Chiu Ming Kiang v. William Lee Shung

CACV000085/1990

Landlord and tenant - whether upon the true construction of section 50 (6) (o) of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7, Part II of the Ordinance applies to a tenancy created after the date mentioned in the section where at the time of the creation of that tenancy the tenant was already in possession of part of the premises but as a sub-tenant of the landlord's principal tenant.

Estoppel - whether a tenant who has applied to the Lands Tribunal for the grant of a new tenancy relying on provisions contained in Part IV of the ordinance is estopped from later contending that on the undisputed facts, as a matter of law, the Tribunal has no jurisdiction under Part IV because Part II applies to his tenancy.

BETWEEN

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Coram: Fuad, V.-P., Clough, J.A. & Nazareth, J.

Date of hearing: 10 October 1990

Date of judgment handed down: 16 October 1990

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JUDGMENT

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Fuad, V.-P. (giving the judgment of the Court) :

1. This is an appeal by Mr. William Lee Shung ("the landlord") from a decision of the Lands Tribunal dated 23rd March 1990 (Presiding Officer, His Honour Judge Cruden) in relation to the tenancy of a flat on the 8th Floor of 50, Yen Chow Street, Kowloon.

2. The background facts are as follows. Mr. Chiu Ming Kiang ("the tenant") first occupied a cubicle in the flat in March 1980 as a sub-tenant of the then principal tenant. Sometime in November 1985 the principal tenant stopped paying rent and disappeared. Mr. Chiu was worried and contacted the solicitors acting for the landlord. It was then arranged that Mr. Chiu should take over the tenancy of the whole flat under a new agreement dated 12th December 1985. The rent, from 1st January 1986, was to be $1,018 per month. When the original term of the lease (2 years) was about to expire the tenancy was renewed for a further 2 years at an enhanced rent of $1,323 per month.

3. On 5th June 1989 the landlord gave the tenant the statutory notice for which provision is made by section 119(1) of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 ("the Ordinance") within the time restraints imposed by section 119 (2). He used the "specified" form, CR101 which, inter alia, informed the tenant that "[he] would not oppose an application for the grant of a new tenancy."

4. The tenant responded within the time allowed, on the specified form. In it he said that he would not move out of the flat as he wanted to continue to live there. He had received the landlord's solicitors' letter and would discuss the terms of the new lease with them. The landlord then served the notice provided for by section 119D (3) (a) (ii) of the Ordinance requiring the tenant to make an application to the Tribunal for a new tenancy within 2 months.  This the tenant did, within 5 days, on 31st October 1989.

5. On 10th November 1989, the landlord gave notice to the Tribunal and to the tenant that he would not oppose the grant of a new tenancy "subject to the payment ... of the prevailing market rent to be determined by the Tribunal."

6. It will have been seen, therefore, that the landlord and, in turn, the tenant, proceeded on the basis that part IV of the Ordinance (in which the provisions they purported to comply with in serving their notices and counter-notices are to be found) applied.

7. In his judgment the Presiding Officer noted that in the course of his evidence, the tenant, who was unrepresented, had asserted that the flat was "Part II premises and not subject to Part IV" and had confirmed what he had said in his notice of application for a new tenancy about the date when he first occupied part of the flat as a sub-tenant and what followed.  The Presiding Officer observed that tenants of Part II premises enjoyed "both restricted rents and security of tenure", while Part IV tenants were only given some security of tenure and were required, on the grant of a new statutory tenancy, to pay the prevailing market rent.

8. The Presiding Officer went on to say that the tenant's evidence raised the question Whether the flat was excluded from Part II by virtue of section 50 (6) (o), which provides that Part II does not apply to:

9. I do not need to set out other provisions of the Ordinance for it is common ground that if the tenancy here is not subject to Part II it is subject to Part IV and the application out of which this appeal arises was properly before the Tribunal.  And if Part II applies then the Tribunal had no jurisdiction to entertain the proceedings under Part IV.

10. The Presiding Officer explained that this was the first case which had come before him where an applicant who became tenant of the whole of the suit premises after the date mentioned in section 50 (6) (o) - 10th June 1983 - had nevertheless been a sub-tenant of part of the same premises before that date. For this reason he had adjourned the hearing for further consideration and argument.

11. The Presiding Officer first addressed the question whether the tenant was estopped, by reason of the procedure he had followed (although originally set in train by the landlord) from seeking to maintain that the tenancy he wished to retain came under Part II of the Ordinance. After referring to a number of English authorities he said that he would accept that under English law, estoppel or waiver might prevent an applicant for a new tenancy from later contesting that his premises were subject to Part II of the Landlord and Tenant Act 1954.  However, he was satisfied that the position in Hong Kong was different for at least two reasons. First, unlike the House of Lords judgment in Kammins Ballrooms Co. Ltd. v. Zenith Investments (Torquay) Ltd.  [1971] AC 850 which held that the time limitations were merely procedural and not jurisdictional, the Court of Appeal in Hong Kong had held that various time and other limitations in section 119D of the Ordinance were jurisdictional and not procedural (Sin Hua Trust Savings and Commercial Bank Ltd. v. Ng Yee May CA No. 137/85; Ram Isardas Mahtani v. Wong Kwok Tai CA No. 156/89.)

12. The Presiding Officer said that the second reason why he considered estoppel or waiver did not "so readily arise" in Hong Kong under the Ordinance followed from the fact that, unlike the position in England where applications for new tenancies were heard in the County Court or the High Court (depending on the rateable value of the premises), in Hong Kong the Tribunal had exclusive jurisdiction. He referred to various provisions of the Lands Tribunal Ordinance, Cap. 17 - section 10(6) which relaxes the rules of evidence, section 10(5)(a) which directs that the proceedings be conducted with as much informality as is consistent with attaining justice and to the provision which authorises the President to give directions as to the manner and form in which proceedings are to be conducted - he referred specifically to paragraphs (8) and (9) of Direction No. 1 which are in these terms:

13. The Presiding Officer then turned to address the question whether the tenancy in question was subject to Part II or to Part IV of the Ordinance. He noted that the tenant had continuously been in possession of at least part of the flat from March 1980 to date and that section 50 (6) (o) did not expressly require continuity of the applicant's status as either tenant or sub-tenant before  10th June 1983 until the present, but in his view that was "the necessary factual consequence."  It was clear to him, he said, that where a tenant entered into a new tenancy on or after 10th June 1983, of domestic premises not otherwise subject to Part IV, if on that date he was already in possession of the same premises under a prior tenancy, then the new tenancy was not subject to Part IV. Section 50 (6) (o) only made former non-Part IV premises subject to Part IV, where the tenant under the new tenancy was also a new tenant. In his view the crucial question here was whether premises continued to be non-Part IV premises if the tenant under the new tenancy agreement was formerly merely a sub-tenant and of part only of the premises, later subject to the new tenancy agreement.

14. The Presiding Officer expressed the view that the plain and ordinary meaning of section 50(6)(o), in the context of the Ordinance read as a whole, was that it also excluded from Part IV tenancies where the tenant was already, on or before 10th June 1983, a sub-tenant of only part of the premises included in the new tenancy. Under the section it did not matter that the tenant previously only occupied part of the existing premises. Nor did it matter that the former status of the tenant was merely that of a sub-tenant. Had the legislature intended to exclude from Part IV only those tenancies where the tenant was also previously tenant of the whole of the premises, it could easily have enacted such a provision in unambiguous terms.

15. He commented that the practice of a sub-tenant of the whole or part of domestic premises becoming, during his period of occupation, the direct tenant of the landlord by agreement was relatively common in Hong Kong.  Moreover, the Ordinance itself contained a number of provisions where that position could arise non-contractually by order of the Tribunal or otherwise; these provisions included sections 21, 34, 53 (6A) and 119P(3). In his judgment, the overall scheme of the Ordinance, including those latter sections, was helpful in construing section 50(6)(o).

16. He then held that since the tenant was on 10th June 1983 already a sub-tenant of part of the flat now subject to the new tenancy agreement, it remained excluded from Part IV pursuant to section 50 (6) (o). It followed that the Tribunal had no jurisdiction to entertain the application for a new tenancy brought under section 117 of Part IV.

17. Mr. Anthony Chan, who did not appear before the Tribunal, in a forceful argument, submitted on behalf of the landlord that the Presiding officer had erred in his construction of section 50 (6) (o) of the Ordinance. He contended that by the use of the formulation "a tenancy or sub-tenancy" in that provision the legislature had evidenced its intention that the word "tenancy" should be interpreted in its strict or narrow sense, distinguishing "tenancy" from "sub-tenancy". Similarly, the formula "tenant or sub-tenant" in section 50 (6) (o) was used to distinguish between a grantee who holds from the head landlord and a grantee who holds from the tenant or other grantee. It followed that the section provided for two separate, narrow, channels of inclusion within Part II (and thus exclusion from Part IV):

18. Mr. Chan suggested that such an interpretation was consistent with the use of the word "another" towards the end of section 50(6)(o) in the phrase "under another tenancy or sub-tenancy".  It could not be said that the applicant had already been in possession of part of the premises under another tenancy.  The true position was that he had merely been in possession of part under a sub-tenancy.  He submitted that to adopt the Presiding Officer's interpretation was to read "under another tenancy or sub-tenancy" as if it were "under another tenancy or another sub-tenancy or under a tenancy (if previously a sub-tenant) or under a sub-tenancy (if previously a tenant)".  He suggested that the two-channel interpretation he had put forward was consistent with the purpose of section 50 (6) (o), which was against avoidance and designed to protect sitting tenants and sub-tenants. The provision was aimed at ensuring that a sitting tenant or sub-tenant was not to be deprived of the rental protection of part II by virtue of his innocently and unnecessarily having entered into a fresh tenancy or fresh sub-tenancy with his existing landlord.

19. An important plank in Mr. Chan's submissions was that the new tenancy granted by the landlord on 12th December 1985 was between different parties from the two who had been parties to the agreement entered into in March 1980 now relied upon by the tenant as triggering section 50 (6) (o) in his favour. Mr. Chan also emphasised the change in the applicant's status from that of sub-tenant to tenant, with all that such a change implied.

20. All the members of this Court found the true construction of section 50 (6) (o) in the context of the Ordinance as a whole a difficult task. Miss Kitty Cheng (who did not represent the tenant before the Tribunal) drew our attention to the expression "as the case may be" after the words "tenant or sub-tenant" occurring in section 50 (4) (a) and we accept that it is significant that a phrase such as "as the case may be" does not appear at the end of section 50 (6) (o) or perhaps the words "between the same parties [to the new tenancy or sub-tenancy]".  we do not think that the task of interpretation we have to perform would justify implying either expression into the section.

21. We have been persuaded by the submissions addressed to us by Miss Cheng that the Presiding Officer's interpretation of the section was correct. The provision is drawn in the widest terms and we agree with his observation that the legislature could have enacted more restrictive provisions had it so wished.  We were also influenced, as was the Presiding Officer, by the fact that a sub-tenant of a landlord's principal tenant is afforded a fairly wide measure of protection under the Ordinance in circumstances where privity of contract between the landlord and the sub-tenant has no relevance: see for example section 53(5) to (6B) inclusive and c.f. section 53A (4) (compensation) and sections 62 and 63 (rent increases) upon which Miss Cheng relied.

22. It cannot be gainsaid that the tenant was in possession of part of the suit premises under a sub-tenancy when the new tenancy was created on a date which was after 10th June 1983.   In our view it is the continuing lawful possession that the provision is intended to protect, even if there should be an increase in the area of the premises which is possessed under the later letting. We can see nothing in the provisions of Part II or Part IV of the Ordinance which requires the change of status from sub-tenant to tenant (or vice versa) to be given such significance as to strain the interpretation of the words "... under another tenancy or sub-tenancy" to produce the restrictive meaning which they do not naturally convey. In our judgment the applicant is, therefore, entitled to the benefit of section 50 (6) (o) with the result that his present tenancy is not excluded from the application of Part II; thus Part IV does not apply.

23. As to the estoppel/waiver point also raised by this appeal, we have no hesitation in concluding that it cannot avail the landlord. However, with very great respect to the views expressed by the Presiding Officer, who obviously dealt with the application with anxious care, we reach this conclusion by a different route. In our judgment none of the cases cited by him are relevant to this issue.  If authority were needed it can be found in the decision of their Lordships' in the Privy Council in Kai Nam v. Ma Kam Chan [1956] AC 358, a case from Hong Kong, which was not cited to the Tribunal. There a landlord gave notice to his tenants terminating their contractual monthly tenancies which were then subsisting. The landlord, 2 months later, instituted proceedings against the tenants claiming possession and mesne profits. When the actions came on for hearing, the tenants relied upon the provisions of an ordinance then in force. The landlord contended that each of the shops occupied by the tenants was excluded from the operation of the ordinance as being "an entirely new building" within the meaning of the relevant provision. The tenants argued that it was not open to the landlord to advance that contention because he was estopped from doing so by reason of the fact that he had served notices of increases of rent under the Ordinance which the tenants had acted upon.

24. Lord Cohen, who gave the opinion of the Board had this to say at p.367:

"         On this point [the question of estoppel] their Lordships agree with the Hong Kong courts that the respondent is not estopped by having served notices of increase of rent purporting to be made under the Ordinance and receiving such increased' rent. It is sufficient to observe that if the documents relied on can be regarded as containing representations, such representations are representations of law, not of fact, and cannot found an estoppel. See Territorial and Auxiliary Forces Association of the County of London v. Nichols [1949] 1 KB 35."

25. The Tribunal has a jurisdiction which is limited by the Ordinance. It can hear and determine an application for a new tenancy only if Part IV applies.  If it does not, the Tribunal is without jurisdiction and resort to concepts of estoppel, waiver, acquiescence, or even express consent, cannot confer jurisdiction upon the Tribunal.

26. For these reasons, we dismiss the appeal and, in handing down this judgment, we make an order nisi that the Respondent (tenant) shall have the costs of the appeal.

Representation:

Mr. Anthony Chan (Edmund Cheung & Co.) for the Appellant

Miss Kitty Cheng (C.K. Mok & Co.) for the Respondent