Wong Yip v. Fong Shek

LDLA000001A/1985

Property law - landlord and tenant - determination on whether premises are within Part I of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 - pre-war business premises excluded from Part I - determination based on user - domestic premises defined as, "premises the subject of a separate letting (including any bedspace, cubicle, room, floor, or portion of a floor or building) which are used wholly as primarily for human habitation." - business premises are defined as "premises which are not domestic premises." Re-hearing based on advice of Court of Appeal. Held: appeal allowed - premises were primarily used for domestic purposes, and come within the provisions of part I. Sections 2, 3, 32 and 51 Landlord and Tenant (Consolidation) Ordinance, Cap. 7.

IN THE LANDS TRIBUNAL OF HONG KONG

(Appellate Jurisdiction)

Landlord & Tenant Appeal No. 1 of 1985

TRIBUNAL: M.W. Phillips, Esq., Member

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DECISION

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1. On an appeal from a decision of this tribunal, the Court of Appeal referred this matter back to the Lands Tribunal to hold a fresh hearing. The Lands Tribunal previously found that the premises at 32 Stanley Main Street, Ground Floor, Stanley Village, came within the definition of domestic premises and were therefore within the provisions of Part I of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. This decision was contrary to a determination of the Commissioner of Rating and Valuation that they were business premises and that, under section 3(1)(i), were exempted from the provisions of that part. Business premises ceased to be within Part I from lst July 1984. The Commissioner of Rating and Valuation made his determination on 12th December 1984 following an inspection on 16th November 1984. In its judgment the Court of Appeal held that:

2. In respect of (1) the Court of Appeal agreed with the Tribunal that it might be guided by the judgment in Chan Yuk Tong v. Chu Sun Biu (1960) DCLR 43 in which Judge Huggins (as he then was) said at p.48, "Even if it can be urged that the business and domestic users are equally balanced I think the proper view is that the domestic user is the primary user and that the business is in the nature of a 'cottage industry'".

3. In considering (2), the Court of Appeal made no finding as to the "propriety" of following the provisions of section 51(3)(c) which deals with user in Part II of the Ordinance, but acting on the footing that I properly directed myself by taking the section as a guide, advised that "it was important that he (the reference is to myself) should consider not merely the active use by the family of different parts of the premises but also what we might call the passive use of space. Mr. Denis Yu is, we think right when he points out that in the "Reasons for Decision" the tribunal has apparently failed to give weight to the user involved in storing goods such as cartons of soft drinks for the purposes of trade in refreshments, cigarettes and tobacco being carried on in the front of the premises. On the other hand he (the reference is again to myself) properly considered the user all round the clock in relation to the shop itself, to cubicle A and to the kitchen; in all of which goods were stored".

4. The Court of Appeal drew attention in (3) to the material period being between 4th May 1979 and 12th December 1984. The first date is that laid down in section 3(1)(i) and the second date is that on which the Commissioner made his determination. Apparently, it was submitted to the Court of Appeal that I had based my determination and my findings on my own inspection on 9th March 1985 which was outside the relevant period. Obviously, with hindsight, uncertainty would have been avoided, had I specified that my decision was not based on the user as I observed it at my inspection. I confess it did not occur to me to be necessary, as I made no suggestion that my decision relied principally on my inspection. Rather, my reference was to the sketch plan produced by the officers of the Rating & Valuation Department based en their inspection of 16th November 1984. I made no notes or observations as to the actual storage arrangements at the time of my inspection, but it did appear there were less goods stored. However apart from this, I will say now that I was able to observe, based on the earlier evidence, that the premises were basicly in the same condition then, as they were at the time of the inspection by the officers of the Rating & Valuation Department.

5. My concern was mainly with the layout and the scale of the premises in relation to the sketch plan produced by the Commissioner's officers compared to that produced by the appellant. In this respect I found my inspection very helpful. I was able to ascertain what would be the general effect such storage, as shown on the sketch, would have on the space available for other uses of a domestic nature. I was able to observe the general character of the premises, particularly the front section which was used as a sitting room and the hire of a majong table as well as a shop. Hence my statement in that earlier decision; "However on having inspected the premises I consider the shop front area to be more in the character of a domestic sitting room than most shops. Apart from the storage in various parts of the premises, this store is little more than a soft drink refrigerator and some shelves for displaying cigarettes".

6. At the fresh hearing held on 7th January 1985 the first respondent, the Commissioner of Rating and Valuation withdrew and took no further part in the proceedings. Mr. Westbrook represented the respondent, Fong Shek, and Mr. Chong appeared for the appellant Wong Yip. It was agreed that the evidence of the earlier hearing and the review might also be evidence of this hearing. Both Counsel suggested that additional evidence should be heard.

7. Previously it was understood that Wong Yip's daughter-in-law had lived permanently at the subject premises over the past six years. She is separated from Wong Yip's son. It appears that although the premises is regarded as her home, she does not sleep there during the days she goes to work in the New Territories. She then stays near to her place of work. For 8 months of the year she spends about 5 nights in any week away from the premises returning on the weekends or any of the days she is not required to work. She was at the premises on Friday 16th November 1984, when the Commissioner's officers inspected. Cubicle B which was used as her bed-room was also used for storing goods. I divided the user equally between domestic and business on the earlier evidence.

8. It now appears that cubicle B has been used for majong games when the need arises for a second table. On the evidence this second table was required only 1 day in any 1 week. The respondent Fong Shek gave evidence of majong games continuing late into the night, but Wong Yip said that his customers who were all local residents usually went home when be closed the shop at about 5 p.m. He admitted that occasionally they may play until later but rarely did they continue beyond 6 p.m. It was submitted by Mr. Westbrook that now that it was evident that this area was used less for domestic purposes than previously thought, the proper allowance for user should be 75% to 80% non-domestic. While I previcusly allowed half domestic and half business, I also noted that if it were to be regarded as totally non-domestic the overall user would still be marginally in favour of domestic. Perhaps in the light of this additional evidence which makes the position much clearer, it might be more appropriate to allow 80% business user for cubicle B. In making this allowance I have not regarded the evidence of this cubicle being let specifically for storage purposes as being relevant to the user question. However I have noted that move goods could have been placed in this cubicle than that recorded on the Commissioner's officer's sketch. This potentional for additional storage is included in the 80% allowance.

9. Further evidence was given concerning the time the shop was open. Although the respondent Fong Shek said it was open for majong up to 8 p.m., it appears the hours of opening are between 9 a.m. and 5 p.m. Wong Yip also said he sometimes closes for half a day on Saturdays and Sundays. Under cross examination he raid that he was open all day for about three Saturdays and three Sundays out of four in any month. That is out of the eight weekend days in a month, he was usually open all day for six of them. I had previously allowed 8 hours a day for the shop area being used as a domestic residence. It would now appear that the shop is not open for business for as long a time as was previously allowed. It is only open up to 9 hours a day, 5 days a week, and half days on one weekend in any one month. This means that over any four weeks the shop is open roughly for 240 hours out of a total of 672 hours. That is 36% of the time. I have not altered my opinion as to the character of this shop area being more in the nature of a domestic sitting room than most. However giving some weight to the respondent's evidence of occasional late evening majong games, I would now review my previous figures of 2/3 non-domestic and 1/3 domestic, to 60% non-domestic 40% domestic. Any allowance over 60% non-domestic user for this part of the premises would seem to me to be unreasonable.

10. I have not been persuaded that I should vary the allowance for the passageway which I still regard as 50% domestic and 50% business.

11. The Court of Appeal in its judgment, agreed with the respondent's counsel that I had given insufficient weight to the storage of goods in the bed room, shown as cubicle A on the sketch plan, and the kitchen and toilet areas. I had stated in my decision that I regarded both these areas as being domestic irrespective of some goods being placed there.

12. Evidence was given of goods being delivered each week on a Friday at about 10 a.m. The Rating and Valuation Department officers inspected at 10.30 a.m. on Friday 16th November 1984. They would have recorded the stock stored on the premises immediately after the week's delivery. Wong Yip said his purchases vary but are in the region of about 1000 bottles and cans of beer and soft drinks each week. Cigarettes and toilet rolls are also purchased and stored. There was some doubt as to whether the toilet rolls were sold or not. If cubicle B were utilised for storage to its full capacity it would appear to be unnecessary to have to place goods in the kitchen or the bedroom. It seems to me that this is dons for convenience. Wong Yip is 72 years of age and his wife is also elderly. They, more than likely, prefer to place the goods in such a way as to minimise any lifting and handling. I previously took the view that the kitchen, toilet and bedroom made up the domestic section of the premises and some storage of goods from time to time did not alter this fact. The Court of Appeal took the view that I "should consider not merely the active use by the family of different parts of the premises but also what we might call the passive use of space". The Court of Appeal also stated, "Evidence relating to the period we have just mentioned demonstrating a user for business purposes for a day or a week or a little longer would not stamp premises otherwise to be regarded as domestic with a business nature. They would not become business premises; though in every case it must be a matter of degree. We make this observation in case the conditions observed by the Commissioner's officers on a particular inspection were shown to be wholly untypical". (underlining added)

13. The Commissioner's officer, Mr. NG Ming-fai said he based his calculations on what he saw at 10.30 a.m. on the day he inspected. He did not consider the use round the clock. The amount of goods stored at the time he inspected would have been the most which would be in storage at any time during the week, being immediately after the weeks delivery. Following the advice of the Court of Appeal, I find that the amount of goods recorded on the sketch was not typical of the usual position. These rooms were predominately used as the domestic section of the premises and the storage of goods from time to time does not materially alter this fact. The amount of storage use does not persuade me to allow more than 10% non-domestic user to each of these areas. This allowance relates to the 80% non-domestic allowance given to cubicle B in that if a greater allowance ware to be given to the business user of these rooms a corresponding lesser allowance should be given to the business user for cubicle B, as the allowance for cubicle B takes into account the potential of that area for more storage use.

14. The total area of the premises is 37.9 m² as calculated by the officers of the Rating and Valuation Department. The calculated areas of the various sections of the premises are as follows.

This gives a total of 37.8 m² 0.1 m² being lost somewhere in the calculations. For the purpose of this exercise I mill regard 37.8 m² as being the total area.

15. Based on all the evidence available, I have revised the various allowances as follows,

This is approximately 45% business and 55% domestic.

16. The Court of Appeal in dealing with the matter of primary user under Part II of the Ordinance in Chan Kwok Kwan v, Chan Cheong Wai trading as Chan Cheong Kee Store (1980) HKLR 450 agreed with the judge in the lower court that it would be wrong to allow oneself to be mesmerized by the arithmetic but considerable assistance can be obtained by such an analysis. The judgment also states, "This is not; of course, to say that the final decision must of necessity be governed by the results of that analysis, however, where the evidence is finely balanced, it may well be that the results of the arithmetical analysis will be sufficient to tip the scale one way or the other."

17. The premises are the ground floor of a pre-war village type house situated in the predominately retail area of Stanley Village. As submitted by Mr. Chong for the appellant, the premises can hardly be regarded as a majong parlour but rather they are the residence of an elderly couple used by them to give them some measure of an income. This income amounts to something in the region of $1000 to $1200 per month. The income from the letting of the majong tables, is more than previously thought but only amounts to about $600 per month. While the majong income can vary, Wong Yip was nontheless firm on his estimated gross talkings being in the region of $3000 per month, and the evidence of his purchases and his outgoings tended to confirm the net income being, as he said, about $1000 to $1200 per month. Whatever it might have bean, it was insufficient for the couple's needs and Wong Yip's grandson was obliged to give them some money from time to time. He usually gave between $400 and $500 some six to seven times a year; but Wong Yip's daughter-in-law paid no rent. No outside workers have ever been employed. I am therefore not persuaded that the business use might be regarded as the appellant's prime financial consideration. Rather, based on all the evidence now available, I am satisified that the premises were primarily used for domestic purposes over the relatitive period and come within the provisions of Part I of the Landlord and Tenant (Consolidation) Ordinance. The appeal is once more allowed.

18. There is no order as to costs.

Dated this 6th day of March 1986.

Representation:

Mr. K.M. Chong instructed by Liang, Ng, Lie and Lai for the appellant

Mr. Simon Westbrook instructed by Johnson, Stokes and Master for the respondent