Tsui Wing Chung v. Anna Ho As Agent for Charles Ho Mook

Landlord and tenant – Part IV – Landlord sought to oppose grant of new tenancy – first Form CR101 did not oppose new tenancy but second Form CR101 purported to oppose new tenancy on ground tenant persistently paid rent late – evidence overwhelmingly established tenant paid rent persistently late – whether landlord may withdraw a valid Form CR101, and replace it with a second Form CR101 – landlord’s earlier successful common law application for vacant possession for non-payment of rent later defeated by tenant making payment of arrears plus costs within 4 weeks of judgment – observation on strict procedural and time limit provisions of Part IV often preventing Tribunal determining the substantial factual issue between parties on its merits – comparison with similar Part II remedies for landlords where tenant pays rent persistently late – absence of strict time limits and 6 to 7 months cooling off period in Part II – Held :

1. Landlord may be withdraw a valid Form CR101 and replace it with a later Form CR101;

2. Landlord in Form 14 limited to grounds of opposition specified (if any) in Landlord’s pre-application Form CR101;

3. The Landlord not having opposed a new tenancy in the first valid Form CR101 it was not open to him to oppose the grant of a new tenancy in his later Form 14 Notice of Opposition;

4. The fact that tenant persistently paid rent late was for the foregoing reasons irrelevant to the issue whether a new tenancy should be granted; and

5. New tenancy granted for 2 years from 1.4.93 at a rent of $20,000 (exclusive of rates) per month.

IN THE LANDS TRIBUNAL OF HONG KONG

APPLICATION L. T. NO. 405 OF 1993

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TRIBUNAL : His Honour Judge Cruden, Presiding Officer.

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JUDGMENT

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1. In this application, pursuant to Section 117(1) of Part IV of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7, the applicant applied for a new tenancy. At the hearing the respondent opposed the grant of a new tenancy. After hearing evidence, the Tribunal granted a new tenancy for 2 years from 1^st April 1993 at a rent of $20,000 (exclusive of rates). Because of the procedural problems which arose during the hearing, the Tribunal indicated that it would give its reasons in writing. These reasons are now handed down.

2. The Applicant commenced this statutory application by filing on 27^th January 1993 a Notice of Application for a new tenancy, on the ground that his current tenancy had been terminated, by the Respondent landlord having served on him a Form CR101.  I record that on 19^th January 1993, the landlord had himself filed a Form 13 under Application L. T. No.267 of 1993, commencing a common law application for vacant possession, founded on alleged non-payment of rent.  Unlike Part I and Part II, a party’s common law rights of forfeiture are preserved for Part IV premises, by virtue of Section 117(2).  The common law proceedings came on for hearing on 9^th March 1993.  An order for vacant possession in favour of the landlord was granted conditional upon, all arrears and costs, not being paid within 7 days.  I would observe that while for statutory applications, the Tribunal’s discretion as to costs, is limited by the provisions of Section 119R, on a common law application the Tribunal’s costs discretion is unfettered.

3. At the commencement of the hearing of the instant proceedings, the solicitor for the Respondent informed the Tribunal, that the tenant had in fact paid all arrears and costs, in the other proceedings, within the seven day period.  Accordingly, the conditional order for vacant possession had never become unconditional and was now discharged.  At the date of the hearing of the instant proceedings, the current tenancy had therefore not been terminated at common law, so the Tribunal had jurisdiction to entertain the statutory application for a new tenancy.  The application was opposed by the Respondent on the ground that the Applicant had, by non-payment of rent on due date, caused unnecessary annoyance, inconvenience or disturbance to the Landlord.

4. Both parties gave evidence.  It was undisputed that the Respondent had duly served on the Applicant a Form CR101 dated 8^th September 1992 (“the first Form CR101”) which terminated the current tenancy on 31^st March 1993.  The notice given thereunder satisfied the statutory requirement to give the tenant not more that 7 months nor less than 6 months notice of termination – Section 119(2).  In the first Form CR101 the Respondent informed the applicant, that he would not oppose an application for a new tenancy.  In response the Applicant sent to the Respondent a Form CR102 on 5^th November 1992.

5. On 12^th October 1992 the Respondent’s solicitors sent, in terms of Section 119E(1)(d), a warning letter to the Applicant in respect of his alleged persistent late payment of rent.  On 21^st October 1992 the Respondent sent a further Form CR101 (“the second Form CR101”) which purported to terminate the current tenancy on 30^th April 1993.  This second Form CR101 informed the Applicant that an application for a new tenancy would be opposed on the Section 119E(1)(d) ground.  The second Form CR101 was accompanied with a covering letter, from the Respondent’s solicitors, which stated that the Applicant had already been informed, on 21^st October 1992, that the first Form CR101 was “withdrawn”.

6. On the evidence I was satisfied that what the Respondent considered was the material factual issue, whether the Applicant had persistently paid the rent late, was overwhelmingly established.  Rent was at best paid at the end instead of the beginning of each month but frequently was paid two or three months late.  For example, it was only at the hearing on 23^rd April 1993 that the Applicant paid the rent due on 1^st April 1993.  The earlier rent, due from 1^st January to 1^st March 1993 was not paid until after 9^th March 1993.

7. If the premises were subject to Part II the landlord could have elected, as with any common law application, to have taken the initiative, by forthwith commencing his own statutory proceedings.  In the case of Part II the landlord’s proceedings would have been brought pursuant to Section 53(2)(d). However, in the case of Part IV, a landlord may only raise such a ground by way of defence in a Notice of Opposition, in response to the tenant’s Notice of Application for a new tenancy.  In other words, except for the landlord serving Form CR101, the initiative for the commencement and conduct of Part IV Lands Tribunal proceedings, compared with Part II, is reversed.

8. This application is yet another case, bedeviled by the far more complex Part IV procedural machinery, which again prevents the Tribunal being able to determine on its merits, the real factual issue between the parties.  Instead the proceedings were dominated by procedural niceties.  Unfortunately, this position is not unusual.  For example, the Tribunal is obliged to make orders for vacant possession each year against hundreds of good and honest tenants, because of similar procedural difficulties.  Those tenants form part of a large group who have received a landlord’s Form CR101, informing the tenant that an application for a new tenancy will not be opposed.  However, such tenants typically thereafter fail to comply with the subsequent complex statutory procedures and time limits.

9. In the case of older tenants, this may not be surprising, for any earlier experience with Part II, would have taught them that under Part II, they never had to take the initiative.  The responsibility for commencing Part II proceedings rested solely on the landlord.  Indeed, until recently it was commonplace for many such tenants, to inform the Tribunal, that they had been told by District Officers that they need not take any steps until their landlord had commenced proceedings in the Lands Tribunal.  That may have been the position under Part II but, as a matter of law, under Part IV, the position was reversed.  It is not surprising that many of these tenants are bewildered, and disgruntled, when orders for vacant possession in relation to their family homes, are made against them.  Their adverse reaction is the more understandable when it is appreciated that the orders are based merely on technical grounds and not on the real merits of the factual position.

10. The common procedural difficulty is of a tenant applying out of time.  No matter how cogent the excuse, that error is fatal, even in those cases where a landlord in a Form CR101 has earlier informed the tenant, that he will not oppose a new tenancy.  The law is crystal clear.  The Court of Appeal first unanimously and later by a majority, having held that the otherwise very wide powers of the Tribunal to enlarge time, do not extend to applications for new tenancies made out of time – Sin Hua Trust, Savings & Commercial Bank Ltd v. Ng Yee May Civil Appeal No. 137 of 1985; Ram Isardas Mahtani v. Wong Kwok Tai Civil Appeal No. 156 of 1989.  Those appellate decisions, remind the Tribunal in this case, of the care that must be exercised, before proceeding to the real merits of the application, first to determine whether there has been compliance with procedural requirements.

11. The first procedural question which arises in this application, is whether a landlord can later withdrawn a duly served valid Form CR101.  The solicitor for the Respondent submits that, provided notice is given, a valid Form CR101 can be withdrawn and a new Form CR101 served.  I am unaware of any binding Hong Kong authority on this question.  However, under the law on the analogous position in England, under the equivalent provisions of the Landlord and Tenant Act 1956, it is clear that a valid notice cannot be withdrawn.  The law is summarized by 2 Woodfall’s Law of landlord and Tenant (29^th Edn) 22.061 :

“There is no power to amend a section 25 notice once it has been served. Since a section 25 notice, like a notice to quit, is a unilateral act of termination of a tenancy, it is considered that except in specific circumstances laid down in the 1954 Act, a valid notice cannot be withdrawn once it is served. Where, however, a section 25 notice is invalid, there is nothing to prevent a landlord from withdrawing it or abandoning reliance on it and serving a fresh notice.”

Polyviou v. Seeley (1980) 1 WLR 55 and Stile Hall Properties Ltd v. Gooch (1980) 1 WLR 62 are examples of valid notices.  The more recent Court of Appeal judgment in Smith v. Draper (1990) 2 EGLR 69 is an example of the different position which arises where the first notice is invalid.

12. The English approach on this issue certainly appears right in principle.  Under our Ordinance a landlord may unilaterally terminate the current tenancy by serving a Form CR101 and a tenant may do so by serving a Form CR103.  Upon the current tenancy being so terminated, that tenancy ceases to exist, except for the limited purpose of its statutory continuance, until any application for a new tenancy is determined.  The scheme of the Ordinance is that once the current tenancy is terminated, both parties have certain statutory rights.  However, whether those rights are later exercisable is subject to the correct statutory steps being taken.

13. The service of a valid Form CR101 or Form CR103, triggers off the relevant statutory machinery.  Upon either form being served, the current tenancy is terminated as at the date of termination specified therein.  At that date the current tenancy ceases.  The tenancy cannot unilaterally be revived or the statutory machinery halted, reversed or cancelled, by the giver, purporting to withdraw his notice.  For these reasons I hold that a valid Form CR101 or Form  CR103, once served, cannot be withdrawn.

14. Secondly, it is equally procedurally clear, that a landlord is limited to pleading in a Notice of Opposition, the grounds specified in his Form CR101.  This follows from the wording of Section 119E(1).

“The grounds upon which a landlord may oppose an application under Section 117(1) are such of the following grounds as may be stated in the landlord’s notice under Section 119……”

15. There then follows the six separate statutory grounds of opposition.  I confirm that this application by the tenant is based on the first Form CR101.  It is therefore not open to the Respondent, to plead as a defence in his Notice of Opposition, any ground not included in the first Form CR101.  I further confirm that in the first Form CR101, the landlord did not oppose the grant of a new tenancy.  So none of the six statutory grounds of opposition, were specified in the first Form CR101.  It was not until the second Form CR101, that one of those grounds, namely Section 119E(1)(d), was specified.

16. However, as the first Form CR101 was valid and could not be withdrawn, the second Form CR101 was a nullity.  In any event, even if it was not a nullity, the mandatory preliminary warning letter, preceding the necessary subsequent default, as required by Section 119E(1)(d), was not sent until 12^th October 1992.  This was well after the first Form CR101, dated 8^th September 1992, was served.  I therefore hold, as a matter of law, that it is not open to the Respondent at the hearing, to oppose the grant of a new tenancy under Section 119E(1)(d) or on any other ground.

17. It is true that independently of the statutory grounds of opposition in Section 119E a landlord may, in respect of Part IV premises, commerce non-statutory forfeiture proceedings.  This is because Section 117(2) preserves his common law forfeiture rights.  However, in practice, where the ground of forfeiture is non-payment of rent, the common law proceedings can easily be defeated.  The defaulting tenant may simply exercise his statutory right of relief against forfeiture, under Section 69 of the District Court Ordinance, Cap. 336, by paying up all arrears plus costs, at the date of hearing or 4 weeks later or such longer period as may allowed.  Indeed, the present landlord has already been frustrated, in his prior common law proceedings, by the tenant making late payment, in terms of the Tribunal’s order in L.T. Application No.405 of 1993.

18. The relative simplicity of Part II, enables a landlord faced with a tenant two persistently pays rent late, to issue his own statutory proceedings under Section 53(2)(d) without delay.  The position in Part IV is quite different.  If after a landlord serves a Form CR101 which does not oppose a new tenancy, a tenant during the following 6 to 7 months cooling-off period, persistently fails to pay rent, that ground cannot be raised at the subsequent hearing.  Instead, the tenant remains unconditionally entitled to a new tenancy.  The persistent late payment, no matter how clear and even if undisputed, is wholly irrelevant and in no way prejudices the right of such a defaulting tenant, to a new tenancy.

19. The persistent late payment would only become relevant under the Ordinance, if during the future 2 year tenancy the tenant, after a warning letter, continued to persist in his default.  The landlord could then serve a Form CR101, invoking Section 119E(1)(d), as a ground of opposition.  Further, even were the landlord to include in his Form CR101, terminating the current tenancy any ground of opposition under Section 119E(1), he must still wait, until the cooling of period has expired, before proceeding to a hearing.  True, he may shorten that period by serving a Form CR105 but unlike his Part II counterpart, he is prohibited from issuing proceedings forthwith.

20. When Part IV was first enacted, doubts were expressed whether its complex procedures were appropriate for legislation affecting the homes of people who were unfamiliar with strict time limits and involved procedural steps.  Part IV was closely modelled on Part II of the English Landlord and Tenant Act.  However, that Act was restricted to business premises.  Parties to business tenancies are, of course, more likely to be familiar with complicated legislation and the importance of complying with strict time limits.

21. Initially, the problems which are increasingly affecting Part IV were less apparent, as Part IV then principally applied to higher rateable value domestic premises. Tenants at this upper end of the market were more familiar with complying with complicated legal procedures.  However in recent years, in addition to Part IV rateable value limits being progressively reduced, lower rateable value premises under alternative criteria, have increasingly fallen into Part IV. This has occurred either pursuant to Section 50(6)(1) and (o) or Section 51B. A further complication reducing the assistance available to parties is that, solely for historical reasons, Legal Aid is available for the far simpler and better known procedural provisions of Part II, but is not available for the more complex provisions of Part IV.

22. In the majority of applications where the Tribunal is unable, because of procedural defects or problems, to deal with the real factual dispute between the parties, it is the tenant who tends to be prejudiced.  Typically those cases relate to an unrepresented tenant, who upon receiving a Form CR101 in which a landlord does not oppose a new tenancy, fails either to serve a Form CR102 on the landlord, or apply in time to the Tribunal, for a new tenancy.  On occasion it is a landlord who is prejudiced.  This present application falls into the latter category.  It demonstrates that the unnecessarily complex and restrictive provisions of Part IV, can also prevent justice being done to a landlord.  The increasing frequency in which many tenants and some landlords, because of procedural difficulties, are being prevented from raising the real issue between the parties, strongly suggests that the Ordinance is well overdue for comprehensive review and substantial amendment. 

23. For the foregoing reason, the Tribunal was reluctantly obliged to grant a new tenancy to the applicant for 2 years from 1^st April 1993.  The remaining dispute was over the prevailing market rent which had to be determined as at 1^st April 1993.  The Applicant expressed the opinion that the prevailing market rent was $15,000 per month but called neither a surveyor to give expert evidence or produced a surveyor’s report or even copies of particulars of recent comparable lettings.  He merely referred to other lettings in the same building ranging from $12,000 to $15,000.  The rents in this locality are complicated by the fact that there are a number of Part II premises, with lower controlled rents, within the same buildings, as higher rental Part IV tenancies.  When referred to the contents of the Respondent’s surveyor’s report, which expressed the expert opinion that the prevailing market rent was $21,000, the Applicant responded that he was not an expert and could not contest the contents of the Report.

24. The Respondent sought a new rent of $20,000, based on his surveyor’s report which in fact supported, a new rent of $21,000.  After considering the contents of that Report, I am satisfied that it is soundly compiled.  On the basis of the seven comparables contained therein, it supports a new rent of at least $20,000 per month exclusive of rates.  On the whole of the evidence I find the prevailing market rent, as at 1^st April 1993, to be $20,000 (exclusive of rates) per month,

25. Finally, I confirm that at the hearing, on 23^rd April 1993, on those findings I made the following orders :

1. New tenancy for 2 years from 1.4.93;

2. New rent $20,000 (exclusive or rates) per month; leave to pay arrears within 7 days;

3. Deposit to be increased pro rata in accordance with the new rent; leave to pay increase within 7 days;

4. Other terms same as in prior tenancy agreement.

DATED this 7^th day of May 1993.

Applicant in person.

Mr K. Y. Chan of T.S. Tong & Co, Solicitors for the Respondent.