Uy Siok Hui and Others v. The Wing on Fire and Marine Insurance Co Ltd
Read the full judgment text of CACV 85/1980 on BabelCite. This Court of Appeal judgment.
1. This appeal raises an important question of interpretation of the Landlord and Tenant (Consolidation) Ordinance. It concerns the right of a landlord to claim possession on the ground that he intends to rebuild the structure which is the subject matter of the tenancy.
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CACV000085/1980 Landlord - Tenant - claim under s.53(2)(c) of Landlord and Tenant (Consolidation) Ordinance against tenant and sub-tenant - sub-tenant paid premium to mesne landlord - no defence to action, because
Coram: Sir Alan Huggins, V.-P., McMullin, V.-P. & O'Connor, J. Date of Judgment: 19 December1980 ----------------- JUDGMENT ----------------- Sir Alan Huggins, V.-P.: 1. This appeal raises an important question of interpretation of the Landlord and Tenant (Consolidation) Ordinance. It concerns the right of a landlord to claim possession on the ground that he intends to rebuild the structure which is the subject matter of the tenancy. 2. It is not in dispute that the Plaintiff was the 1st Defendant's landlord of domestic premises not that the 1st Defendant had sublet to the 3rd Defendant. The 1st Defendant had paid no premium to the Plaintiff, but the 3rd Defendant testified that he had paid a premium to the 1st Defendant, and that evidence was not challenged, although the judge made no finding on the point, because, in view of the way in which the case was presented to him, it was not relevant. The 1st Defendant did not defend the action against him and judgment was entered in default of defence. The 3rd Defendant claimed protection against eviction under Part IV of the Ordinance, but the judge held that as he had paid no premium directly to the Plaintiff he was not protected, and judgment was entered against the 3rd Defendant also. 3. In the court below the defence was conducted on the basis of contentions which have been abandoned in this court. The only ground of appeal which appears in the original notice of appeal and which is still pursued relates to costs. Mr. Swaine has sought leave to argue additional. grounds of appeal which Mr. Lee has submitted are not open to him as they relate to points which were not taken at the trial. The first issue for us to decide is, therefore, whether it is open to the Appellant to take these points. 4. Both points rest upon the allegation that the sub-tenant had paid a premium to the tenant. Mr. Lee submits that it has not been established that, had the points been raised at the trial, no further relevant evidence could have been adduced. He also suggests that the court should view any attempt to take a new point more jealously where the appeal is one from the District Court, because the District Court already has a power of review which could be exercised to consider a point not taken at the trial: see Lee Bing-keung v Wong Hiu-kwan 1961 H.K.L.R. 242. For my part, even without this latter consideration, I agree that these new points are not open. Whilst it is true that the payment of a premium by the 2nd Defendant was not seriously in dispute and that her evidence that she had paid the money to the 1st Defendant, supported as it was by the production of a receipt, was not challenged, the fact remains that the Plaintiff reasonably assumed that there was no need to dispute this evidence. It is not for us to enquire whether the evidence could have been successfully challenged. Even if we were to be of opinion that the chance of a successful challenge was slight, the Plaintiff should not be deprived of the opportunity of attempting to challenge it: we would have to be satisfied that the evidence established "beyond doubt that the facts, if fully investigated, would have supported the new plea": per Lord watson in Connecticut Fire Insurance Co. v Kavanagh 1892 A.C. 473, 480. In this connection we must not overlook the possibility of a conspiracy between a tenant and his sub-tenant to fabricate evidence. 5. However, as the other members of the Court are of opinion that the evidence is really beyond doubt, I would express my views on the new points raised. Ground 7, which is at once the most far reaching and the shortest of the grounds argued, is in these terms:
This is not very precise, but I now understand the argument to run like this:
6. As to the first step I must now assume that a premium was paid to the tenant. As to the second step it necessarily follows that Part IV did apply to the sub-tenancy. The general rule under section 116(1) is that Part IV applies to any tenancy to which Part I does not apply, and it is conceded that the sub-tenancy is such a tenancy. There are exceptions under subsection (2), but by reason of a double negative this sub-tenancy is not within the only relevant exception:
(No point has been taken on the fact that subsection (2)(b) refers to "any case", whereas, in conformity with subsection (1), which states that Part IV shall apply to "any tenancy", paragraphs (a) and (b) exclude tenancies.) 7. As to the third step, protection under Part IV is conferred by section 117, which reads in part:
The first of the specified conditions is that Part IV applies to the tenancy, which condition we have seen to be fulfilled, and the others are admittedly fulfilled. It is important to bear in mind the nature of the protection which is thus granted to this sub-tenancy; it is a protection against termination of the sub-tenancy by notice to quit, notice which could be served upon the sub-tenant only by her immediate landlord. 8. It is at the fourth step that contention first arises. Section 50(6)(f) reads:
There can, of course, be no doubt that the sub-tenancy was "enjoying protection under section 117", but Mr. Lee submits that it was nevertheless not excluded from Part II. The contention was based upon the submission that section 50(60(f) must not be taken literally and he submits that one must read into it the words "as the case may be". He seems to assume that if the sub-tenancy is not one to which Part II applies his client is not entitled to an order for possession under section 53(2). I shall come back to that later. For my part I do not think that the addition of the words "as the case may be" would alter the sense of the paragraph, although I accept that the only protection which a sub-tenant could enjoy under section 117 is protection against eviction by his mesne landlord. That must be the protection which the Legislature contemplated when it enacted section 50(6)(f). Such protection the 2nd Defendant was enjoying while the head-tenancy subsisted. 9. As to the fifth step it necessarily follows from what I have just said that Part II did not apply to the sub-tenancy. 10. It is when we come to the sixth step that the crux of the case is reached. As I have said, it seemed to be assumed by Mr. Lee, although he did not concede the point, that if Part II did not apply to the sub-tenancy no order for possession could be made against the sub-tenant. I am unable to accept that. It would be correct if the head-landlord had sought an order for possession of the premises which were the subject matter of the sub-tenancy, but that is not the order which was sought and it is not the order which was made. The writ claimed possession - equally against the 2nd Defendant as against the 1st Defendant - of the premises which were the subject matter of the head-tenancy. That tenancy was one to which Part II did apply. Provided that the head-landlord proved his intention to rebuild there was no reason to refuse an order for possession against the 1st Defendant. The compound preposition "in respect of" in section 53(2) cannot, I think, mean more than "of". It is true that an order for possession against the 1st Defendant would not assist the head-landlord to evict the sub-tenant (see section 53(5)), but there was no reason why an order for possession of the subject matter of the head-tenancy should not be made against the 3rd Defendant herself. The effect of section 53(5) is merely that proceedings must be issued against the sub-tenant personally: Enniskillen Urban District Council v Bartley 1947 N.I. 177. In the United Kingdom such a joinder is by no means a mere formality, because no order for possession can be made against a defendant unless the court thinks it reasonable to do so. No such condition exists in Hong Kong, so that where the head-landlord is able to establish a ground for obtaining possession against the head-tenant under section 53(2)(c) it is unlikely that a sub-tenant will be able successfully to oppose the making of an order against him, but he is entitled to try. Section 53(6) cannot assist the 2nd Defendant, because it is concerned with the situation where the head-landlord is unable to obtain an order for possession as against the sub-tenant: Idem. 11. Under Ground 5, as I understand it from para. (d), it is argued that, even if the sub-tenancy was not previously excluded from Part II by reason of the payment of a premium to the mesne landlord, it became so excluded as soon as the order for possession was made against the mesne landlord. It is said again that that was result is produced by s.53(5) and (6), it being common ground that the sub-tenancy was lawful. The contention is that under subsection (6) the sub-tenant was, on the making of the order against the mesne landlord, deemed to become the tenant of the head-landlord "on the same terms as [she] would have held from the tenant if the tenancy had continued" and that those terms included a term that the sub-tenant should have protection under s.117. I cannot accept that argument. It fails for the reasons already given under Ground 7 and also because the provision granting protection under Part IV was never a term of the sub-tenancy, either by contract or by implication of law, and it could not become a term of the direct tenancy. Therefore any direct tenancy which might have arisen would not have been excluded by virtue of s.50(6)(f). 12. Ground 6 involved the contention that unless a head-landlord can show that he has the ability to obtain possession against any sub-tenants he cannot establish an "intention to rebuild" within the meaning of s.53(2)(c). The effect of this, it was argued, would be not merely to defeat the landlord's claim against the particular sub-tenant whose continued presence would obstruct the re-building but also to defeat his claim against the tenant and any other sub-tenants who would otherwise have had no defence. Mr. Swaine relies upon passages in Vol. II of woodfall on Landlord and Tenant (27th edition) at pp.1365 and 1375. There are to the effect that the landlord must show an intention which he has a reasonable prospect of being able to carry out and that he does not so intend "if he has too many hurdles to overcome or too little control of events", the material date for the existence of the intention being the date of the hearing. The passages are supported, and indeed based upon, the speeches in Betty's Cafe Ltd. v Phillips Furnishing Stores Ltd. 1959 A.C. 20. However, that case makes it clear that the intention may be sufficient although it is conditional upon the landlord's obtaining possession of the premises, always assuming that the landlord has done everything in his power to obtain possession. The judge here found that there was an intention to rebuild and in as far as that was a finding of fact it is not open to appeal. I think there was evidence upon which he could properly so find. 13. In my view, therefore, the judgment in the court below ought to stand and the only point remaining relates to costs. The judge ordered that the Defendants pay the entirety of the Plaintiff's taxed costs. The Appellants contend that
and that the correct order was for the Plaintiff to pay so much of the costs as related to his proving his intention to rebuild or that, at most, each side should have been ordered to pay its own costs. Clearly the ground of appeal was stated too widely and the argument has been limited to cases under s.53(2)(c). In such cases it is true that the landlord is on one view asking the court to override the protection given to the tenant by s.52(1) and it can be said that the tenant should not be required to pay the costs incurred by the plaintiff in establishing his intention to rebuild. On the other hand, the Legislature could have provided that a landlord should not recover his costs even if successful, but has instead left the ordinary rule to apple, that the costs shall be in the discretion of the court. For my part I would see no sufficient reason for interfering with the discretion of the trial judge in the present case. McMullin, V.-P.: 14. This appeal concerns premises occupied by many tenants of domestic premises the owner of which wishes to demolish for the purpose of redevelopment. The Plaintiff (owner) obtained judgment from Judge de Basto for possession against some eighty such tenants on 13th June 1980. The order was made by the learned judge under para. (c) of subsection (2) of section 53 of the Landord and Tenant (Consolidation) Ordinance, the judge being satisfied that the owner had proved an intention to rebuild and that he had the capacity to do so. There were several sub-tenancies in existence at the time when the landlord sought the order of the court and several of the sub-tenants claimed protection under Part II of the Landlord and Tenant (Consolidation) Ordinance on the ground that they had paid construction money to their principal tenants. We have before us a number of appeals from the order of the learned judge consolidated for hearing. In effect however we are concerned only with one of these cases, no grounds of appeal having been put in in respect of the other appellants. The case with which we are concerned is that of a Madam Chan Ping-chuen who was one of four defendants in District Court Action 1431 of 1979. Her co-defendants did not give evidence at the trial. 15. She told the court that she had paid Mr. Lau, her principal tenant, $12,000 by way of key money some time in April, 1976. It is common ground that Mr. Lau did not himself pay any key money to the plaintiff landlord. Although his tenancy clearly fell within the provisions of Part II of the Ordinance so that it was not necessary to serve him with any notice to quit before applying for possession on the grounds of an intention to rebuild, he was in fact served with notice to quit and he did not subsequently defend the action for possession. Judgment for possession was given against him in the District Court on 12th October 1979. 16. The original grounds of appeal which concerned both Madam Chan and her co-defendants were filed in a notice dated 27th June 1980. The principal points put forward on behalf of the appellants were firstly, that the judge had erred in finding that the landlord had a right to proceed directly against the sub-tenants under section 53(2)(c) of the Ordinance, and, secondly, that he had misconstrued the meaning of the words "intends to rebuild the premises" in that provision. Those grounds were formally abandoned by Mr. Swaine in the course of the hearing before this court and we heard argument on the three grounds with which we are presently concerned. The fourth of the original grounds of appeal concerns the order for costs made by the trial judge against the defendants and to that I will return later. 17. A preliminary point arises as to whether Mr. Swaine should have been permitted to argue these new grounds at all. Mr. Lee, for the respondent company, while not consenting to their introduction, reserved his right to object and, in the end, he did submit that, since the new grounds raise matters which were never raised in the court below, and notwithstanding that he had fully argued the principal points raised by the new grounds, we should consider also the question whether the appeal in its final form was competent or not. 18. For my own part, notwithstanding the late introduction of these grounds, I believe that the factual basis upon which they are supported, i.e. the payment of key or construction money by Madam Chan, is not seriously in dispute. It is true that if the points taken now on behalf of the appellants had been pleaded and urged before the court below, it might have been possible for the respondent company to adduce evidence that no such money was even paid. On the other hand, Madam Chan gave evidence that she had paid the money and she produced a receipt and was not challenged upon that matter at the trial. In this regard I think Mr. Swaine can reasonably rely upon the authority of Connecticut Fire Insurance Co. v Kavanagh 1892 A.C. 473 and in particular upon the words of Lord Watson at page 480 which were quoted and approved by Willmer, L.J. in Donaghey v P. O'Brien & Co. and Another (1966) 2 All E.R. 822 at 828. 19. The three new grounds of appeal, although argued separately, rest effectively upon a single proposition. What is said on behalf of Madam Chan is that by paying this key money to her immediate landlord in April or 1976 she has acquired an indefeasible right to remain in occupation of the premises for five years from 23rd April 1976 (the date of the receipt). If this be the case she would be thus protected from eviction until April, 1981. 20. It is conceded - indeed, it could not be contended to the contrary - that she did indeed acquire immunity against any Valid notice to quit upon her by virtue of the provisions of section 117 of the Ordinance as against her immediate landlord, Mr. Lau. Mr. Swaine however contends that notwithstanding the disappearance of Mr. Lau from the picture upon the ending of his tenancy the protection thus obtained enures to the benefit of his client against the head landlord, the respondent in the present proceedings. The main-spring of this argument is to be found in three provisions of Part II of the Ordinance. Subsections (5) and (6) of section 53 are as follows:
We then turn to section 50(6)(f) which provides:
Section 117, as we have seen, protects a tenant or sub-tenant from the common law effect of a notice to quit in any case in which key or construction money has been paid. 21. Counsel says therefore that once Mr. Lau's tenancy had ended Madam Chan became the tenant of the respondent company upon the very terms on which she had formerly held her premises from Mr. Lau and that, counsel says, includes a term that she shall be immune from notice to quit for five years from April, 1976. The stronger version of this argument is that contained in the 7th ground, which is the argument that by virtue of section 50(6)(f) Part II of the Ordinance has no application to sub-tenancies protected under Part IV. Mr. Lee is, I think, right to find an answer to the contention in this form in the provisions of subsection (2) of section 117 which are as follows:
It is clear from this provision that where a tenant who is himself enjoying what one might for convenience call "key money protection" assigns his interest in the premises before the end of the five-year period the assignee gains only such immunity from notice to quit as had been acquired by the original tenant on the payment of key money and the assignee will not gain any further immunity by reason of the fact that he himself may have paid the assignor key money upon the transfer of the premises. The Legislature, in other words, intends to protect the tenant only against the claim of his immediate landlord to whom the money has been paid. 22. Although under ground 5 the argument has been somewhat more elaborate, effectively it, too, rests upon the contention that Madam Chan, the appellant, continues, after the termination of Mr. Lau's tenancy, to be a person enjoying protection under section 117 by virtue of the money that she formerly paid to Mr. Lau. Under subsection (6) of section 53 she continues to hold from the head landlord and does so upon the terms which she formerly enjoyed under her tenancy from Mr. Lau. It is this substitution which, in Mr. Swaine's contention, "triggers off" the application of section 50(6)(f) to the new situation. The terms upon which she held from Mr. Lau included, in counsel's submission, a period of five years secure from termination by a notice to quit. Mr. Lee points out however that one cannot be a person enjoying protection under Part IV (section 117) without becoming automatically excluded from the provisions of Part II and therefore outside the operation of any of the legislative machinery contained in that Part including, of course, sections 50 and 53. To my mind that is a substantial answer. The appellant seeks to escape the binding force of an order made under Part II by showing that she has acquired "key money protection" under Part IV. But she cannot do that without at the same time divesting herself of that continuity of tenancy provided by section 53(6) of Part II without which she is bare of title to remain in possession Unsupported by that provision, the common law principle applies and the subtenancy ends. If she has no such protection the her case does indeed fall within Part II but then she is left without any answer to the Part. The basic question recurs: Is she in enjoyment of a tenancy which is protected under section 117? I have suggested that the intention of the Legislature is made manifest by considering the situation of an assignee in relation to the provisions of subsection (2) of that section. I can find no reason in law or logic to suppose that it was intended to confer a larger right against the head landlord upon a sub-tenant than upon the assignee of the intermediate tenant. It was never intended that the casual connection between the payment of key money and exemption from forfeiture of tenancy by notice to quit was to extend beyond the immediate parties to such payment. 23. Mr. Swaine has also relied upon the provisions of section 74A of the Ordinance. Para. (b) of that section runs as follows:
At first sight it seems a reasonable inference from that provision that the Legislature envisaged a case in which the sub-tenant might enjoy greater security of tenure than the tenant. The great security which he is said to enjoy however is only that which is accorded to him by subsections (5) and (6) of section 53. In Enniskillen Urban District Council v Bartley and Lynch 1947 N. In 177 the Court of Appeal for Northern Ireland was considering the effect upon a subtenancy of very similar provisions under the Rent Restrictions legislation. Section 5(1) of the Increase of Rent and Mortgage Interest (Restrictions) Act 1920 provided that no order or judgment for recovery of possession of a dwelling house to which the Act applied or for the ejectment of a tenant therefrom should be made or given except in circumstances which were set out in paragraphs (a) to (k). Subsection (5) of that section and subsection (3) of section 15 of the same Act make provisions upon lines very similar to those contained in subsections (5) and (6) of section 53 of the Ordinance. In other words an order made against the tenant is not to give a right of possession as against the subtenant and where the tenancy has been ended by an order of the court the subtenant is to become the tenant of the landlord upon the same terms as he formerly held from his intermediate tenant. It was held nevertheless that those provisions did not confer upon the sub-tenant of a dwelling house within the Acts any greater degree of protection than that conferred upon the tenant by subsection (5)(i). Mr. Swaine stresses the fact that the right given to the sub-tenant under subsection (5) of section 5 of the English Act to retain possession after the order of the court has deprived his principal retain of possession is a right to "retain possession under this section" (i.e. section 5 of the Act). He argues that the absence of any similar formula from subsections (5) and (6) of section 53 of the Ordinance renders the Enniskillen Case invalid as an authority for applying any similar proposition to the appellant's tenancy in the present case. I cannot agree. In our case, as in the Irish case, the effect of the relevant provisions of the legislation is that the common law principle that a sub-tenant's interest ends with that of his immediate landlord is abrogated to the extent that an order made against the immediate landlord will on its own be ineffective to terminate the tenancy between that person and his immediate tenant. That and nothing more is I believe the meaning of the provisions in para. (b) of section 7A. Black, J. at p.188 of the report in the Enniskillen Case paraphrases the effect of section 5(5) of the English Act in this way:
The concluding words of that passage reflect the fact that there was a provision in the English Act which obliged the judge to consider whether in all the circumstances it was reasonable to make the order. No such provision exists in our Ordinance. But whether the sub-tenant is joined as a party with the tenant in the proceedings or sued separately after an order has been obtained against the tenant, he is entitled to urge separately upon his own behalf all such matters as might provide him with a good defence under the law. As Rowlatt, J. said in Lord Hylton v Heal (1921) 2 K.B. 438 at p.449 (in a passage relied upon by Andrews, L.C.J. in the Enniskillen Case):
Mr. Swaine says that here, by way of analogy, the sub-tenant can urge the payment of construction money against the making of the order in her regard. That once again brings us back to consideration of the question: Does she have a tenancy enjoying protection under the provisions of section 117? I conclude that she does not and the argument must fail. 24. I agree with the order for costs suggested by Huggins, V.-P. O'Connor, J. (Read by Sir Alan Huggins, V.-P.): 25. I agree with McMullin, V.-P. that the new grounds argued are open to the appellant. It is clear to me that if the points had been taken in the lower court the defendant would not have been able to meet them with evidence. In the circumstances it appears to me to be established beyond doubt that it could not be realistically contended that Madam Chan had not paid key money to Mr. Lau. 26. I agree that the appeal he dismissed. Ground 7 relies upon the contention that Part II does not apply to a subtenancy protected under section 117. Mr. Lau was the tenant of the plaintiff head landlord and Madam Chan was the tenant of Mr. Lau. Madam Chan was a subtenant in relation to the plaintiff. Madam Chan had paid key money to Mr. Lau, and therefore she had by virtue of section 117 acquired protection against any notice to quit that might be given by him. She had not acquired any protection against a notice to quit that might be given by the plaintiff head landlord. Madam Chan's interest, considered as a tenancy, that is considered in relation to the principal tenant Mr. Lau, was enjoying protection under section 117. However considered as a subtenancy, that is considered in relation to the plaintiff head landlord, it was not enjoying such protection. 27. The person claiming possession, in order to rebuild, under section 53(2)(c) is the plaintiff head landlord and therefore what is relevant for the purposes of section 50(6)(f) is whether Madam Chan's interest is protected in its character of subtenancy. It is not. The fact that her interest is protected in its character as a tenancy is not relevant where possession is being sought against Madam Chan in her capacity as subtenant. When the head landlord issues proceedings for possession under section 53(2)(c) he is obliged, if there is a subtenant, to issue proceedings not only against his tenant, but also against any subtenants. That is the effect of section 53(5). In considering the issues between the plaintiff head landlord and the subtenant what is relevant is the position in relation to the subtenant's interest when considered as a subtenancy, not his interest when considered as a tenancy. In my opinion therefore the interest of Madam Chan is not enjoying protection under section 117, for the purposes of section 50(6)(f) in this action. 28. For the reasons given by McMullin, V.-P. I find that ground 5 fails. I agree with the judgment of Huggins, V.-P. as to ground 6 and the order relating to costs made in the lower court. 19th December,1980 |