Shek Kau v. Poon Kam Cheung

DCCJ001770A/1970

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

ACTION NO. 1770 of 1970

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Coram: District Judge D. Cons in Court.

Date of Judgment: 18 September 1970

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JUDGMENT

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1. This matter first came before me in the form of short legal submissions upon the undisputed terms of a lease. Judgment was immediately given extempore and later reduced to writing at the request of the plaintiff landlord. I am now indebted to the solicitors on either side for more extensive arguments addressed to me upon the landlord's application for review.

2. The question to be decided is simply this: Is a tenancy for three years, which gives an option to the tenant, and to the tenant alone, to determine the same at any time within that period upon one month's notice to quit, a tenancy excluded from the application of the Tenancy (Notice of Termination) Ordinance (Cap. 335) by reason of section 2 subsection 2(a) thereof, which provides that the Ordinance shall not apply to:-

"a tenancy for a fixed term of three years or more the agreement for which contains no provision for earlier determination of the same other than for breach of any of the provisions of the agreement",

or to put it in other words, does the qualification contained in that subsection relate only to options for the benefit of the landlord. To arrive at a solution it may perhaps be helpful to trace the history of similar provisions in other tenancy legislation. To avoid needless repetition and confusion from the various lengths of the terms involved I will speak merely of "long leases".

3. Rent acts were first introduced into England at the time of the first world war. Section 8(3) of the Increase of Rent and Mortgage Interest (Restrictions) Act 1920 prohibited the payment of premiums for controlled dwellings, but the restriction did "not apply to the grant, renewal or continuance [of long leases]". The 1923 Act decontrolled otherwise rent restricted dwellings which were the subject of long leases, although control was re-imposed again some fifteen years later. During the respite, however, the point was taken that a long lease was not properly so called if it gave to the tenant an option to determine within the prescribed length: Quinlan v. Avis⁽¹⁾. But the Court rejected the argument, basing its decision upon the intention of Parliament to give the tenant security for at least that length of time and being of the opinion that such security was not in anyway lessened by the tenant's option to determine sooner.

4. After the last war similar legislation was introduced into this Colony by the British Military Administration, whose proclamations were later embodied, with amendments, into the Landlord and Tenant Ordinance, 1947, (Cap. 255). Excluded from the operation of that Ordinance were, "business premises which may .......... be let for a [long lease]". That exclusion has remained to the present day, and has been interpreted upon the same principle as that adopted by the English Divisional Court. In Tse Chuen Wing & others v. Tak Wing Firm⁽²⁾ the District Court held that a long lease lost that characteristic if the landlord had the option to determine within the said period, and again in Lo Yim Chai v. Au Kin Kwan⁽³⁾ if the landlord could not guarantee uninterrupted possession for the necessary length of time.

5. Up to this stage the law is clear. A long lease is not a long lease where the landlord has the option to determine within the prescribed period, but an option in favour of the tenant is immaterial. The position first becomes confused after March, 1963, when the Legislature adopted, in the Rent Increases (Domestic Premises) Control Ordinance, the new and fuller phraseology that it had first used the previous year in the Notice of Termination Ordinance and which is recited shortly after the commencement of this judgment. A change of words frequently indicates a change of meaning, particularly where the original words have been the subject of judicial interpretation. No reason appears from the Ordinance itself, or the objects appended to the introductory bill, why the Legislature decided in this respect to abrogate the rule laid down in Quinlan v. Avis. But that it did so appears to be confirmed by regulations made only 5 months later. Under the 1963 Ordinance the Governor-in-Council may in his absolute discretion exclude from the operation of that Ordinance any particular or class of premises of tenancy. In August of the same year the Rent Increases (Domestic Premises) Control (Exclusion) Order, 1963 was made. The effect of this was to equate with a long lease a short lease which gave the tenant the option to extend beyond doubt, a long lease becomes a short lease where the landlord has an opportunity to determine, a short lease must become a long lease if the tenant has the option to extend. He has at the outset precisely the same security as if he had a long lease determinable at his own option. The distinction is purely a matter of expression. If authority is necessary to support this view it may be found in the case of Rex v. Godinho⁽⁴⁾ where the Judges of the East African Court of Appeal follow what they term to be a "principle ...... beyond question" and apply what appears to be an English County Court decision. If therefore the rule in Quinlan v. Avis had continued to apply after the passing of the 1963 Ordinance the net result would have been the exclusion of the short lease extendable from its operation. Perhaps this is more easily understood if the double negative in that Ordinance is eliminated and section 3(5) read as:-

"This Ordinance shall apply to a [long lease] which contains a provision for earlier determination of the same."

At first sight the Ordinance would apply to a short lease extendable, this being the same as a long lease determinable, but the rule in Quinlan v. Avis would have provided that the tenant's option should be ignored thereby taking the lease out of the Ordinance and depriving the tenant of its benefit. But as the Governor-in-Council thought it necessary to make express regulation to achieve the same position, it must be assumed that authority at least was of the opinion that the new wording had effected some change in the existing law. The Council of course is not the Legislature, but with the ex officio members of each being almost identical and including the Attorney General it is a strong indication that the Legislature was satisfied that a correct interpretation had been placed upon its words.

6. Subsequent legislation, however, has raised doubts. The 1963 Ordinance expired by effluxion of time in 1966. Depression of the realty market made further legislation unnecessary until January this year when temporary legislation was passed, to be replaced later by the Rent Increases (Domestic Premises) Control Ordinance 1970. The wording of the relevant section in each of this year's Ordinance is identical and follows that of the 1963 Ordinance, but with the important distinction that the words "by the landlord" are inserted as a further qualification to the provision for earlier determination. It might have been simpler had the paragraph stopped after the words "a fixed term of three years or more"; it has never been suggested, as far as I know, that a long lease loses that characteristic merely by containing provisions for determination on breach of any of its terms. However, the meaning in this Ordinance is now made clear beyond doubt, disposing one would think of any necessity for legislation similar to that of the 1963 regulation. Yet this is to be found reenacted in the very next paragraph. I am unable to think of any purpose that may be served by its present inclusion, but the mere fact of its inclusion can only cast suspicion upon the process of reasoning evolved earlier in this judgment to account for its first enactment.

7. I turn now to the arguments which the landlord has put forward. Principally he says that the one cardinal characteristic of all rent protective legislation is the exclusion of the tenant who already holds the benefit of a long lease. I am not sure that this is necessarily so, at least with regard to this Colony. The provision as to long leases in the Landlord and Tenant Ordinance relates only to business premises; in the Rent Increases Ordinances the long lease exclusion might very well stem from the temporary nature of the legislation itself. In any event, with regard to the 1963 Ordinance the argument begs the question. But accepting the principle to some extent in my earlier decision I then rejected it in relation to the present question by distinguishing the object of the two types of legislation, the Landlord and Tenant and Rent Increases Ordinances dealing primarily with increases of rent and security of tenure, the Notice of Termination Ordinance with warning of eviction. A closer examination, however, reveals that the distinction is not quite as I then thought. The Notice of Termination Ordinance seems to have been enacted with two purposes in mind. The first, as expressed in its preamble, is to "provide for a minimum of six months' notice of termination of certain tenancies". That aspect of the Ordinance still remains effective, applying at the moment principally, although by no means exclusively, to business premises. On its face it operates upon both landlord and tenant, although there cannot be many cases in which a landlord will reap any practical advantage.

8. The second purpose of the Ordinance was to impose a halt of six months, later increased to twelve, upon the rent spiral of that time, while consideration was being given to the introduction of suitable controlling legislation, legislation which eventually took the form of the 1963 Ordinance. This is apparent from the explanatory notes attached to each of the relevant Bills. In this respect security of tenure was a primary consideration, but it was a consideration that vanished completely upon the passing of the later legislation and is of only very minor importance with regard to the permanment features of the Ordinance.

9. A further argument of the landlord is that the construction sought for by the tenant in the present instance would give birth to a unique creature in the tenancy world, namely, a domestic tenant holding both a long lease and the benefits of six months notice to quit; that the Legislature should not be taken to have acted so strangely without express provision in clear, uncompromising words. It is an accepted principle that where a statute is ambiguous, it should not be construed to produce capricious results; but it is equally the case that a Court should not miscontrue clear words because it suspects that some unintended results may follow. Moreover, even if the creature suggested is unique, he does not strike me as so monstrous or undesirable that I should usurp the authority or duty of the Legislature to put him down.

10. I should perhaps interpose here that during the course of the second hearing it was overlooked that the tenancy in the present instant was in fact for business purposes and not domestic, although this does not in anyway affect the principle of the argument.

11. Finally the landlord suggests that the subsequent words "other than for a breach of any of the provisions of the agreement" can relate sensibly only to provisions in favour of the landlord and should be taken as indicative of the tenor of the whole paragraph. The basic premise of this argument is I think substantially correct. It would be unusual for a lease to contain a provision for the tenant to determine by reason of the landlord's failure to conform to any of its terms. But the consequence suggested does not necessarily follow. Once the Legislature had embarked upon the embellishment of the simple words contained in the Landlord and Tenant Ordinance it became obliged to carry on with further qualifications relating to a possible forfeiture, whether the provisions for earlier determination other than by way of forfeiture were expected to be in favour of the landlord alone or in favour of both the landlord and the tenant alike.

12. This question has not been easy to decide, but the difficulties have perhaps been self-induced. Taken in isolation the words of the section are sufficiently clear; doubt creeps in only when they are related to what is suggested as the general intention or policy of the Legislature over the whole range of protected tenancies. But having allowed myself to be led into this wider field I must say that I find nothing there, nothing in the arguments put forward, sufficiently compelling to warrant my rejecting the face value of the words in question. This application for review is therefore refused. Costs of this application to the defendant.

18 SEP 1970

Representation:

Mr. Wimbush (Deacons) for plaintiff.

Mr. Cheung (W.I. Cheung & Co.) for defendant.

Judgment delivered on 18th of September, 1970.

(1) (1933) 149 Law Times, p.214.

(2) (1958) D.C.L.R. p.35.

(3) (1960) D.C.L.R. p.224.

(4) (1950) Vol. 16-18, East African Court of Appeal Reports, p.132