|
HCA007836/1981
The true construction of the phrase "a tenancy for a fixed term of three years or more" in Section 121(2)(a) of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7.
Three years estate in land not required - contractual security for three years suffices.
| IN THE HIGH COURT OF JUSTICE |
1981, No. 7836
|
BETWEEN
|
Sze Yuen Co. Ltd. |
Plaintiff |
|
AND
|
|
|
Kwan Hang |
Defendant |
_______
Coram: Hunter, J. in Chambers
Date: 13 May 1982
(Judgment delivered in open court)
___________
JUDGMENT
___________
1. This is an appeal from a decision of Master Wilson given on 22nd March 1982. It raises a question of some interest and importance, namely the true construction of the phrase "a tenancy for a fixed term of three years or more" in Section 121(2)(a) of the Landlord and Tenant (Consolidation) Ordinance Cap. 7. For this reason, and because I had been told that other cases depend upon it, I acceded to a request to give judgment in open court.
2. The short facts are these. The plaintiff is the owner of the ground floor of No. 127, Sai Yee Street, Kowloon. When he bought in November 1973 the defendant was already the tenant of the premises under a lease granted by the plaintiff's predecessor in title. This lease expired on 31st October 1978. Shortly before its expiry there were discussions as to a new lease, and certainly the defendant "held over" after 31st October. The plaintiff says that a binding oral agreement for a new lease was made before 31st October, but I do not regard the evidence of this as sufficiently clear to enable me to act on it under Order 14.
3. What is clear is that the parties made a new agreement in writing, and in Chinese, dated 3rd November 1978. By this agreement the premises were relet by the plaintiff to the defendant. Clause 2 of the agreement provided as follows:-
"The term of tenancy is agreed from first day of November 1978 to the end of October 1981. It is agreed that during the term of tenancy, the tenant may not withdraw from the tenancy, otherwise rent will be calculated on the remainder of the term".
4. The plaintiff's case is that this lease expired by effluxion of time on 31st October 1981: that no notice of termination was necessary; and that he is entitled to possession. Master Wilson regarded this claim as well-founded and accordingly on 22nd March last ordered that judgment be entered for the plaintiff for possession of the premises with ancillary relief. From this decision the defendant appeals. The sole point taken before me on the appeal was that the lease did not expire by effluxion of time and that notice to terminate was necessary because the tenancy was not "for a fixed term of three years or more" with in Section 121(2)(a) of the Ordinance and was caught by the provision of Part V thereof.
5. The appellant's argument, most economically and persuasively put by Mr. Warren Chan, can be summarised as follows:-
| (i) |
|
the phrase "term of years" in this section of the Ordinance should be given its strict technical meaning, namely the length of the estate in land granted by the landlord to the tenant.
|
| (ii) |
|
the court should follow and apply the reasoning in a line of English authorities namely Shaw v. Kay(1); Cadogan (Earl) v. Guinness(2); Colton v. Becollda Property(3); Roberts v. Church Commissioners(4); Bradshaw v. Pawley.(5)
|
| (iii) |
|
these authorities show that the term in a lease is fixed by the habendum, and the operation of this is "merely prospective". A lease can operate as a grant only from the date of its execution; there can no backdated grant. Therefore the term of years created or granted by a lease starts from the execution of the document and not from the date in habendum, if that be earlier. An apparent grant by a lessor of a term commencing before the date of the document may have contractual effect between the parties, but in construing an Act of Parliament, the court must strictly apply the law.
|
| (iv) |
|
therefore said the appellant I should apply these principles to our Ordinance, and conclude that though the parties in Clause 2 plainly intended to create a three year term, they failed in law by not concluding their agreement until 3rd November |
6. Three short citations are sufficient to show that the third proposition is sound. Thus:-
|
(3) |
In Colton v. Becollda Property(3) Denning L.J. at p. 231 said this: "In point of law the legal interest of the tenant starts from the date when the lease was executed. But as between the parties it may start from the date stated in the lease, because the parties, by their agreement, have related its commencement back to the date when the tenant went into occupation".
|
|
(4) |
In Roberts v. Church Commissioners(4) Stamp L.J. at p. 285 says: "It is well settled that the habendum in a lease only marks the duration of the tenant's interest, and the operation of the lease as a grant takes effect only from the time of its delivery: ..... The expression "duration of the term" connotes the period during which the term is to continue, and it cannot start until it is created. Until then there is no tenancy and no interest in the tenant. Although the terms of the habendum are, or may be relevant in construing the lease, here what has to be construed is an Act of Parliament".
|
|
(5) |
In Bradshaw v. Pawley(5), Megarry V.C. at p. 14 says "Whatever contractual obligations there may be between the parties, no actual term of years can be created until the lease has been executed and so the grant has been made. Thus where the question is what term has actually been created, as where a statute refers to terms of a particular length, the commencement of the term cannot be earlier than the date of the grant of the lease". |
7. In relation to these English decisions two features in particular must be noted namely:-
| (i) |
|
The relevant statutes being considered by the courts required lengthy terms of years - the shortest being 14 years. Under English law such a lease can only be created by Deed, Section 52 of the Law of Property Act 1925. By definition a Deed can only operate from its execution - from its delivery. This was a compelling reason for treating word "term" in the relevant Acts as referring exclusively to the estate in land created by the Deed.
|
| (ii) |
|
The cases on the other hand recognise that there is nothing to prevent the parties from backdating their obligation by contract; that their obligations so created are binding; and that as between the landlord and tenant this is an every day occurence especially in a contract of reletting. |
8. This analysis reveals that Mr. Chan's first proposition is a crucial one. When this Ordinance, and its predecessor in similar or identical terms, were enacted, must the legislature be taken to have had in mind exclusively the estate in land, or is it more probable that it had in mind simply the measure of the contractual obligation. In my judgment there are compelling reasons pointing to the latter conclusion. They include the following:-
| (i) |
|
The absence of any provision similar to Section 52 of the Law of Property Act. The legal and legislative position is fundamentally different when a contractual term of years of any length can be created by agreement and not by deed given that there is a sufficient note or memorandum, Cap. 23 Sections 5-7. As the English decisions recognised, contractual obligations can be backdated, and therefore the date of the agreement is quite insignificant.
|
| (ii) |
|
One reason for this vital difference, no doubt, is the fact that, as here, tenancy agreements are commonly written in Chinese. It would be absurd or impossible to apply the technicalities of English Deeds to such agreements.
|
| (iii) |
|
The minimum term required by the subsection in question is three years which can be created by parol, Cap. 23 Section 7(2). This provision is derived from Section 54 of the Law of Property Act 1925. There is no English authority, of which I am aware, upon the meaning of the word "term" in Section 54; but there are reasons for doubting whether the English court would give it the technical meaning here contended for. It is noteworthy that in Colton v. Becollda(3) an oral gentlemen's agreement which fell short of a binding agreement made before the commencement of the term was held sufficient to satisfy the relevant statute.
|
| (iv) |
|
I feel sure that what the legislature had in mind was three years security of tenure, which can quite sufficiently be created in Hong Kong by contract. I agree here with a view expressed by Judge Mills-Owens in Tse Chun Wing v. Tak Wing Firm(6): and grateful adopt the phrase "a measure of contractual security" (my emphasis) used by Huggins J. (as he then was) in Chan Sang v. Choy Yuk(7). |
9. In my judgment therefore, on its truth construction Section 121(2)(a) requires no more than three years contractual security: that this was given to the defendant by the agreement of 3rd November 1978; and that this appeal accordingly fails and is dismissed.
|
(D.S. Hunter) |
|
Judge of the High Court |
(1) (1847) 1 Exch. 412
(2) (1936) 1 Ch. 515
(3) (1950) 1 K.B. 216
(4) (1972) 1 Q.B. 278
(5) (1980) 1 W.L.R. 10
(3) (1950) 1 K.B. 216
(4) (1972) 1 Q.B. 278
(5) (1980) 1 W.L.R. 10
(3) (1950) 1 K.B. 216
(6) (1958) D.C.L.R. 35 at p. 40
(7) (1963) H.K.L.R. 476 at p. 484
Representation:
Mr. Warren Chan, instructed by John Ku & Co. for Appellant/Defendant
Mr. K-John Cheung, instructed by H.H. Lsu & Co. for Respondent/Plaintiff
|