Chinese Estates Ltd v. Cheng Cheong Kee and Others

DCCJ000001/1974

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

Tenancy Tribunal Appeal No. 1 of 1974

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Coram: Liu, D.J., Q.C. in Court.

Date of Judgment:

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JUDGMENT

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1. The Applicants are the owners of the China Building, and they sought an order for possession from the Tenancy Tribunal in respect of Room 415 therein against three Opponents, a sole proprietorship firm and the surviving son and widow of its deceased sole proprietor. At the hearing before the learned President of the Tenancy Tribunal, the parties hereto agreed on facts which are set out below:-

2. It was further agreed that the suit premises were pre-war property subject to Part I of the Landlord and Tenant (Consolidation) Ordinance Cap.7. The said Tenancy Agreement dated the 1st May 1946 and the said letter dated the 13th July 1972 were produced by consent as Exhibit A and Exhibit B. The parties have confirmed before me that the 2nd Opponent is the surviving son of the deceased Cheng Cheong.

3. The procedural difficulty which would immediately leap to one's mind is the apparently erroneous joinder of the said deceased's sole proprietorship firm as the 1st Opponent herein: it would appear that the proper party should be the executor de son tort or the Official Administrator of the estate of the said deceased. No point was taken on this matter before the learned President of the Tenancy Tribunal or is now being taken before me on appeal, and in view of the conclusions I have arrived at, it would be futile to postpone these proceedings for bringing before the Court the proper party representing the estate of the said deceased.

4. In substance, the Appellant's case is: the contractual monthly business tenancy granted to the said deceased under the said Tenancy Agreement was a personal interest which immediately merged with and was superseded by the deceased's statutory tenancy of the same premises; upon his death, the deceased's statutory tenancy came to an end; as there was no subsisting contractual tenancy interest which had been entirely devoured by the statutory tenancy, the estate of the said deceased was entitled to no interest in or of the suit premises; as it was impossible to have a transmission of the statutory business tenancy to the widow of a deceased tenant who resided elsewhere from the business premises or any transmission of statutory business tenancy at all, the 3rd Opponent has acquired no interest whatsoever in or of the suit premises, and consequently the opponents are all trespassers. Alternatively, the Appellants seek to set up a case of unlawful assignment, transfer, subletting or parting with possession of the suit premises by the 1st Opponent to the other Opponents.

5. Counsel for the Appellants submitted (A) that as Cheng Cheong Kee was not a legal entity, the tenancy under the said Tenancy Agreement (Exhibit A) was created in favour of its sole proprietor, the said Cheng Cheong, deceased, personally and alone; thus, in the circumstances of this case, not being a party to the said Tenancy Agreement, none of the 2nd and 3rd Opponents could derive any contractual tenancy interest therefrom, (B) that the ratio decidendi of Law Yuk Chuen v. Ah Yin (1) excludes the principle of transmission from the case of the widow of a deceased business tenant who did not reside in the business premises, and (C) that as the contractual tenancy under the said Tenancy Agreement merged with and was superseded by the statutory tenancy of the same premises, upon the incidental termination of the deceased's statutory tenancy at the time of his death, there was no tenancy interest of any kind subsisting, and the landlord being entitled to immediate possession may eject the occupiers found in the suit premises without having to serve any or any contractual notice to quit on the estate of the deceased tenant. On this last submission, Counsel for the Appellants developes his contention thus: our local definition of "tenant" differs from that of the England Rent Acts in that it does not include a person deriving title under the original contractual tenant, and the reason for such omission in Hong Kong is that we have no contractual tenancy to devolve upon the death of the tenant as such contractual tenancy has merged with the statutory tenancy and lost its identity from the very inception; further as all tenancies of pre-war buildings are, subject to certain exemptions, protected, if counsel's contention were erroneous (i.e. a contractual tenancy might survive), a person who derives title under such original contractual tenant would enjoy statutory protection as a tenant within the meaning of the definition of "tenant" in our local Ordinance; such state of affairs, counsel submits, would do violence to the language in our definition of "tenant" which has, for this specific purpose, deliberately omitted the words "any person deriving title under the original tenant".

6. I will consider these submissions in the reverse order. Under s.12(1)(f) of the Act of 1920, the expression "tenant" included any person deriving title under the original tenant. In England, a tenant who is in possession under a contract of tenancy but at the same time looks forward to enjoy the protection of the Rent Acts is generally known as a protected tenant, and the "status of irremovability" which comes into existence on the termination of such a contract of tenancy is known as a statutory tenancy. See p.p. 1553-4 Woodfall on Landlord & Tenant 27th Ed. Volume 2, p.882 Hill and Redman's Law of Landlord & Tenant 15th Ed., and p.18 Megarry on The Rent Acts Volume 1 10th Ed. In England, as the tenant will become, if personally resident in the premises, a statutory tenant upon termination of his contractual tenancy, the person who derives title under the original tenant and is for the time being a contractual tenant, if himself personally resident in the premises, may also enjoy statutory protection at the termination of his acquired contractual tenancy. It is the passing of the contractual right before the commencement of the statutory tenancy, and it is not to be confused by the fact that under the English Rent Acts the right to statutory protection cannot be passed without the prior consent of the landlord. See para. 2636 in Volume 2 Woodfall on Landlord & Tenant 27th Ed. Therefore, by including a person deriving title under the original contractual tenant, the definition section 12 of the Act of 1920 merely anticipated the transfer of the contractual interest before the crystallization of the statutory tenancy, and in no way did it enable the voluntary passing of the right to statutory protection. In other words, even under the Rent Acts the passing, voluntary or by devolution, of contractual interest can be effected only before the coming into being of a statutory tenancy in favour of the original tenant, and the statutory tenancy which arises on the termination of the contractual tenancy cannot be freely conveyed without the landlord's consent. Obviously, the inclusion of the person deriving title under the original tenant in the definition of "tenant" in the Act of 1920 would not undermine the personal nature of the right to a statutory tenancy. Thus, the definition s.12(1)(f) in no way made the right to statutory protection under s.15 of the Act of 1920 transferrable or less personal. Similarly, the definition of "tenant" in s.113 of the Rent Act, 1968 (which includes even a statutory tenant, a sub-tenant in addition to any person deriving title under the original tenant or sub-tenant) has not made the right to statutory protection under s.3 thereof transferrable or any the less personal. See p.p. 891 & 1052 Hill & Redman's Law of Landlord & Tenant 15th Ed. In Part I of our Landlord & Tenant (Consolidation) Ordinance Cap.7, the position is somewhat different. Whilst the English Rent Acts afford protection against ejectment only to statutory tenants after the termination of their preceding contractual tenancies, our Part I protects both contractual and statutory tenancies. If "tenant" in our s.2 were to include a person deriving title under the original tenant, by reason of the dual application of our Part I to both contractual and statutory tenancies our s.17 would put such a person in the position of a statutory tenant with the benefit of statutory protection and would in effect allow an unfettered passing, voluntary or by devolution, of the purely personal right to statutory protection; further, the image of a personal right to statutory protection would then be completely shattered by the possibility of free alienation of statutory protection by one contractual "tenant" to another, and the safeguard against unlawful assignment, transfer, subletting or parting with possession afforded by s.36 of Part I of our Landlord & Tenant (Consolidation) Ordinance Cap.7 would be somewhat affected, particularly in the devolution of contractual interest. Therefore, it stands to reason why our definition of "tenant" should omit the reference to a person deriving title under the original tenant. I cannot accept Counsel's submission that the subsistence of a contractual tenancy would confer statutory protection on all persons deriving title under the original contractual tenant. An unlawful transfer of such an original contractual tenancy in breach of the provisions of the Ordinance or otherwise will not turn the unlawful transferee into a tenant of the landlord or a "tenant" for the purpose of our Ordinance, but a lawful transfer with the consent of the landlord will. A person deriving title under the original contractual tenant by devolution upon his death (e.g. the Official Administrator or his personal representative) will have such contractual right suspended, if he should happen not to be the very person to whom the statutory tenancy has been transmitted. In my judgment, the omission of the phrase "any person deriving title under the original tenant" from the definition of "tenant" in our Ordinance could not be for the reason advanced by counsel for the Appellants. It would seem that these words had to be omitted on account of the dual application of Part I of our Ordinance to as well contractual as statutory tenancies. But whatever the real motivation behind such omission was, I am convinced by a wealth of local authorities that a contractual tenancy may prevail in pre war protected premises. In the Wing On Company Limited v. Sheun Hai Yue (2), Reece, J. decided at p.215 thereof that the a new contractual tenancy created after the expiration of an earlier exempted contractual tenancy was within the provisions of the then Landlord & Tenant Ordinance. Gould, J. sitting on appeal from a decision of the Tenancy Tribunal, observed that the definition of "tenant" in the Landlord & Tenat Ordinance was wide enough to include both contractual and statutory tenants. See Far East Aviation Co. Ltd. & Another v. F.M. Soares & Others (3) In Ng Kam Chuen v. The World Motor Repairing Works (4), Judge Huggins, as he then was, felt constrained to recognize the possible subsistence of a contractual tenancy in pre-war protected premises. The Full Court in Wong Choi Hai v. Wong Nui (5) also accepted the existence of a contractual tenancy in protected premises. The proviso to s.17 of the Landlord & Tenant (Consolidation) Ordinance, Cap.7 expressly dispensed with the service of a notice to quit, "notwithstanding any-thing in the contract of tenancy", by "a landlord who obtains an order for possession", and that is indicative, in the Ordinance itself, of the settled principle that a contractual tenancy interest may exist in premises controlled by the provisions of our rent restriction legislation. The concept of a subsisting contractual tenancy under our rent restriction Ordinance has so deeply implanted into our law that it would be almost reckless now to endeavour to uproot it. In my judgment, the contractual tenancy, unless expires by effluxion of time or otherwise terminate, will enjoy like protection as that enjoyed by a statutory tenancy and does not lose its own identity by a merger. Therefore, unless it is otherwise expressly dispensed with, e.g. in the proviso to s.17 of the Landlord & Tenant (Consolidation) Ordinance, Cap. 7, a notice to quit is necessary to terminate such an existent contractual tenancy.

7. I turn next to consider Mr. Tang's second submission. In 1958, Judge Huggins, as he then was, held that a non-occupying tenant was entitled to statutory protection in Hong Kong. Vide Ng Kam Chuen v. The World Motor Repairing Works. ibid. (4) The learned judge acknowledged the dual application of the Landlord & Tenant Ordinance to domestic and business tenancies alike and equated an occupying business tenant as one who was "actually carrying on a business in the premises". With usual admirable clarity, the learned judge left it in no uncertain terms that "personal residence" was irrelevant to statutory protection for a business tenancy under the Landlord & Tenant Ordinance. In 1960, Judge Macfee held in Law Yuk Chuen & Another v. Ah Yin (1) that there could be no transmission of business premises or domestic premises at which the deceased tenant did not personally reside at the time of his death. It would seem that Judge Macfee was not prepared to sweep aside the right to statutory protection of non-occupying tenants in its entirety, but he restricted the transmission of statutory protection on death to premises actually occupied by the deceased statutory tenant as his residence. The learned judge derived support for his conclusions from the definition of "tenant" and the English case of Collier v. Stoneman (6). No attention seemed to have been drawn to the very crucial facts that the English Rent Acts were confined to dwellings in domestic premises and that in England under the principle of Skinner v. Geary (7), personal occupation was a pre-requisite to statutory protection. On the force of Collier's case, the learned judge must be taken to have read into the definition the words similar to those inserted within the brackets below: "tenant ....... includes ....... (for the purposes of premises occupied by the original tenant as his own residence) the widow of a tenant, residing with the tenant (at such premises) at the time of his death". Apart from the fact that had the legislature so intended, it could have expressly enacted in precisely that language, such construction was unwarranted and is not consistent with the general tenor of our rent restriction legislation. In 1962, Judge Pickering, as he then was, seemed to have accepted the decision in Ng Kam Chuen's case (4) as establishing the principle and held that in Hong Kong the widow of a tenant who did not reside in the shop-front was entitled to have statutory protection by way of transmission. See Ho Yin Sham v. Chong Chi Yan (8). The Full Court in dealing with tenancy by estoppel in Chan Sang v. Choy Yuk (9), made no adverse comments on the transmission of a statutory tenancy to the widow of a non-occupying tenant during the course of its observation on the question of non-suspension of the contractual tenancy right in the case of a non-occupying widow. In another case in 1963, the Full Court accepted as settled law that a non-occupying tenant is entitled to statutory protection. See Wong Choi Ha v. Wong Nui ibid (5). The consenus seems to be at variance with the decision of Judge Macfee in the 1960 Law Yuk Chuen's case. The decisions of Judge Huggins and Judge Pickering, as they then were, are, in my judgment, obviously unchallengeable. In fact, Judge Pickering, in his adoption of the principle laid down by Judge Huggins, decided on the very point of transmission in favour of the widow of a non-occupying tenant of protected business premises. The decision in Law Yuk Chuen & Another v. Ah Yin (1) is, in my view, erroneous. In the result, I do not accept Counsel's second submission.

8. I can find no flaw with the remaining submission of Mr. Tang, counsel for the Appellants. It requires no authority for the fundamental concept that a letting in the name of a sole proprietorship firm is tantamount to a letting to its sole proprietor.

9. I hold in favour of the Appellants on the first submission but against them on the second and third submissions. It follows that the 3rd Opponent, being the surviving widow, has acquired a statutory tenancy by transmission as at the death of her late husband and that the contractual tenancy, though suspended during the subsistence of the transmitted statutory tenancy, is vested in the Official Administrator or the personal representative of the estate of her said late husband. Neither the transmitted statutory tenancy nor the contractual tenancy has been duly terminated, and the appeal must therefore fail. I ought to mention, en passant, that there is not one iota of evidence of the alleged unlawful assignment, transfer, subletting or parting with possession, and that the 3rd Opponent's transmitted statutory tenancy as held by this Court has virtually defeated the Appellants' alternative contention. I, therefore, dismiss this appeal with costs on Scale V with certificate for counsel.

Representation:

(1) 1960 DCLR 33

(2) 1959 HKIR 200

(3) 34 (1950) HKLR 53, at p.59

(4) 1958 DCLR 229, at p.235

(5) 1963 HKLR 955, at p.p.958 & 961

(6) (1957) 3 A.E.R.20; (1957) 1 W.L.R.1108

(7) (1931) 2 K.B.546

(4) 1958 DCLR 229

(8) 1962 DCLR 12, at p. 20

(9) 1963 HKLR 476 at p.480.

(5) 1963 HKLR 955