Lai Mai Yu v. Attorney General

HCA002474/1976

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ACTION NO. 2474 OF 1976

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Coram: Trainor, J.

Date of Judgment: 5th July, 1977.

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JUDGMENT

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1. By an agreement in writing dated the 8th May, 1974 the Crown let the property the object of these proceedings to the plaintiff for the term of one year certain from the 1st December, 1973 and thereafter quarterly at the annual rent of $60,000. It was provided in the letting agreement that either party might determine "the term" thereby created by giving to the other at any time not less than three months notice "provided that no such notice shall expire before the 30th day of November, 1974."

2. On the 9th July, 1976 the District Officer of Tsuen Wan wrote to the plaintiff saying, inter alia:

"Please be informed that your Short Term Tenancy No. 103 will be wholly affected by permanent development on or before 15th October, 1976. I hereby give you three months notice to quit and hand back the whole of the tenancy area you are now occupying on or before the 15th October 1976".

To that letter the plaintiff replied on the 17th July saying that by reason of having spent the sum of $200,000 on the property and by reason of considerable business commitments with regard to the property it was impossible to hand over the property at such short notice. It went on to say:

"In this connection, I beg you a favour to grant me an extension of one year, say to the end of June, 1977 ......"

On the 13th August the District Officer replied regretting that he could not help. I might say here that both the letters from the District Officer were signed on his behalf.

3. On the 24th August, 1976 there emanated from the same District Office an unsigned document addressed to the plaintiff. It was common case that the document was a demand for the payment of $15,000 rent for the property in question for the period 1st September to the 30th November, 1976. That sum was paid and a receipt dated the 3rd September was given which stated that the money was received from the plaintiff "in respect of rent for S.T.T. 103 for the period 1.9.76 - 30.11.76". $15,000 is one quarter of the rent fixed for the year 1st December 1973 to the 30th November, 1974; and I assume that "S.T.T. 103" stands for "Short Term Tenancy 103".

4. It was a term of the tenancy agreement that the tenant pay the rates on the property. The plaintiff duly received a demand from the Treasury for rates for the quarter of the year ending 31st December 1976 amounting to $2,862.00 and that amount was paid on the 7th October.

5. A Notice under section 6(1) of the Crown Land Ordinance dated the 26th October, 1976 and another similar notice, but called a "Final Notice" dated the 12th November, 1976 were served on the plaintiff, the first calling on the plaintiff to vacate the premises on the 2nd November and the second calling for possession on the 19th November.

6. On the 17th November, 1976 the plaintiff commenced the present proceedings. In the Statement of Claim endorsed on the writ the plaintiff alleged that on the termination of the year certain he "held over and is still holding over the said tenancy under the same terms and conditions as provided therein the said tenancy agreement on a quarterly basis". The Statement of Claim went on to allege that the Notice to Quit was served wrongfully and in breach of the tenancy agreement and, alternatively, that it required the plaintiff to yield up possession before the end of the quarter ending on the 30th November and in either of which circumstances the Notice was null and void. The plaintiff further alleged that the demand for, and acceptance of rent by the Crown constituted an acceptance of the plaintiff as a tenant, and, further, that by that demand for and acceptance of rent the Crown waived its rights to determine the tenancy before the 28th February, 1977. As to the Notices served under the Crown Land Ordinance the plaintiff alleged that in the premises he is a tenant of the Crown and therefore the notices are null and void, or they were issued ultra vires the powers of the Secretary for the New Territories and therefore null and void.

7. The relief sought by the plaintiff was

8. In a Defence that was a model of clarity, precision and brevity the defendant denied that the plaintiff is holding over and that the Notice to Quit was in breach of the agreement or was null and void. It acknowledged that the Crown asked for and received rent, but denied that it thereby accepted the defendant as a tenant after the 15th October, or waived its rights to determine the tenancy on or before the 28th February, 1977. It admitted the two notices under the Crown Land Ordinance but denied they were null and void.

9. The defendant counterclaimed. In the counterclaim it is stated that in so far as the demand for rent included a period subsequent to the expiration of the Notice to Quit, i.e. 15th Octover to the 30th November, that was a mistake. The defendant claimed:

10. It was alleged in the counterclaim that the Chekiang First Bank Ltd. executed a Bond to secure the due performance of the terms and conditions of the tenancy agreement, one of which conditions was that the plaintiff upon the termination of the tenancy would vacate the premises. The defendant sought an order that the bond be forfeited to the Crown. As Chekiang Bank Ltd. was not before the Court I dismissed that part of the counterclaim.

11. Position of the Parties at the Expiration of First Year.

12. Under the heading "Term" in the schedule to the tenancy agreement the tenancy is stated to be for "One year certain commencing from the 1st day of December, 1973 and thereafter quarterly until determined under Clause 4(h) of this Agreement". Mr.Tong who appeared for the plaintiff contended that when the plaintiff remained in the premises after 1st December, 1974 he held over; and when he paid rent which the Crown accepted there attached to his occupation the provisions of the tenancy agreement the effect of which was to establish a tenancy from quarter to quarter. He went so far as to say that the defendant conceded that the plaintiff held over. The relevancy and importance of the point, as I understand it, was that Mr. Tong would argue that as the plaintiff held over there came into existence a quarterly tenancy which could only be determined by a notice to quit expiring on a quarter day; in this case the 30th November, 28th February the 31st May or the 31st August. On the same basis, i.e. that the plaintiff held over, he would contend that Clause 4(h) of the tenancy agreement does not apply to the relationship that arose between the plaintiff and the Crown after the 30th November, 1974.

13. It might perhaps be appropriate to quote Clause 4(h) at this point:

"4(h) That notwithstanding anything to the contrary herein provided the term hereby created may be determined at anytime by either party giving to the other not less than three calendar months' notice in writing to that effect provided that no such notice shall expire before the 30th November, 1974 and that upon the determination aforesaid by either party no compensation shall be payable to the other."

14. At the outset may I say that I never understood Mr. Edmonds to concede that the plaintiff held over; the farthest he went was to say that even if the plaintiff did hold over it made not the slightest difference.

15. Was There A Holding Over By The Plaintiff.

16. Holding over simply means that on the expiration of a term the tenant remains in occupation of the demised premises. If he does so without either the consent or disapproval of the owner he is a tenant at sufferance; if it is with the approval of the owner then there is a tenancy at will. If the occupant remains with the consent of the owner and pays him rent there arises between them by a presumption of law a relationship of landlord and tenant. When the rent paid is expressed to be at an annual rate, even though payable by instalments, then the nature of the relationship is presumed to be that of a tenant from year to year and such of the terms of the expired lease as are applicable to a yearly tenancy will apply. It is a presumption, however, that is rebuttable by the circumstances. It is when rent is paid and received that the relationship of landlord and tenant is established and the nature of the relationship can be ascertained, e.g. is the occupant a yearly tenant. The great difference is that a notice to quit the property after a certain minimum time and, in the absence of explicit provisions in the expired lease to the contrary, expiring on an anniversary or gale day or quarter day is necessary to determine the occupation when a tenancy arises, whereas a demand for possession is all that is required in the other circumstances.

17. In the instant case there was no holding over. The plaintiff was never either a tenant at sufferance or at will. He was a tenant who occupied the premises under the contract of tenancy of the 8th May, 1974 which provided that he held the premises for one year and thereafter on a quarterly tenancy. What was created by the contract was a continuing tenancy, the first part of which was for a year expiring on the 30th November, 1974, and the other continuing immediately thereupon on a quarterly basis.

18. Was the Notice to Quit a Valid Notice.

19. Clause 4(h) provides that three months notice to determine "the term" created by the agreement may be given at any time. After the 30th November, 1974 the term there referred to was the quarterly term created by the agreement; the term of one year could not be terminated before that date. Mr. Tong would argue that by saying that not less than three months' notice may be given "at any time" it was intended that the notice might be given at any time, that it might be delivered at any time; as the plaintiff held over it did not remove the necessity for the period of the notice to expire on a gale day. To provide otherwise, he said, quoting 27th Edition Woodfall on Landlord and Tenant Vo1. 1 Para. 1984, requires clear and explicit language.

20. In my opinion the language in the agreement is clear and explicit and falls well within what is to be found in para. 400 of the 16th Edition of Hill and Redman Law of Landlord and Tenant quoted by Mr. Edmonds: "The effect of a term that the tenancy shall be terminated 'at any time by notice of a certain length, is that such notice may be given for any date, notwithstanding that the date is not an anniversary of the commencement of the tenancy or a quarter day". Reference is made in paragraph 400 to Soames v. Nicholson⁽¹⁾ referred to by both counsel. I think it is sufficient to quote the heading to that case:

21. Another case cited by both counsel was Wembley Corporation v. Sherren⁽²⁾. In that case the defendant held over after the expiration of a lease and became a tenant from year to year. The lease had contained a clause giving the lessor the right, on the property being required for (inter alia) a public purpose, to determine the tenancy on giving the tenant one month's notice. The plaintiffs, who had become reversioners, required the property for such a purpose and gave the defendant one month's notice. The defendant contended, inter alia, that the clause should be construed to ensure that the term would end on the last day of a year of the tenancy. It was held that "read fairly, the clause operated to enable the plaintiffs to give notice at any time."

22. In his judgment Finlay L.J. said (P.256)

23. He then went on to say, p.257H:

"I think, in the first place, that the clause does apply, and that it falls within the general principles which are stated in the judgment of Sargant, L.J."

24. In this case I have held that the plaintiff did not hold over so as to give rise to a tenancy by implication, but had I done so I would have held that Clause 4(h) of the tenancy agreement would have attached to it and, as in Soames v. Nicholson⁽¹⁾, that the notice need not expire on a gale day. In other words, I held the defendant served on the plaintiff a perfectly good and valid notice to quit and I agree with Mr. Edmonds that it made no difference whether the tenancy was under the agreement or as a result of holding over.

25. Mr. Tong sought to derive some assistance from Kemp v. Derret⁽³⁾. That was a case where the tenant "was always subject to quit at three months' notice". It was held that the tenancy was from "three months to three months" and therefore a notice to quit expiring at the end of any quarter calculated from the time the tenant entered the premises was necessary to determine the tenancy. Keith, Prowse & Co. v. National Telephone Co.,⁽⁴⁾ was also cited by Mr. Tong. I do not think that those cases are of any help to him in the light of the later decisions. It is clear from the learned authors quoted and the later cases cited that where there is a periodic tenancy determinable on notice of a specified length such notice must be given to expire at the end of a year, a quarter or as the case may be unless there is a special stipulation to the contrary clearly expressed. "At any time", or words that can be construed as having that meaning, (Wembley Corporation v. Sherren⁽²⁾) have been held to be such a stipulation, and a tenancy using such a phrase is determinable on any day provided the notice is for not less than the prescribed period.

26. It is my opinion and I hold that the notice to quit served on the plaintiff was valid and effective to terminate the tenancy of the plaintiff.

27. What is the Effect of Service Of Valid Notice to Quit?

28. Does the service of a valid notice to quit irrevocably end the tenancy? The classic case on this point, and one which has survived a number of attacks but emerged unscathed is Tayleur v. Wildin⁽⁵⁾. In his judgment Kelly, C.B. (p.305) said:

"The question is, whether .... if the notice to quit was a notice that could be withdrawn and done away with at the option of the party giving it, and it was in fact so withdrawn whilst the tenancy subsisted, the tenancy would not have been determined. But it is clear that, whether the notice to quit is given by the landlord or the tenant, the party to whom it is given is entitled to insist upon it, and it cannot be withdrawn without the consent of both. If that is so, then the consent of the parties makes a new agreement, and if there is a new agreement there is a new tenancy created to take effect at the expiration of the old tenancy."

Bramwell, B. (p.305) agreed. He said:

"I am of the same opinion. A tenant from year to year has an interest in the land so long as neither party gives a six months' notice to quit. When that is done the estate is determined. This would be abundantly evident if we were to suppose the agreement to be reduced into writing, embodying the term that the tenancy should be determined by a six months' notice. If the notice is given, the tenancy is at an end; the parties may by a parol contract create a new tenancy, which is what is meant by the phrase withdrawing the notice, but the old tenancy no longer exists .....".

29. That case was folloed in Freeman v. Evans (and another)⁽⁶⁾. In that case the plaintiff's predecessors in title on the 20th May, 1888 let certain premises to Evans for a term of one year and so on from year to year, subject to a covenant against sub-letting without the previous licence in writing of the landlord. Thirty years later, on the 29th November, 1918, Evans without permission sub-let part of the premises. On the 31st December, 1919 the plaintiff, being seised in fee simple of all the premises comprised in the letting of the 20th May, 1888, demised the premises to Evans for 5 years at an increased rent. Again there was a covenant against sub-letting without the consent of the lessor. On the 17th February, 1920 Evans proposed to raise the rent of the sub-tenants and on their failing to agree served a notice to quit on them. The sub-tenants then agreed to pay the increased rent and the notice to quit was cancelled, and the sub-tenants continued as tenants at the increased rent. The plaintiff then brought proceedings against the defendant and his tenants to recover possession of the whole of the premises on the ground that as between the co-defendants, by reason of the notice to quit and its subsequent withdrawal, a new tenancy had been created which constituted a breach of the covenant against sub-letting contained in the lease of the 31st December, 1919. A decision that no new tenancy was created was appealed against and, on allowing the appeal, it was held: "That the plaintiff was entitled to judgment, the point being covered by Tayleur v. Wildin⁽⁵⁾, a decision which though not followed by the Court of Appeal in Ireland in Lord Inchquin v. Lyons⁽⁷⁾, had been uniformly accepted and acted upon in England."

30. In his judgment Lord Sterndale M.R. said (p.45)

"As Tayleur v. Wildin⁽⁵⁾ has stood for so long without being disapproved of and has found its way into the text-books, and has no doubt, as Brett L.J. said, been acted upon for a great number of Appeal in England and has never been in any way doubted or criticised by that Court, I think we ought act upon it. That being so I am obliged to hold that here a new tenancy was created ... and that, therefore there was a breach of the covenant not to sub-let without consent ...."

31. Warrington L.J. at 47 said:

"I see no sufficient ground for differing from the view taken by the three judges in the Court of Exchequer ..... Tayleur v. Wildin⁽⁵⁾"

32. Young L.J. at 49 expressed his view of the Tayleur case:

"With regard to Tayleur v. Wildin⁽⁵⁾ I agree with what my Lord and the Lord Justice have said. The principle on which that decision proceeded appears to me to be quite intelligible and having lasted as long as it has done it would not have been open to us to throw any doubt upon its correctness, even if we were more satisfied than any of us are, that it was wrong."

33. Both Tayleur v. Wildin⁽⁵⁾ and Freeman v. Evans⁽⁶⁾ were followed in Lower v. Sorrell⁽⁸⁾.

34. A case that was cited in Freeman v. Evans⁽⁶⁾ and Lower Sorrell was Lord Inchquin v. Lyons⁽⁷⁾. That was a decision of the Court of Appeal of Ireland which decided that where the parties agree to waive or withdraw a notice to quit the parties revert to the status quo ante, but it was rejected in the English cases.

35. With respect and despite my legal education and background I think the English decisions are correct and to be followed. A notice to quit is not a sentence of death passed on a tenancy; it is an execution and no resuscitation is possible. That being so when the notice to quit was served on the plaintiff his tenancy died though he was permitted to remain in the premises until the 15th October without being a trepasser on the property. It follows from what I have said that a payment of rent after due service of a valid notice to quit cannot revive the tenancy.

36. What is the effect of Demand and Acceptance of Rent?

37. The answer to that question depends entirely on the intention of the parties. If the parties were in agreement that a new contract of tenancy should commence then a new relationship of landlord and tenant would arise. But a letting of premises does not differ from any other contract, and the parties must be ad idem. In this case it is clear they never were ad idem with regard to a new tenancy. The letters from the District Officer to the plaintiff made clear what the defendant's view was, and the evidence before me from the witnesses for the defendant, which I accept, satisfies me that the demand for and acceptance of the rent was a mistake. Had these proceedings been by the defendant against the plaintiff it is possible that the latter might have shielded himself behind the principle of estoppel but he cannot as plaintiff avail of that principle as a sword to attack. That being so there is no benefit to be derived by the plaintiff from the fact that he paid rent. (Maconochie Bros. Ltd. v. Brand and Ors.)⁽⁹⁾ The amount that he paid would go towards paying the portion of his occupancy up to the 15th October the balance he was entitled to recover.

38. The Notices under the Crown Land Ordinance.

39. When the notice to quit expired on the 15th October the defendant took no action to enforce its rights. The plaintiff was in unlawful occupation and the Crown could have acted in a number of ways: an action for possession or trepass; or a notice under section 6 of the Crown Land Ordinance requiring the plaintiff forthwith to vacate the premises followed by his immediate removal; there is no minimum time limit fixed by the Ordinance. The defendant chose to rely on the latter procedure and issued the two notices to which I have earlier referred. The plaintiff claims they are invalid; the defendant claims they are not. As the plaintiff was in unlawful possession I hold they are valid. But as the first gave the plaintiff until the 2nd November to cease occupation and as the later one gave him until the 29th November I must hold that he remained on the premises as a licensee of the defendant until the latter date; after that he became a trespasser and remained so until he vacated the premises in February 1977.

40. The result of my decision is that I hold against the plaintiff on his entire claim. As to the Counterclaim I find for the defendant on it except in so far as I have dismissed its claim with regard to the bond of the Chekiang First Bank Ltd. and in so far as I find that the plaintiff was a licensee of the property until the 29th November. As I hold that after that date the plaintiff was a trespasser the defendant is entitled to damages and such damages would include such sums as it may legally be obliged to pay by reason of the plaintiff's refusal to deliver up possession on that date. I direct that an enquiry be held before the Registrar as to what damages (if any) the defendant is entitled having regard to what I next have to say. The defendant is entitled to mesne profits from the 15th October until the date possession was yielded up on a daily basis calculated at the rate of $60,000 per annum credit being given for what has already been paid. Costs to the defendant on the claim and counterclaim less such sum as may be agreed or allowed on taxation in respect of those parts of the defendant's counterclaim on which it failed or partially failed.

Representation:

Mr. R. Tong (C.P. Lin & Co.) for plaintiff.

Mr. C. Edmonds, C.C. for defendant.

(1) (1902) 1 K.B.D., 157

(2) (1938) 4 A.E.R. 255

(3) 3 Camp 510

(4) (1894) 2 Ch. D. 147

(5) (1868) L.R. 3 Ex. 303

(6) (1922) C.D. 36

(7) (1887) 20 L.R. Ir. 474

(8) (1963) 1 Q.B. 959

(9) (1946) 2 A.E.R. 778