Lee Kwok-wun v. Yeung Hing-kwan

DCCJ000114/1973

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT KOWLOON

CIVIL JURISDICTION

RENT INCREASES APPLICATION NO. 114 OF 1973

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Coram: Judge Rhind in Court.

Date of Judgment: 14th September 1973

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JUDGMENT

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1. It is common ground that the Applicant, who is the owner of the suit premises comprising a flat situated on the 3rd floor of 320, Castle Peak Road, sought to terminate the Respondent's domestic tenancy thereof, protected under the Rent Increases (Domestic Premises) Ordinance, Cap. 338, by serving a notice to quit under S.7(2)(a) of that Ordinance, requiring possession for use as a dwelling by himself and his family. The Respondent, who served the Applicant with a counter-notice conforming with S.7(6), disputes that the Court should make an order for possession in the Applicant's favour because, relying on the proviso to S.7(7), he contends that greater hardship would be caused by granting such an order than by refusing it.

2. The unchallenged evidence of the Respondent and his witness R.W.2 established that, at the time the Applicant served his notice to quit, one room of the suit premises was sub-let by the Respondent to a 'sub-tenant' within the ambit of the Ordinance.

3. After serving the notice to quit on the Respondent, it is not in dispute that the Applicant displayed it for three successive days at the entrance of the suit premises in the manner provided by S.7(3). Despite the absence of any counter-notice from the sub-tenant, the Respondent contends that, nonetheless, the Court is entitled to add any 'hardship' such a sub-tenant might suffer to the 'hardship' of the tenant, so that if the combined weight of their hardship exceeds that of the Applicant landlord the order for possession should be refused. According to the Applicant's submission, though, the sub-tenant lost his chance to have his hard ship considered when he failed to serve a counter-notice in time, and because of that procedural omission the Court should be precluded from taking any hardship to the sub-tenant into account.

4. There is a school of interpretation, exemplified by the reasoning in WONG To and others v. WONG Chi-chung, K.D.C. Civil Jurisdiction, Action 8163 of 1972, that, at best, a sub-tenant, even where he serves a counter-notice, gets no more than 'procedural rights' which certainly do not amount to a right to have his hardship weighed against the landlord's. By contrast, a different school of interpretation, which may be found expounded in LI Yit-kwei v. YUEN Koon-man and another 1971 D.C.L.R. 29, proclaims that the sub-tenant has the substantive right to have his hardship weighed against the landlord. LI Yit-kwei v. YUEN Koon, as well as the other cases of which I am aware which assert the existence of this substantive right, are all ones where the sub-tenant served a counter-notice, so that the question whether there are other procedural means, apart from the sub-tenants own counter-notice, of giving effect to this right remains open.

5. As I find myself persuaded by the cases supporting the existence of a substantive right, the opportunity now arises for me to determine whether procedurally it may be enforced in the present circumstances.

6. Adopting a literal interpretation of the Ordinance, particular heed having been paid to S.7(6) and S.7(7), I can find nothing to impel me to the conclusion that a counter-notice from the sub-tenant is a sine qua non to his hardship being considered.

7. On the contrary, sub-section 7 requires merely 'a counter-notice' without specifying from whom. If a counter-notice is the magic carpet which alone may lead to the benefits offered by the proviso to sub-section 7, I can find nothing in the legislation to prevent a sub-tenant from sharing a ride on the tenant's. As I understand the proviso, it seeks to give the Court a very wide discretion in determining hardship, and I would be loath to fetter that discretion. Because the sub-tenant has chosen not to comply with the ritual of delivering a piece of paper called a 'counter-notice' to the landlord does not impress me as a compelling reason.

8. It is arguably also possible to arrive at the same result by a different route. S.7(2) appears to draw a distinction between the service of a notice to quit and the effect of a notice to quit. Sub-section (6) only requires a counter-notice where the tenant or sub-tenant disputes the right of the landlord or principal tenant '....... to serve notice to quit'. The sub-section is silent though on what the procedure is where the tenant or sub-tenant concedes that the landlord has the right to serve notice to quit because there is no dispute about the prerequisites such as the landlord genuinely requiring possession for use as a dwelling by his family, but nonetheless, the tenant or sub-tenant disputes that the notice to quit should take effect by resulting in an order for possession because of the question of hardship. For example, in the present case before the Court there is no dispute that the Applicant had the right to serve a notice to quit, but it is certainly questionable whether it should take effect in view of the hardship to the Respondent and his sub-tenant.

9. If the tenant or sub-tenant does not even dispute the right to serve notice to quit, it is hard to see why their substantive rights to raise questions of hardship should be extinguished for mere want of a counter-notice which could be regarded as redundant in any event.

10. On this line of reasoning a counter-notice is only necessary where the landlord's right to serve the notice to quit is disputed, but where there is no such dispute the ordinary writ procedure could be used as an alternative vehicle to a counter-notice for raising the issue of hardship.

11. The implications of this are far reaching as it offers a tenant or sub-tenant a means of raising the issue of hardship even where no one has served a counter-notice in time.

12. Against this it can be argued that sub-section (6) should not be construed too literally because the following sub-section appears to presuppose that the right of the landlord or principal tenant to serve notice to quit also included the right to enforce that notice to quit, and Judge Jennings in NG Kai v. KOO Po-tai 1964 D.C.L.R. 26 clearly appears to have been of that view, holding that a tenant who had not served a counter-notice could not raise the question of greater hardship. Judge Jennings presumed that because the proviso relating to hardship occurred in sub-section 7 which is otherwise concerned only with the procedure on an application following a counter-notice, the proviso should be limited to such an application rather than being available generally. According to his view, one would have expected the proviso to occur in sub-section (2) or as a separate sub-section if it were meant to be of more general application. While there is obvious merit in that argument, it would have carried more weight in the context of more tightly drawn and coherent piece of legislation where the draftsman consistently made his meaning abundantly plain, but this particular Ordinance is so shot through with ambiguity and obscurity that is hard to presume anything with confidence.

13. On a literal construction of the proviso to sub-section 7, there is nothing to prevent it being of more general application.

14. Another argument militating against raising hardship other than through the medium of a counter-notice is the provision of S.7(1)(c) that a tenancy or sub-tenancy shall terminate where a notice to quit given under sub-section (2) takes effect. If a tenancy or sub-tenancy had terminated by virtue of a notice to quit taking effect, the question arises whether any scope would remain for considering hardship under sub-section 7. However, because sub-section 2 makes the notice to quit take effect subject to sub-section 7, the issue of hardship could still be regarded as preserved.

15. Turning now to the facts of this case, the Applicant is at present residing with his wife and 7 children on the ground floor of 314, Castle Peak Road in a pre-war building. Also at that address the Applicant conducts a business selling shoes.

16. As the landlord of those premises intends to demolish the building in which they are situated, he has recently obtained an Exemption Order under the Landlord & Tenant Ordinance as the result of proceedings in the Tenancy Tribunal. The Applicant will, therefore, soon be required to move away from those premises.

17. At his present address he and his family occupy about 600 sq. ft. for residential purposes, while about another 400 sq.ft. is used for their shoe business.

18. The Applicant's children living with him range in age from 11 to 22, the three oldest who are aged 22, 20 and 18 respectively all working for him in the shoe shop, while the four younger ones, aged 17, 15, 13 and 11 respectively all attend school full time.

19. Besides his wife and children, the Applicant also has one foki living with him.

20. The Applicant's sources of income are his shoe shop, a small ice retailing business he runs at Shun Ning Road, the rent of $300.00 per month he collects from the suit premises, and rent of $750.00 per month he collects for use of part of a shop at 318, Castle Peak Road which he purchased in March this year. Although the Applicant was not precise about his monthly income - and this was not surprising as it would probably fluctuate considerably - I inferred it must be at least $6,000.00 per month.

21. He described his business and family expenses as being about $2,700.00 per month and he said he had $100 or $200 left each month after paying those expenses. I presume the business expenses he was referring to are those on his shoe shop at 314, Castle Peak Road and on his ice business.

22. In addition he is also able to afford to pay monthly mortgage instalments of just over $3,100.00 each on the new shop he bought in March this year. The purchase price was $265,000.00 and the mortgage which was for $125,000.00 will be repaid over a five-year period, the balance of the purchase money amounting to $140,000.00 having been paid out of the Applicant's savings.

23. For his present premises the Applicant, or rather his wife, pays $230.00 per month rent, but they will receive $30,000.00 compensation from their landlord when they vacate.

24. The Applicant says that he has already spent $20,000.00 of that compensation, and as he struck me as an honest witness I accept it as true that he will only have $10,000.00 of the compensation moneys left. In addition he mentioned having about $3,000.00 in savings.

25. At least from the income point of view the Respondent's position is not so very different from the Applicant's. The Respondent's family residing with him on the suit premises comprises his wife, children aged 5, 3 and 1 respectively and his wife's parents. The Applicant challenged whether Respondent's in-laws live with him permanently, but Respondent satisfied me that they do. The total income for Respondent and those living with him is his salary of about $1,350.00 per month plus $480.00 per month rent which his wife and father-in-law receive on a flat they own in Poplar Street and a further $150.00 rent from the sub-tenant. Respondent and those living with him appear to have no other capital or sources of income. As far as the Court is aware from the evidence, Respondent is the only one working in his family.

26. Because the Applicant was slightly vague about his income and in particular did not distinguish between business and family expenses, and also because there are considerable differences in the ages and consequentially the needs of those comprising the families of the parties, it is rather difficult to say with any precision which of the families is the better off from the income point of view. The general impression I got, though, was that the Applicant's and the Respondent's family were each able to maintain about the same standard of living.

27. The one thing that the parties were fully agreed on was the difficulty about finding suitable alternative accommodation. Were it not for the fact that the tenant of Respondent's wife's and father-in-law's flat is protected and unwilling to leave his domestic premises, there might have been an easy solution to the parties' difficulties. Unfortunately too, there can be no question of the Applicant's inability to reside on his new shop premises as the relevant occupation permit excludes domestic user. Thus, whoever loses this case will presumably have to rent accommodation.

28. The suit premises are about 400 sq. feet.

29. The Applicant indicated he could have rented a flat of 900 sq. feet for $900.00 plus a few thousand dollars "construction fees", whilst the Respondent testified that a flat he located in Castle Peak Road was $800.00 for 600 sq. feet and in addition there were also "construction fees".

30. Obviously whichever of the parties is deprived of the suit premises will suffer some hardship because his standard of living will suffer through greater expenditure on rent, but, of the two, the Applicant would be the less affected because he has $10,000.00 compensation from the Tenancy Tribunal which should serve to cushion the effect of having to pay out more for rent.

31. When one adds the hardship of the sub-tenant, it becomes even clearer that the correct course for the Court is to refuse the order. The sub-tenant earns a little over $600.00 per month from which he has to support his wife, and soon he will have to support a baby as his wife is in an advanced stage of pregnancy. With such a low income, the sub-tenant could not afford a flat of his own, and would no doubt have to pay considerably more than his present rent of $150.00 per month for an alternative room. Moreover, in a tight property market like the one existing in Hong Kong now, anyone with a baby is likely to encounter difficulty in securing a room or cubicle.

32. As I am satisfied that greater hardship would be caused by my granting the order than by refusing it, I accordingly dismiss the application.

Representation: