Chan Pak Wai v. Thomas Young and Others

DCCJ009443/1981

Landlord and tenant - claim by landlord for possession of domestic suit premises on ground that after expiration of tenancy agreement not prohibiting subletting the tenant subsequently sublet the premises without the consent in writing of the landlord - Landlord and Tenant (Consolidation) Amendment Ordinance (No. 2) 1981 removes the former statutory prohibition during the period of statutory continuance of subletting without consent and instead provides that the provisions of the prior tenancy agreement thereon continue to apply-

Section 53(2)(e) Landlord and Tenant (Consolidation) Ordinance, Cap. 7.

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

ACTION NO. 9443 OF 1981

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Coram: H. H. Judge Cruden

Date: 29 January 1982

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JUDGMENT

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1. The plaintiff is the landlord of the domestic suit premises which are subject to Part II of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. The premises were let to the 1st defendant under a written tenancy agreement for a period of 3 years from the 10th day of May, 1977. On the 9th of December 1981 the plaintiff issued proceedings for possession of the premises pursuant to Section 53(2)(e) of the Ordinance, on the grounds that the 1st defendant had, on or about the 10th day of October 1981, sub-let the premises to the 2nd defendant without the written consent of the plaintiff.

2. The particulars of claim indicated that the plaintiff did not claim that the tenancy agreement prohibited subletting but instead relied on the statutory cause of action arising under Section 53(2)(e) during the period of statutory continuance after the expiration of the contractual term. When the proceedings commenced the law was well settled that where a tenancy agreement did not expressly prohibit subletting a tenant might lawfully sublet. However, if the tenancy was continued by statute after the tenancy agreement had expired, subletting, during such period of statutory continuance, would only be lawful if the consent in writing of the landlord was obtained. If consent was not obtained then upon the expiration of the tenancy agreement a statutory cause of action for possession would prima facie arise in the landlord's favour.

3. For completeness it might be added that paragraph 4 of the original particulars of claim pleaded that this tenancy agreement was renewed for a further term of 2 years from the expiration of the original term. In that event the renewal would expire on the 9th day of May 1982 and prima facie no cause of action would yet have arisen. It was no doubt to cure this defect that the particulars of claim were amended on the 22nd day of January, 1982 by deleting the reference to renewal in paragraph 4 and simply pleading that after the expiration of the original term on the 9th day of May 1980, the tenant held over. While that amendment to the pleadings cured the defect which existed in the plaintiff's claim when first filed, by the time it was made the Ordinance itself had also been amended Whether the amended particulars of  claim are equally adequate under the amended Ordinance is the major and separate question I may have to consider shortly.

4. On the 14th day of January 1982 a summons, taken out by the 1st defendant in person, came before me in which he applied to have the amended particulars of  claim struck out on the ground that they were frivolous, vexatious and disclosed no cause of action. He further sought a ruling on the meaning of Sections 53(2)(e) and 74A (aa) of the Ordinance. The plaintiff, represented by Counsel, opposed that summons. I would state at once that the District court has no power to issue declaratory judgments. I therefore treated that summons as a simple summons to strike out. The 1st defendant's basic submission on that occasion was that as he had exercised a written option to renew included in the tenancy agreement he was still tenant under the contractual term and therefore no cause of action could arise under Section 53(2)(e) in view of the provisions of Section 74A (aa). The tenancy agreement pleaded by the plaintiff was exhibited to the 1st defendant's affirmation in support of his summons and Clause 4(i) thereof did contain the option to renew for two years as alleged. However, there was no evidence that that option had been exercised and Counsel for the plaintiff, quite properly, refused to make a concession in that regard. As there was a dispute as to fact on a material issue I dismissed that summons. I further indicated that as it seemed to me, after hearing submissions from the parties, that if the option had been exercised no cause of action would yet have arisen in favour of the plaintiff it was desirable at the trial for that question to be considered as a preliminary issue. The court after hearing evidence on that limited issue could then make a finding of fact thereon which might be decisive of the parties rights.

5. On the 21st of January 1982 the 1st defendant issued a second summons to strike out based on similar grounds but not limited, as was the prior summons, as to whether a cause of action could arise during the contractual term. This summons has come before me this morning and Counsel for the plaintiff makes the preliminary objection that the summons is an abuse of the process of the court; should be struck out on the ground, inter alia, that it raises the same substantial issue as was raised on the earlier summons; that in any event the further affidavit filed by the 1st defendant, exhibiting a copy of a purported notice exercising the option to renew, should not be considered by the Court at an interlocutory stage; nor in any event was it decisive of that issue.

6. Dealing with the last point first, I accept the plaintiff's submission that I should not look at that affidavit which endeavours to cure an evidential defect which arose on the prior summons on which I have already adjudicated. I would further observe that even if I was prepared to consider its contents, I would not be minded on that evidence alone, to find that the option to renew had been duly exercised.

7. As to whether the present summons is an abuse of process I was referred by the plaintiff to the opinion of the Privy Council on appeal from our own Full Court in Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd. & Anor. (1975) A C. 581 which is analogous to the present proceedings although here I am not concerned with competing statements of claim or counterclaims in different actions but with successive summonses in the one action. Having considered the principles of that decision I consider that the question now raised on this second summons is sufficiently different to the prior summons that the Privy Council's opinion is of far less relevance than it would otherwise have been. If the two summonses were the same and the 1st defendant was now merely seeking to cure an evidential defect or to argue the same point of law again I would have no hesitation in holding that the second summons was an abuse of process. I am also of the view that even if the two summonses were not substantially different "special circumstances" would exist in terms of Henderson v. Henderson (1843) 3 Hare 100,115 which would allow the present summons to proceed. Those special circumstances include the confusion that has arisen, even among members of the legal profession experianced in Landlord and tenant matters, following the enactment of the tortuous provisions of the Landlord and Tenant (Consolidation) Amendment Ordinance (No. 2) 1981 which came into force on the 19th day of December 1981. The full effect of the major amendments are probably not yet everywhere completely understood. There are also a number of apparently minor amendments which on closer examination  effect major changes to hitherto well settled principles. For reasons which I shall expand on shortly this second summons, in its wider form, squarely raises the effect of a major amendment included in the recent amending Ordinance, which was neither raised nor argued on the prior summons.

8. I accept that the law to be considered is the law existing at the date of the hearing of this summons. I have already given my reasons for coming to the same conclusion in relation to other provisions enacted by this amending Ordinance, in Leung Wai Han v. Lau Fung Ying & Ors. VCJ No. 3700/81. In that judgment I followed the decision of the Court of Appeal in Lam Wai v. Mak Yok Jan (1980.) H.K.L.R. 236 which considered similar amending phraseology under an earlier amendment of the same Ordinance.

9. I have already observed that before the recent amendments that after the expiration of a tenancy agreement under which a tenant might lawfully sublet, he was thereafter in breach of the statutory condition imposed by Section 53(2)(e) on the protected statutory continuance of the tenancy, if he then sublet without the written consent of the landlord. Previously in the instant circumstances a tenant during a contractual tenancy could lawfully sublet without consent and no cause of action arose. However, during the period of statutory continuance he could not lawfully sublet without the written consent of the landlord. Where he did so, in the latter circumstances, a statutory cause of action under Section 53(2)(e) arose in favour of the landlord who could, on that ground alone, claim possession of the suit premises. I can take judicial notice of the fact that this court has heard many actions brought in those very circumstances. Indeed, I can also take judicial notice of the fact that the present 1st defendant has himself been the defendant in a large number of actions relating to different suit premises where the cause of action was also founded on Section 53(2) (e) in circumstances where the premises were lawfully sublet during the contractual tenancy without consent, but such subletting, in the absence of written consent, became unlawful during the subsequent period of statutory continuance. So this issue has substantial practical consequences and affects the tenancies of a large number of domestic premises in Hong Kong.

10. I should pause here to mention that Section 74A (aa) was enacted on the 10th day of July 1980 to confirm inter alia the right of a tenant to sublet without consent during the contractual term if the tenancy agreement did not prohibit subletting. In other words, that amendment made it clear that the statutory requirement of written consent to subletting did not apply during the term of the contractual tenancy. It could only apply after that term had expired and the tenant remained as tenant during the period of statutory continuance. So Section 74A(aa) could properly have been approached as an amendment to strengthen the tenant's position and limit the landlord's statutory rights to recover possession. The 1st defendant in paragraph 1 of this summons, expressly raises Section 74A(aa). However, that formerly very important provision was one of the sections repealed by the Landlord and Tenant (Consolidation) Amendment Ordinance (No. 2) 1981 and so no longer exists. The well camouflaged solution to the initial legal mystery of what had happened to Section 74A (aa) is to be found in the subtle and unsignposted amendments to Sections 52(1) and 53(1). These show that while Section 74A (aa) has disappeared its provisions have been replaced and strengthened by the superficially small but in reality major and significant amendments to Sections 52(1) and 53(1).

11. In my view the new but different amendments to Section 53(2) go even further in protecting a tenant in the subletting circumstances I have outlined. They abolish the former mandatory statutory requirement imposed on a tenant to obtain the landlord's written consent to any subletting during the period of statutory continuance. If consent was not required during the earlier period of the contractual tenancy neither now is it required during the period of statutory continuance. The new provisions - adapted on the present basis that jurisdiction under Part II remains with the District Court and has yet to be transferred to the Lands Tribunal - provide:-

"53.	(1)	......
	(1A)	.....
	(2)	The "(Court)" shall not make an order for possession of premises in respect of which there is a tenancy ... unless it is satisfied that- ... (e) the tenant ...... in breach of the contractual tenancy sublet the whole or any part of the premises of which he is the tenant;"

12. So a tenant can now only unlawfully sublet during the period of statutory continuance, if such subletting would equally have been unlawful, during the earlier period of the contractual tenancy. The former unqualified provision that all subletting after the expiration of the contractual tenancy not consented to in writing was unlawful has been repealed. Before the amendments Section 53(2) generally imposed statutory terms on the period of statutory continuance irrespective of what. may earlier have been the contractual position between the parties. The new Section 53(2)(e) does the reverse. It simply extends the preexisting contractual terms beyond their contractual expiration and gives them full force and effect during the latter period of statutory continuance.

13. This represents a major and important, if unheralded, change to our tenancy law. Where as here and in many other cases which come before this Court, the provisions of the tenancy agreement are silent as to subletting the tenant has the common law right to sublet. Previously the legislature was apparently of the view that where a tenant was allowed after the expiration of the tenancy agreement to remain in possession under the protective provisions of the Ordinance, he could only sublet during the protected period if he had the landlord's written consent. That perhaps was a quid pro quo for allowing him to remain, when he had no contractual right to do so and the legislature had intervened on social grounds to prevent a landlord from recovering possession of his property on the date both landlord and tenant had earlier agreed. However, now where the tenant under the tenancy agreement enjoys the right to sublet - even if there is no express provision allowing him to sublet - he can continue, so long as the present provisions of Part II exist, to sublet the premises in perpetuity, as against a landlord's right to recover possession under Section 53(2)(e).

14. Applying that interpretation of the new Section 53(2)(e) to the instant summons it matters not whether the option to renew was exercised. Even if it were not exercised - and I am not able to find that it was - the powerful position of the 1st defendant as tenant under the tenancy agreement, which I shall treat as having expired on the 9th day of May 1980, remains unaltered.

15. For it was common ground that the tenancy agreement pleaded in paragraph 3 of the amended particulars of claim did not prohibit subletting without the consent of the landlord. On the interpretation most favourable to the plaintiff - that the contractual tenancy has expired and the period of statutory continuance has commenced - the new Section 53(2)(e) requires that any subletting must be in breach of that prior tenancy agreement, before a cause of action under Section 53(2)(e) can arise. There was no such breach. Accordingly no cause of action has arisen under Section 53(2)(e) in favour of the plaintiff. The plaintiff pleads no other. In terms of paragraph 2 of the 1st defendant's summons the plaintiff's amended particulars of claim must be struck out.

16. As to costs, it is clear that when the plaintiff first commenced proceedings having instructed solicitors who in turn instructed counsel, the earlier statutory ground for possession under Section 53(2)(e) applied. However, even by the date of the amended particulars of claim the law had been amended to its present form. Nevertheless the sudden and not always apparent major changes to the Ordinance last month have clearly taken many by surprise. In these circumstances I am well satisfied that the continuation of the present action was not frivolous or vexatious and so there will be no order as to costs against the plaintiff. Counsel for the plaintiff now orally applies for leave to appeal . In considering whether to hear his oral application at this hearing I am aware of the several interlocutory applications which have already been filed herein.

17. This action has already been subject to 4 interlocutory applications. It seems in the interests of justice that the necessity for a further formal summons for leave to appeal should, if possible, be avoided. A fifth interlocutory summons apart from delay would only add to the costs of all parties and I am mindful of the fact that under the new Amendment that except in exceptional circumstances, these will not be recoverable by even a successful party. For notwithstanding the number of interlocutory applications or the merits in favour of a successfully party, neither costs nor certificates for counsel, may be awarded or granted except where the other party's behaviour has been frivolous or vexatious

18. Counsel for the plaintiff gives oral notice that the plaintiff on appeal might, inter alia, dispute my ruling that the new amendments apply to this summons and this action. I consider that in order to expedite matters and avoid additional and irrecoverable costs, the proper course, having heard the 1st defendant on this issue, is to grant leave to appeal to the plaintiff and I do so unconditionally.

DATED this 29th day of January, 1982.

Representation:

Mr. K. Kwok instructed by Wilkinson & Grist for plaintiff. 1st Defendant in person.

Mr. Radcliffe of Deacons for 3rd defendant.