PACIFIC KNIGHT LTD v. GOLDEN CROWN RESTAURANT LTD AND ANOTHER

LDNT000208B/2002

LDNT208/2002

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Application No.: LDNT No. 208 of 2002

 

BETWEEN
	Pacific Knight Limited	Applicant
	AND
	Golden Crown Restaurant Limited & Golden Crown Investment Co. Ltd.	Respondents

Coram: Member W K LO

Date of hearing: 21 October 2003

Date of decision: 12 November 2003

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DECISION ON COSTS

____________________________

Background

1. Following the delivery of Judgment on 18 September 2003 on the review application taken out by the Applicant ("Review Judgment"), the Respondents made an application to the Tribunal for a costs order on the review application. This application was fixed for hearing on 21 October 2003. After hearing the parties' submission, the matter was adjourned to 12 November 2003 for the handing down of decision. This written decision sets out the reasons for my decision and the costs order so awarded.

The Respondents' submission

2. The Respondents submitted that, as the review application was a proceeding under section 11A of the Lands Tribunal Ordinance (Cap. 17), the provisions of that Ordinance but not those under Part IV of the Landlord And Tenant (Consolidation) Ordinance (Cap. 7) should apply. Therefore, the Respondent submitted that the Tribunal's power to award costs in the review hearing should "not subject to or in any way fettered by section 119R of Cap. 7".

3. As such, Order 62 of the Rules of the High Court (Cap. 4 sub. leg.) should apply to the award, taxation and recovery of costs in the Tribunal. Under the said Order 62, the underlying principle would be that "costs normally follow the event". That is, the party who wins in the proceeding will in general be entitled his costs.

4. The Respondents further submitted that whilst the Tribunal had a discretionary power on awarding costs, the discretion however had to be exercised judiciously.

5. The Respondents said that since the Applicant's grounds for review were not new but were merely repeating what it had said in the hearing for the original application, there was no reason why costs should not follow the event in respect of the review application. Since the Applicant did not succeed in changing any of the orders for the original new tenancy application, the Applicant totally lost the review application and consequently, costs should be awarded to the Respondents, at District Court Scale, on party and party basis.

6. In addition, the Respondents submitted that in the absence of special circumstances, the Respondents, being a successful litigant, should be awarded their costs (Hong Kong Civil Procedure 2002 at para. 62/3/3). There was also "no positive reason" why the Respondents should be deprived of costs when there was no fault on the part of the Respondents, in simply affirming the original decision made by the Tribunal in the review hearing.

The Applicant's Submission

7. The Applicant had two main points in the submission. Firstly, the Applicant said that the Tribunal as a court was functus officio and could make no variation to the order already given in the written Review Judgment dated 18 September 2003 on the review application. The Applicant said that the said Review Judgment included at the end an order that the previous orders "shall remain unchanged"; and the previous orders already contained an order (Order No. 5), "No order as to costs". Therefore, it was clear that the Tribunal had already decided and given in the Review Judgment a costs order that there should be "No order as to costs" for the review application. Hence, the Applicant said that as far as the Tribunal was concerned, the order made on 18 September 2003 on the matter of costs must be the final costs order. The Tribunal would have no jurisdiction to vary or annul the order already made on 18 September 2003. That is, the Tribunal was functus officio as far as the issue of costs of the review application was concerned. In support of her submission, the Counsel for the Applicant cited the case of Ampittia Inc. v B-Tech (Holdings) Ltd. & Ors. [2001] 2 HKC at 574 in which Deputy Judge Susan Kwan, as she then was, held,

"... Once an order had been perfected, the court was functus officio and could make no variation itself. Any variation which might be made must be made by a court of appellate jurisdiction."

8. The Applicant added that even under Order 62 of the High Court Order, the Tribunal would have no jurisdiction to make an order to award costs following the making of the costs order on 18 September 2003.

9. The Applicant also had a fallback argument. The Applicant submitted that in the Review Judgment of 18 September 2003, the Tribunal admitted that in the original Judgment of 24 June 2003, the Tribunal had omitted the words "the effects of" in the 4th line of paragraph 22. And the Tribunal further stated that the said omission "might be the reason behind Mr. Lane's filing the Affidavit stating that I erred in finding that neither the occupants of the Applicant (i.e. Mr. Lane and his family) nor those of either Comparable 5 or 6 (Mrs. Bye and family) knew of the existence of the said construction site" prior to December 2002. Therefore, the Applicant submitted that since the Applicant did not know of the omission of the words "the effects of" in the above said Review Judgment, the Applicant was not at fault in making the Affidavit and in filing the application for review. And since the Applicant was not at fault, the Applicant should not be ordered to bear the costs of the review.

The Respondents' response

10. In replying to the Applicant's argument that the Tribunal had clarified upon review that there was an omission of a few words in the original judgment, which was a cause of the review application by the Applicant, the Respondent said that the Applicant could seek a clarification from the Tribunal instead of filing a review application.

11. The Respondents also in response to the Applicant's submission pointed out that in the present case, there was no perfected order. Also, there was no argument on costs at the end of the review hearing on 8 August 2003. Therefore, the Respondents submitted that the hearing on costs on 21 October 2003 was merely a continuation of the hearing of the review application, although it was only on the matter of costs and the date of hearing was fixed upon application by the Applicant made on 2 October 2003. The Respondent reminded the Tribunal that the Review Judgment in writing was handed down on 18 September 2003 without giving the parties an opportunity to argue on costs of the review application.

Tribunal's jurisdiction to award costs

12. The Tribunal has the jurisdiction to award costs to and against any party to any proceedings conducted in the Tribunal. Section 12 of the Lands Tribunal Ordinance (Cap. 17) sets out the relevant provisions:

"12 Costs

(1)	Subject to the provisions of the Ordinance giving the Tribunal the jurisdiction in any matter, the Tribunal may award costs to and against any party to the proceedings and may order that those costs be taxed on the basis of any one of the Scales of Costs set out in the First Schedule to the District Court Civil Procedure (Costs) Rules (Cap. 336 sub. leg.) and the Schedules to Order 62 of the Rules of the High Court (Cap. 4 sub. leg.).
(2)	Subject to any rules made by the Chief Justice under section 10(3), Order 62 of the Rules of the High Court (Cap. 4 sub. leg.) shall apply to the award, taxation and recovery of costs in the Tribunal."

Is the Tribunal functus officio as far as the matter of costs of the review application is concerned?

13. Both parties had no dispute that if the Tribunal had given an order on the matter of costs of the review application, the order must be final as far as the Tribunal was concerned. If any party was not satisfied with the order so granted, the remedy lied with an appeal to the Court of Appeal. In the present case, therefore, the question as to whether the Tribunal was functus officio was, whether the Tribunal had given any order on the matter of costs of the review application.

14. I find that at the end of my Review Judgment delivered to the parties on 18 September 2003, I had not dealt with the matter of costs even though upon checking my notes, the parties had in closing of their submission on 9 May 2003 invited the Tribunal to give a costs order nisi. Although my order of 18 September 2003 stated that the earlier orders of 24 June 2003 shall remain unchanged, and the said earlier order contained a costs order (i.e. No order as to costs), this said costs order does not have any meaning other than that with regard to the proceedings in connection with the original new tenancy application, there shall be no order as to costs. That is, this said costs order could not mean to cover the proceedings relating to the review application.

15. Hence, I agree with the Respondents that the hearing on 21 October 2003 was a continuation of the review hearing, or more particularly, the hearing on the matter of costs relating to the review hearing. Therefore, the issue of functus officio does not exist in the present case.

16. There was no dispute among the parties on the principles applicable to the award of costs in relation to the review hearing. As to the matter of costs of the review application, I agree with the fallback argument of the Applicant. There was no fault on the part of the Applicant when they lodged the review application after finding that there were obvious differences between the findings of the Tribunal in the original Judgment and in their record of the evidence of their witnesses. Since this discrepancy was not in the form of obvious typo or arithmetic errors, I do not know how the Applicant could seek the Tribunal to clarify the matter other than to apply by way of a review application. In addition, this matter could have an important bearing on the choice of relevant comparables and the valuation of the prevailing market rent of the suit premises at the relevant date. Therefore, I agree with the Applicant that under the special circumstances of the case, it was not the fault of the Applicant in applying for a review. Although at the end, the Applicant lost the review, I agree that the exception rather than the usual rule should apply here. For this reason, I agree that for the review application, there shall be no order as to costs.

Order

No order as to costs for the review application including the hearing on 21 October 2003

	(W. K. LO)
	Member, Lands Tribunal

Representation:

The Applicant, represented by Messrs. Lovells, Solicitors

The Respondent, represented by Messrs Albert Dan & Co., Solicitors

LDNT000208/2000

LDNT208/2000

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Application No.: LDNT 208 of 2002

 

BETWEEN
	Pacific Knight Limited	Applicant
	AND
	Golden Crown Restaurant Ltd. & Golden Crown Investment Co. Ltd.	Respondents

Coram: Member W K LO

Date of hearing: 17 January 2003, 27 March 2003 and 9 May 2003

Date of judgment: 24 June 2003

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JUDGMENT

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Background

1. The Applicant is the tenant and the Respondents the landlords of the subject premises known as House 31B, The Crown Villa, 29-31 Ching Sau Lane, Chung Hom Kok, Hong Kong ("the Premises", also known as "House 31B"). The Premises is situated in the same building lot with 3 other houses, House 29A ("Comparable 6"), House 29B ("Comparable 5") and House 31A. All four houses in The Crown Villa belong to the Respondents. The Premises is held under a tenancy for a term of 2 years commencing on 16 November 2000 and terminating on 15 November 2002 at a monthly rent of $71,000 inclusive of rates and management fee ("the previous tenancy"). The break clause can be exercised by giving 3 months' prior notice after the expiration of 12 months. The rates and management fee for the Premises, on monthly basis, are $3,080 and $8,200 respectively. Therefore, the monthly rent on exclusive basis of the Premises under the previous tenancy is $59,720.

2. The parties agreed that the Tribunal should grant a new tenancy of the Premises for a term of 2 years commencing from 16 November 2002. The two outstanding issues were firstly, the amount of the prevailing market rent ("PMR") as at the relevant valuation date of 15 November 2002 and secondly, the condition of the break-clause in the new tenancy. The Applicant estimated the monthly rent to be $48,850 on inclusive basis (i.e. the PMR of $37,570 on exclusive basis) while the Respondents, relying on her expert's opinion, estimated the PMR to be in the sum of $66,594 per month.

3. Both parties were legally represented. They adopted the same comparison method of valuation using unit rental value per unit area of each comparable as their basis of valuation. Between the parties, a total of 6 comparables were considered. The Applicant called for the evidence of its director, Mr. Martin Lane, who and his family have been residing in the Premises since November 1998. Mr. Lane presented his calculations and adjustments in his report (Exhibit A1). The Applicant also called for the evidence of another factual witness, Mrs. Ferris C. Bye, the tenant of Comparable 6 but did not call for any expert witness. The Respondents called for two witnesses: Mr. Wong Kwok Ming, a representative of the Respondents and Mr. Wayne Lee, a surveyor who prepared a valuation report and a supplementary report (Exhibits R7 and R6 respectively) and gave expert evidence in the hearing. The substantial difference in the final assessment of the Premises by the two parties is caused by the following factors:

(a) the choice of the relevant comparables by each party; and

(b) the differences in the adjustments of the comparables due to (i) the nuisance of noise and air pollution as well as adverse visual effects caused by the construction site situated in front of The Crown Villa; (ii) the differences in the time adjustments caused by the choice of different statistics; (iii) the reduction in the use of general amenity areas of the Premises and (iv) the adjustment of the rent passing for Comparable 6 to reflect the sum paid by the former tenant to the present tenant of that comparable.

Choice of relevant comparables

4. There are a total of 6 comparables given by the Rating & Valuation Department for this case. Mr. Lee in his valuation report and oral evidence gave opinion that all 6 comparables should be used for the purpose of valuation of the Premises. The Respondents relied on the expert opinion of Mr. Lee in submitting that all 6 comparables should be adopted in assessing the PMR of the Premises.

5. However, it was the Applicant's case that Comparables 1, 2, 3 and 4 should be disregarded. The Applicant submitted that Comparable 1, albeit located close to The Crown Villa and is of similar age, was not directly comparable to the Premises as its rental package was of an exclusive basis. The rental information of Comparable 1 also caused a certain degree of speculation, submitted the Applicant, because "the adjusted unit rent for Comparable 1 is 10% higher than the adjusted unit rent of Comparable 5 & 6 even though Comparable 1 is of a smaller size." As for Comparables 2 & 3, the Applicant submitted that they were not within the same category as the Premises since they were of much more luxurious nature with better amenities (with a larger house area, more number of bedrooms, central heating and heated indoor pool, and for Comparable 3, a much larger lawn). Similarly, the Applicant submitted that Comparable 4 was not within the same category as the Premises.

6. The Applicant summarized in the final submission the basic principles in the choice of comparables that had been adopted by the Lands Tribunal in several cases in recent years. I do not find any particular reason in the present case that merits any departure from the basic principles which are summarized below:

(i) The very first things an expert (and the Tribunal) should do is to consider "the relevance of the comparables, notwithstanding that the comparables were provided by an independent Government Department. This is an essential step in any valuation by direct comparison method, one step that should not be ignored by any surveyor." (paragraph 12 of an unreported case, LDNT 147 of 2000, Concept Asia Ltd. v Yuen Kit Man Florence).

(ii) "Where recent comparable lettings in the same property are available in sufficient numbers to enable a reasonable assessment to be made of the prevailing market rent, there is no need to rely on comparisons with premises in other buildings, save to the extent necessary to show that rents in the same property do not diverge sharply from the general market level." (paragraph 6 of an unreported case, LDNT 107 of 2002, Doultsons Limited v Lee Pui Nang, quoting Sentry Holdings (Asia) Ltd. v Cali Enterprises Ltd. [1983-85] CPR 14). This principle applies in the present case because the 4 houses, including the Premises, in the subject estate, The Crown Villa are similar to each other, and are hence analogous to flats in a single development.

7. I disagree with the Applicant that Comparable 1 should be disregarded just because it would be necessary to convert the rent passing on the exclusive basis to the rent on the inclusive basis. I do not agree to this reasoning because the Landlord and Tenant (Consolidation) Ordinance (Cap.7) ("the Ordinance") governing the present application requires the determination of the PMR for the Premises on an exclusive basis. Therefore, in theory, after adjusting all the differences between a particular comparables and the Premises, the unit rent of that comparable will be converted to the estimated unit rent for the Premises, on exclusive basis. Only at the very last stage that it is necessary to convert the estimated exclusive rent of the Premises to the estimated rent for the same Premises under the new tenancy, on an inclusive basis. In converting the estimated rent from exclusive basis to inclusive basis, it is obvious that only the current rates and management fee of the Premises, which are not in dispute, are relevant here. As to the difference of about 10% in the adjusted unit rent of Comparable 1 and those of other similar houses in The Crown Villa (i.e. Comparable 5 & 6), I find that the margin is far too small for one to draw any conclusion as to whether Comparable 1 should be excluded for being obviously out of line with the relevant comparables. Hence, I decide not to exclude Comparable 1 in the process of choosing the best comparables.

8. In addition, based on the evidence provided by the parties, I have no doubt that Comparable 2 and 3 are not suitable comparables for the Premises because, even though they are also situated nearby in Ching Sau Lane, which is a short street, they provide much bigger and better facilities. I find that according to the analysis of Mr. Lee (Appendix VI of his report, Exhibit R7), the net rents of Comparable 2 and 3 are about 67% and 95% above the average net rents of Comparable 5 and 6, the 2 comparable houses in The Crown Villa. Therefore, I find that since these Comparable 2 and 3 belong to different sub-market, they should be discarded.

9. The situation is not so clear cut for Comparable 4. The effective area of Comparable 4 is only about 11% larger than that of the houses in The Crown Villa but the net rent of Comparable 4 is about 44% above that of the average of Comparable 5 and 6. As a result, the net unit rent (before adjustment) of Comparable 4 is about 30% higher than that of the average of Comparable 5 and 6. Since there are already 2 good comparables (Comparable 5 and 6) in The Crown Villa, a small estate comprising only 4 houses and a third good comparable, Comparable 1, which is situated adjacent to Crown Villa, I find that Comparable 4, being not so good as the other 3 comparables, should be discarded. Next, I shall consider below the evidence of the parties for these 3 most relevant comparables.

Analysis and adjustments of the Comparables 1, 5 and 6

10. Mr. Lane for the Applicant analyzed the comparables in his report dated 17 January 2003 (Exhibit A1). He applied the adjusted unit rate to the effective area of the Premises after which he adjusted for the factor of "noxious adjoining construction activities" (i.e. the nuisance of noise and air pollution as well adverse effects caused by the construction site situated in front of The Crown Villa.

11. On the other hand, Mr. Lee summarized his adjustments, in the table at Appendix II of his valuation report (Exhibit R7). He estimated the percentage of adjustment for every factor between each comparable and the Premises. He summed up the total percentage of adjustment for each comparable and applied that to the unadjusted net unit rent for that comparable before arriving at the appropriate adjusted unit rent.

12. The Respondents submitted that Mr. Lee's approach was the usual approach adopted by surveyors and since Mr. Lee was an experienced expert in this field whose evidence had also been accepted by the Tribunal in the past, his approach and indeed his evidence should be preferred than that of Mr. Lane, who was not a trained surveyor and had no experience in property valuation. Moreover, the Respondent submitted that Mr. Lane's approach unnecessarily made adjustments to the rates and management fee of the Premises, which should not be varied regardless of whether any adjustment should be made to reflect the factor of nuisance of noise, pollution and / or adverse visual effects caused by the construction taking place on the site adjacent to the Premises.

13. I agree with the Respondents and prefer to follow the approach of Mr. Lee. However, I refuse to accept entirely the evidence of Mr. Lee as to every adjustment simply on the ground that he was the only expert witness called by the parties. I am of the view that when there is no clear cut evidence of one way or another regarding whether a factor identified by a party should call for adjustment, the Tribunal should make its decision only after weighing the evidence produced between the parties, including those from the expert witness. However, when the Tribunal's task is simply to decide on, for instance, the magnitude of certain adjustments, the evidence of expert witness should normally be given more weight. The same approach is adopted in the present case.

14. Therefore, I adopt Mr. Lee's adjustments to Comparable 1, 5 and 6 for the factors of size and building age. As to the adjustments for time, view (or view, noise and pollution) and conditions and amenities, I shall consider these further below.

Adjustment for time

15. Although Mr. Lane agreed that time adjustment should be made, he approached the matter differently from that of Mr. Lee. He relied on the market commentaries provided by two international firms of real estate consultants in arriving at an average rate per month before applying the same to the comparables. Mr. Lane and the Applicant further criticized Mr. Lee for adopted the "Average Rent by Class", but not the "Rental Indices" provided by the Rating & Valuation Department. The Applicant relied on the guideline stated in the "Technical Notes" of the rental statistics published by the Department. It stated that "Rental Indices are a better reflection of change of value than Average Rents by Class". The Applicant further cited the judgment given on 8 July 2002 in Personal Electronics Ltd and Pantai Investments Ltd. (unreported case of LDNT 22/2002) in which Deputy Judge Wong of the Lands Tribunal opined in paragraph 12, inter alia, that, "I find the Private Domestic Rental Indices by Class (...) being more accurate and reliable than the others. I will therefore adopt the figures therein to assess the time adjustment."

16. I agree with the Applicant that the Private Domestic Rental Indices by Class be adopted for the purpose of assessing the time adjustment. I also prefer to use the Respondent's basic methodology of adjusting the time differences by reference to the relevant valuation date for the Premises and the commencement date of tenancies of the comparables.

Adjustment for the effects of having a construction site adjacent to The Crown Villa

17. Mr. Lane and Mrs. Bye gave evidence on the impacts of the adjacent construction site to the living environment of The Crown Villa. The Applicant summed up the impacts in the written submission, as follows:

"- construction works commenced in December 2002, the usual tranquil and heavily treed view was replaced with crane and heavy equipment;

- long period of construction works: Monday to Saturday, 8:00 am to 6:00 pm, causing severe noise, dust and air pollution;

- lost use of terrace, roof, forecourt, communal playground and communal swimming pool;

- the Premises is the one which is closest to the construction site."

It was the case of the Applicant that as the construction works would not complete until January 2005 and the extent of pollution and nuisance could not be predicted at any time, the entire period of the new tenancy of the Premises would be affected.

18. Mrs. Bye gave evidence that at the time of agreeing the tenancy of Comparable 6, she and her husband did not aware of the effects of the construction site next door. They did not even aware of the existence of the construction site. The tenant of Comparable 5 also wrote a letter testifying the same situation in his case. The said letter was produced by Mr. Lane.

19. The Applicant submitted that "if Mr. Lee, who is an experienced in buildings and lands valuation failed to notice the construction site when visiting the Premises on 29 November 2002 - about 2 months after the time when the tenant in Comparable 1 negotiated his tenancy - how could a lay tenant with naked eye spot such a site, especially when the whole area was still covered by trees?" Since some 200 trees covering the site were not cut down until December 2002, anyone, including the tenant of Comparable 1, when inspecting the said comparable property in mid October 2002, would still find the view from Comparable 1 towards the adjacent construction site to be a lush green view. Therefore, the Applicant submitted that the rent of Comparable 1 had not reflected any adverse impact of the construction site.

20. Mr. Lane therefore opined that the adjusted rents for the Comparable 1, 5 & 6 should at the end be further adjusted downwards by say 25% to reflect the nuisance factors in the form of noise, pollution and loss of view.

21. On the other hand, Mr. Lee gave evidence that when first inspecting the Premises on 29 November 2002, he did not even notice the existence of a construction site next to The Crown Villa. Mr. Lee further opined that the tenants of Comparable 1, 5 and 6 should have taken the existence and hence the effects of the said construction site into account when negotiating for their respective tenancies. As a result, Mr. Lee concluded that since the rents reserved of these comparables already reflected the impacts of the said construction site, no further downward adjustment to any of these comparables, as suggested by Mr. Lane, would be warranted.

22. I disagree with Mr. Lee but concur with the Applicant's submission. I accept the evidence of Mr. Lane and those of the tenants of Comparable 5 & 6 that during the time prior to December 2003, neither the occupants of the Premises nor those of either Comparable 5 or 6 knew of the existence of the said construction site. For the same reason, it is unlikely that any visitor, including any intending tenant of the Premises would be aware of the existence of the said construction site. This conclusion is supported by the evidence of Mr. Lee who, despite of his knowledge and experience and his understanding of the effects of a construction site towards the PMR for the Premises, did not aware of the construction site either when inspecting the Premises on 29 November 2002. However, since any visitor, including any intending tenant, did not aware of the existence of the construction site, then obviously, the site and its adverse effects, if any, should not be a factor of adjustment, in the minds of any intending tenant. For this reason, since the relevant valuation date of the Premises is 15 November 2003 and as the effects of the construction site were only apparent to the occupants of the premises and those of the comparables or any visitor after the felling of trees in early December 2002, I find that no downward adjustment to Comparable 1, 5 & 6 to reflect the effects of the site should be allowed.

Adjustment for conditions and amenities

23. I agree to adopt Mr. Lee's adjustment of +3% for Comparable 1 to reflect the difference in amenities between Comparable 1 and the Premises.

24. I find that a downward adjustment of 2% should be allowed for Comparable 6 to reflect the obviously superior quality of the bathroom in that comparable.

Adjustment to the rent of Comparable 6

25. Mrs. Bye of Comparable 6 gave evidence that before agreeing to take over the renting of the premises from the former tenant, the latter undertook to give them a sum of $144,000, being equivalent to 2 months' rent. Mr. Lane, in his calculations, suggested that a deduction to the rent passing of Comparable 6, in the sum of $6,000 per month, should be made before arriving at the net rent for analysis. On the other hand, the Respondents submitted that Mr. Lane's calculation was illogical because the sum of $6,000 per month was not an offer by the landlord, the Respondents and therefore, it should not be a factor in the calculation of the market rent for Comparable 6. The Respondent also submitted that Mrs. Lane would enter the tenancy in any event because of the reduction.

26. I find Mrs. Bye to be an honest witness. I have no reason to disbelieve what she said. Therefore, for Comparable 6, I find that on the one hand, the landlord agreed and received a monthly inclusive rent of $72,000 whilst on the other hand, the tenant, after taking into account the lump sum inducement from the former tenant, effectively paid a monthly inclusive rent of $66,000 only. Therefore, this comparable is not a good comparable. If this comparable is not located in the same estate as the Premises, I shall discard this comparable. However, since this comparable is very close to the Premises in terms of similarities in all physical respects and it is a transaction relatively not too far away in time from the relevant valuation date of the Premises, I decide to retain this comparable. Nevertheless, before this comparable is analyzed and adjusted, I find that an average of the two figures of $72,000 and $66,000 or $69,000 should be used since this is an attempt to find a figure closest to what the landlord was receiving and what the tenant was paying for the tenancy of the comparable.

Determination of the adjusted unit rent for the Premises

27. Based on my findings as set out above, I calculate the adjusted unit rent for each comparable as follows:

Compar -able No.	Net rent ($)	Unit rent ($/sq.m.)	Adjustments						Adjusted Unit Rent ($/sqm)
			Time	View	Size	Building Age	Conditions and Amenities	Total
1	60,000	268.9	-1.4%	0	-1.0%	2.0%	3%	2.6%	275.9
5	62,220	258.4	-2.5%	0	0	0	0	-2.5%	251.9
6	57,720 (after adjusted)	239.7	-1.7%	0	0	0	-2%	-3.7%	230.8
								Average	252.9

28. From the above analysis, the adjusted unit rent for Comparable 1, 5 and 6 are found to be $275.9 per sq. m., $251.9 per sq. m. and $230.8 per sq. m. respectively. The average of the 3 adjusted unit rents is $252.9 per sq. m. Applying this average to the effective area of 240.8 sq. m. for the Premises gives a sum of $60,898 as to be the PMR for the Premises under the new tenancy. However, since the previous tenancy was on the basis of inclusive of rates and management fee, I agree with the parties that the rent under the new tenancy should be on the same inclusive basis. Adding this sum of $60,898 to the monthly rates and management fee of $3,080 and $8,200 respectively gives a figure of $72,178, which is rounded to $72,000. To conclude, the monthly rent under the new tenancy for the Premises, on the basis of inclusive of rates and management fee, is determined to be $72,000.

Condition of the break clause in the new tenancy

29. Mr. Lane gave evidence that he was worried about the health of his children as he found that the Premises as well as the amenity areas outside the Premises had been very much adversely affected by the construction site next door. He requested for a break clause in the new tenancy allowing the Applicant to give a one month's notice to quit after the first 3 months of the new tenancy. The Applicant submitted that this request was not only reasonable, but understandable.

30. Also, since the new tenancy would have already lapsed for more than 7 months, the break clause of 1 month's notice to vacate after the first 3 months of the new tenancy became academic. The Applicant therefore submitted in the final written submission that the Tribunal should allow the Applicant to give 1 month's notice to vacate after it has completed the first 8 months of the new tenancy on 16 July 2003. In case the Tribunal should be of the view that 1 month's notice is not adequate, submitted the Applicant, the Tribunal could extend the period to 6 weeks or otherwise.

31. The Applicant further submitted that although the Applicant asked for a break clause after 8 months, the PMR for the Premises should not be affected.

32. The Respondents submitted that the usual break clause of 3 months' prior notice after the expiration of 12 months, same as that in the previous tenancy of the Premises and those of other houses in the same estate, should be adopted as a term of the new tenancy.

33. I find it unreasonable to grant a new tenancy with a break clause of 1 month's or 6 weeks' prior notice after the expiration of first 8 months of a 2 years tenancy. I fail to see why the usual break clause for new tenancies for properties similar to the Premises, including the previous tenancy of the Premises and those of other houses in the same estate, should not be used. Furthermore, now that the trees had been cut and the works in the construction site were in active progress for some months, it would be up to the Applicant to decide whether to accept the tenancy as granted by the Lands Tribunal. Under section 119M of the Ordinance, the Applicant has the option as to whether to take up the new tenancy on terms as determined by the Tribunal or to notify the landlord that it does not wish to accept the tenancy. The Applicant should make up his mind and take advantage of the said provision of the Ordinance. On the other hand, the Respondents simply do not have that similar option under the same Ordinance.

Costs

34. As I do not find that either party has conducted this case in a frivolous or vexatious manner, I shall not make any order as to costs against any party.

Orders

1. New Tenancy for two years commencing from 16 November 2002;

2. New rent at $72,000 per month (inclusive of rates and management fee); leave to the Applicant to pay the Respondents arrears in of rent, if any, within one month;

3. Deposit to be increased pro rata in accordance with the new rent; leave to the Applicant to pay the Respondents the adjustment within one month;

4. Other terms of new tenancy same as in the previous tenancy agreement;

5. No order as to costs.

	(W. K. LO)
	Member, Lands Tribunal

Representation:

The Applicant, represented by Messrs. Lovells, Solicitors

The Respondents, represented by Messrs. Albert Dan & Co., Solicitors