Chan Kan and Others v. Johnson Chi
Read the full judgment text of HCA 435/1968 on BabelCite. This High Court CFI judgment was delivered on 23 July 1968.
1. This is an application for summary judgment under Order 14 Rule 1 of the Rules of the Supreme Court. The plaintiffs are the landlords of the premises possession of which is in dispute. The original defendant was one Johnson Chi and I shall refer to him as the first defendant. The first defendant was the lessee of the premises and a certain Ng Wai Chun, who was added as a defendant upon his own application and to whom I shall refer as the second defendant, claims to be a sub-tenant of the firs
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HCA000435/1968 IN THE SUPREME COURT OF HONG KONG ORIGINAL JURISDICTION ACTION NO. 435 of 1968 -----------------
Coram: Pickering J. Date of Judgment: 23 July 1968 ----------------- DECISION ----------------- 1. This is an application for summary judgment under Order 14 Rule 1 of the Rules of the Supreme Court. The plaintiffs are the landlords of the premises possession of which is in dispute. The original defendant was one Johnson Chi and I shall refer to him as the first defendant. The first defendant was the lessee of the premises and a certain Ng Wai Chun, who was added as a defendant upon his own application and to whom I shall refer as the second defendant, claims to be a sub-tenant of the first defendant. 2. The premises in dispute consist of a ground floor shop at 473 Hennessy Road, Hong Kong. They were let by the plaintiffs to the first defendant as business premises for a term of five years from the 10th day of May 1967 at the rental of $2,600 per month during the first three years of the term and thereafter at $2,860 per month; these rents were to be payable in advance on the 10th day of each and every calendar month. Whereas the lease was expressed to run from the 10th day of May 1967 it was not executed until the 12th of May although the first defendant actually entered into occupation on the third of May, plaintiffs having allowed him seven days within which to re-decorate the premises. 3. The lease contained, in Clause 5(a) thereof, the usual proviso for re-entry by the plaintiffs if the rent reserved or any part thereof should be unpaid for thirty days after becoming payable whilst in Clause 5(f) the first defendant agreed to waive and deprive himself of his rights to protection against ejectment, if any, contained in the Landlord and Tenant Ordinance (Cap. 255) and in any other then existing or future legislation. 4. As from the 10th of February 1968 the first defendant ceased to pay rent and on the 22nd of March the plaintiffs issued the writ in this action against the first defendant claiming possession, arrears of rent, and mesne profits. On the 6th of April 1968 judgment by consent was entered for the plaintiffs against the first defendant. On the same day, upon the application of the second defendant, it was ordered that he be added as a defendant in the action. 5. In support of his application to be joined as a defendant the second defendant filed an affidavit stating that he is in possession of the whole of the premises in dispute and carries on there a business under the name of the 'Kam Fung Dress Shop' as a sub-tenant of the first defendant. 6. In connection with the present summons for judgment the fourth plaintiff, for himself and the other three plaintiffs, filed an affidavit on the 27th of April stating that none of the plaintiffs know the second defendant who is a complete stranger to all of them. A photostat copy of the lease of the 12th of May 1967 between the plaintiffs and the first defendant is exhibited to this affidavit which refers specifically to Clause 3(j) of the lease stipulating that the tenant shall not "assign, sublet, underlet, or in anywise part with the possession or control of the demised premises or any part or parts thereof without the consent in writing of the landlord first had and obtained". The affidavit further states that none of the plaintiffs has ever been approached by the first defendant for consent to subletting and it asks for judgment. 7. This affidavit was but the second volley in the paper battle which developed upon affidavit between the parties. In a further affidavit of the 3rd of May the second defendant claims to have become a tenant of the principal tenant, that is the first defendant, as from the 1st of December 1967 in respect of the whole of the premises at a rental of $2,400 a month payable at the rate of $80 per day on the basis of a thirty-day month and paying in addition a daily sum of $20 as advance electricity charges. This affidavit further claims that the first defendant had informed the second defendant that the plaintiffs had agreed to the subletting and it alleges that the plaintiffs were at all times aware that the second defendant had entered into possession as a sub-tenant; the change in user, it is claimed, was apparent since whereas the first defendant had sold refrigerators and television sets in the premises under the name of "Lucky Refrigerator Co.", the second defendant uses the premises as a dress shop and displays a large signboard "Kam Fung Dress Shop". It is further alleged in this affidavit of the second defendant that two of the plaintiffs, both of whom he knew only as Mr. Chan but each of whom he says he could identify, came frequently to the premises to see the decoration work being undertaken and went so far as to proffer advice about securing the rear door against thieves. The second defendant further claims to have told the two Mr. Chans that he had rented the premises from the first defendant and to have encountered no objection, to have had a conversation with them about blocked drains when a part of the premises were flooded and to have actually sold clothing in the shop to these two plaintiffs. It is the contention of the second defendant that because the plaintiffs, with full knowledge of the sub-letting, had continued to receive rent from the first defendant and had by this action sued for arrears of rent, they cannot now be heard to say that his tenancy should not be recognized. 8. Amongst the numerous exhibits to this affidavit there is a certificate of standard rent dated the 22nd of January 1968 and signed by an Assistant Commissioner of Rating and Valuation showing the standard rent to be $100 per month including rates. The second defendant asserts that on the strength of that certificate he applied to the Tenany Tribunal in February for a variation of the rent payable by him to the first defendant. There is no mention in this affidavit of the fact that this application has since been withdrawn. 9. This second affidavit of the second defendant was met by a further affidavit from the fourth plaintiff dated the 24th of May denying any knowledge on the part of the plaintiffs of the subletting, any consent to a sub-letting and any visits to the premises by any of the plaintiffs after the original letting to the first defendant. 10. This affidavit contains the further allegation that whereas the second defendant claims that he became a sub-entant of the first defendant from the 1st day of December 1967, the first defendant entered on the very day into a written agreement in Chinese with one Leung Ming whereby the latter entered into the premises for the purpose of selling clothing for a period of four months. Reference is made in the affidavit to the unlikelihood of the first defendant granting such a "licence of service agreement" to Leung Ming and on the same day purporting to sublet the same premises to the second defendant. The affidavit further alleges collusion between Leung Ming and the second defendant in regard to this and other premises. 11. The second defendant's second affidavit was also countered by an affidavit of the plaintiffs' solicitor dated 24th of May exhibiting a copy of an agreement between the first defendant and Leung Ming dated the 1st December 1967. The terms of this agreement are sufficiently material to this application to justify setting it out:-
12. The first defendant's Grounds of Opposition to the application made by the second defendant to the Tenancy Tribunal for a variation of rent are also exhibited to this affidavit of the plaintiff's solicitor. In his Grounds of Opposition the first defendant denied any relationship of landlord and tenant between himself and the second defendant. 13. Although the second defendant's affidavit had made no mention of Leung Ming the latter suddenly entered the lists on behalf of the second defendant with an affidavit of the 4th of June in which he admitted that the document set out above is in fact a copy of a document signed between the first defendant and himself about a week before December the 1st 1967 although dated the 1st of December. Leung Ming goes on to state in his affidavit that two or three days after the signing of this agreement he found himself unable to raise the necessary capital to begin business at the premises and told the first defendant so suggesting to the latter that they cancel their agreement which, he claims, was never intended to be an agreement appointing him as the first defendant's manager but was intended to create a sub-tenancy. Upon the first defendant agreeing to cancel their agreement Leung Ming claims to have introduced the second defendant to the first defendant who, in Leung Ming's presence, agreed to sublet the premises to the second defendant at the same rental of $2,400 per month payable daily at $80 a day. It is further claimed in this affidavit that the second defendant was to enter into possession on the 1st of December in order to decorate the premises though the rent was to begin from the 4th of December and Leung Ming states that when on that latter date he visisted the shop it had then been re-decorated by the second defendant and two of the plaintiffs, each of whom was introduced to him as "Mr. Chan", were present in the premises. 14. The second defendant remains in occupation of the premises and the present summons for judgment is directed against him and claims possession and mesne profits from the 6th April 1968 which is the date upon which judgment by consent was entered against the first defendant. 15. Mr. Bernacchi, for the plaintiffs, dealt first with a suggestion that the five-year lease granted to the first defendant did not confer exemption from the provisions of the Landlord and Tenant Ordinance under S.3(1)(e) thereof because it was executed only on 12th May 1967 and though purporting to be for a term of five years from the 10th May 1967, failed to create the five-year term necessary for exemption since the lease was executed after the purported commencement of the term. Counsel countered this argument by reference to the cases of Tse Chan Wing and Tak Wing Firm(1) and Lo Yim Choi and Au Kin Kwan(2) in both of which it was held that the sub-section required premises to be "let" and not "leased" for the requisite term. In the present case, counsel said, the first defendant was in possession on the 10th May 1967 under a subsisting agreement for a lease which was in fact subsequently specificially performed by the grant of the lease so that the combined effect of the agreement and subsequent demise was a letting for a term of five years. That letting having been determined by the consent judgment against the first defendant, consel urged that there could be no tenancy in the second defendant for which he could possibly claim protection. For this proposition counsel relied upon the cases of Smith v. Great Western Railway(3) and Tang Yau Ah and Chan Kit Ching(4). It is to be observed that in the former of these cases no question of waiver arose whilst in the latter the particular waiver asserted before the Full Court had neither been pleaded nor adverted to in the court below and failed for that reason. In the present case waiver is heavily relied upon and if and when a Statement of Defence is filed, will no doubt be pleaded. Although in the Tang Yau Ah and Chan Kit Ching(4) case the Court did not decide the validity of a claim to waiver, counsel submits that if a head lease is forfeited the mere fact that the landlords knew of a subletting is irrelevant; it was open to the second defendant to apply for relief from forfeiture by taking over the head lease but no such application had been made. It is perhaps pertinent for me to observe that no doubt the reason for the failure to make such an application is the second defendant's reluctance to tie himself to a rental of $2,600 per month in the face of his hope of obtaining a reduction of that rental upon a renewed application to the Tenancy Tribunal. 16. However that may be, the effect of waiver by a head landlord was not determined in any of the cases quoted to me and, if the very confident assertions in regard to waiver made by the second defendant can be substantiated in the present case, their effect upon his occupation of the premises will fall to be weighed. 17. In this regard even if I accept that either the second defendant was never told by the first defendant, as he claims to have been told, that the plaintiffs had agreed to the subletting of the premises, or that if he was so told, the first defendant was deceiving him, it is clear that the change of user of the premises which took place almost four months before the issue of the writ against the first defendant must have been apparent to anybody with eyes to see. I have, however, no evidence that such change was ever the subject of comment to anybody by any of the plaintiffs two of whom are alleged by the second defendant to have visited the dress shop not infrequently - and assertion borne out, at any rate as to the 4th December 1967, by Leung Ming. Moreover the second defendant claims that he could identify those two particular plaintiffs. Thus the question whether the plaintiffs knew of and assent to the occupation of the premises by the defendants is open. If it be found that they did so know and assent, the significance of their waiver of the subletting by the first defendant without any written permission would remain to be considered and I am not persuaded on the authorities quoted to me that it is clear that such waiver could have no significance in regard to the establishment of some right in the premises by the second defendant against the plaintiffs. As it seems to me, both the existence of waiver and if it be found to exist, its effect, are triable issues. For that reason leave to defend must be given. 18. As to whether such leave should be unconditional or on terms, Mr. Ming Huang for the second defendant asserts that the imposition of terms would amount to an oppression since there was never any contractual relationship between the plaintiffs and the second defendant calling for the payment of rent by him; that the imposition of terms would make it more costly for the second defendant to defend and that if he were required to pay into Court the amount of his contractual rental with the first defendant he might be unable to recover such amount if subsequently a Tenancy Tribunal were to reduce his rental. 19. There appear to me to be two cogent objections to this last approach. In the first place on the admitted facts it is unlikely that a Tenancy Tribunal would hold itself to have jurisdiction. The cases of Tse Chan Wing and Tak Wing Firm(1) and Lo Yim Choi and Au Kin Kwan(2) are not binding upon me but I see absolutely no reason to differ from the conclusion reached in those cases and unless the Tenancy Tribunal was prepared so to do it would decline to entertain an application for variation of rent in the face of a letting of those business premises for a term of five years having the effect of excluding the premises from the ambit of the Landlord & Tenant Ordinance by virtue of Section 3(1)(e) thereof. Secondly, the approach suggested requires me to assume that even if a Tenancy Tribunal did entertain the application, the result of such application would favour the second defendant and lead to a reduction of his "rent". I am not prepared or entitled to make any such assumption. The only appropriate approach is on the basis of the rental, if such is the proper description of figure of $2,400 per month, which obtains today. 20. For the rest, the second defendant is using the plaintiffs premises for the purpose of his business and they are receiving no rent either from him or from anybody else. Whatever the outcome of those proceedings that is not a situation which the second defendant can expect to continue and indeed eventually he must expect to have to compensate the plaintiffs for his occupancy of the premises since the 6th April 1968 the date upon which the first defendant consented to judgment. In the light of his proposed defence it is entirely reasonable that he should be put upon terms. His story of a licence being granted to Leung Ming by the first defendant on 1st December 1967 and an oral sub-tenancy of the same premises being given to himself on the same date is inherently suspect. I emphasise "inherently" for although it is admitted by counsel for the second defendant that the Leung Ming who is concerned in this case is the same Leung Ming who was described by the judge in Chan Bock Hing Investment Co. Ltd. and Leung Ming and Lok Chi Yu(5) as having once bragged that he had on prior occasions obtained premises rent free and said that he would do so again, I have deemed it proper to exclude any reference to that case from my mind. Whilst I am no admirer of the much criticised doctrine contained in Hollington v. Hewthorn(6), it would be going well beyond the prohibition contained in that case to permit myself to be influenced by the facts of Chan Bock Hing(5) case which was not even between the same parties as are concerned in the present case. It remains true however that, without attaching the slightest importance to the Chan Bock Hing(5)case, the proposed defence herein displays a considerable element of suspicion. 21. In the case of Pitamberdas Chatomel Kalwani and Jacobson Van Den Berg (Hong Kong) Ltd.(7) the learned Chief Justice said:
22. The extract from Devlin L.J.'s judgment in Fieldrank Ltd. v. E. Stein(9) referred to by the Chief Justice will bear quotation in full. In that case Devlin L.J. said:-
23. In the same case of Pitamberdas Chatomal Kalwani and Jacobson Van Den Berg (Hong Kong) Ltd.(7) Blair-Kerr J. Said:-
24. In the present case it is entirely reasonable that leave to defend should be conditional upon the second defendant bringing into court as from the date of the consent judgment against the first defendant, the amount of money which he says he contracted to pay under his alleged oral agreement with the first defendant. Accordingly there will be leave to defend conditionally upon the second defendant paying into Court the sum of $9,600 within seven days of the date hereof and the further sum of $2,400 per month on or before the sixth day of each succeeding month commencing with the month of August, 1968, until trial. In default of such payment the plaintiffs are to be at liberty to sign judgment as claimed. 25. It is ordered that the Defence be filed by the second defendant within twenty-one days hereof and the plaintiffs' Reply, if any, within fourteen days thereafter. Costs of the application will be in the cause and there will be a certificate for one counsel on each side.
23rd July, 1968. Representation: B. Bernacchi, Q.C. & M. Asome (Edmund Cheung & Young) for Plaintiffs. Ming Huang (T.M. Chow & Co.) for 2nd Defendant. (1) (1968) D.C.L.R. 35 (2) (1960) D.C.L.R. 224 (3) 3 A.C. 165 (4) (1958) H.K.L.R. 7 (5) (1965) H.K.L.R. 808 (6) (1943) 2 A.E.R. 35 (7) (1964) H.K.L.R. 842 at 856 (8) (1893) 10 T.L.R. 53 (9) (1961) 1 W.L.R. 1287 (10) (1876) 1 Ex. D. 262 (11) (1901) 85 L.R. 262 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||