Sze Chiu and Another v. Wong Wang-yee and Another
Read the full judgment text of CACV 25/1978 on BabelCite. This Court of Appeal judgment was delivered on 5 February 1979.
1. The question we have to decide is whether the 1st Defendant is entitled to possession of a cockloft and yard by virtue of the provisions of Part II of the Landlord and Tenant (Consolidation) Ordinance. The learned judge in the court below decided that he was, and therefore dismissed an action for possession by the Plaintiffs, as reversioners.
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CACV000025/1978
----------------- Coram: Briggs, C.J., Huggins and Pickering, JJ.A. Date of Judgment: 5 February 1979 ----------------- JUDGMENT ----------------- Huggins, J.A.: 1. The question we have to decide is whether the 1st Defendant is entitled to possession of a cockloft and yard by virtue of the provisions of Part II of the Landlord and Tenant (Consolidation) Ordinance. The learned judge in the court below decided that he was, and therefore dismissed an action for possession by the Plaintiffs, as reversioners. 2. The facts are somewhat unusual. The Plaintiffs' predecessors in title, Kwan Yick Co., let to the 1st Defendant the ground floor of a building. The 1st Defendant erected a cockloft in the premises. In 1964 the 1st Defendant let the front portion of the ground floor to the 2nd Plaintiff and in the following year let the rear portion of the ground floor to the 1st Plaintiff. The 1st Defendant continued to live in the cockloft. The Plaintiffs then agreed to purchase the ground floor and cockloft from Kwan Yick. Before completion Kwan Yick sent notice to quit to the 1st Defendant. The 1st Defendant did not wish to quit and this led to negotiations between the 1st Defendant and the 2nd Plaintiff, as a result of which a written agreement was executed on 1st July 1970. That rather strange document shows that "in consideration of friendship [the 1st Defendant] agreed to return the tenancy right of the [ground floor and cockloft] to [the 2nd Plaintiff] voluntarily. [The 2nd Plaintiff] also agreed to give [the 1st Defendant] the right to reside at the cockloft" (sic) for four and a half years expiring on 30th December 1975. The 1st Defendant was also given the use of the yard. Among the covenants were one by the 2nd Plaintiff to pay $10,000 to the 1st Defendant forthwith "for decoration fee of cockloft and the removal fee upon expiration" and one by the 1st Defendant to pay a rent of $10 a month. It has not been contested that the agreement was an agreement for a tenancy or that the rent was never paid. Condition 3 was in these terms:
3. The four and a half year term having expired, the 1st Defendant remained in possession and has still paid no rent. There is therefore no question of a new contractual tenancy's having arisen. The contention of the appellant Plaintiffs is that the agreement was illegal, although the Public Works Department has not "interfered with" the cockloft. The illegality is said to arise from three causes:
It is not disputed that the cockloft was erected without submission of the plans to the Building Authority and, consequently, without their approval. For present purposes I will assume that that was a breach of section 14 and an offence under section 40 and that section 41 (3) did not exempt the building works from the requirement of such approval. In my view it did not make the letting of the cockloft illegal, nor was such letting contrary to public policy. Any damage which may have resulted from the non-observance of section 14 had been done whether the cockloft was let or not, and to uphold the tenancy would in no way involve the court in encouraging the non-observance of section 14. Even if the building works were exempt from the requirement of approval that would not permit them to be carried out in contravention of any regulation (the proviso to section 41 (3)) and it is submitted by Mr. Bernacchi that there was a clear breach of Reg.24 of the Building (Planning) Regulations in that the height of the cockloft measured from floor to ceiling was said to be 7 feet. Mr. Cheung was not disposed to argue that there had been no breach of that regulation, but he still submits that it has not been made an offence and that it is not against public policy for the court to enforce a contract of letting. Again I would agree that public policy does not require that the court should on this ground refuse to recognize the existence of a tenancy. 4. The absence of an occupation permit for domestic use cannot be overcome in the same way: here we are faced with the fact that to uphold the agreement as it stands would be to encourage the use of the cockloft for domestic purposes in breach of section 21 of the Buildings Ordinance. Mr. Cheung contends that there is nevertheless ample protection of the public interest provided by the Ordinance without the court's refusing to recognize a tenancy of the cockloft: section 24 gives the Building Authority power to order demolition. I do not find it necessary to express any opinion as to that, for he relies, also, upon the principle that a person in possession under a void tenancy agreement has a lawful leasehold interest which will protect him until the landlord can eject him without having to rely upon the agreement. The principle was stated by the English Court of Appeal in Alexander v Rayson 1936 1 K.B. 169, 186:
It is thus the enforcement of the unlawful agreement to which the court will not lend its aid: the tenant in possession may plead it as the source of his right to possession. That was the position here until 30th December 1975: the 1st Defendant was entitled to possession, although he, of course, was as subject to the Buildings Ordinance as anyone else and could not have prevented the demolition of the cockloft. 5. The 1st Defendant, having a tenancy, was prima facie protected by Part II of the Landlord and Tenant (Consolidation) Ordinance by virtue of section 50. However, Mr. Bernacchi submits that the tenancy must be regarded as a rent free tenancy and that, notwithstanding the wide terms of section 50, protection under Part II is limited to tenancies for which the consideration is a pecuniary rent. He further argued that a rent of $10 a month could be ignored as being so small that the court should apply the principle de minimis non curat lex. That last argument is, in my judgment, not well founded, for, whether or not such a rent was adequate, it was substantial and real. Whilst I cannot accept that it was open to the Plaintiffs, without seeking rectification, to allege not only that the rent of $10 a month was not paid but also that it was never intended to be paid, I do agree that the rent was irrecoverable. It was held in Mahuvawalla v Iranee (1949) 33 H.K.L.R. 1 that the Proclamation which was the forerunner of Part II of the present Ordinance did not operate to protect a tenancy for which the consideration was services to be rendered by the tenant. In so holding the Full Court followed the English cases of Hornsby v Maynard 1925 1 K.B. 514 and Bracey v Pales 1927 1 K.B. 818. It was from the first of those cases that the limitation of the word "rent" to a monetary rent has been derived. The matter was taken a step further in the second case, where it was held, applying Hornsby v Maynard, that the Rent and Mortgage Restriction Act 1923 did not protect against eviction a tenant who held rent free: he was not to be regarded as a tenant so far as the Act was concerned. In the Hong Kong case Gould, J., although agreeing that services could not be "rent" within the meaning of the Proclamation, was in some doubt whether "rent" in the Proclamation should be confined to monetary rent. The Full Court decided that Article 1 of the Proclamation, by defining "principal tenant" and "subtenant" as persons "paying rent", limited the tenants who were protected. Mr. Cheung was not disposed to challenge the decision in Mahuvawalla v Iranee and, further, appeared to concede that it was good authority in relation to Part I of the present Ordinance. I therefore do no more than observe that the equivalent definitions in Part I of the Ordinance are very different from those in the Proclamation in that they make no reference to rent. No case has been cited to us in which Part I or its immediate predecessors have been interpreted as giving protection only where a tenant pays a monetary rent, although it may well be that it should be so interpreted. Mr. Bernacchi has drawn attention to various provisions in Part II which, he submits, could certainly not be applied to a tenancy for which the consideration was other than a monetary rent. Part II, in the words of section 50(4), affords both "benefits" and "protection" to the tenant. No indication is given of the intended distinction, but there are two headings which show the general scope of the advantages conferred: "Continuation and Termination of Tenancies" and "Increases of Rent". Although Mr. Bernacchi pointed to section 53 in the fasciculus of sections under the first heading, I can find nothing there which on the face of them would make the provisions of Part II unworkable if they were applied to rent free tenancies or tenancies for which the rent was other than a monetary rent. It is only when one comes to the fasciculus of sections under the second heading that difficulty might arise. Section 54 requires the landlord of a tenancy entered into on or after 15th December 1973 to lodge with the Commissioner of Rating and Valuation a notice "stating the rent payable by the tenant". Section 58(2) permits the rent to be increased by an amount which "shall be such sum as shall be ascertained after dividing the amount by which the fair market rent exceeds the current rent by the appropriate factor", the "appropriate factor" being then defined by subsection (3). There is, however, a proviso:
It might be difficult to calculate a percentage of a current rent which was not a monetary rent and there could be no increase under section 58 of a rent of a tenancy which began as a rent free tenancy. Moreover, section 67 could clearly be applied only where an increase was expressed in terms of money. Although it was not advanced in so many words, I think the argument was that if the rent increase provisions could not apply to the present case (as, I am satisfied, they could not) the Legislature could not have intended to give the tenant protection against eviction, for it would be manifestly unjust to force upon the landlord for an extended period a tenant whose rent was no longer reasonable but could not be increased. That must have been the reasoning behind the decision in Bracey v Pales (supra) - a case which apparently was not cited to the learned District Judge - and I think it is right. 6. The 2nd Defendant was granted a sub-tenancy of the yard by the 1st Defendant on the very day that the 1st Defendant signed the agreement with the 2nd Plaintiff. It is conceded that if the 1st Defendant has no protection against ...(illegible) the 2nd Defendant can have no such protection. 7. I have had the opportunity of seeing in draft the judgment which Pickering, J.A. is about to read and I agree with him. I have, however, preferred to decide the case upon the point which has formed the basis of the argument both at first instance and in this court. 8. I would allow the appeal and make an order for possession against both Defendants. I do not consider that it is necessary to grant the injunction asked for in the Notice of Appeal. 5th February 1979.
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----------------- Coram: Briggs, C.J., Huggins & Pickering, JJ.A. Date of Judgment: 5th February, 1979. ----------------- JUDGMENT ----------------- Pickering, J.A.: 9. As it seems to me this appeal must succeed upon the simplest of grounds. The cockloft and yard, possession of which is in dispute, were let by the 2nd Plaintiff to the 1st Defendant for a term of four and a half years which term has now expired so that the only way by which the 1st Defendant can justify his continued retention of the premises is by invoking section 52(1) of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7). But I do not find that that sub-section can assist the 1st Defendant containing, as it does, a saving in respect of the provisions of section 53 which inhibits the Court from making an order for possession unless it is satisfied that (inter alia) "any rent lawfully due from the tenant or sub-tenant has not been paid." The rent reserved under the Agreement for the four and a half year term was $10 per month and it is common ground that, as pleaded in the Statement of Claim, it has never been paid. Mr. Bernacchi, for the Plaintiffs, seeks to argue that $10 per month is not a pecuniary rent or that if it is, the maxim de minimis non curat lex should apply to it and that Part II of the Landlord and Tenant (Consolidation) Ordinance (in which is contained section 52(1)) applies only to tenancies the subject of pecuniary rentals so that the 1st Defendant is not, in any event, entitled to the protection of that sub-section. Mr. Cheung, for the Defendants, disputes that Part II of the Ordinance applies only to tenancies the subject of pecuniary rentals but says that if that view be wrong then $10 per month is a pecuniary rental. 10. A general review of Part II of the Ordinance persuades me, for very much the same reasons as those advanced by my brother Huggins, that the Part does in fact apply only to tenancies governed by a monetary rent. I am unable to agree with Mr. Bernacchi however that $10 per month is not a pecuniary rent. Plainly it is. Nor do I consider that the maxim de minimis non curat lex can avail the Plaintiffs for the Courts do not look into the adequacy of consideration. We have then a tenancy which is governed by a pecuniary rent and which is therefore, on the face of it, protected by the provisions of Part II of the Ordinance and notably section 52(1). 11. However, Mr. Cheung's quite proper insistence that $10 per month is a pecuniary rent brings him face to face with the fact that, for whatever reason, that rent has never been paid and it is of no avail to say that it was never intended on either side to be paid. The rental was inserted into the Agreement for a four and a half year term by the parties thereto in the belief that such insertion would give the Agreement legal efficacy. That is precisely what it has done. Section 52(1) of the Ordinance does not, by virtue of section 53(2)(a), operate to protect a tenant who has not paid his rent that being one of the circumstances in which the Court is not precluded from making an order for possession. Although the matter was not argued before us in this way the legal result is there and cannot be evaded. Moreover that result was pleaded in the Amended Particulars of Claim para. 13 of which reads in part:-
12. Clearly the pleading went too far in alleging that by virtue of the non-payment of rent the tenancy did not fall within Part II of the Ordinance. The tenancy did fall within Part II since it was a domestic tenancy in a post-war building. But the corollary of the fact that no rent was paid was that the tenancy did not fall within the protection of Part II so that there was no impediment to the Court making an order for possession rather than permitting the defendants to remain in rent-free occupation of the premises until such time as Part II might be repealed. 13. Since the 2nd Defendant holds his portion of the premises, the yard, from the 1st Defendant his tenancy goes with that of the 1st. 14. I too would allow the appeal and order possession against both Defendants with a stay of execution for six weeks and, having heard counsel, no order as to mesne profits. I agree that it is unnecessary to grant the injunction sought by the Plaintiffs who are however entitled to their costs here and in the Court below. Representation: B. Bernacchi, Q.C. & H.L. Wong (K.M. Lai & Li) for Appellants. Oswald Cheung, Q.C. & Miss H.C. Wong (H.H.Lau & Co.) for Respondents.
Coram: Briggs, C.J., Huggins & Pickering, JJ.A. Date of Judgment: 5 February 1979 ----------------- JUDGMENT ----------------- 15. I concur with my brother judges, and there is nothing I wish to add.
Representation: Bernacchi, Q.C. & H.L. Wong (K.M. Lai & Li) for appellants Cheung, Q.C. & Miss H.C. Wong (H.H. Lau & Co.) for respondents |