Tan Choo Kim v. Lai Hon Bor and Others

DCCJ007000/1981

LANDLORD AND TENANT - Landlord and Tenant (Consolidation) Ordinance (Cap.7) - sections 53(2)(a), 53(2)(e), 53(4), 53(5), 53(6) - domestic tenancy - forfeiture for non-payment of rent, subletting and user in breach of tenancy agreement - claims in the alternative - scope of contractual prohibition against subletting - whether order against tenant operates against sub-tenants - whether power to grant relief against forfeiture applies when order for possession is sought under section 53(2)(a) of Cap. 7 - extent of jurisdiction of District Court or Lands Tribunal to order payment of rent and/or mesne profits - interim orders for payment of rent or mesne profits.

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT KOWLOON

CIVIL JURISDICTION

ACTION NO. 7000 OF 1981

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Coram: His Honour Judge Downey

Date: 23 September 1982

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JUDGMENT

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1. On the 23rd September 1982, I delivered an oral judgment in this case, and made certain orders in consequence thereof. Although I offered to reduce my judgment to writing, Miss Ho indicated that she did not wish me to do so. Subsequently, her instructing solicitors asked for a written judgment.  I now comply with that request, but I wish to make clear that the latter part hereof (beginning with the second paragraph on page 9), although it sets out my reasons for making the orders I eventually made, was not actually uttered as part of my oral judgment.

2. By a Chinese tenancy agreement dated the 1st March 1978 (Exh.P.2), the plaintiff let Flat B on the 18th Floor of San Po Kong Mansion ("the premises") to the first defendant ("the tenant") for a term of three years, from the 1st March 1978 until the 28th February 1981, at a monthly rental of $1,900. The premises were let for domestic purposes. They consist of two units (originally flats B5 & B6), which had been combined into one by constructing a connecting door in the party wall. What was originally flat B5 formed the siting-room of the premises, and the entrance to B5 became the main entrance to the premises. At the time of the letting, the other unit was partitioned into three bedrooms.

3. The plaintiff seeks to recover possession of these premises on several grounds. By her Writ and Particulars of Claim, issued on the 22nd June 1981, she sought to recover arrears of rent and to re-enter on the basis of forfeiture for non-payment of rent since the 1st December 1980. Upon discovering that the second, third, and fourth defendants("the sub-tenants") were living at the premises, she amended the Writ and Particulars of Claim, on the 2nd February 1982, to join the sub-tenants as defendants and to allege additional grounds for possession, based on subletting, in breach of the tenancy agreement, and user of the premises for "a Embroidery Factory", also in breach of the agreement. By this time, the alleged arrears of rent amounted to $24,700. By the amended pleading, it was further alleged that after the 28th February 1981, the tenant had held over as a monthly tenant.

4. Notwithstanding the purposes of the letting and the enactment of the Landlord and Tenant (Consolidation) (Amendment) Ordinance 1980, neither the original nor the amended Particulars of Claim alleged that the tenancy (fixed term or monthly?) was governed by Part II of the Landlord and Tenant (Consolidation) Ordinance (Cap 7). As pleaded, the plaintiff's claim was merely a common-law action of re-entry for forfeiture. However, any doubts regarding my jurisdiction, or whether a cause of action was disclosed, were removed by amendments at the hearing, whereby the plaintiff alternatively sought to recover possession pursuant to section 53(2)(a) and (e) of Cap 7.

5. The facts are not really in dispute, as the tenant did not file a Defence or take any part in the proceedings. I find myself in the happy position of being able to say that I accept the evidence of the plaintiff and of the sub-tenants. Accordingly, I find the following facts. During the tenancy, the plaintiff visited the premises on only one occasion - in the second month - in order to collect rent. On that occasion, she saw six sewing machines on the floor of the sitting room. She did not know why they were there. Nor did she suspect that the premises were being used as a factory. She did not know about the presence of the sub-tenants until she was so informed by her lawyers, whom she consulted after the tenant failed to pay the monthly rent. After the second month, the tenant sent the rent to her by post. But he failed to pay the rent due in December 1980, and no rent has been paid since that time. By consent, a certificate of primary user dated the 30th April 1981 (Exh.P.3) was put in evidence. This certified that the primary user of the premises - described therein as 10 & 12 Yin Hing Street, 18th Floor - on the 12th March 1981 was non-domestic.

6. At the close of the plaintiff's case, Mr. Collins submitted that there was no evidence to support paragraph 9 of the Amended Partiiculars of Claim. This alleged that the tenant had converted the premises

"as a Embroidery Factory thus committing a breach of Clause 8 of the said Agreement which reads (inter alia) 'this premises is allowed to be used only for domestic purpose.'''

7. In the exercise of my discretion, I allowed Mr. Collins to make that submission without putting him to his election. But having heard it, I rejected it. Although the plaintiff's evidence did not support the particular use alleged in paragraph 9, in my view, her evidence of seeing six sewing machines in the sitting room, coupled with the prima facie evidence of the certificate of primary user, was sufficient to prove a prima facie case of user of the premises in breach of Clause 8 of the Tenancy Agreement. Although there was no evidence to show whether the sewing machines were industrial machines, or that they were being used on any scale of mass-production (or at all), it seemed to me that it was open to me to infer, from the quantity alone, user going beyond a mere domestic user.

8. Each of the sub-tenants gave evidence. Mr. Chiu started living, at the premises in March 1979. He occupied the largest bedroom and paid the tenant a rent of $600 per month. He last paid this rent to the tenant in May 1981. Since then, he has not seen the tenant.   But since he began living at the premises, the tenant lived in the rear cubicle. Mr. Chiu expressed a willingness to pay the plaintiff the substantial arrears of rent due from the tenant.

9. Mr. Wong started to live at the premises in March 1978. Originally he lived in the rear cubicle, paying $300 per month. The tenant was his boss. In or about May 1979, he moved to another cubicle, which the tenant created by partitioning the sitting room, and paid a rent of $500 a month. He last paid rent to the tenant in May 1981. Although the tenant left in November 1980, he occasionally stayed at the premises, occupying the smallest cubicle and using the sitting room for "sewing purposes."

10. Miss Yeung started to live at the premises in June 1979, occupying the middle room, at a rent of $450 per month. She last paid rent to the tenant in May 1981. At that time the tenant was occupying the smallest cubicle, and using the sitting-room for "sewing purposes." Since that date, he has, from time to time, returned to the premises.

11. On the basis of the evidence, and the facts which I have found, Mr. Collins conceded that the tenant was in arrears with his rent since December 1980, and rightly conceded that I had no choice but to make an order for possession against the tenant. However, he submitted that, for a number of reasons, I should not make any order against the sub-tenants. In particular, he relied on subsections (5) and (6) of Section 53 of Cap 7.

12. Upon the evidence (including that of the sub-tenants as to the user of the sewing machines by the tenant) I have no hesitation in concluding that the plaintiff has established, against the tenant, grounds for possession under Section 53(2)(a) of Cap 7, in the form of non-payment of rent and user in breach of Clause 8 of the Tenancy Agreement, which would have been a cause of forfeiture having regard to Clause 3, which in my view contains an express proviso for reentry for breach of any stipulation in the Agreement. I will deal with the alleged breach by sub-letting later in this judgment, but, I do not consider that the plaintiff has established a ground for possession under Section 53(2)(e) of Cap 7. Whether I should apply the law now in force, or that in force at the date of the original writ, the tenancy in this case was not one to which Part II of Cap 7. applied immediately prior to the 18th December 1979. Accordingly sub-paragraph (ii) of section 53(2)(e) is the governing provision. The plaintiff has not proved any sub-letting by the tenant after that date.

13. In support of his submission that no order should be made against the sub-tenants, Mr. Collins firstly contended that they were entitled to relief against any alleged or notional forfeiture of the tenancy, because of Mr. Chiu's undertaking to discharge the tenants arrears of rent, and the fact that none of the sub-tenants was responsible for the user of the premises for non-domestic purposes. Even if their sub-tenancies were in breach of the Tenancy Agreement, he contended that they should be granted relief against any forfeiture, presumably in the exercise of a general equitable jurisdiction to grant relief. He sought is pray in aid the provisions of section 69 of the District Court ordinance (Cap 336), in respect of each of the alleged grounds relied on by the plaintiff.

14. I do not propose to embark upon a full consideration of the extent of the District Court's jurisdiction to grant relief against forfeiture, or its equivalent, in relation to premises which are subject to any tenancy. But, as presently advised, I take the view that such jurisdiction as I may possess has no relevance to proceedings governed by Part II of Cap. 7. In the first place, I do not consider that the legislature intended that such jurisdiction, as I may possess in this respect, should be an additional restriction upon my jurisdiction to grant relief to a landlord who has established a statutory right to re-possess his premises. The statute in question merely requires me to be satisfied that the breach in question "would, but for this Part, have been a cause of forfeiture" (Emphasis supplied). It does not require me to be satisfied that, apart from Part II, the court would not have given effect to a proved ground for forfeiture. In other words, I do not think that it requires a landlord to prove that his tenant could not obtain relief against the alleged or proved forfeiture. Furthermore, the effect of granting relief against forfeiture is to reinstate the tenant in his enjoyment of the contractual tenancy. It seems to me to be totally otiose to consider those powers when the relevant contractual tenancy has come to an end by effluxion of time before the landlord commences proceedings for recovery of the premises, as in this case.

15. In my view, the question whether an order should be made against the sub-tenants in this case depends upon the provisions of section 53(6)(b), which, in turn, depends upon whether the sub-lettings were in breach of the contractual tenancy. According to the certified translation of the Tenancy Agreement (Exh. P.2), Clause (2) thereof provided:

"It is stipulated that Party B (i.e. the tenant) shall not underlet or transfer to others."

16. This provision is somewhat ambiguous, since it does not expressly indicate whether the subject-matter of the prohibition is the whole premises or any part thereof. It is capable of being read as a general prohibition against any underletting or transfer. Apart from the principle that any ambiguity in the Agreement should be construed contra proferentem, Miss Ho conceded that, if the tenant had retained any part of the premises in his own possession or occupation, there would be no breach of clause (2). She submitted that the evidence showed that the tenant had sublet or transferred the whole of the premises during the contractual period of the tenancy. On the facts which I have found I am unable to agree with that submission. Although the tenant has not been living regularly at the premises since about November 1980, the evidence shows that he has retained one of the cubicles and the sitting room, and that he has returned to the premises from time to time. There is no evidence that he has given up possession of these parts of the premises to the sub-tenants or any other person.  His connexion with the premises may be slight, but I consider that it is sufficient to preclude me from finding that he has sub-let on transferred the whole of the premises. Accordingly, I am not satisfied that the plaintiff has established that the sub-letting to the sub-tenants was a breach of Clause (2). That ground for possession therefore fails.

17. Upon my finding that the tenant has, without breach of the contractual tenancy, sublet part of the premises, section 53(6) provides that the court "shall not make any order for possession  under sub-section (2) against the sub-tenant unless -

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18. In the circumstances of this case, I consider that I must assume that the tenant had sought an order for possession against the sub-tenants on the grounds of non-payment of rent and/or breach. of the stipulation as to domestic user. The evidence shows quite clearly that in both respects the tenant would have failed. Each of the sub-tenants has paid rent regularly. Their non-payment since about May or June 1981 is due entirely to the tenant's failure to demand it. Such user of a non-domestic nature as has occurred, as I have found, was by the tenant alone, and there is, understandably, no evidence evidence any other ground upon which the tenant would have been entitled to an order against the sub-tenants. Accordingly, whilst the plaintiff is entitled to an order against the tenant on the grounds of non-payment of rent and breach of the stipulation as to user, there are no grounds for making an order against the sub-tenants. Subject to any application which Miss Ho may wish to make under sub-section (6A), the plaintiff's claims against the sub-tenants must be dismissed. There will be an order for possession against the tenant which I order shall take effect today.

19. When I had delivered my oral judgment, Miss Ho did not make any application under sub-section (6A), as she had no instruction thereon from her client. I then turned to the problem of the tenant's arrears of rent.

20. Assuming that I have jurisdiction to deal with this aspect of the case, I find as a fact that the tenant has failed to pay the rent of $1,900 per month since the 1st December 1980. In my view, however, there is some doubt as to the order I can or should make in respect of these substantial arrears.

21. In the original and the Amended Particulars of Claim, the prayer for relief claimed;

22. In the original Particulars of Claim the arrears were quantified at $13,300, being seven months' rent due at the date of the writ. In the Amended Particulars of Claim, they were quantified at $24,700 being 13 months' rent from the 1st December 1980 until the 31st December 1981, If I had not been satisfied that the plaintiff was entitled to an order for possession against the tenant, I apprehend that there might be doubts as to my jurisdiction to give judgment for the arrears, having regard to the present financial limits upon the jurisdiction of the District Court in respect of money-claims. However, section 53(4)(c) of Cap 7 provides:

"When making an order for possession under sub-section (2), the Court may also order the payment of rent or mesne profits."

23. If "or" is to be construed disjunctively (of section 3 of the Interpretation and General Clauses Ordinance), it would seem that the Court cannot order the payment of both rent and mesne profits, but must select one of the forms of payment for use and occupation after the date of judgment, according to the date fixed for the order for possession to take effect under section 53(4)(a). It would also seem that this power can only be exercised with reference to the future, since the right to mesne profits normally does not arise until after the termination of the tenancy, namely when an order of the Court takes effect. (Section 53(1)(b) of Cap 7). Until that time the tenant is bound to pay rent, which may not be the same, in amount, as mesne profits. Yet, if the provision only deals with rent between the date of making the order and the date when it is to take effect, the only advantage to the landlord is that he can get an order, which can be executed upon default, instead of having to institute separate proceedings to recover future arrears of rent. If such an order can only be made in respect of the future, it would seem to follow that the Court's power to give judgment for arrears of rent, accrued before the date of the order for possession, is subject to the financial limits imposed by the District Court Ordinance. If this is so, landlords would be put to considerable additional expense and inconvenience in recovering monies to which they are clearly entitled.

24. However, if section 53(4)(c) is construed as giving the Court power to make an order dealing with the situation in the past, and also, perhaps, with the future, and "or" is construed as meaning "and/or", the additional expense and inconvenience of having to institute further proceedings, or suing in different courts or tribunals, would be avoided. If this provision is intended to enable the Court, once and for all, to dispose of all matters arising out of the termination of a tenancy to which Part II applies, section 68(6) would give the District Court jurisdiction to hear and determine claims far in excess of its general jurisdiction, although an aggrieved party would then be deprived of his right to appeal on questions of fact!

25. I have not had the benefit of argument on these matters, and my doubts may be unfounded, and may arise solely from my ignorance. But I venture to suggest that, when the relevant legislation is next reviewed, consideration be given to clarifying this situation or, at least, putting it wholly beyond question. In this particular case, I decided to adopt a course which I consider to be in accordance with what I conceive to be the legislature's intention, that the Court should when making an order terminating the relationship of landlord and tenant, at the same time deal finally with the outstanding financial obligations of that relationship, at least in so far as they relate to payment for use and occupation of the premises in question. Accordingly, in the exercise of the powers conferred by section 53(4)(c), I made an order that the tenant should pay to the plaintiff $41,800, being rent due, and unpaid, between the 1st December 1980 and the 1st September 1982, and mesne profits, at the rate of $1,900 per month, from the date of the order for possession until the date when possession is delivered up to the plaintiff. In making that order, I considered that some support could be derived from the recent decision of the Court of Appeal in Wing Tai Hang v Dah Luen Investment Co Ltd (Civ. App. No 112 of 1981; 27th November 1981), although the case was decided after argument by counsel on only one side, and I apprehend that the relevant law in Hong Kong and England (cf Hill & Redman's Law of Landlord & Tenant, 16 ed. p.1048) may not be entirely settled. Furthermore, in this particular case, at the date when the Writ was issued, the arrears then due did not exceed the limit of the District Court's jurisdiction under Cap 336.

26. At the outset of the trial, Miss Ho informed me that the tenant had not complied with an order for interim payment of rent and/or mesne profits, made by another judge do the 13th April 1982. Our Rules of the Supreme Court (Ord. 29 rr 18 - 21), under which interim orders are made by the District Court, are derived from England. But they have not kept pace with the English rules, which now expressly prohibit disclosure of such orders, or payments made under such orders, prior to final judgment. Nor do our rules expressly oblige the court to take into account such payments when entering final judgment at the hearing. However, I considered that I should not take any step in respect of the alleged non-compliance with the interim order before I had heard the evidence at the trial. Like any other order, it could have been enforced by the plaintiff seeking one of the methods of execution (cf Supreme Court Practice 1982, 29/9 - 18/21, p.550). In any event, I do not consider that, upon proof of non-compliance, the court is empowered to make an immediate order for possession, as some practitioners appear to think. It is merely a sensible and useful machinery whereby landlords can receive what is due to them by way of rent or mesne profits without prejudicing their claims to recover possession.

27. However, having delivered final judgment in this action, it seemed to me that I should do something about the interim order made in this case, although our present rules are silent on this point. By its very nature, an interim payment order is not, in my view, intended to continue in force after final judgment in the action. It is my usual practice to discharge them, without prejudice to rights of enforcing the same which may have accrued before final judgment in the action. I did so in this case in the belief that I had jurisdiction to make the order for payment of arrears of rant and future mesne profits which I made on the 23rd September 1982. If that order was made in excess of my jurisdiction, and therefore invalid, it would seem that my purported discharge of the interim order may not necessarily or obviously be invalid. But, if I am mistaken in this respect, the plaintiff may still be able to recover the arrears of rent due to her by enforcing the interim order, unless that is also challenged by an appeal out of time.

28. The doubts I have expressed in this case may be academic in the extreme, in the sense that any order for the payment of money by the tenant to the plaintiff may be fruitless. However, although I have not elaborated upon the existing or possible problems, I consider that some of the matters I have alluded to, directly or indirectly, may deserve closer attention by practitioners at this time, bearing in mind that legal proceedings in these cases may have to be conducted, simultaneously or otherwise, in the High Court, the District Court, or the Lands Tribunal. Where a landlord's claim is based on forfeiture, an application for interim payment of rent or mesne profits may be subject to the financial limitations of the District Court's general jurisdiction. Experience has shown that, whilst the rateable value of premises may be below $15,000, the unpaid rent or mesne profits, at the commencement of proceedings or the application for an interim order, can easily exceed $20,000., In this case, the alleged arrears, at the date of the issue of the Writ, was $13,300. By the time of the application for the interim payment order they had increased to $30,400. In cases where the jurisdiction of the District Court make an order for possession is not derived from Part II of Cap 7, I consider that applications for interim orders may have to be rejected if the amount Involved is in excess of the District Court's general jurisdiction. (Where proceedings are commenced, or continued, in the Lands Tribunal, the situation is somewhat unclear!) The obvious solution to any jurisdictional problems, which exist or may arise, is to make such applications at the earliest stage. Delay may not invariably result in a denial of ultimate justice; but expedition in matters affecting litigation will usually ensure that all of the parties' reasonable expectations are satisfied, and not frustrated by technicalities.

Representation:

Miss Mary Ho, counsel instructed by C.P. Tsang & Co. for plaintiff.

Mr. Collins, Legal Aid Officer for defendants 2, 3 & 4.

1st defendant Lai Hon Bor in person absent.