Low Fung Rosie Kai Ping and Another v. Bentex Corporation (A Firm) and Another

DCCJ002963/1981

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

ACTION NO. 2963 OF 1981

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Coram: H.H. Judge H. Wong in Court

Date of Judgment: 9th December, 1981.

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JUDGMENT

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1. Plaintiffs, who are husband and wife, brought this action against both defendants for possession of the premises known as Nos. 126-130 Kennedy Road, Grandview Tower, 11/F and carpark space No. 25 on ground floor 5 ("the suit premises").

2. It is common ground between plaintiffs and D1 that plaintiffs are the registered owners of the suit premises which are exempt from the application of Parts I and IV of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. It is also pertinent to mention at the outset that defendants did not testify or call witnesses and that plaintiffs' only evidence came from Mrs. LOW Fung Rosie Kai Ping, 1st plaintiff. ("Mrs. LOW").

3. Mrs. LOW stated that she purchased the suit premises on 3rd March 1978 and about a month later was contacted on the telephone by a representative of Worldwide Agencies Corporation ("WAC"), a real estate agent, who claimed to speak on behalf of a foreign firm that wished to rent the suit premises. They had a discussion and agreed on 3 aspects: (1) rent at $2,000.00 a month, (2) term of 3 years, subject to renewal for a further similar period with an increase of 20% in rental and (3) the tenant should not remove fixtures, such as geyser and iron gate upon vacating the premises. Following that agreement Mrs. LOW was asked by the person at the other end of the line to see him and sign the relevant papers. She duly called at his office in Jaffe Road, Wanchai and was met by a man who gave her a visiting-card bearing the name of George SHAK, Manager of WAC. Mr. SHAK then disclosed to Mrs. LOW that the tenant in question was Bentex Corporation of 126 Connaught Road West, 3rd floor, Hong Kong, that is D1, and that it would take up the tenancy of the suit premises for a period of 3 years from 9th April 1978. He also obtained her signature on a letter of acceptance to that effect and gave her a sum of $4,939.00, which represented payment of $6,000.00 to cover a deposit of $4,000.00 and rent for the first month of $2,000.00, less his commission of $1,000 on the introduction of that business deal and Mrs. LOW's half share of $61.00 of stamp duty on the lease agreement. After having effected that payment Mr. SHAK showed a tenancy agreement to Mrs. LWO who casually glanced at it. According to her, she only paid attention to the two typed paragraphs 4(j) and (k) at the end of the printed clauses and noted that those paragraphs dealt with renewal of the lease and the non-removal of fixtures by the tenant as had previously been agreed to. Mr. SHAK of further explained to her the 3 basis points of that contract, viz., the tenant's name, the monthly rental and the lease period and asked her to sign on that document. She did so and was told that the other party would sign in due course. A few days later she was given a copy of the said tenancy agreement completed with purported signatures of D1 and witnesses.

4. In May 1978 Mrs. LOW received a letter from WAC which enclosed its cheque to defray rent of the suit premises for the second month of the lease. This mode of payment gave rise to her inquiry to Mr. SHAK, from whom she learned that WAC had acted and would continue to act for D1. She consequently accepted his instructions (a) to make rent receipts of the suit premises in WAC's name, but took upon herself to add the words to the effect that it was for D1 and (b) to send those receipts to WAC. In the following years she moved house to her present home in Conduit Road and notified WAC accordingly. Also from that year onward, rent of the suit premises had, at her request, been paid direct into her bank account by WAC. In March 1981 it dawned on her to go to the suit premises for two purposes, one was to inform the management office of Grandview Tower, where the suit premises are situated, of her new address and the other was to talk to D1 on renewal of the lease, which was about to expire. She met Mr. LAU of that office and from what she heard from him. proceeded to the suit premises. Upon arrival, she saw the name of "William WONG" at the main door of the flat concerned and found that a Mr. TSUI was living there. A conversation with Mr. TSUI, followed by a visit to his place of work at Room 1203 Bank of Canton Building on the next day led Mrs. LOW to instruct a lawyer to institute these proceedings. She further caused a search to be made of WAC and D1 at the Business Registration Office and came to know that those 2 companies were owned by a Mr. Imdad SHAK alias the said George SHAK.

5. Plaintiffs originally claimed under 2 grounds: (1) that it was an implied term of the said tenancy agreement between Mrs. LOW and D1 that D1 should not sublet, assign or part with possession of the suit premises to any other persons and (2) that further or in the alternative D1 had sublet the suit premises to D2 without the consent in writing of plaintiffs in breach of S. 53(2)(e) of the Ordinance.

6. In its defence D1 admitted that it had sublet the suit premises to D2 but contended that that subletting (1) was due to Mrs. LOW's oral consent having been given to Mr. SHAK at the time of the signing of the said t/a (tenancy agreement) or (2) alternatively was known to plaintiffs who, by their conduct, had waived forfeiture of the tenancy.

7. D2's defence was that it had no knowledge of plaintiff's status concerning the suit premises or what the relationship between plaintiffs and D1 was. It denied being in wrongful possession of the suit premises on the ground that (1) on 2nd June 1978 D1 granted to it a tenancy of the suit premises for a term of 2 years from 16th June 1978 at $2,600.00 in monthly rental and (2) on 10th June 1980 D1 renewed that lease for a further period of 2 years from 16th June 1980 at $3,146.00 in monthly rental.

8. At the close of the hearing plaintiffs' counsel conceded that he could not, in law, proceed with the first ground and rested his case on the second ground, while D1's counsel seemed to abandon both limbs of defence for lack of evidence from D1 to substantiate them and was content to rely on the preponderance of evidence and the interpretation of the law on facts adduced. D2, through its counsel, chose to remain neutral and left its position to depend on the findings for or against D1. Also from counsel's submission I accept the view that in the absence of evidence by the defence defendants should be bound by their pleadings, subject to the qualification that what one defendant said in its written defence would be binding on it and not on another defendant.

9. Having seen and heard Mrs. LOW testify I have no doubt that she was a truthful witness. I thus believe that she thought she was dealing with Mr. SHAK, estate broker, who recommended D1 as a tenant of the suit premises to her for a commission and had in fact earned such a commission of $1,000.00 from her. She also considered him to be D1's agent when he negotiated the terms of the tenancy of the suit premises with her and later took care of the payment of rent and matters related to that tenancy. I further believe that the subject of subletting of the suit premises was never discussed between Mrs. LOW and Mr. SHAK or even raised by either of them. Consequently, it is my finding that the allegation of plaintiffs' knowledge of subletting by D1, and consent and waiver thereof is not supported by evidence and is therefore rejected. In those circumstances there was no reason, as stated by Mrs. LOW, for her to suspect or know that D1 had sublet the suit premises and it was not until she called at that place that she discovered a door tenant surnamed William WONG and an actual occupant called TSUI. It is common sense that since Mr. SHAK was then proprietor of WAC and D1, he or his employee would be expected to reside at the suit premises. However, as it transpired that Mr. TSUI's office was at an address different from that of WAC or D1, there is a strong indication that he was not in the employment of those companies. Furthermore, as D2 is a limited company, which is in law a distinct and separate entity, it cannot be said to be D1's employee. There is therefore sufficient proof to meet the requirement of S. 53(1) which says "for the purpose of S. 53(2)(e) where a landlord establishes a prima facie case that there has been an apparent change in the occupation of the premises or any part thereof, the tenant shall be deemed to have sublet such premises or such part unless he satisfies the court to the contrary". This view is reinforced by D1's admission in its pleading of having sublet the suit premises to D2 and D2's confirmation of it in its defence, including the disclosure that it had continuously leased the suit premises from D1 since June 1978 and was still occupying the suit premises under a second tenancy agreement with D1. All these aspects lead me, in spite of the lack of production of the sub-lease agreements between D1 and D2, which is a matter not within plaintiffs' reach, to the irresistible conclusion that D1 had sub-let the suit premises to D2 in the manner described in D2's pleading. I would add that it goes without saying that there should be two parties to an agreement and D2 could not be in occupation of the suit premises without having entered into the two sub-leases with D1, for the terms of 2 years each from 16th June 1978 and 16th June 1980 respectively. Here it is interesting to note that D2's second sub-lease with D1 was meant to end on 15th June 1982, which date would go beyond the expiry of D1's tenancy agreement with plaintiffs on 20th March 1981.

10. Regarding the determination of tenancy on the ground of unauthorized subletting I allude to the principle propounded in "Lo Wah and another v. Chiu Fun" (1980) HKLR p. 844, in which it was held, inter alia, that "Under Part II, there is no need - as there is in England - first to determine the contractual tenancy and then to pursue the statutory remedy. Section 52(1) clearly provides that no tenancy or sub-tenancy whether created before or after 18th December 1979 shall terminate during the continuance in force of Part II. Accordingly, there were no means by which the contractual tenancy could be determined otherwise than by an order under section 53(2)" and that ........ whereas the original head tenancy was not within Part II, the new head tenancy was within that Part, and the carving out of a sub-tenancy would be a ground for possession under S. 53(2)(e) unless there was written consent. In this respect the statute clearly overrides the contract between the parties "whereas the original head-tenancy was not within Part II, the new head tenancy was within that Part, and the carving out of a sub-tenancy would be a ground for possession under Section 53(2)(e) unless there was written consent. In this respect the statute clearly overrides the contract between the parties. Such a right to possession could not exist in the landlord before 15th May 1979 and nothing done before that date could constitute a representation by him that he would not enforce a right which did not then exist."" In another case "POON Ming-yin v. CHEUNG Yuet-ngor" (1980) HKLR p. 693, Roberts, C.J. said at p. 695 "In LAM Wai v. MAK Yok-jan" (1980) HKLR 236 it was held that a three-year tenancy which, before Ord. No. 6 of 1980, had fallen outside the protection of Part II of Cap. 7, would be protected by the said Part II if that 3-year tenancy were still extant on 18th December 1979, the date on which Ord. No. 6 of 1980 was deemed to have come into force" and at p. 697 he said "I therefore conclude that the intention of Ord. No. 6 of 1980. insofar as three-year tenancies are concerned, was to give protection only to those tenancies of that nature which were still in force on 18th December 1979".

11. As far as the present case is concerned I hold the view that the head-lease between plaintiffs and D1, which is silent on sub-letting, would come within the ambit of the said amended legislation of Part II of the Ordinance on 18th December 1979, if D1 sublet the suit premises after that date. And as I have earlier found, there was a second sub-lease of the suit-premises by D1 to D2 on 10th June 1980, which occurred after 18th December 1979, the date Order No. 6 of 1980 came into operation. In this connection I reject the contention of D1's counsel that the said amended legislation would affect a new tenancy created after 18th December 1979 but would not be applicable to a tenancy that had already been in existence on 18th December 1979 and renewed after that date. My views are that the first sub-lease between D1 and D2 in June 1978 made D2 a lawful tenant, so that the right to possession could not be available to plaintiffs because such right did not then exist. However, the renewal of the sub-lease on 10th June 1980 by D1 to D2 was for all intent and purposes a new agreement and therefore brought the parties' relationship squarely within the four corners of S. 53(2)(e). And since that second sub-letting was made without plaintiffs' consent, it was an infringement of S. 53(2)(e) and would make D2 an unlawful tenant. A relevant English case in "Moore Properties (Ilford) Ltd. v. McKeon and others" (1977) 1 all E.R. p. 262 in which it was held that "... since D2's sub-tenancy had been granted in breach of an absolute prohibition against sub-letting and without the knowledge or consent of plaintiffs and was not blinding on plaintiffs, plaintiffs were entitled to an order for possession". In Lo Wah's case Cons, J.A. said at p. 848 "I would only add, and with the very greatest respect, that in relation to the position of the 2nd defendant alone I do not for my part share the hesitation to call the sub-letting unlawful. I am content to take section 53(2) as writing into the contract substantive rights in favour of the landlord."

12. To sum up, it is plain and clear that Mr. SHAK used D1 as a dummy company to lease the suit premises from plaintiffs for its own use and immediately sub-let them to D2 for monthly profit of $600.00 for the first two years and $1,146.00 for the subsequent similar period. In addition, there is a grain of truth in Mrs. LOW's allegation that Mr. SHAK had the tenancy agreement form printed for use in her case because the customary clause against subletting by the tenant was conveniently found missing. It is also obvious that Mr. SHAK deliberately misled Mrs. LOW into believing that he was a real estate agent when he in fact wore not only the agent's hat but also the principal's i.e., as D1's owner, as well. From the evidence I find that D1 had by two contracts of 16th June 1978 and 16th June 1980 sublet the suit premises to D2 and that the second one was made without plaintiffs' consent and therefore in contravention of S. 53(2)(e). That breach thus gave rise to a forfeiture of the tenancy which plaintiffs had duly exercised. And since this finding renders D2 an unlawful tenant based on the Moore Properties and the Lo Wah's cases, there will be judgment for plaintiffs against both defendants for possession of the suit premises.

Representation: