Hooverton Investments Ltd v. Ng Kai Tai

DCCJ008447/1980

Landlord and Tenant - claim by owner for possession of wall-shop-whether agreement to occupy wall-shop constitutes a tenancy - if so whether tenant an implied assignee under 3 year tenancy or monthly tenant - whether payment of money to prior landlord "key money" - whether Part IV excluded - Section 116 Landlord & Tenant (Consolidation) Ordinance, Cap. 7.

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

ACTION NO. 8447 OF 1980 & 8906 OF 1980

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Coram: H.H. Judge Cruden in Court.

Date of Judgment: 20th October, 1981.

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JUDGMENT

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1. In this consolidated action the plaintiff, under its amended particulars of claim, claims an order for vacant possession of the suit premises. Both actions were initially commenced in the High Court but it is now agreed that rateable value of the suit premises does not exceed $15,000 and the parties accept the jurisdiction of this Court.

2. The plaintiff pleads that the suit premises were, under a tenancy agreement to the defendant's predecessor in title, let for a term of 3 years from the 1st day of July 1977 such tenancy agreement being subsequently assigned to the defendant who has continued to remain in possession. It was further pleaded that Parts I, II, IV and V of the Landlord & Tenant (Consolidation) Ordinance, Cap. 7 (hereinafter called "the Ordinance") do not apply to the premises. It was further submitted on behalf of the plaintiff that the status of the defendant was less than a tenant or lessee and was, at most, a licensee and therefore for that reason too, the provisions of the Ordinance do not apply.

3. The defendant denies that any tenancy agreement was assigned to him and pleads that he is a monthly tenant. He further pleads that he paid key money in the sum of $2,200 to the plaintiff's predecessor in title and accordingly Part IV of the Ordinance applies. If Part IV does apply then the defendant is entitled to the protection of the provisions contained therein and the plaintiff's present action must fail.

4. The suit premises comprise what is commonly called a "wall shop". In addition to having possession from the plaintiff of a portion of the plaintiff's premises abutting Tang Fung Street, the defendant, pursuant to Urban Council Wall Stall Licence No.297 issued under the Public Health and Urban Services Ordinance, Cap. 132 and the Hawker By-laws 1972 thereunder, has the right to occupy part of that Street as an extension of his shop premises which commence in the plaintiff's premises.

5. I am, however, solely concerned with whatever rights he may enjoy from the plaintiff to occupy portion of the plaintiff's premises.

6. The portion of those premises occupied by the defendant while utilised as one unit, in fact comprises two pieces of land contiguous to each other. The two pieces were subject to two separate documents intituled "Tenancy Agreement" from Chan Kuen the plaintiff's predecessor in title to Man Pui Sum who occupied the premises immediately prior to the defendant.

7. The tenancy agreement which related to Action No. 8447 was for 3 years from the 1st day of July 1977 at a monthly rent of $300 and was produced as Exhibit P.5. The tenancy agreement which related to Action 8906 was for 4 years from the 1st day of September 1976 at a monthly rental of $220 per month. The total area comprised in both tenancy agreements as evidenced by Exhibits P.1 and P.2 was 29 feet long by 2½ feet wide.

8. So the dimensions of the suit premises were relatively long but very narrow in width. On the basis of these physical characteristics the plaintiff submitted that on the authority of LEUNG Kwok-kau v. TAM So-wa Trading as Sun Cheong Electric and Plumbing Co. (1968) H.K.L.R. 673 there was no tenancy of the premises to which the Ordinance could apply, for, it was submitted, in the absence of a defined portion of the soil to which a letting can be distinctly related, no estate or interest in land is created. Here, it was submitted, the defendant simply had the use of the outer surface of a vertical wall which by its nature had no depth. That factual situation was fatal to the defendant in LEUNG Kwok-kau's Case where the Full Court held that no tenancy arose. The judgments in that case accept that it was only the bare surface of the wall to which the defendant had any rights. Here the area is distinctly defined and has a width of 2½ feet which is very much more than the surface of a wall. While that width is narrow in relation to the area's length it does seem to have the characteristics which enable it to be let as an interest in land under a tenancy agreement. Huggins, J., as he then was, in delivering his judgment, after referring to his previous wide judicial experience in dealing with side wall shops, goes on to declare:-

"I venture to think that the cases must be rare indeed where the parties actually intend to contract only in relation to the surface of a wall. This case has been fought on the basis that was what was intended and for the reasons given by my Lords I agreed that the appeal should be dismissed."

9. So that decision must be approached on the basis of the unusual facts which came before the Court, namely that it was only the bare surface of the wall that was in dispute. The facts here are sufficiently different, that the decision of the Full Court does not apply. To the extent that it sets out principles, in relation to the Hong Kong phenomenon of side wall shops, it supports the defendant's submission that the transaction between the parties constituted a tenancy of the suit premises which is subject to the Ordinance. I find that a tenancy does exist between the parties.

10. The next issue is whether Part IV applies. The suit premises are clearly business premises. The plaintiff pleads that the tenancy agreements produced as Exhibits P.4 and P.5 were for periods of 3 and 4 years and there-fore are excluded from Part IV by virtue of Section 116(2)(a) which provides:-

"(2) This part shall not apply -

11. The plaintiff pleads that the agreements were impliedly assigned from the prior tenant Man Pui Sum to the defendant. It is undisputed that there was no written assignment. No witnesses were called in support of any purported assignment. It is true that on the assignment of a property from one owner to another, subject to existing tenancies, the new owner becomes the new landlord of the existing tenant. But when one tenant succeeds another there is no presumption that there has been an implied assignment of the prior tenant's rights, under any then existing tenancy agreement, to the new tenant. In the absence of any evidence to the contrary I accept the defendant's submission that the relationship between the parties is not governed by any written agreement. Accordingly as rent was paid monthly I hold that the defendant is a monthly tenant at common law of the plaintiff. That by itself would be sufficient to exclude exemption from Part IV.

12. The defendant further submitted that money had been paid by the defendant to Chan Kuen, namely the sum of $2,200 by way of key money. Accordingly it was submitted that the exclusionary provisions of Section 116(2)(b) did not apply.

13. The defendant did not call any evidence and rested this submission on the pleadings. In paragraph of the defence the defendant pleaded:-

14. In paragraph 2 of the plaintiff's reply it admits payment of the sum of $2,200 by the defendant to the plaintiff's predecessor in title, but otherwise denies the allegations. There was no evidence on this issue at the trial. So the issue rests on the pleadings. They disclose that payment of the sum of $2,200 is admitted but the nature of that payment is not admitted. Section 116(3) places the onus under Section 116(2)(b) on the landlord in these terms:

15. So the onus is on the plaintiff, by evidence, to prove that no key money was paid. The admission in the Reply raises an estoppel against the plaintiff from denying that the sum of $2,200 was paid by the defendant tenant to the former landlord. There being no evidence to satisfy me that the payment was "not key or construction money or other premium" the plaintiff has failed to discharge that statutory onus. It follows on this ground too, that the application of Part IV has therefore not been excluded.

16. Having arrived at that conclusion judgment must be given in favour of the defendant. Leave is granted to the defendant to pay arrears of rents, if any, within 14 days. The defendant is also entitled to his costs on the upper scale to be taxed if not agreed. The exhibits may be returned to the parties producing them after the time limited for appeal has expired.

DATED this 20th day of October, 1981.

Representation:

Miss S. Kwan inst'd by Patrick Chan & Co. for plaintiff.

Mr. H.C. Ho of H.C. Ho & Co. for Defendant.