order varying the prior order for interim payments, by providing that no interim payments were to be made for the period after the 2nd day of November 1983. This interlocutory application came before me on the 9th day of November 1983 when the applicant pointed out that service had only been effected on the 7th day of November 1983 which was inadequate and there had therefore been noncompliance with the Rules. Because of this short service the applicant sought an adjournment. The parties then agreed that the respondent's interlocutory application for variation should be adjourned until the 14th day of November 1983 when it would be heard together with the already adjourned application for interim payment and the applicant's application for amendment. The parties further agreed that the prior order for payment into Court for the period from the 2nd day of November 1983 should, until further order, be suspended. By consent orders were made in these terms. 10. On the 14th day of November 1983 the parties again appeared to make further submissions on these various applications. Counsel for the respondent, in support of the application for variation, first conceded that the premises were subject to Part IV of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. However, he submitted that the general principle set out in Section 117(1) that Part IV tenancies shall not come to an end otherwise than in accordance with the statutory provisions thereof did not apply, because of the provisions of Section 117(2) which provides:
11. The respondent submitted that here the applicant had terminated the tenancy by forfeiture and accordingly the other provisions of Part IV were inapplicable. Instead all the Tribunal had to consider were the common law principles relating to forfeiture. As to these the respondent pointed out that the application for possession, founded on non-payment of rent, in paragraph 7 thereof, expressly sought to forfeit the tenancy:-
It was submitted that as a consequence of the Court of Appeal's decision in Canas Propertry Co. Ltd. v. K.L. Television Services Ltd. (1970) 2 W.L.R. 1133, on the forfeiture of a tenancy previous practice had been changed and that rent now continues to be payable not to the date of issue but down to the date of service of the writ and mesne profits are payable thereafter. The applicant accepted that this statement of the law is now well established. Service of the notice of application was here effected on the 29th day of September 1983. 12. The more interesting and complex question is for what period after service are mesne profits in the instant application payable? The respondent submits that mesne profits are payable until the date the tenant yields up vacant possession. With that bare statement of principle the applicant also agrees. The real dispute relates to the position where promises are physically vacated before the order for vacant possession is granted. 13. The respondent states that it physically vacated the premises on the 2nd day of November 1983 when it offered the keys to applicant's solicitors but they were rejected. The applicant accepts that service of the notice of application on the respondent was an irrevocable election by the applicant to terminate the tenancy by forfeiture. However, the applicant submits that mere service is not enough to terminate the tenancy and that the applicant is entitled to then pursue and obtain an order for possession in terms of the application. Upon the order for possession being granted it concedes that the forfeiture then dates back to the date of service but that mesne profits are payable from the date of service to the date of the order for possession. 14. In support of the respondent's submission that the service of the notice of application was sufficient to terminate the tenancy as at the date of service, I was referred to the following extract from 27 Halsbury (4th Edn.) 332, para. 428:
15. Mr. Chang, for the respondent, recognised that some textbooks suggest the contrary and indicate that judgment is required to perfect the forfeiture although the forfeiture then dates back to the date of service of the writ. In this regard I was referred to 1 Woodfall 'Landlord and Tenant' (28th Edn.) 1-1899:
16. I was also referred to 1 Hill & Redman's Law of Landlord and Tenant (17th Edn.) para. 385 which similarly states:
17. However, Mr. Chang submitted that these two statements of principle are wrong and are not supported by the cases cited by the textbooks. It is therefore necessary to turn to consider the cases. Before doing so it may be useful to emphasise that the present application includes two features which do not appear to be present in any of the cited cases. First, the tenant is not opposing the termination of its tenancy on the ground of forfeiture. Further, its Counsel both at the hearing on the 3rd day of November 1983 and again on the 14th day of November 1983 expressly informed the Tribunal that it was not seeking any relief against forfeiture and was waiving any rights it might otherwise have under Section 69 of the District Court Ordinance, Cap. 336. As to a tenant's well established right to waive the benefit of any statutory rights such as those provided in Section 69, I was referred to Tam Man and Anor v. Tin Kwai Yin (1949) H.K.L.R. 296, Chuk Yau-cheong v. Lee Miu-ying (1979) H.K.L.R. 575 and Chan Nam v. Poon Siu-ping (1980) H.K.L.R. 363. I hold that a tenant may likewise waive his rights under Section 69 and I find that the respondent has done so in these proceedings. 18. Secondly, the respondent asserts that upon vacating the premises on the 2nd day of November 1983 and by offering the keys to the applicant's solicitors on that date, it physically yielded up possession. In its view that is the date to which mesne profits are payable and not down to the subsequent date when an order for possession was made. 19. So this is not a typical case where a tenant is seeking relief against forfeiture or where there is no dispute that the tenant was physically in possession throughout the whole period for which mesne profits are claimed. Indeed, the factual position is the reverse of the circumstances which are usually placed before a Court in forfeiture cases. In England, as the cases cited indicate, the position which has arisen accords with the usual position which exists in Hong Kong, namely the tenant is either resisting forfeiture or seeking relief and remains in occupation while these various proceedings are completed. 20. The apparent explanation for the tenant vacating, not opposing an order for possession but contesting both the rate of mesne profits and the period for which they are payable, is the fall in rents since the beginning of 1983 when the tenancy between the parties was created. Whether $54,000 per month was even then a high market rent is at this stage not clear but whatever the position then the respondent is confident that the current market rent for the premises would be below that sum. 21. I will now proceed to the cases the respondent referred to which were also those relied upon by Halsbury, Woodfall and Hill & Redman for their statements of principle. Scarf v. Jardine (1882) 7 App. Case 345 is a House of Lords case dealing with dissolution of partnership where the question of election arose. Lord Blackburn at page 361 refers by way of example to the position of a landlord and whether, where he has a right to elect to forfeit a lease, he has elected to or not. This decision merely includes obiter observations that where a landlord has exercised his right and has communicated his unequivocal election to forfeit to the tenant, it is not open to him thereafter to claim that the lease is still subsisting. The House of Lords did not consider the question whether mesne profits are payable between the date of the communication of the election and the obtaining of a formal order for possession whether or not the tenant remains in occupation during that period. 22. In Canas Property Co. Ltd. v. K.L. Television Services Ltd. Lord Denning M.R. as a member of an unanimous Court of Appeal changed his earlier view by holding that a lease is terminated by forfeiture not on the issue of proceedings but when they are served. However, the Court of Appeal was primarily concerned with the date when the landlord made his irrevocable election. The contest was between the date of issue and the date of service of the proceedings. It was held that the date of service was the appropriate date, rent being payable down to that date and mesne profits thereafter. 23. Counsel for the respondent also referred to Meadows v. Clerical Medical and General Life Assurance Society (1981) Ch. 70. In that case, the issue was whether a tenant whose lease had been forfeited but whose application for relief against forfeiture had not been determined, retained the status of a tenant to permit him to apply under Part II of the English Landlord and Tenant Act 1954 - which apart from applying only to business premises is similar to our Part IV - for a new tenancy. So this was another English case where the tenant was remaining in possession. Furthermore he was not only taking steps to obtain relief against forfeiture but was also attempting to obtain a new tenancy to follow on the currently forfeited tenancy, if it was re-established, upon relief being granted. In the course of his judgment Sir Robert Megarry V.C. reviews most of the authorities which were cited to the Tribunal and at page 74 poses the very two alternatives which divide the applicant and the respondent in this case:
24. Thus it was not necessary for Megarry V.C. to hold whether in the absence of physical re-entry service of the writ simpliciter was sufficient to forfeit the tenancy. However, two comments may be made on his passing observations. First, as Canas Property Co. Ltd. v. K.L. Television Services Ltd. was not cited to the Court of Appeal in City of Westminster Assurance Co. Ltd. v. Ainis the better view is that the latter Court of Appeal judgment should be considered subject to the qualification that while the lease is not terminated until judgment is given for possession the judgment, when given, relates back to the service of the writ and not to its issue. If that qualification in relation to dating back is made, there is no apparent conflict between these two Court of Appeal decisions. 25. The Court of Appeal in the City of Westminster Case in any event dealt with these two issues separately. Cairns L.J. in giving the principal judgment stated, at page 471:
So Woodfall and Hill and Redman do accurately reflect that statement by the Court of Appeal. 26. Secondly, the mere statement by Megarry V.C. of the contrary view itself provides grounds for its rejection. For the view the respondent invites the Tribunal to take is stated by Megarry V.C. in these terms:
In determining whether forfeiture has in a given case occurred it is implicit in any examination that what is being ascertained is whether there has been a lawful forfeiture. If a purported forfeiture was not lawful, it cannot by definition be a forfeiture. Where a writ is served, it seems that all that has occurred is that on the basis of the alleged ground of forfeiture the landlord has made an irrevocable election. There has yet to be judicially determined whether the alleged ground existed. If it does exist, the forfeiture is backdated to the service of the writ and the landlord having made his election by service is powerless to change his mind and attempt to re-establish the lease. Where after service it is judicially determined that the alleged ground did not exist, then the apparent election by the landlord is rendered nugatory. 27. The respondent agreed that it was open to the landlord after service to obtain judgment. However, in that event, the respondent submitted, the judgment would merely confirm the reality that the tenancy on service of the proceedings became irrevocably dead. Such judgment, it was submitted, was not a necessary pre-condition to the ending of the tenancy as it had already been ended on service. The respondent stressed that the present case was considerably simplified as it was not complicated by either the issue or the possibility of relief against forfeiture proceedings. The Tribunal did not therefore have to consider the possibility of a lease forfeited by an irrevocable election on the part of the landlord, being re-established by a successful application for relief against forfeiture on the part of the tenant. 28. The possibility of a lease being in those circumstances "re-established" to use Lord Denning's phrase, was considered by Megarry V.C. in Meadows v. Clerical, Medical and General Life Assurance Society at page 75:
29. Mr. Chang submitted that these metaphysical considerations did not concern the Tribunal in this case. For here, as the tenant had waived any relief against forfeiture there was no possibility of, to use his own apt metaphor, the "ghost" of a tenancy continuing during the otherwise grey area between service of the writ and the outcome of any relief against forfeiture proceedings. 30. The respondent finally submitted that whether a landlord after service of a writ wanted to proceed to judgment for possession was discretionary and as a matter of law unnecessary. I recognise that where a tenant remained in possession, no doubt a landlord would seek judgment. Certainly it would assist him in enforcing his rights, which might involve bailiffs entering upon the property pursuant to the Court's order, to evict tenants remaining in possession. However, to the respondent that was a separate matter that did not arise in this particular case. 31. Counsel for the respondent point out that the applicant's own pleadings also supported the respondent's submission. For in paragraph 8(b) of the substantive application the applicant applies for rent and/or mesne profits to the date of delivery of possession and not to the date of any order for possession. 32. Mr. Sit for the applicant submitted that there were three necessary steps where forfeiture was effected not by physical re-entry but by taking Court proceedings. First, there was the issue of the proceedings. This was merely a preliminary step which, by itself, did not affect the rights of either landlord or tenant. Secondly, there was service of the writ - or in the case of the Lands Tribunal notice of application - which evidenced an irrevocable election by the landlord to forfeit the tenancy and forgo any other remedies that may have existed contractually under the tenancy. Thirdly, the obtaining of an order for possession. 33. The order for possession, it was submitted, was of twofold significance. On the one hand, the order established that the alleged ground for forfeiture did in fact exist. Until this was judicially determined the existence of the alleged default was in doubt. On the other hand,it was conceded that upon the order for possession being made, the forfeiture dated back to the date of service with the consequence that rent was payable up to that date and mesne profits thereafter. 34. The applicant further submitted that not only did the already cited extracts from Woodfall and Hill & Redman expressly support that view but that Halsbury's statement of the law also accorded with that view. The crucial sentence in the paragraph 428 already cited was, the applicant submitted:-
According to the applicant that statement is solely concerned with the extent of the landlord's election and merely declares that upon service of the writ that election is final or irrevocable. The statement is expressly silent on whether judgment is necessary. 35. Similarly, it was submitted, in Canas Property Co. Ltd. v. K.L. Television Services Ltd. the Court of Appeal was concerned not with either the necessity or the right of the landlord to obtain judgment but with the prior question whether the landlord's election to forfeit becomes irrevocable on either the issue or the service of the writ. Certainly that is the question posed by Lord Denning in the opening sentence of his judgment. 36. In the applicant's view the tenancy is not terminated by service of the writ. All that service indicates is an irrevocable election by the landlord to forfeit which is binding on the landlord. The tenancy is not thereby terminated or its terms and conditions extinguished until an order for possession is given. The applicant accepted that when such an order is granted, the forfeiture then relates back to the service of the application. However, the applicant emphasised that until the order for possession is made there can be no relation back. 37. The applicant submitted that it was entitled to the protection of an order for possession before physically entering into possession. Otherwise if it were to do so forthwith after the service of the application, it would do so at its peril as there was always the risk that upon the hearing of the substantive application the alleged ground upon which the forfeiture proceedings were brought might not be established. On the facts of the present case the respondent had as late as 24th October 1983 applied for an extension of time for 14 days from the 22nd day of October 1983 to serve a notice of opposition and it was only on the 2nd day of November 1983 that the applicant was informed that the proceedings were not to be defended. 38. Further the applicant would not accept that the tenant's undertaking not to pursue any proceedings for relief against forfeiture barred the tenant from later taking such steps. On this point I was referred to Seto & Anor. v. Kowloon Shopping Centre Ltd. & Ors. (1980) H.K.L.R. 717 where it was held that the Courts have always jealously preserved the right to grant relief in favour of tenant's and that on the facts of that case the undertaking given by the 2nd defendants did not expressly abandon the right to come to Court for relief. 39. In resolving this dispute I accept that although the premises are subject to Part IV I am not assisted by the statutory provisions of the Landlord and Tenant (Consolidation) Ordinance, but am concerned with the position at common law. Forfeiture at common law has had a long and interesting history and it might have been anticipated that where, as in the present case, the facts are clear and simple the law would equally be well settled. Yet Counsel were unable to cite any Hong Kong, English or other authority where the factual circumstances were the same as in this case. This is surprising and one would not have thought that even the vagaries of the Hong Kong property market, which have largely produced the present problem, are so unique that this issue has not squarely arisen in any previous reported decision. 40. However, I am not unmindful of the observations last year of the editors of 1 Hill & Redman (17th Edn.) v. that:
41. Certainly the law relating to forfeiture seems to be continually evolving. For example, such an important point whether the election of a landlord to forfeit becomes irrevocable on the issue or on the service of a writ was only settled in 1970 in Canas Property Co. Ltd. v. K.L. Television Services Ltd. where Lord Denning observed at page 1137, that: "The point has never before come up for decision." 42. To determine the present dispute the Tribunal is obliged to consider the apparent conflict of the authorities which Megarry V.C. in Meadows v. Clerical Medical and General Life Assurance Society remarked he fortunately did not have to discuss. 43. Turning first to Halsbury I accept that the final sentence in paragraph 428 in its express terms, is limited to the question of when the election of the landlord becomes irrevocable. It does not go beyond that issue. The preceding sentence which at one stage concerned the applicant, does not, in my view, assist the respondent. For it is in very general terms and merely illustrates the principle that in addition to actual entry a landlord may alternatively re-enter by bringing an action for possession. Halsbury does not in that sentence condescend into the particulars of the various steps in an action. I was also referred to paragraph 438 of Halsbury but as it was concerned with relief against forfeiture it is not of any direct assistance. 44. Both Woodfall and Hill & Redman share the view that a tenancy is not terminated when the landlord makes his irrevocable election by serving the writ on the tenant but only when the subsequent order for possession is granted. This is subject to the now settled law that the termination of the lease then dates back to the service of the writ. They rely on Meadows v. Clerical, Medical and General Life Assurance Society as an authority for the former proposition and Canas Property Co. Ltd. v. K.L. Television Services Ltd. for the latter. The respondent also relied on the latter authority for the proposition that an order for possession was unnecessary. After considering that decision of the Court of Appeal I can find no express statement either supporting or opposing that submission. I have already indicated that the Court of Appeal was concerned with a different and more limited issue, namely whether the landlord's election became final on issue or service of the writ. Any comments beyond that issue would be obiter. In fact none were made on the present issue. 45. Whether it is implicit in the Court of Appeal's judgment that a tenancy is not terminated by service without any subsequent judgment for possession is a separate and very much more difficult matter. Certainly there are sentences in Lord Denning's judgment, if taken in isolation, which support the contrary view, for example at page 1139:
However, it will be seen that Lord Denning is silent on the effect of a judgment for possession. Without more it may be claimed that Lord Denning inferred that judgment was not necessary. However, it may also be claimed that Lord Denning proceeded on the assumption that judgment for possession in the normal course had been granted and he was considering the factual position after the operation of the doctrine of relation back. At least the textbooks do not cite it to support the contrary and wider principle which the respondent now seeks to establish. 46. In dealing with cases supporting the earlier contrary view on the election issue, Lord Denning explained, for example, Elliott v. Boynton (1924) 1 Ch. 236, on the ground that in that case "no point was taken as to the difference between the date of issue of the writ and the date of service of it". To the extent that Lord Denning's own judgment might suggest that a tenancy is terminated on service, quite uncomplicated by whether judgment for possession is subsequently obtained, it might also be explained on the ground that no such point was taken before the Court of Appeal. However, it does appear that Lord Denning did not even go that far. 47. I recognise that most of the English cases cited are complicated by the fact that relief against forfeiture was also, on the facts, a consideration. However, there is the clear statement in City of Westminster Assurance Co. Ltd. v. Ainis, at page 471, that where an action for forfeiture is brought "the lease is not terminated until judgment is given for possession". In the earlier Court of Appeal decision Driscoll v. Church Commissioners for England (1957) 1 Q.B. 330 Lord Denning in rejecting the submission that on the unequivocal election of the landlords to forfeit the leases they and their covenants had gone, stated at page 340:
Hodson L.J. was of the same opinion and refers to the two "rival contentions" before the Court of Appeal which are very similar to the two rival contentions before this Tribunal. Hodson L.J. goes on to explain the real ratio of such cases as Serjeant v. Nash, Field & Co. (1903) which might otherwise have suggested a contrary view, by citing the subsequent words of Sir Richard Henn Collins M.R., in that case which he stated illuminate that Court's actual conclusion:
Parenthetically, it might be noted that Megarry V.C. in Meadows v. Clerical, Medical and General Life Assurance Society considered, apparently erroneously, that Serjeant v. Nash, Field & Co. supported the contrary conclusion. So this is an area of the law where there is much judicial confusion. 48. Counsel for the respondent in referring to Driscoll's Case was prepared to dispose of it on the ground that it was yet another English case where the issue of forfeiture arose. In any event while not expressly referred to in the Canas Property Co. Ltd. v. K.L. Television Services Ltd. the judgment was cited to the Court of Appeal in argument and therefore had to be considered in the light of the latter case. I do not think Driscoll's Case can be disposed of so simply. 49. For unlike the Canas Property Case, the Court of Appeal in Driscoll's Case expressly considered the wider issue of the effect of forfeiture proceedings culminating in an order for possession or other final judgment. Further Lord Denning does not merely refer to the possibility that after the landlord's final election to forfeit the tenant may obtain relief. He also refers to the other possibility - which I have initially adverted to and would potentially have been highly relevant in the present proceedings - that the landlord might not at the hearing be able to establish a ground entitling him to forfeit. 50. In that event, apart from any possibility of relief, either the reality of the tenancy or a species of Mr. Chang's metaphorical ghost of the tenancy, would linger on until the substantive application for possession was finally disposed of by the Tribunal. On this view all that the service of the application would have achieved, during that interim or twilight period, would be to prevent the landlord going back on his election. In the instant proceedings, this would prevent him from exercising under Rule 25(1) Lands Tribunal Rules, Cap. 17, what would otherwise be his absolute right to discontinue. It may be noted that under the Rules he may do so without leave. 51. Finally so far as the authorities cited to me are concerned, I will refer to Seto & Anor. v. Kowloon Shopping Centre Ltd. & Ors. which was cited by the applicant in support of the proposition that even an undertaking by the respondent to abandon relief against forfeiture does not debar him from subsequently coming to the Court and obtaining relief. From my reading of that judgment it seems clear that, against the background of the clearly established historical role of the Courts to preserve relief in favour of tenants, the particular wording of the written undertaking in that case failed to go so far as expressly to abandon relief. That case is therefore not authority for asserting that where the right to relief against forfeiture is expressly and unequivocally abandoned by a tenant he may still later apply for relief. Certainly the tenant in the undertaking in that case which is set out at page 725, did not expressly abandon relief. As Fuad J. concluded:
52. In the instant case at the hearing on the 3rd day of November 1983 Counsel for the respondent informed the Tribunal that he was instructed to waive any rights the tenant might have for relief against forfeiture including any rights under Section 69 of the District Court Ordinance. That clear and express waiver places this case in a very different category to Seto & Anor v. Kowloon Shopping Centre Ltd. & Ors. I hold that the respondent is bound by the undertaking given by its Counsel and is therefore barred from bringing any proceedings for relief against forfeiture, statutory or otherwise and is similarly barred from exercising any rights that might otherwise have been available to it under Section 69 of the District Court Ordinance. 53. Against the background of these submissions and the authorities cited to me I recognise the substantial arguments very cogently advanced by Counsel in support of each of the two rival contentions. There are express statements in a number of the cases and in the textbooks supporting the applicant's contentions. If there is less express support for the respondent's contention, certainly it is strongly arguable that it is implicit in the more recent cases that service of the writ is sufficient by itself without any further step in the proceedings being taken, to forfeit a tenancy. 54. In this situation it is invariably helpful to return to the facts and consider the practical realities as they face the parties. Turning first to the pleadings I have considered the respondent's submission that the fact that the service of the application is the sole decisive date, is supported by paragraph 8(b) of the Notice of Application. In my view the form of pleading is neutral to the issue before me. It follows a common form. The reason why an applicant pleads for rent or mesne profits to the date of delivery of possession and not down to the date an order for possession, is because in the majority of cases a tenant will remain in possession after the date of the order for possession. When an application is filed, an applicant properly and reasonably takes that possibility into account. Where a tenant vacates before an order for possession is granted, the form of that pleading by itself does not prevent a landlord from obtaining rent or mesne profits down to the date an order for possession is made if, as a matter of law, they are due down to the later date. I therefore hold that the form of pleading in paragraph 8(b) does not by itself support either contention. 55. Re-entry of leased premises where a lease is forfeited is more often effected by the issue of proceedings for possession on that ground culminating in an order for possession, that by direct physical re-entry. Where a landlord elects to bring proceedings then, even where relief against forfeiture is absolutely abandoned by a tenant, the onus remains on the landlord, after service of the proceedings, to establish to a Court on the balance of probabilities the ground on which the forfeiture sought is based. 56. If a landlord were physically to re-enter after service but before an order for possession, he does so at the risk that subsequently a Court might find that the alleged ground for forfeiture did not exist. In those circumstances, apart from the inconvenience of having to vacate, a landlord would probably be liable in damages to the tenant for wrongful eviction, interference with the covenant for quiet enjoyment and the like. 57. It would therefore seem, on the facts, a very prudent course for a landlord first to obtain an order for possession before physically re-entering. Upon obtaining such an order, the ground for forfeiture has been recognised by the Court and any subsequent re-entry would be in terms of the order. Accordingly no possibility of damages for wrongful re-entry could arise. So far as the financial relationship of the parties is concerned, in view of the doctrine of relation back, rent would be payable up to the date of service of the proceedings and thereafter mesne profits until vacant possession was yielded up. 58. The only factual complication that could arise is if a tenant vacated after the date of service of the proceedings but before the date of the order for possession. The applicant asserts that the tenancy exists until the date of the order for possession and payment must in such a case be made down to the date of the order. In the applicant's view the only qualification caused by the doctrine of relation back is that rent would be payable to the date of service and mesne profits from the date of service to the date of the order for possession. On the other hand, the respondent states that mesne profits are only payable for such period, if any, that the tenant remains in possession after the date of service. Accordingly if he vacates before the order for possession mesne profits are payable only up to the date of vacating and not until the later date when the order for possession is made. 59. If the applicant is right, then I appreciate the respondent's concern, that if a landlord after a tenant vacates takes time before obtaining an order for possession mesne profits would be payable over much a longer period than if they ceased upon the tenant vacating. If this were the position it might appear that a landlord, having elected to forfeit rather than merely sue for arrears of rent simpliciter, might end up enjoying the advantages of forfeiture while minimising its disadvantages. 60. This fear seems to be more imagined than real. Mesne profits are not rent but damages although in quantum the two are frequently identical. Upon forfeiture a landlord is at common law under a duty to the tenant mitigate his loss which generally would involve, once he has made an irrevocable election to forfeit, to proceed with his application expeditiously, recover vacant possession and thereupon use the suit premises for his own benefit whether by self-occupation, reletting, or otherwise. 61. Where a landlord delayed obtaining an order for possession or was otherwise dilatory that would be a relevant factor for the Tribunal to take into account in the assessment of mesne profits. It would thus be open to the Tribunal to disallow a claim for mesne profits for any period it held in the circumstances to be unreasonable. 62. I am satisfied that after the proceedings have been served, it will usually be reasonable for a landlord to refrain from physically entering into possession, whether or not the tenant has apparently vacated, until an order for possession is obtained. During that interim period the landlord will invariably be deprived of the income that would otherwise be produced by the property, if the tenant had not defaulted. It is now established that the landlord is entitled to rent down to the date of service and not merely down to the date of the issue of the proceedings. It seems to be equally in accord with principle and the authorities that the landlord is also entitled to compensation, by way of mesne profits, where the tenant vacates on or before the order for possession, from the date of service down to the date of the order for possession. 63. Accordingly the following principles appear to be clear and I so hold:-
64. In these proceedings there were suggestions that the applicant was not anxious to obtain an order for possession at the earliest available opportunity. On the hearing on the 14th day of November 1983 it is true that the application for interim payment was the only application from the applicant before the Tribunal. However, in fairness to the applicant it had been filed on the 24th day of October 1983 on the same day as the respondent's application for an extension of time to file a notice of opposition. So at that stage the applicant had reasonable cause to believe that the substantive application would be contested. So the position remained until the 3rd day of November 1983 when the respondent informed the Tribunal in the presence of the applicant that it would not be pursuing its application for extension of time as it did not propose to oppose the substantive application for possession. 65. At the adjourned hearing on the 14th day of November 1983 it was therefore clear that the application for an order for possession was unopposed. The applicant was not prepared to go so far as to ask for such an order to be made. I noted that the applicant's interlocutory application sought interim payment only until final judgment. The respondent was not opposed to a final order for possession being made. Counsel for the applicant conceded that such an order might well be made under Section 10(1)(i) of the Lands Tribunal Ordinance. To the extent that Section 10(1)(i) invokes Order 13 of the Rules of the Supreme Court it would, however, require an application on the part of the applicant. 66. Here no notice of opposition had been filed by the respondent, the respondent concurred in an order for possession being made against it and after some initial hesitation, the applicant's Counsel did not object to an order being made in the applicant's favour in terms of paragraph 8(a) of the notice of application. Accordingly on the 14th day of November 1983 the Tribunal made an order for possession of the premises in favour of the applicant against the respondent. I then reserved for judgment the issue of mesne profits and amendment. 67. I now hold that rent is payable down to the 29th day of September 1983 and mesne profits are payable from the 29th day of September 1983 down to the 14th day of November 1983. Before reaching that conclusion I have paused to consider whether mesne profits should reasonably only be allowed for a shorter period. However, in view of the fact that it was only on the 3rd day of November 1983 that the respondent gave notice that it was not going to pursue its application for an extension of time to file a notice of opposition, I do not consider the interval between service and the order for possession to have been unreasonable or lengthened by inaction on the part of the applicant. I also notice that in the respondent's affidavit for extension of time its solicitor not only sought an extension of time but in paragraph 18 of her affidavit, sworn on the 24th day of October 1983 deposed:
68. I am well satisfied that not only has there been no delay on the part of the applicant but once it became known that the respondent was abandoning its opposition, the ultimate order for possession was granted within a relatively short time. 69. The remaining issue relates to the applicant's interlocutory application for amendment. The applicant sought to add a new paragraph 5(B) to its notice of application to expressly plead Clause 21(b) of the tenancy agreement which contained a provision for interest on rent unpaid on due date together with a consequential amendment to paragraph 8 claiming such interest. Counsel for the respondent had no objection to those amendments. An order was made granting those amendments and as they were unopposed both in form and substance, re-service was dispensed with. 70. The application for amendment also applied to add a new clause (f) to paragraph 8 of the notice of application under which the applicant sought to claim damages to be assessed. If this claim did not go beyond rent, mesne profits and interest, the respondent had no objection. However, Counsel for the applicant explained that it was intended to cover other losses flowing from the respondent's pleaded breach of tenancy. 71. The respondent objected to any amendment in those terms. In addition to the particulars of such damages not having been pleaded, it was submitted that as the applicant had elected to forfeit the tenancy, no such damages were recoverable in accordance with Hop Woo Cheung Enterprises v. Intergroup Industries Ltd. H.C.A. No. 4760/81. 72. The respondent submitted that on the present pleadings the applicant has forfeited the tenancy pursuant to a contractual provision of the tenancy and not invoked the common law doctrine of repudiation. I accept that on this view the applicant would only be entitled to mesne profits from the date of termination and not in addition to general damages. It was also submitted by the respondent that the Lands Tribunal has no jurisdiction to award damages. 73. The latter submission was based on Section 10(8) of the Lands Tribunal Ordinance, Cap. 17 which empowers the Tribunal in applications for possession:- "... to make orders for the payment of rent, mesne profits, including interim payments of rent and mesne profits, and for the payment of any other money which is due under the tenancy ..." 74. Damages are not expressly referred to and probably the words "any other money which is due under the tenancy" are not wide enough to include damages arising on default under the tenancy. However, the applicant submits that Section 10(9) gives the Lands Tribunal the same common law jurisdiction as the District Court and that an award of damages may be made under that provision. That submission appears to be soundly based and raises the consequential issue whether the power to award damages is subject to the District Court's monetary limit of $40,000 or whether the general jurisdiction of the Lands Tribunal, which as to quantum is unlimited, would apply. 75. However, I do not have to consider these submissions further. Because the amendment to add a claim for damages based on pleadings limited to an allegation that there has been a contractual default under the terms of the tenancy agreement, brings the application within the principle set out in Hop Woo Cheung Enterprises v. Intergroup Industries Ltd. The application to add a claim for damages is therefore refused. 76. In the result the remaining matter to determine is the amount of mesne profits. As the parties have not agreed to the rate, that matter is adjourned sine die for assessment in terms of this judgment. Costs are reserved. There will be liberty to apply. DATED this 19th day of November 1983.
Representation: Mr. Peter Sit of Sit, Fung, Kwong & Co. for the applicant. Mr. Denis Chang, Q.C. with him Mr. W. Chan instructed by Baker & McKenzie for the respondent. |
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