Wong Kwan Cheng v. Kam Lai-hung

DCCJ004338/1974

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT KOWLOON

CIVIL JURISDICTION

ACTION NO. 4338 OF 1974

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Coram: D.A. Davies, D.J.

Date of Judgment: 16 January 1975.

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JUDGMENT

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1. In this action, the plaintiff, who is the registered owner of the premises in suit, has sued his tenant She Kwai Thing, and obtained judgment against her in default of defence.

2. Prior to the entry of the said judgment however, Kam Lai Hung, who is the present occupier of the premises, applied to be joined in the action, and this application was granted. Thereafter, Madam She has been referred to as the 1st defendant and Mr. Kam Lai Hung as the 2nd defendant.

3. The plaintiff purchased the suit premises from one Jue Shih Yueh in February 1958. It is a plot of land with a stone house erected thereon. The house stood on the land at the time of sale, in February 1958. It is leasehold property, the Crown lease having been granted on 18th March 1905, for a term of 75 years, thus due to expire in just over 5 years' time.

4. The premises are described as agricultural premises, and the Crown lease stipulates that the user may not be altered without licence from the Crown. As from 1st August 1967, plaintiff, through his agent the Dah Yuan Real Estate Co., Ltd., let the premises for a term of 3 years to 1st defendant. The written tenancy agreement contained a clause that the premises were to be used only for the business of a school, and other clauses which, inter alia, forbid sub-letting, forbid the installation of machinery, preparation of food, use of the premises as domestic or sleeping quarters, and a host of other restrictive covenants.

5. According to D2 (and there is nothing to gainsay it), D1 let the whole of the premises to him exactly 2 months later, with effect from 1st October 1967.

6. Since then D2 has been living in the stone house with his wife and children, and has extended the building by erecting outhouses, wherein he has 11 sewing machines which he uses to operate a woollen knitwear, factory known as the Hung Kee Company, duly registered.

7. D2 has said that until recently, he was unaware of any tenancy agreement between D1 and plaintiff. Indeed, he did not even know who the landlord was. Prior to his occupancy, 1st defendant had told him that she did not find the premises suitable to her purposes and there fore wanted to let them.

8. The witness for the plaintiff, Mr. Yip of the Dah Yuan Real Estate Co., Ltd. has said that equally, the plaintiff and/or his agents, was unaware that 1st defendant was not in occupation of the premises.

9. When the lease expired in 1970, no new agreement was entered into and 1st defendant held over, with the plaintiff's consent. Subject to increases in rent and also the alteration of the tenure to a monthly tenancy arising by operation of law, 1st defendant continued to hold, on the same terms as hitherto, including of course, all the restrictive covenants.

10. Throughout the fixed term of the original tenancy, and there after, rent was received from 1st defendant by post, at the Dah Yuan offices, and duly acknowledged by a receipt sent therefrom to 1st defendant, also by post.

11. The letter-heading on the notepaper used by 1st defendant read "Titus School and Kindergarten (wrongly spelled, I may say - not a very good advertisement for a schoolmistress!) 216, Sheung Yuen Ling, Diamond Hill, Kowloon".

12. The tenancy agreement refers to the suit premises as 216C (also known as 216), and it was accordingly assumed by plaintiff's agents that 1st defendant was duly in occupation of the suit premises as a school. I should perhaps more strictly use the expression "School extension for the evidence is that 1st defendant's main school was on an adjoining plot, and her stated object in renting the suit premises was enlarge her school accommodation. It was evidently a day-school only.

13. I think that the foregoing has set out most of the salient facts, and it is time that I turned my attention to the legal aspects of the matter.

14. Basically, it is the plaintiff's contention that 2nd defendant's occupation of the suit premises is a trespass. Mr. Wat, for plaintiff, has submitted that 2nd defendant's very presence there, and a fortiori the nature of his user of the premises, constitutes breaches of many covenants of the tenancy agreement between plaintiff and 1st defendant, nor the least of which is the covenant against sub-letting.

15. On this ground alone, he submits, there is no lawful subtenancy, and 2nd defendant cannot claim protection under any statutory provision. He adds, however, that should this ground fail, 2nd defendant cannot avail himself of protection under Part II of the Landlord and Tenant (Consolidation) Ordinance, by reason that the evidence indicates the primary user of the premises by 2nd defendant to be non-domestic.

16. Mr. Ho for 2nd defendant has based his case upon 2 alternative submissions - firstly that Part I of the Landlord and Tenant (Consolidation) Ordinance applies to the suit premises, and thus that 2nd defendant is entitled to the protection afforded by that Part.

17. Or in the alternative, that Part II applies to the premises, and 2nd defendant is entitled to protection there under as a sub-tenant of domestic premises.

18. I will deal with these contentions seriatim:

19. 1) Mr. Ho refers first to the definition of "agricultural land as set out in section 2 of Part I

"agricultural land" means land which is held from the Crown on terms the effect of which is to prohibit the use thereof otherwise than as agricultural land or to prohibit the erection thereon of any building without the consent of the Crown"

I think that it is unarguable that the suit premises are, by the very terms of the Crown lease (produced Ex. P4) within the meaning of that definition.

20. Next Mr. Ho draws my attention to section 3(1)(b)of Part I

"agricultural land or any building thereon, other than a building erected before the 17th day of August, 1945"

21. The converse of this proposition clearly is that this Part shall apply to agricultural land or any building thereon which was erected before 17th August 1945.

22. I will pause at this point to mention that Mr. Ho has quoted me a judgment of Williams Ag. C.J. in Chan Pui v. Chu Yan Kit 1950 H.K.L.R. 297, which concerns the application of the Landlord and Tenant Ordinance 1947 to agricultural land.

23. Mr. Wat has replied that this judgment does not assist 2nd defendant's case but rather militates against it.

24. Be all that as it may, I can, however, with respect, unhesitatingly brand that judgment a red herring for the purposes of my present deliberations.

25. The 1947 Landlord and Tenant Ordinance did not contain any provision similar to section 3(1)(b) of our present part I, which was enacted only in 1953. Indeed, it was probably as a result of the uncertainty complained of by the learned C.J. in the Chan Pui case, and his recommendation "My opinion, though it is obiter, is that the Ordinance does not apply to agricultural land wherever situate in the Colony. If the Ordinance is amended in the near future, I suggest that these questions be clarified beyond doubt," that section 3(1)(b) came into existence.

26. Plainly, we are now bound by the clear wording of a statutory provision, and the judgment in the Chan Pui case is, in all the circumstances, value less to either side.

27. Reverting again to Mr. Ho's submissions in relation to section 3(1)(b), he has urged upon me that the absence of any evidence as to when the stone house was built is fatal to plaintiff's case. His argument is that "the onus is upon the plaintiff to take the premises out of the section, and if he cannot do that, then Part I will apply".

28. In other words, he submits that it is plaintiff's burden to show that the stone house was erected not earlier than 17th August 1945.

29. It is undeniable that there is not a scintilla of evidence direct or indirect, as to the age of the stone house which stands on the suit premises. Yet, I must ask myself, upon whom does the onus of proof lie?

30. Unlike Part II of the Ordinance which by virtue of section 50(3), places the onus of proof that a building is not post-war upon the party so asserting. Part I contains no specific evidenciary provisions relating to section 3(1)(b).

31. Section 3(2) does provide for resolution of doubt by a tribunal on the application of either landlord or tenant, but this offers cold comfort in the present case since, it would appear, neither side has seen fit to so apply.

32. I have done some research into this question of onus in relation to section 3(1)(b). The matter seems to have been considered in only two reported cases, both based upon the old Landlord and Tenant Ordinance, but after the 1953 amendment, so that the provision referred to is identical to the present section 3(1)(b). The first in point of time, appears in the judgment of Charles D.J. in Tye Tin Fuk v. Ng Keung Weaving Factory (1957 D.C.L.R. 161), and the second reference to the question is found in the judgment of Wylie D.J. in Tong Mo Chiu v. Kai Sun Iron Factory & Another(1963 D.C.L.R. 212).

33. I am somewhat surprised that Mr. Ho did not elect to quote this latter judgment to me since, it would seen, he appeared in the case, and the learned judge's remark, obiter though it was, supports his present submissions.

34. Though I have perused the works of several learned text-book writers, I have derived scant assistance from them, partly because they give little space to matters of onus generally, but more particularly, of course, because section 3(1)(b) is peculiar to our own legislation.

35. In the cases above-mentioned each of the learned judges has adopted a different viewpoint.

36. Judge Wylie's reference to the matter in the Tong Mo Chiu case is very short. It is to be found on p. 217, para. 2, first sentence "As regards the phrase "or any building thereon" in s.3(1)(aa) of the Ordinance, even were I to assume that the land was agricultural the plaintiff, in order to take the case outside the Ordinance, would have to show that any building or buildings erected on the lots was or were erected after 17th August, 1945." It does make clear, however, that he regarded the onus as lying upon the plaintiff. Although that case went to the Full Court on appeal, Judge Wylie's dictum was not pronounced upon in that appeal, which was founded upon other issues.

37. The relevant portion of the Judge Charles decision appears at p.163, last para. to p.165 end of para. 1 "The evidence relating to the date of the erection of the warehouse was certainly left in a most unsatisfactory state, as. the plaintiff chose to rely upon the evidence of the building contractor that he had erected a warehouse for him in 1951, although the contractor could not say that he had erected the building on the land claimed. Consequently, there is no evidence identifying that warehouse with the one claimed and as to when the one claimed was erected, and the question arises: Upon whom is the onus of proof under section 3(1)(aa) of the Landlord and Tenant Ordinance as to that matter?

38. In my judgment the answer is that the onus is upon the defendant and the second defence, therefore, fails. The general rule is that a person claiming to be within an exception to a general provision has to prove his claim. Section 3(1)(aa), in terms, exempts from the application of the Landlord and Tenant Ordinance all buildings upon agricultural land except those erected before the 17th August 1945. The use of the language of exception in clause (aa) is in marked contrast to the language used in clauses (a) and (b) in the same subsection and must be construed, and given effect to, as having been used deliberately." It is thus clear that he took the diametrically opposite view to Judge Wylie.

39. As there is seemingly no decision of a higher court to bind me, I must decide which of my learned predecessors to follow.

40. I readily concede that the issue is still open to doubt but obliged as I am to come down on the one side or the other, I have to say that the view adopted by Judge Charles commends itself over the opposing view. My reasons for this are two-fold:

41. 1) The Charles decision carries the greater weight because it was an issue upon which the Court's decision depended, whereas the remark of Judge Wylie was made only obiter.

42. 2) Judge Charles gave his reasons, and cogent ones at that, for his decision on the question of onus. Judge Wylie on the other hand, (no doubt because his statement was obiter), did not elect to expand his reasons for making it. I did not carelessly say earlier that the matter was not clear of doubt, because it might well be argued that, in such cases as the present one, the issue of when a building was erected upon the suit premises is closer within the knowledge of the plaintiff than any other party.

43. However I do agree with Judge Charles that where a defence is founded upon the contention that the defendant is an exception to a provision of general application, it is upon him to bring himself within that exception. The statute provides that "agricultural premises" are without its ambit. Such premises are within it, only if they contain a building erected before 17th August 1945.

44. If it is 2nd defendant's case that this is so, my view is that the onus is upon him to prove it.

45. For this reason, with the greatest respect, I feel obliged to rule against Mr. Ho's submission that Part I of the Ordinance applies to the suit premises.

46. 2) I come finally to the question of whether the premises fall under Part II of the Ordinance. This is the second leg of Mr. Ho's argument.

47. In my view, there are 2 essentials to the application of Part II in the present case:

48. A) That 2nd defendant's occupancy of the suit premises is within the meaning of "lawful sub-tenancy", the expression used in section 53(5):

"(5) Notwithstanding subsection (1)(c), if the court makes an order for possession of premises from a tenant under subsection (2), nothing in the order shall affect the right of any sub-tenant to whom the premises or any part thereof have been lawfully sublet before the commencement of the proceedings to retain possession thereof, nor shall the order operate to give a right to possession as against such sub-tenant."

and B) That the primary user of the suit premises by 2nd defendant is domestic.

49. The issue raised by item B) has been the subject of considerable controversy in this trial. I think it most appropriate to deal with matter A) first.

50. It is clear from undisputed evidence that 2nd defendant's occupancy, and the nature of his user of the premises, constitute breaches of many of the covenants in the tenancy agreement between the plaintiff and 1st defendant. Any one of these breaches of covenant might well alone render the tenancy agreement voidable at the instance of the plaintiff, and in particular of course the breach of covenant not to sub-let. Regarded cumulatively, there can be no doubt whatever that they would render the lease liable to forfeiture.

51. In this connection, Mr. Ho has invoked the best-known maxim of equity, the "soiled-hands" maxim. He submits that the plaintiff, having broken the terms of his Crown lease by letting the suit premises to 1st defendant as a school and not as an agricultural holding, is estopped from relying upon the breaches of covenant by 1st defendant in her tenancy agreement with plaintiff.

52. Mr. Wat's reply to this is based upon privity of contract. He argues that there is no contractual relationship as between plaintiff and 2nd defendant, and that Mr. Ho's submissions are applicable only to cases founded upon breach of contract.

53. With great respect to Mr. Ho, I have to say that in my view, clear hands, equity and estoppel have no relevance whatever to the present case.

54. Any breach of the Crown lease provided H.M. with whatever remedy she could lawfully claim. The Government has not apparently sought any such remedy; but how this can be called in aid by 2nd defendant I cannot conceive. If anything at all, I would have thought that the plaintiff's lease to 1st defendant, if it were to be regarded as illegal, would weaken the position of 2nd defendant, rather than strengthen it.

55. I have had occasion to consider the effect of a breach of covenant (in that case, only a breach of covenant not to sublet) quite recently, in K.D.C. Civil Action No. 5435 of 1974, Lee Mui v. Ma Yau Hung and 2 others.

56. I will apologise in advance for quoting my own judgment in that case but at least it will serve to set out my own views, which are in no way since modified:

57. "Next, subsection (5) come into play. -"Notwithstanding subsection (1)(c), if the court makes an order for possession of premises from a tenant under subsection (2), nothing in the order shall affect the right of any sub-tenant to whom the premises or any part thereof have been lawfully sublet before the commencement of the proceedings to retain possession as against such sub-tenant." Clearly, I must decide whether 2nd defendant and 3rd defendant have been "lawfully sub-let" their portions of the premises. Our legislation being silent on such definition, I have been obliged to refer to Megarry on "The Rent Acts". Though the edition from which I quote (9th edition) is not the latest, the information upon this subject does, I am assured, still hold good. I refer to page 415 (para. (2) first sentence, read). "Whether the tenancy is contractual or statutory, a sub-tenant can claim the protection of these provisions only if the sub-letting was 'lawful'; a sub-letting in breach of covenant or agreement can give the sub-tenant no protection against the landlord under this head, although his position as against the tenant, who will be unable to take advantage of his own wrong, is not thereby prejudiced."

58. Mr. Wat has quoted me a Full Court decision, Tang Yau Ah v. Chan Kit Ching (1958 H.K.L.R. p. 7), which in general appears to support my view. I have read that very lengthy judgment from end to end, and whilst I agree that the remarks of Gould J., at the last paragraph of p. 18 and the beginning of p. 19:

"Be that as it may, it would not appear that there was anything in the judgments in Woo Sau Yue vs. Po Cho Ying which turned upon the proviso to section 5(3) and when in the judgment of the learned Chief Justice he used such words as "lawful", it would appear that in the context he meant nothing more than without breach of covenant. Subletting in breach of covenant is an unlawful subletting taking it out of the scope of section 15(3) of the Increase of Rent and Mortgage Interest (Restrictions) Act, 1920, in England, and that such a breach might in the view of the Chief Justice be a relevant factor in Hong Kong is hinted in the following passage at p. 227:-

"The defendant in that case was a tenant and if he could take a 'distinct and defined portion' of the premises out of the protection of the Act by using it for business purposes, the earlier part of the passage I have just quoted seems to me clearly to show that the same consequence would flow from a change of user of that portion by a subtenant; provided, of course, such change of use was not in breach of the lease or sub-lease," (concurred in by Hogan C.J.), the issues in the case did not directly turn on them, and they are of persuasive value only, though that is not inconsiderable.

59. However, it is my considered conclusion that in the present case it cannot successfully be contended that 2nd defendant's occupancy of the suit premises can be classified as a "lawful" subtenancy.

60. On this basis alone, Part II of the Ordinance is in my judgment inapplicable, and it is therefore unnecessary to pronounce upon the question of primary user.

61. It follows from these observations, which I hope are lucid, that I find the plaintiff entitled to judgment for possession of the suit premises as against 2nd defendant, and for ancillary relief in the form of mesne profits, as claimed.

62. The costs of this action are to be the plaintiff's costs as against 2nd defendant, (except in so far as the costs involved in obtaining judgment against 1st defendant lie against 1st defendant), to be taxed on the standard scale.

63. Delivered by me in open court this 16.1.75.

Representation:

Wat (Wat & Fu) for plaintiff.

Ho (Ho & Co.) for 2^nd defendant.