Ansley Estates Ltd v. Lam Sau Hong t/a Lam (Hong Kee)

DCCJ004845/1974

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

ACTION NO. 4845 OF 1974

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Coram: Judge Mayo, D.J., in Court.

Date of Judgment: 11 November 1974

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JUDGMENT

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1. The Plaintiff is claiming possession of the suit premises in this action on the basis that the original lease dated the 6.5.59 for 10 years and a further lease dated the 28.5.69 have now expired through the effluxion of time and that as the suit premises were let as business premises for a term exceeding 5 years they are by virtue of the provisions contained in Section 3(1) (e) of the Landlord and Tenant (Consolidation) Ordinance excluded from the protection which is afforded by the Ordinance.

2. Briefly the Defendant's defence to this claim is that the primary user of the suit premises was and is residential and although it is not specifically pleaded, the Landlord has waived any breach there may have been of the covenants in the lease by accepting the position that the suit premises have been used as domestio premises and in particular the fact that the Defendant has with the consent of the Landlord sub-let the premises contrary to the covenants in the leases, to sub-tenants who have resided in the premises domestically. The Defendant also gave evidence that the only reason the premises were stated to be let as business premises was that the parties had inserted these covenants so as to circumvent the operation of the Lanlord and Tenant Ordinance.

3. The Plaintiff Company was suing as the successor in title of the original Landlord. However, the Plaintiff was able to call as witnesses both the Managing Clerk in the firm of Solioitors Shea & Co., who prepared the 1969 lease and the Landlord's wife, Mrs. Tang who physically collected rent from the Defendant from 1969 to the time recently when the suit premises were purchased by the Plaintiffs.

4. I propose dealing first with Mr. Lai, the Managing Clerk's evidence. He is basically a disinterested party and I found him to be a reliable and satisfactory witness. He gave evidence that Mr. Tang, the Landlord was originally his client and that Mr. Tang came to him with the outline agreement which had been concluded with the Defendant and that he had been requested to prepare the necessary documentation to implement the negotiations of the parties. He also gave evidence that he particularly concerned himself with the request of the parties that the term of the lease should be based on the Lunar Calendar and the fact that the lease was of business premises for a period of 5 years and accordingly would be outside the scope of the Landlord and Tenant Ordinance. Mr. Lai said that he had been under the impression that the Defendant was in business and that the premises would be used for business purposes. This impression would no doubt have been fortified by the description of the Defendant in the lease as Lam Sau Hong trading as Lam (Hong Kee). I entirely reject the Defendant's evidence that the leases were sham leases and that there had been an agreement or understanding between the parties to insert the provisions relating to business user simply as a device to avoid the operation of the Landlord & Tenant Ordinance. In any event I would not have been prepared to accept this parole evidence as being sufficiently cogent to contradict the written terms contained in the leases that the premises were to be used as business premises.

5. I will now consider the question of the user of the premises. I accept the general proposition at law that the onus of establishing that there has been a change of user is on the party endeavouring to establish this. The authority for this proposition is referred to in Chung Pak Sun and Ng Sek & Others¹. The Plaintiff mainly placed reliance upon the evidence of Mrs. Tang who I have already referred to. This lady gave evidence that she attended at the premises each month to collect rent. She gave evidence that on numerous occasions she saw the Defendant making dumplings in the backyard comprising part of the suit premises. She also gave evidence that she saw goods stored at the premises on a number of occasions. I accept the evidence given by this witness. The Plaintiff also called evidence of Mr. Pang, who is a Director of the Plaintiff Company who attended the premises when Mrs. Tang introduced the party to the Defendant. His evidence does not take matters much further.

6. The Defendant attempted to rebut this evidence by his own testimony and the evidence of 2 sub-tenants. The Defendant was emphatic that at no time had he conducted a business from the suit premises. He said that he had been a coolie and that he had derived an income from transporting dried fish from Aberdeen to retailers in Western District. He said that he had been a member of a syndicate which had undertaken this service. He also gave evidence that he had been in the employ of the occupier of the adjoining premises to the suit premises and that he had received a salary of $200 per month. He denied that he had ever used the suit premises for the purpose of storing dried fish which was being delivered to retailers in Western District. He did however admit that the suit premises had been used for the purpose of storing goods belonging to the owner of the adjoining premises but denied that he had ever received any consideration in respect of this. I do not accept this evidence. The Plaintiff however mainly placed reliance upon the dumpling making activities to establish the business user, Mr. Ltd in his evidence said that he was under the impression that the Defendant was conducting a Grocery business. At another point in the case vague reference was made to the Defendant doing business as a provisions merchant. I would imagine that if the Defendant was doing business as a Provisions Merchant the dumpling making activities may come within the scope of such a business. In any event the Defendant did himself give evidence that he made dumplings once or twice a month for domestic purposes. He admitted that he made 100 such dumplings on occasions but claimed that these were never sold and that they were consumed by him and his family and friends. I find it very difficult to accept this evidence. No convincing reason was forthcoming to explain why the Defendant only manufactured these dumplings on the 15th of each Lunar month. There was reference to the observation of religious or customary rites but I very much doubt whether the dumplings were made for any such reason. I also do not believe that the dumplings were made simply for domestic purposes. It is much more likely that the manufacture was for commerical use. I accept however that there is no conclusive evidence either one way or the other on this.

7. In anticipation of the difficulties which were likely to arise in determining the user of the suit premises, I did myself in company with the legal representatives of both parties attend at the suit premises for the purpose of inspecting the premises. The suit premises are in a small side street or cul-de-sac off Des Voeux Road West. All of the buildings in the street are antiquated and in a delapidated condition. The ground floor premises of most of the buildings in the lane are used for commerical or business purposes. The property immediately adjoining the suit premises at 19 Sai Yuen Lane are used as a wharehouse or godown. It did generally appear to me that the user of the buildings in the lane was mixed being small family businesses where members of the families of the proprietors also resided as well as carrying on business operations. So far as the suit premises are concerned it is not a simple matter to be dogmatic about the present user of the premises. It is obvious that the premises are at least partially used for domestic purposes. There were a number of beds and chairs in the premises the presence of which are all consistent with domestic occupation. I did however notice that not all of the space in the premises was being used and on the face of the conjested use of parts of the premises this would indicate that the relatively unused parts of the premises may well be utilised for business purposes such as storage of goods. I realise however that this may be speculation on my part. It is necessary however for me to view this matter in an overall context. Generally I prefer Mrs. Tang's evidence to that of the Defendant or even to the sub-tenants who also are interested parties in the proceedings. I am satisfied that the Defendant has conducted a business as a pasty cook or dumpling maker on the premises. I am also satisfied that the premises have been used for the storage of goods which I find to be a commerical or business user of the premises. This being the case I do not think that the Defendant has discharged the onus placed upon him of establishing that there has been a change of user. I must state that in any event I would have been reluctant to hold in the Defendant's favour on the question of user particularly as this change was brought about as a result of his breaching the terms of the lease or leases under which he held the premises.

8. Even if I am wrong in this I find it difficult to see how the Defendant's defence can succeed. The Defendant claims that the landlord waived the breaches of covenant relating both to business user and subletting. This waiver was not pleaded in the Defence. Such a failure would appear to be fatal to the defence. The authority for this can be found in Tang Yau Ah v. Chan Kit Ching² at page 13.

9. In addition to this even if waiver could be argued I am doubtful whether the argument could succeed. Waiver is normally considered in the context of forfeiture. Clearly it is a considerable extension of this doctrine to operate waiver to the prejudice of a parties rights to exclusion from statutory provisions. Although the format of the Rent Acts in England is by no means similar to our Landlord and Tenant Legislation in the Colony I am satisfied that a satisfactory analogy can be drawn from English case law. I have referred to the case of Wolfe and Hogan³ where a similar problem arose in England. Lord Denning who was one of the appeal Judges in that case, states the position at p.205 of the report. He makes the valid point that waiver of a breach only operates up to the time of the acceptance of rent by the Landlord. He goes on from this to argue that waiver is only a bar to a claim for forfeiture if it can be inferred that the Landlord has not merely waived the breach but has affirmatively consented to the breach referred to. I am satisfied that even if I were to accept the Defendant's evidence, which I do not, I would still be bound to find in the Plaintiff's favour as there is clearly insufficient evidence to establish waiver against the Landlord so far as the operation of the Landlord and Tenant Ordinance is concerned.

10. For the reasons I have given I find that the Plaintiff has proved its claim and accordingly I enter judgment in its favour as claimed. The Plaintiff is also entitled to its costs on the upper scale. I will hear the parties on the question as to whether there should be any stay of execution.

Representation:

Mr. CHIU of (Deacons) for Plaintiff.

Mr. WOO (K.Y. Woo & Co.,) for Defendant

1 1964 H.K.L.R. p.301.

2 1958 H.K.L.R. p.7.

3 1949 2 K.B. p.194.