V.L. Cheung v. Wong Tat Kee David
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CACV000154/1988
HEADNOTE Landlord and Tenant (Consolidation) Ordinance (Cap. 7) (Sections 53(8) and 68B) (1) Consideration of measure of compensation that may be awarded by the Lands Tribunal under section 53(8) to a tenant against his landlord who has obtained an order for possession of the premises under section 53(2)(b) (reasonable requirement) by misrepresentation of material facts. (2) Compensation not to include any punitive element. (3) Damage or loss to be taken into account in assessing compensation not confined to special damage (in the pleading sense) but may in appropriate circumstances, include a reasonable lump sum for the loss of a protected tenancy (4) Section 68B (which precludes any award of costs against an unsuccessful party in proceedings under Part II of the Ordinance unless that party has conducted his case in a frivolous or vexatious manner) is to be applied to proceedings in the Lands Tribunal for compensation under section 53(8) without regard to the conduct of previous proceedings by the landlord for possession of the premises. (5) The Tribunal has no power to circumvent section 68B by awarding a successful tenant in section 53(8) proceedings the costs of those proceedings as compensation under that section. Such costs are not compensation for the purposes of section 53(8).
BETWEEN
____________________ Coram: Kempster & Clough, JJ.A. & Godfrey, J. Date of hearing: 13 - 14 June 1989 Date of delivery of judgment: 30 June 1989 ------------------------ J U D G M E N T ------------------------ Kempster, J.A.: 1. I have had the advantage of reading in draft the judgment about to be delivered by my Lord Clough, J.A. I agree with its terms and with its conclusions. Clough, J.A.: 2. This appeal and cross-appeal which have been ably argued by counsel on both sides, raise questions concerning the measure of compensation that may be awarded under section 53(8) of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) to a tenant against his landlord who has obtained an order for possession of the relevant premises under section 53(2)(b) of the Ordinance by misrepresentation of material facts. The question also arises whether in the circumstances of this case the costs of a successful tenant in proceedings for compensation under section 53(8) are recoverable by him from the respondent landlord under section 68B of the Ordinance (which precludes any award of costs against an unsuccessful party in any proceedings under Part II of the Ordinance unless that party has conducted his case in a frivolous or vexatious manner) or, alternatively, as compensation under section 53(8) itself. 3. The appellant ("the tenant") appeals against the order of the Lands Tribunal (Presiding Officer His Honour Judge Scriven) made on the 12th August 1988 awarding the tenant $63,716 (including a sum of $25,000 costs) against the respondent ("`the landlord''). The tenant's claim as formulated at the hearing before the presiding officer which occupied no less than four days, was for compensation in the region of $330,000. On appeal he contends that the award was inadequate. The landlord cross appealed on the issues of both liability and quantum. However at the hearing before before this court he abandoned his attack on the liability issue and confined his cross-appeal to challenging the validity of the presiding officer's award of $25,000 compensation to the tenant in respect of his costs of the compensation proceedings before the presiding officer. 4. The tenant's claim was the sequel to an order for possession ("the possession order") made against him by the Tribunal (Presiding Officer His Honour Judge Downey) on the 9th June 1986 under section 53(2) (b) of the Ordinance requiring the tenant to give up possession of a flat and parking space ("the first flat") in Pok Fu Lam. That order was directed to take effect on the 15th December 1986. 5. The tenant, who is a practising solicitor, had been in occupation of the first flat since the 15th February 1976, initially under a two year term created by a tenancy agreement dated the 23rd January 1976 and made between the landlord's mother and the tenant. After the expiration of the term the tenancy continued under Part II of the Ordinance at a montly rent, which was increased on the1st June 1984, to $3,515.50. On the 12th November 1985 the Landlord's mother assigned the first flat to him. On the 13th November 1985 the landlord gave the tenant notice to quit the first flat by the 14th December 1985. On the 21st December 1985 the landlord applied to the Lands Tribunal for an order for possession of the first flat under section 53(2)(b) of the Ordinance on the ground that he reasonably required the premises for occupation as a residence for himself. 6. The application was strenuously resisted by the tenant who appeared in person and challenged the bona fides of the landlord and alleged that the assignment and subsequent application were made, not by reason of genuine requirement, but out of spite because there had been previous differences between the tenant and the landlord's mother concerning the tenant's demands for repairs to be effected to the first flat by and at the expense of the landlord's mother. In the correspondence prior to the hearing resulting in the making of the possession order the tenant had drawn the landlord's attention to the provisions of section 53(8). However the presiding officer found on the evidence before him (including that of both the landlord and the tenant) that a genuine reasonable requirement had been established by the landlord and the possession order was made accordingly. 7. The tenant complied with that order, giving up possession on the 15th December 1986. On the 23rd July 1987 the tenant issued his notice of application in the Lands Tribunal claiming compensation (initially $1260,000) against the landlord under section 53(8) of the Ordinance. The claim was opposed both as to liability and quantum. After much time had been taken up by numerous interlocutory applications the matter finally came before the Tribunal for hearing on the 19th July 1988. 8. At or in the course of the hearing the tenant's claim was formulated as follows by his counsel. The principal amount claimed was for $219,000 or alternatively $203,628 for the loss of use and enjoyment of the first flat as a statutorily regulated rent. The first figure of $219,000 was claimed on the footing that the regulated monthly rent was $3,675 inclusive of rates, that the current monthly market rental value was $12,800 and that a multiplier of 24 (months) applied to the difference between the two rentals ($9,125) produced a claim for $219,000. The alternative sum of $203,628 was produced by a similar calculation with the same multiplier but adopting a regulated monthly rent of $3,515.50 exclusive of rates and a current monthly market rental value of $12,000. The multiplier of 24 was based on the 24 months inhibition imposed by section 53(7) of the Ordinance on the disposition and user of premises by a landlord who has recovered posession of premises under section 53(2) (b). 9. A further claim for the sum of $127,330 was advanced in respect of expenses incurred and time lost by tenant. This claim comprised 16 items of expenditure claimed to have incurred in the course of or incidental to two moves which he had made as a result of the possession order. 10. On the 5th December 1986 he had entered into an agreement to purchase a flat ("the third flat") in South Bay to accommodate himself. He paid a price of $1.606 million for the third flat, raising a 90 per cent mortgage repayable by monthly instalments which amounted at the the date of the hearing to between $12,000 and $13,000. He completed the purchase on or about the 22nd December 1986 but the third flat was not yet ready for occupation. Accordingly he had to find temporary acommodation during the period that he was waiting to go into occupation of the third flat. He found such accommodation in Tai Koo Shing where he rented a flat ("the second flat"). He gave detailed particulars of this transaction in his pleadings but the only relevant evidence given about it at the hearing seems to have been to the effect that the second flat was smaller (700 square feet gross) than the first flat (1162 square feet net) so that his double bed had to be put in the lounge, and that he had paid rent in the form of one lump sum of $10,000 for a term of three months less 10 days. 11. At the hearing certain facts indicating that the first flat had been lying unoccupied at least until August 1987 were agreed between the parties. The tenant relied upon these facts as giving rise, in the absence of any explanation from the landlord, to the inference that the possession order had been obtained by the misrepresentation of the landlord's genuine reasonable requirement of possession for occupation as a residence for himself. The landlord called two witnesses, a valuer and a person who had taken photographs of the first flat, but elected not to give evidence himself. Understandably the presiding officer felt "led inexorably to the conclusion" that the representation the landlord had made, upon which Judge Downey had made the possession order, "was false and a misrepresentation as to a material fact as to his requirement made before the judge." Although the presiding officer's conclusion that the tenant had proved that the possession order had been obtained by misrepresentation of material facts was challenged in the landlord's respondent's notice, the challenge was abandoned at the hearing before this court. 12. On the question of quantum the presiding officer rejected the whole of the principal claim for the loss of the use and enjoyment of the first flat at a statutorily regulated rent. He gave this claim, as formulated, careful consideration in a reserved decision, but felt unable to accede to any part of it. By his notice of appeal the tenant seeks to obtain an order upholding his claim under this head as formulated before the Tribunal (equating mortgage interest paid by the tenant in respect of the third flat with the "loss'' of market rent differential in respect of the first flat), "or such other monthly sum as may be appropriate or proved, for 24 months or for such other period as the Court of Appeal may consider appropriate. 13. As regards the itemised claim amounting to $127,330, the judge allowed only $27,709. This related to six items of expenditure amounting to, to $12,690 which had not, been seriously disputed and a further six items amounting to $15,019 which had been disputed but which the presiding officer found to be "true expenses''. The presiding officer rejected the balance of the tenant's claim of $127,330(which he found to be $100,121 but which in fact seems to have been $99,621) on the ground that, although the expenditure had been incurred by the tenant, the items concerned were either capital expenditure or "material incidents thereof". 14. However he went on to award the tenant two additional sums of compensation which had not been specifically claimed. The first sum was $6,007 representing one year's interest at the rate of six per cent per annum on the rejected balance of $100,121. The second sum was $5,000 which the presiding officer added "for the loss of amenity in the form of the general upheaval and inconvenience of a double move". The total sum allowed, apart from costs, was therefore $38,716. 15. None of these sums awarded are challenged by the landlord except the additional sum of $25,000 which the presiding officer allowed for the tenant's costs of the proceedings before him. I will return to that matter below. 16. The tenant seeks by his notice of appeal to obtain an order upholding his claim for compensation in respect of three of the items comprised in the claim for $127,330 which were rejected` by the presiding officer. Those items are :
17. In addition to the general contention that the presiding officer was wrong in law in rejecting the basis of the tenant's claim for $219,000 or $203,628 for the loss of the use and enjoyment of the first flat at a statutorily regulated rent and for $88,261 in respect of the above mentioned three items of expenditure, the tenant contends in his supplementary grounds of appeal that the presiding officer has misdirected himself in several respects. It is contended in particular that the presiding officer erred in refusing to equate, for the purposes of section 53(8) of the Ordinance, mortgage interest payments with rental payments and in awarding interest for only one year. As regards the approach of the presiding officer to the nature of compensation under section 53(8), the presiding officer is said to have wrongly restricted compensation to financial loss and to have wrongly held that compensation was roughly equivalent to special damages and should not include any punitive element. He is also said to have erred in so far as, he held the tenant's occupation social status and income were relevant factors. 18. Section 53 (8) provides as follows:
19. Considering those provisions in their context in Part II of the Ordinance and free from authority it seems to me that they are clearly intended to provide a simple remedy and procedure for a tenant or sub-tenant who is wrongly deprived of his Part II protected domestic tenancy as a result of misrepresentation by the landlord or principal tenant. The tenant who sustains "damage or loss" in this way is entitled to sue his landlord in deceit in ordinary proceedings in the courts but the section provides him with a simpler and cheaper additional remedy and section 68B protects him from being At risk as to costs provided he does not conduct his case in a frivolous or vexatious manner. 20. In assessing compensation under the subsection the Tribunal (or the court where subsection (7) has been contravened) may award "such sum as it thinks fit". I take this to be an indication that the Tribunal may where appropriate use a broad brush when determining what sum to award and that it is not intended to make a minute and lengthy examination into a claim provided that the sum awarded is fair and reasonable in all the circumstances and suppportable on the evidence. There may well be cases where special damages (in the pleading sense) are proved, such as removal expenditure and additional rent paid for equivalent premises, and constitute the appropriate measure of compensation. However, in my judgment there is nothing in the subsection to indicate that only special damages are recoverable as "compensation for damage or loss sustained". Despite his reference to special damages in his judgment the presiding officer seems to have recognised this by awarding the tenant $5,000 in respect of loss of amenity. 21. The very fact that a tenant is wrongfully deprived of his premises which are protected and regulated under Part II of the Ordinance seems to me to involve loss. This goes without saying in the congested conditions of Hong Kong where even a cubicle is at a premium. If the tenant who loses possession stays with friends or purchases other premises I can see no reason why, in addition to claiming removal expenses, he should not be entitled to such further sum as the Tribunal or court "thinks fit" to determine, to compensate him for his damage or loss sustained by reason of the loss of his protected tenancy. By analogy with general damages in ordinary civil proceedings the presiding officer would perform a jury function in assessing such a sum. Provided the sum assessed were reasonable in all the circumstances, I can see no reason why it should not be awarded. Were the position otherwise the impecunious sub-tenant reduced to sleeping in a card board box in the street by reason of a wrongfully obtained order for possession would be unable to recover fair compensation. 22. There can be no basis for reacting into the statutory remedy afforded by the subsection any power to award punitive or exemplary compensation. The provision must contemplate a similar basis for assessing compensation both when it is invoked in criminal proceedings which have resulted from a breach of section 53(7) and when it is invoked in the case of misrepresentation or concealment of material facts independently of any criminal proceedings. Certainly in the case of a prosecution of a landlord for contravention of section 53(7) he faces a fine and forfeiture under section 53(7B), and subsection (7C) makes it clear that liability for compensation under subsection (8) is in addition to such penalties. As the intention in a criminal case must therefore be to exclude any punitive element from the compensation awarded by a court under subsection (8), the same intention is to be inferred in the case of a claim in the Tribunal in civil proceedings. In the present case there was in any event no pleading of a claim for exemplary damages. 23. I can see nothing in section 53(8) to indicate that a tenant who is well off and able to purchase his own flat should by reason of his affluence alone be discriminated against in the matter of compensation. However, in fairness to the presiding officer, who dealt with this matter with commendable care, I do not understand his observations about the status of the parties to have been intended to convey such a meaning. They seem to me to have been directed more to the unusual circumstances of this case and the question whether a tenant who was fortunate enough to accommodate himself in relative affluence in his own flat was entitled to claim a substantial part of the expenditure involved from the landlord in these proceedings. 24. None of the numerous authorities cited during the hearing of the appeal seems to me to contradict the views I have expressed above. Section 53(8) is derived from section 5(6) of the Increase of the increase of Rent and Mortgage Interest (Restrictions) Act 1920 which contained no link with criminal proceedings and provided for the court to make an order for such sum "as appears sufficient" as compensation for the damage or loss sustained by the tenant, whereas section 53(8) has replaced the quoted words with "as it thinks fit". 25. Unfortunately most of the cases cited (some of which are referred to in the Rent Acts by R. E. Megarry (11th edition) Vol. I at p.441) are not fully reported and appear only in the Estates Gazettes Reports. It is not always possible to be sure from the report whether a particular case is concerned with a claim based on fraudulent misrepresentation at common law or with a statutory claim for compensation for misrepresentation under section 5(6) of the 1920 Rent Act or its immediate successor section 19 of the 1968 Act. 26. The existence of a separate statutory claim for compensation (created by section 5(6) of the 1920 Act) additional to any claim at common law or inequity based on fraudulent or innocent misrepresentation was recognised in Thorne v. Smith, [1947] 1. KB 3,07 (C.A.) where it was emphasised by Scott L.J. at p.312 that the statutory right to compensation could be established without proof of fraud. Indeed a claim for damages for fraud has been joined with a claim under the statute in England. 27. Thus in Hunt v, Barnett (1951] E.G.D. 323 the tenant sued in the High Court to set aside a possession order made against him in a county court. He based his claim on fraudulent misrepresentation and made an alternative claim for compensation under section 5(6) of the 1920 Act. McNair J. held that fraudulent misrepresentation was not established but that the possession order had been obtained by concealment of material facts. In assessing compensation the judge found that the tenant had incurred removal expenses of £2.17s9d and that his annual expenditure had increased by about £30. Rejecting the tenant's contention that he was entitled to the £1,000 which the landlord had offered him to give up his tenancy, the judge assessed the proper compensation at £2,00. 28. Hunt v. Barnett seems to me to be a good example of a case where a tenant could show only very limited special damage but exercised the function of a jury in assessing damages in a situation where precise measure can be pointed out except the opinion and judgment of a reasonable man. 29. A similar approach was adopted in Engleheart v. Catford [1926] E.G.D. 352 (C.A.) which is cited in Megarry on the Rent Acts at p. 441 for the proposition that punitive awards are not permissible under the statute, although it is not clear from the report whether the claim was at common law or under the statute. The tenant had given up possession by reason of the landlord's misrepresentation. He had then bought himself another home for £1200. His cost of removal was only £4.11s6d but the jury appears to have awarded him £300 for the loss of his statutory tenancy. The Court of Appeal accepted that this figured was too high and that the jury had wrongly made a punitive award. However it is significant that a re-assessment of damages on a new trial was awarded. There was no suggestion that the jury was not required to Pit a reasonable value on the loss of a statutory tenancy. 30. The only reported decision on section 53(8) in the Hong Kong Court of Appeal is Fung Wing-kwong v. The Queen [1982] HKLR 165 (C.A.). That was a criminal prosecution of a landlord for contravention of section 53(7) of the Ordinance. He was fined $35,000 and ordered to forfeit $30,000 under section 53(7B). He was also ordered to pay $25,000 his former tenant as compensation under section 53(8). On appeal the Amount of compensation was reduced to $8,000. In that case the tenant who had given up possession had found alternative rented accommodation which the Court Appeal was prepared to assume was reasonably comparable to the suit premises. He had stayed there for 10 months, paying more rent than he had paid for the suit premises, and had then moved to larger premises where he had paid yet more rent. 31. The trial judge had awarded compensation based on the actual monthly rental differential between the suit premises and the other two premises successively occupied by the tenant for 18 months. The Court of Appeal disallowed inter alia the additional differential incurred by the tenant in respect of the larger premises. Delivering the judgment of the court Li J.A. observed:
32. The Court of Appeal could see nothing wrong with the multiplier of 18 adopted by the trial judge. 33. Fung's case seems to me to be an example of a case where, in the absence of any claim for removal expenses and inconvenience, compensation under section 53(8) of the Ordinance was properly capable of being measured by reference to rental differential related to comparable alternative accommodation to which the tenant had moved. It is helpful in that the Court of Appeal indicated that a multiplier of 18 (months) was acceptable in such a case and that a landlord is not to be made to compensate a tenant for rental differential except on the basis of comparability of premises. 34. Mr Mok relied on the principles applied in a line of English and Hong Kong authority relating to criminal compensation orders. It suffices to refer to Reg. v. Vivian [1979] 1 WLR 291 (C.A.) where Reg. v. Inwood (1974) 60 Cr. App. R. 70 (C.A.) was applied and Reg. v. Miller (1976) Cr.L.Rev. 694 (C.A.) was referred to. In Vivian at p.293 the English Court of Appeal applied the following dictum of Scarman L.J. in Inwood at p.73:
35. The Court of Appeal cited Miller for the proposition that an order should only be made when the legal position was quite clear. It did so when about to quash a criminal compensation order based on a mere estimate for repairs to a car (which the defendant disputed) and expressed the view that ``no order for compensation should be made unless the sum claimed by way of compensation is either agreed or has been proved '' 36. The latter observation was applied by the Hong Kong Court of Appeal in The Queen v. Chan Lai-ping [1987] HKLR 1241 (C.A) where the court reduced an award of compensation under section 70B(3) of the Ordinance for "damage, loss or inconvenience suffered" by a sub-tenant due to harassment by his landlord. At p. 1243E, after citing this observation Roberts C.J., delivering the judgment of the court, said:
37. For my part I consider that it is important to bear in mind the circumstances in which these principles were enunciated and applied in both Vivian and Chan Lai-ping's case. In the former case the court was considering the quantification of actual damage sustained by a car. In the latter case the court had to consider the trial judge's assessment of the sub-tenant's quantifiable loss of profits and accepted the landlord's counsel 's contention that the judge had misread the evidence. It is significant that in Chan Lai-ping the court declined to interfere with the judge' assessment of compensation for "inconvenience'' at a figure of $5,000. Roberts C.J. said of this award at p.1243 J:
38. In the course of his helpful and able argument Mr. Mok contended in reliance on the English criminal compensation cases and on Fung's case and Chan Lai-ping's case, that compensation should not be ordered under section 53(8) for loss of a regulated Part II tenancy if the tenant, after going out of possession, was able to use and enjoy a flat of comparable quality for no rent or at a rent no greater than he paid under his former regulated tenancy. To award compensation to such a tenant for loss of regulated tenancy would, Mr. Mok contended, be to allow the tenant a windfall profit which is not the intention of compensation. This part of Mr. Mok's argument culminated in the following proposition:
39. This proposition which amounts to regarding compensation under 53(8) as confined, in effect, to expenditure or special damage (in the pleading sense)actually incurred and accurately quantifiable is one which I am unable to accept. For the reasons I have already given and in the light of authorities such as Hunt v. Barnett and Engleheart v. Catford I can see no reason why compensation should not be awarded in appropriate circumstances to a tenant in the form of a reasonable sum in respect of his loss of a regulated Part II tenancy as a result of his landlord's misrepresentation. 40. Approaching the tenant's appeal in the light of the above observations regarding the nature of the compensation payable under section 53(8), I consider that the tenant's claim for $219,000 or alternatively $203,628 was rightly rejected by the presiding officer. The claim was clearly too remote. The monthly mortgage interest payments made by the tenant were not rent that could give rise to a rental differential claim of the kind which was advanced in Fung's case. Those payment and the monthly instalments of capital were the price of the capital which the tenant had borrowed to enable him to purchase the third flat. Neither the interest nor the capital repayments were in any sense the equivalent, even for the period of 24 months (or any appropriate lesser period) of the loss of the advantage of the protected occupation of the first flat at a rent substantially below a market rent. 41. The tenant was not under a general duty to minimise the damage and loss he sustained as a result of the wrongfully obtained possession order. He was entitled to buy himself a flat to accommodate himself and to acquire at considerable expense a substantial capital asset which might increase or decrease in value. However he was not entitled to claim from the landlord as compensation by way of damage or loss any greater sum than represented the true measure of the loss of his protected tenancy. 42. In any event the tenant failed to adduce any evidence segregating the interest from the capital element of his monthly mortgage instalments and the presiding officer was not, with respect, entitled to make assumptions regarding the amount of the interest element. Mortgate transaction vary widely in their terms. 43. The presiding officer was not asked to determine the value of the tenant's loss of his protected tenancy by assessing a figure in accordance with what he considered reasonable and just in all the circumstances. He is not therefore to be faulted for failure to do so. However, in my judgment, in a case of this kind where the tenant has not moved to comparable or any rented premises where he has had to pay an enhanced rent, but has purchased his own flat as a result of being wrongfully ordered out of his premises, he is entitled to recover something over and above removal expenses and loss of amenity for the loss of his protected tenancy. The same position would arise where the tenant stayed with friends or simply slept in the street. 44. This approach is consistent with Hunt v. Barnett and Engleheart v. Catford. In my judgment it is also supported by Mafo v. Adams [1970].1 QB 548 (C.A.). In that case a tenant who had been tricked out of his regulated tenancy by his landlord pursued a common law remedy in damages against him. As a result of the loss of his regulated tenancy he had been obliged to stay with friends, for some weeks and then had obtained new accommodation of his own. There was no evidence that he had paid an enhanced rent for the new accommodation but it was less commodious than his former premises and it was unlikely to be as securely protected by the Rent Acts as those premises. 45. The Court of Appeal held that the tenant in that case was entitled to £100 damages in deceit for the loss of his protected tenancy and for the inconvenience he had suffered. Widgery L.J. observed at p. 557:
46. Mr. Mok contended that widgery L.J. was there meaning to refer only to security of tenure afforded by the Rent Acts and not to, loss of any rental. Mr. Mok had earlier pointed out by reference to the various Parts of the Ordinance that all tenanted domestic premises in Hong Kong are afforded some measure of protection of tenure. He contended that, whilst Part II of the Ordinance governing the first flat gave security of tenure under sections 52 and 53 and regulated rental under sections 57 to 62 and 64, the tenant's claim in respect of his loss of his protected tenancy in the present case could relate only to the controlled rental under Part II because he would have suffered no loss of security of tenure even if he had rented other premises under Part IV (under which the tenant of domestic premises is given security of tenure at a market rental). 47. For my part I consider that Mafo v. Adams must be considered in the light of the facts there before the court. The tenant had moved to other rented premises where he had not been shown to be paying an increased rent and which appeared to be less securely protected than his former premises. The court could not therefore award him any damages for enhanced rent. However it seems to me that when giving him damages, assessed at a reasonable figure, for the loss of his protected tenancy the court must have been contemplating that the protection lost by the tenant related not only to actual tenure but also to the controlled rent, the amount of which is regulated under the English Rent Acts, producing the result that the rent of a controlled tenancy is usually substantially below a market rent. Without control of rent the actual value of such a tenancy to the tenant would be greatly reduced. 48. I conclude that in the circumstances of this case the tenant has claimed a sum far in excess of his entitlement, which the presiding officer has rightly, rejected. Likewise the landlord has wrongly contended that the tenant is entitled to nothing as compensation for the loss of his protected tenancy, but only to the sums awarded by the presiding officer for expenses actually incurred in or incidental to his two moves and for loss of amenity. Moreover, for the reasons given above, I consider that the tenant is clearly entitled in the circumstances to a reasonable sum for the loss of his protected tenancy. 49. No claim for such a measure of damages was made before the Tribunal. It was not claimed in the tenant's notice of appeal, but in his supplementary grounds of appeal he had contested the presiding officer's ruling that the compensation to be awarded under section 53(8) was roughly equivalent to special damages. In the course of his submissions in support of this ground Mr McCoy for the tenant contended, rightly in my opinion, that the presiding officer was entitled to make a "jury" award for the loss of a protected tenancy, adding wrongly, that such an award could include a punitive award. Moreover the tenant has always claimed compensation for the loss of his protected tenancy, albeit in accordance with the wrong measure. 50. In my judgment this is a situation where this court should exercise its powers under Order 60A Rule 5 and Order 59 rule 10(3) and (4) to do justice by ensuring the determination on the merits of the real question in controversy between the parties by awarding a reasonable to the tenant to compensate him for the loss of his protected tenancy at a regulated rent: see Tanner v. Tanner [1975] 1 W.L.R. 1346 (C .A.) and c.f. Pollock v. Kumar (1977) 242 E.G. 371 (C.A.) where the Court of appeal remitted the assessment (which was lump sum assessment) to the County Court because it was not in possession of the necessary information to make the assessment itself. In the present case this court is in as good a position to make the assessment as the Tribunal. It has all the relevant information. 51. In assessing a reasonable sum to compensate the tenant for the loss of his protected tenancy I bear in mind that Mr. Mok has stressed that the tenant complained that the premises were leaking and in a state of disrepair and that his counterclaim against the landlord for damages in this respect in other proceedings between the same parties was dismissed. I also bear in mind that the last two yearly increase of rent in respect of the premises under sections 57 and 64 of the Ordinance was effected in 1984 and that from the 16th December 1986 the tenant would have been liable to have his rent increased to a figure of about $6,120. A further point made by Mr. Mok is that under section 74B(1), Part II will expire on the 18th December 1989 unless extended by resolution of the Legislative Council under section 74B(2) but I regard the resultant element of uncertainty as being relatively slight in view of the consistent pattern of renewal in the past. 52. Bearing in mind those considerations and all the circumstances of the case I consider that a reasonable sum for the loss of the protected tenancy would be $50,000, whether assessed, by analogy with Lord Denning's assessment of compensation in Tanner v. Tanner, as compensation for a controlled tenancy that should not have been lost, or by analogy with Brightman J.'s assessment in that case, as the amount which the tenant might reasonably have requested and which the landlord might reasonably have been expected to pay as the price for an agreement made on the 9th June 1986 (the date of the possession order) for the surrender of the protected tenancy on the 15th December 1986 pursuant to section 52A of the Ordinance. 53. As regards the additional sums claimed, amounting to a total of $88,261, in respect of stamp duty and solicitors charges and disbursements ($72,081), four new air conditioners ($14,530) and the installation of those air conditioners together with an old air conditioner brought to the third flat from the first flat ($1,650), Mr. McCoy had very little to say in support of these items except for the cost of installing the old air conditioner. Apart from the latter item, which the presiding officer seems understandably to have over looked, this group of claims was clearly too remote and he rightly rejected them as linked with and incidental to the capital expenditure involved in acquiring the third flat. On a rough and ready basis I would attribute $330 (1/5 of $1650) to the cost of installing the old air conditioner in the third flat and increase the compensation by that amount. 54. There remains the landlord's cross-appeal on costs. Being of the view that there could be no question of the conduct of the landlord's case being regarded as having been conducted in a frivolous or vexatious manner, the presiding officer accepted that he was precluded by section 68B of the Ordinance from awarding any costs as such to the tenant in respect of the proceedings. However, being understandably minded to compensate the for the loss he would compensate the tenant for the loss he would otherwise sustain by way of costs incurred in the proceedings he decided to do so notwithstanding the provisions of section 68B. He explained his decision to take this course in the following words:
55. With respect to the presiding officer this attempt to drive the proverbial coach and horses though section 68B cannot be sustained. Mr Mok mounted an elaborate and impressive argument in support of the landlord's cross-appeal against this award. For my part I do not find it necessary to deal with all that argument because I think it will not do not to dress up an award of costs in a particular set of proceedings under section 53(8) as damages or loss under that provision in order to circumvent section 68B which expresly prohibits the award of costs in those proceedings except in circumstances which are not applicable in this cast. I accept Mr. Mok's contention that, whilst an award of costs qua costs is also a form of compensation, the purpose of section 53(8) is to provide compensation for loss and damage resulting to a tenant from a wrongfully obtained possession order and not to compensate the tenant for the costs he has incurred in bringing proceedings to obtain obtain compensation under section 53(8). 56. Put another way the combined effect of section 53(8) and 68B must, in my judgment, be that the Ordinance contemplates that damage or loss constituting compensation under section 53(8) does not include the costs of proceedings under that provision to recover such compensation. Were the position otherwise, as Mr. Mok pointed out, section 68B would be otiose to the sucessful tenant in proceedings by him for compensation under section 53(8). Such compensation would include his costs incurred in the proceedings whether or not the conduct of the landlord's case had been frivolous or vexatious. On the other hand the landlord, who can never have claim for compensation under section 53(8), could not recover his costs under that provision nor could he do so under section 68B unless the conduct of the tenant's case were frivolous or vexatious. A similar situation would arise mutatis mutandis in the case of a landlord's claim against a tenant under section 53(9). This would be an absurdly capricious result and cannot be right. 57. To the extent that the reasoning of the Tribunal on the costs issue could not be sustained (which is in my judgment the case), Mr. McCoy contended that costs should be awarded by this court to the tenant under section 68B in respect of the section 53(8) proceedings. He argued that, when the presiding officer delivered his judgment in those proceedings it was clearly apparent that the landlord's application in the previous proceedings for the possession order was vexatious. On this footing he sought to support his claim for costs under section 68B by contending that "case" in that section meant "the case as a whole including the original possession and any consequential proceedings". In the alternative he contended that section 68B should be construed to mean that if a case for possession were conducted vexatiously, then costs in remedial proceedings such as those under section 53(8) may be awarded against the party guilty of such conduct. 58. This convoluted argument is demonstrably unsound because it wrongly seeks to equate ''case'' with "proceedings" in section 68B and, in the case of the alternative argument, to control the award of a party's costs in one set of proceedings by reference to the conduct of that party's case in a previous and different set of proceedings against the same adversary. I agree with Mr. Mok's basic argument that the unambiguous terms of section 68B relating to the costs of "any proceedings under this Part" relate to any particular set of proceedings and that the award or refusal of costs to a successful party in any proceedings to which the section applies is governed by the manner in which the unsuccessful party has conducted his "case" in those proceedings, not his"case" in those and previous related proceedings or his case in only the previous proceedings. 59. Accordingly I would allow the tenant's appeal to the extent of increasing the award of compensation by $50,000 (for loss of his statutory tenancy) and $330 (for the cost of the installation of one old air conditioner in the third flat). This has the effect of increasing the award (excluding costs) from $38,716 to $89,046. I would allow the landlord's cross-appeal and set aside the award of $25,000 in respect of the tenant's costs. Godfrey, J., 60. The facts of this case, and its history, have been set out in the judgment of my Lord Mr. Justice Clough. J.A. I shall not repeat then. 61. If a landlord of domestic premises subject to the provisions of Part II of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 obtains an order for possession against his tenant by misrepresentation or concealment of material facts, the landlord exposes himself to a claim by the tenant in the Lands Tribunal for compensation for damage or loss sustained by the tenant as a result of the order; and the Lands Tribunal has power to award the tenant by way of such compensation such sum as it "thinks fit" : see section 53(8) of the Ordinance (This, in my opinion confers a discretion on the Lands Tribunal with the exercise of which this court cannot and should not interfere unless it is satisfied that the Lands Tribunal went wrong on a matter of principle. It cannot substitute its own judgment for that of the Lands Tribunal on whether a particular claim should be allowed or disallowed.) The application to the Lands Tribunal must be made in writing setting out the nature of the relief applied for and the grounds of the application but no particular form need be followed : see r.4 of the lands Tribunal Rules. The tenant must state the facts he relies upon in sufficient detail to enable the landlord to know the case he has to meet : see r. 53A. 62. A claim brought by a tenant against his landlord in the Lands Tribunal under section 53(8) of the Ordinance is not and does not exclude an action for damages for deceit. The section does not create a new tort, to which it would be appropriate to apply the common law rules to relating to remoteness or measure of damage. As has see been pointed out in relation to a similar section of the ordinance, section 70B(1) "a section of this nature is intended to do no more than provide a form of quick relief. It is not meant to involve the Court in the sort of detailed examination of damages which is normally undertaken, for example, in a full claim in contract or tort. Indeed, when applying the section, the court should bear in mind the possibility that, in appropriate cases, the victim may resort to [other] civil proceedings" (see R. V. Chan Lai-ping [1987] HKLR 1241, per Roberts C.J. at p.1243). 63. Section 53(8) confers a power on the court convicting a landlord of a criminal offence under other provisions of the Ordinance to award a tenant the same measure of compensation as that which he can claim where the landlord has obtained an order for possession against him by misrepresentation or concealment of material facts. It cannot have bee. intended that a court of criminal jurisdiction convicting the landlord of such a statutory offence should embark on the sort of inquiry appropriate in a civil action for damages for deceit; and it cannot have been intended that the inquiry to be conducted by the Lands Tribunal under the same subsection should be of a different nature from that conducted by such a court. The Lands Tribunal must, of course, act on evidence, not on speculation: but, subject to this, it is entitled to make such an award of compensation as it.thinks fit. 64. In England and Wales, under statutory provisions similar to those contained in section 53(8), the principal items of damage and loss held recoverable are removal expenses, legal costs, loss of amenity, net rental loss and the cost of adapting curtains, carpets and the like where the tenant succeeds in finding other accommodation, some sum in respect of the loss of a protected tenancy and time and trouble in finding alternative accommodation : Megarry, The Rent Acts, 11th Edition (1988), at p.p. 441, 442. 65. In the present case, the Lands Tribunal, in the exercise of its discretion, thought fit to make a total award of $63,716.00. This included an award, of which the landlord complains, of $25,000.00 for costs. Section 68B of the Ordinance provides, as the Lands Tribunal recognized, that no costs can be awarded to the tenant in such proceedings as these, unless the landlord has conducted his case in a frivolous or vexations manner. The Lands Tribunal said, in my judgment correctly "There is no question of such conduct here". Before this court, it was argued that, because the landlord had obtained his order for possession against the tenant by misrepresenting the true facts to the judge who made that order, it necessarily followed that the proceedings before the Lands Tribunal must have been conducted frivolously or vexatiously. But, as it seems to me, this does not at all follow. The landlord put the applicant to proof of his case. But that is not the sort of frivolous or vexatious conduct to which reference is made in section 68B. The Lands Tribunal tried to get out of the difficulty posed by section 68B by awarding the costs, not as costs, but as part of the compensation. This will not do. It flies in the face of the plainly expressed intention of those responsible for the ordinance. The landlord's cross-appeal, in respect of this award of $25,000.00 for costs, must, in my opinion, be allowed. The error of the Lands Tribunal was an error of principle. 66. I turn to the appeal itself, in which the tenant complains of the failure of the Lands Tribunal to award compensation for a number of specified items of damage or loss. There are three of these. The first is, in substance, a claim by the tenant for loss of his protected tenancy. The second is a claim for his expenses incurred in relation to his purchase of alternative accommodation. The third is a claim for the cost of installing four new air-conditioners at that accommodation. 67. As to the claim for compensation for loss of the protected tenancy, I am of the opinion that, in principle, this claim was justified. It is not possible, in the present conditions which prevail in Hong Kong, for a protected tenant who loses his accommodation to find a similar tenancy of similar accommodation at a similar rent. If he finds similar premises on similar terms (otherwise than as to rent), he will have to pay more for those premises. He therefore suffers a real not a notional, loss. His loss can be quantified by reference to the amount which the tenant might reasonably have requested, and which the landlord might reasonably have been expected to pay, for a surrender of the protected tenancy (compare the reasoning of Brightman, J. in Tanner v. Tanner [1975] 1 WLR 1346, at p. 1352). However, no suggestion was made in this case, until the last moments of the hearing in this court, that this was an appropriate way in which to calculate the tenant's loss. No suggestion of this method of calculation was raised in the material placed before the Lands Tribunal and no evidence was called which would have enabled the Lands Tribunal to have come to any finding as to the correct amount. In those circumstances it seems to me impossible for this court to entertain the suggestion now. I regret that on this point I must beg to differ from my Lords Mr. Justice Kempster J.A. and Mr. Justice Clough, J.A. 68. In fact, the case for the tenant was not put to the Lands Tribunal in this way. The tenant claimed either a notional sum, to be measured by the difference between the statutory rental of the premises, and the market rental, over 24 months; or, alternatively compensation for the mortgage payments which the tenant has had to pay in relation to his purchase of alternative accommodation. 69. As to the first of these, I see no reason to apply by analogy the arbitrary measure of compensation (24 months rental difference) provided for by the ordinance in the case of a contravention of other of its provisions. And, as to the second, I can see no good reason for allowing the compensation to be measured by reference to the mortgage payments paid by the tenant in connection with his purchase of the alternative accommodation. These are in no way connected with the loss suffered by the tenant. He might have chosen to purchase a much more, or much less, expensive property than the South Bay flat which he did buy; and he might have chosen to do so out of his own resources, rather than out of borrowed money. He might even have chosen to stay with his parents, or with friends. The mortgage payments (whether representing repayments of capital, or interest, or both) are entirely beside the point. What has to be considered is what sum should be awarded to the tenant to compensate him for the loss of his protected tenancy; the landlord cannot be held responsible for the cost of the particular way in which the tenant chooses to arrange his affairs after he has suffered that loss. 70. As to the expenses of purchasing the South Bay flat, there can be no distinction drawn between this point and the one which I have just considered. These expenses were incurred, like the mortgage payments, in relation to the purchase of the flat. 71. Lastly, there is the matter of the four air-conditioners. This expense seems to me to be nothing to do with the landlord and nothing to do with the loss suffered by the tenant. 72. A number of cases were cited to us but they are in my opinion of no assistance. In any event, so far as the second and third claims are concerned, I cannot see that the Lands Tribunal went wrong in principle in disallowing them. (In fact, I think it was right so to do.) 73. For the reasons I have endeavoured to state, I would dismiss this appeal and allow the cross-appeal. 74. I feel bound to add that (as my Lord Mr. Justice Clough, has noted) this case took four days before the Lands Tribunal, and two days before us. Section 53(8) proceedings should never again be conducted at this length. This s no criticism of the Lands Tribunal, which had no option but to treat the case with care and patience, as it obviously did.
Representation: Mr. G.J.X. McCoy (Ricky Ma & Co.) for Appellant/Applicant. Mr. Johnny Mok (Rowdget W. Young & Co.) for Respondent/Respondent. |
Cases cited in this judgment