Ng Wing-lee v. Ho Yuk-chang t/a Cheung Kee

Landlord and Tenant - part I pre-war premises - landlord seeking possession of premises let under monthly oral tenancy on grounds of illegal user - whether in addition to statutory case of action to recover possession is there also an implied covenant against immoral or illegal user - where third party convicted of gambling offence on premises is it necessary to prove knowledge on the part of tenant before he can be held to have “suffered” or “permitted” illegal user - Section 33 (1) (b) and (d) Landlord and Tenant (Consolidation) Ordinance, cap. 7.

IN THE LANDS TRIBUNAL OF HONG KONG

Application No. K1/82

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BETWEEN

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Coram : His Honour Judge Cruden, President and M. W. Phillips, Esq., Member, in Court.

1. This is an application pursuant to Section 33 of Part I of the landlord and Tenant (Consolidation) Ordinance, Cap. 7 for an order for ejectment.  The applicant is the registered owner of the suit premises at the Ground Floor, 3 Market Street, Tai O, Lantao Island, New Territories.  The respondent carries on business at the premises as a newspaper and stationery vendor.

2. The applicant bases his claim on both Clauses (b) and (d) of Section 33 (1).  The section provides:-

“33(1) The Tribunal on the applicantion of a landlord may make on order for the recovery of possession from or the ejectment of:-

…

(b) a tenant who has been convicted of an offence against this Part or of using or suffering or permitting to be used the premises or any part thereof for an immoral or illegal purpose;

…

(d) a tenant who has failed to observe and perform any stipulation or condition of his tenancy agreement other than save as hereinafter provided a stipulation or condition imposing an obligation to vacate the premises.”

3. The applicant pleaded that on the 14th day of September 1980 the Police entered the premises and as a consequence charged Miss HO Wing-hen with an offence under the Gambling Ordinance of which she was subsequently convicted on the 28th day of November 1980.

4. The applicant claimed that the respondent suffered or permitted the premises to be used for an illegal purpose and was therefore liable to be ejected under Section 33 (1) (b).  Further the applicant pleaded that it was an implied term of the monthly tenancy that the tenant would not use or suffer or permit the use of the premises for an immoral or illegal purpose.  On the basis of that alleged implied term, the applicant claimed he was alternatively entitled to an order under Section 33 (1) (d).

5. The applicant called a clerk of the South Kowloon Magistracy and from his evidence we are satisfied that Miss Ho Wing-han on the 28th day of November 1980 appeared in the South Kowloon Magistracy and pleaded guilty to bookmaking contrary to Section 7 (c) of the Gambling Ordinance, Cap. 148.  She was represented by Counsel.  The particulars of the offence alleged that Miss Ho:-

“...on the 14th day of September, 1980 at No. 3 Market Street, G/F., Tai O, Lantau Island, New Territories, in this Colony ... did assist another person in bookmaking.”

6. The record of the proceedings in the Magistrate’s Court were produced as Exhibit A2.

7. After admitting the “Brief Facts of Case” the defendant was bound over for 12 months in the sum of $500 and ordered to pay 8500 costs.  A further order was made that no conviction was to be recorded.

8. The applicant also gave evidence.  He produced as Exhibit Al a letter from the Police informing him, as the registered owner of the premises, that as a result of a visit to the premises one person was charged and subsequently convicted of assisting with bookmaking.  The expressed purpose of that letter was to draw the applicant’s attention to Section 15 of the Gambling Ordinance and to the penalities thereunder in the event of any contravention.  Section 15 makes an owner liable for an offence who knowingly permits or suffers his premises to be used as a gambling establishment.

9. On the closing of the applicant’s case it was clear that:-

1. The respondent Mr. HO Yuk-chang was the tenant premises on the 14th day of September 1980; and

2. That a Miss HO Wing-hen had committed an offence under the Gambling Ordinance of assisting another person in bookmaking at the premises on the 14th day of September 1980.

10. The fact that no conviction was recorded was not relevant to guilt but only to sentence se that distinction is not of any significance for the purpose of the present application.  This was also not a case where the respondent had been convicted nor was there direct evidence that the respondent was present or had any knowledge that an offence under the Gambling Ordinance had been committed.  Indeed, at the close of the applicant’s case there was no oral evidence that Miss Ho was known to the respondent or a member of his family although she did share the same surname.  Although the Probation Officer’s Report also included as part of Exhibit A2, recorded that one “HO Yuk Cheung” a newspaper stall and stationery store owner was her father.  In addition, the address of the premises in all the documents produced was No.3 Market Street, Ground Floor, Lantao, New Territories.

11. However, the potentially interesting position which may have arisen, if the evidence had not gone beyond that, did not have to be considered, for the respondent elected to give evidence.  He stated that Miss Ho Wing-han was his daughter.  But he asserted that he was not present on the evening of the Police visit nor had he knowledge of that visit.  On the applicant’s evidence the police visit occurred at 8.20 p.m. and the gambling exhibits were seized at 9 p.m.  There is no other evidence indicating that the respondent was personally present.

12. Before making findings of fact on the evidence we will first consider the several submissions of law which were made to th Tribunal which may help to narrow down the matters the Tribunal may ultimately have to decide.

13. Both Counsel made submissions on Clauses (b) and (d) of Section 33 (1).  It is convenient to consider the latter Clause first.

14. Under Section 33 (1) (d) the ground for recovery of possession or ejectment, is where there had been a failure on the tenant’s part to observe a term of the tenancy.  In the instant case there is no written lease or tenancy agreement.  The relationship of the parties is that of landlord and tenant under an oral monthly tenancy.  Faced with this fact the applicant pleads that:-

“It is an implied term of the said tenancy that the opponent shall not use or suffer or pormit the use of the said premis or any part thereof for an immoral or illegal purpose.”

15. The Tribunal can no doubt take judicial notice of the fact that such a term is commonly found in written leases of both business and domestic premises in Hong Kong.  The important point here is whether in the case of an oral monthly tenancy such a term may be implied.  The applicant states that such a provision is so common that at least in relation to illegal user, as distinct from immoral user, such a term may properly be implied.  We appreciate that there may be merit in this distinction and that generally it is neither in the interest of the landlord or the public that premises should be used for an illegal purpose.

16. As to that, the respondent submitted that there is no such implied term.  In support of that submission, he cited Megarry & Wade’s ’Law of Real Property’ (4th Edn.) 675 and Woodfall ’landlord and Tenant’ (28th Edn.) 1-1140/1151.  We accept that those authorities support the submission that a covenant not to use premises for an illegal purpose is not among the covenants commonly implied.  Both authorities also emphasis that covenants are not to be implied unnecessarily.

17. Woodfall sets out the position at 1-1144 thus:-

‘The tendency of the courts is not to imply covenants or stipulations which might and ought to have been expressed if intended.  “It is not competent to the court to make a contract for the parties which they have not thought fit to make for themselves, or to import a covenant which does not arise by fair and necessary implication from the language they have used.”’

18. We were also referred to Burfort Financial Investment Ltd. v. Chotard 239. E G. 891, where the landlord endeavoured to recover possession of three flats in Brewer Street, London two of which were clearly used by prostitutes.  One of the landlord’s grounds was breach of an implied covenant prohibiting immoral user.  There was no such express covenant in the lease.  Foster J. Held that no such covenant was implied.  If it were to be implied in that lease, then it would have to be implied in every lease which the judge found would be fanciful.  The applicant submitted that this case should be distinguished because of its special facts.  Certainly the facts were unusual, as was indicated by Foster J.’s comment, that if a lessor tried to insert a covenant against illegal or immoral use in Brewer Street he would never be able to find a tenant.

19. However, Foster J. also referred to the then recent decision of the House of Lords dealing with implied covenants in Liverpool City Council v. Irwin (1976) 2 All E. R. 39. while the House of Lords was concerned with very different facts, namely what covenants should be implied in leases of multi-storey flats where each flat shared certain common areas, it did reaffirm certain basic principles.  Lord Wilberforce, at page 44, in considering the test as to whether a particular covenant could be implied, declared:-

“... what test is to be applied, and I do not find this difficult.  In my opinion such obligation should be read into the contract as the nature of the contract itself implicity requires, no more, no less; a test in other words of necessity.”

20. We propose to adopt the same test of necessity in the instant case.  We do not think any need for such a covenant amounts to a necessity.  As far as protection to the landlord is concerned he has, of course, in any event, the separate statutory right under Clause (b) to recover possession.  The existence of that statutory provision, at least to some extent, lessens the need for a similar provision to be contractually implied as a covenant of the tenancy.

21. We know of no Hong Kong authority which has held that the law in Hong Kong as to implied covenants is different to the law in England.  We accept that the principles relating to implied covenants in England equally apply in Hong Kong.  we therefore further hold that no such covenant can be implied between the partial in this case.  We are fortified in coming to that conclusion by the fact that, as we have already mentioned, Section 33 (1) (b) provides, whatever the contractual position between the parties, an independent statutory ground for recovery of possession where, in terms of Clause (b), there has been an immoral or illegal user.

22. We next turn to determine whether the applicant has established a ground for possession under Clause (b).  It is common ground that the person who committed the gambling offence was a person other than the tenant.  The applicant submits that Clause (b) is wide enough to include a tenant who, while not convicted, nevertheless uses, suffers or permits the premises to be used for an illegal purpose.  To the contrary, the respondent argues that a tenant is only caught under the Clause if the tenant is convicted under Part I or the tenant is convicted of using the premises or the tenant is convicted of suffering the premises to be used or the tenant is convicted of permitting the premises to be used, for an illegal purpose.

23. If the latter interpretation is correct, then it is clear that the tenant has not been convicted of suffering or permitting the premises to be used for an illegal purpose and application must fail.  The narrow question is whether, as a matter of statutory interpretation, the Clause is to be interpreted conjunctively or disjunctively.  In the Tribunal’s view the plain and ordinary meaning of the clause requires that it be construed disjunctively.  Namely, it is sufficient if the tenant has either been convicted under Part I or, although not convicted, has used, suffered, or permitted the premises to be used for an illegal purpose.  A conviction of a tenant for any of the latter three acts may well be useful evidence that a tenant is in default under Clause (b) but it is not obligatory.  If we were in any doubt that this is the proper interpretation of the clause, it would have been removed by the provisions of Section 3 of the Interpretation and General Clauses Ordinance, Cap which provides:-

24. “or” ... shall be construed disjunctively ...”

25. As to whether the respondent “suffered” or “permitted” his daughter to use the premises for an illegal purpose, the respondent submitted that before he was liable under those heads he must have had actual knowledge.  Generally, where either of these words is used knowledge is required.  As to the necessity of knowledge in relation to the word “permit” the observation of Mathew J., in Somerset v. Wade (1984) 1 Q. B. remains pertinent:-

“In a case where the defendant does not know that the person who was on his premises was in fact drunk he cannot be said to permit drunkenness.”

7. More recently in the House of Lords in Sweet v. Parsley (1970) A. C. 132 Lord Diplock declared:-

‘The act of the occupier which is prohibited is to “permit” those premises to be used for the purpose of smoking cannabis ....  Here the word “permits” used to define the prohibited act in itself connotes as a mental element of the prohibited conduct knowledge or grounds of reasonable suspicion on the part of the occupier that the premises will be used by someone for that purpose and an unwillingness on his part to take means available to him to prevent it.’

26. The authorities, some of which are collected in 5 Stroud’s Judicia1 Dictionary (4th Edn.) 2666, indicate that in most contexts there is no real distinction between “suffers” and “permits”.  Although in some areas of legislation, “suffer” may have a wider meaning than “permit”.  This exceptional wider meaning was considered in Boston v. Read (1932) 1 Ch. 367:-

‘The word “suffer” is a wide term.  It seems to me to be wider than permit.  At any rate it must cover allowing something to be done which the covenantor has the complete power to prevent.’

27. But even where this wider meaning applies, knowledge remains an ingredient.  This essential requirement was emphasised in Somerset v. Wads (supra). Mathew J., held that an offence of suffering or permitting was not established unless the defendant:-

“... knows of it s existence, or connives at it, or wilfully shuts his eyes to it.”

28. The same conclusion, requiring knowledge, had been reached in Hong Kong in respect of other legislation - R. v. wong Yun Fai (1977 H.K.L.R. 404; R. v. Kowloon Motor Bus Co. (1922) Ltd. & Ors Cr. App. No. 455/73.

29. Under Section 33(1) (b) a landlord may recover possession or obtain an order for ejectment if he establishes that a tenant has suffered or permitted the premises to be used for an illegal purposes.  We are satisfied and hold that the tenant must have actual knowledge of the illegal purpose, or, having grounds to be reasonably suspicious, willfully shuts his eyes to the illegal activity.

30. Turning to the facts, did the respondent have actual knowledge of his daughter’s illegal actions or if he was reasonably suspicious of such actions, did he willfully shut his eyes to those illegal actions?

31. The very fact that the respondent carried on business at the premises and that his daughter was convicted of a gambling offence at those same premises would, in most circumstances, be powerful evidence pointing to knowledge on the part of the father.  That evidence is strengthened, rather than weakened, by paragraph 6 of the ‘Brief Facts of Case’ forming part of the admitted Magistrates Court record which states:-

“6. That further in the caution statement the defendant says that her mother asked her to assist in collecting betting slips and. she did so when customers turned up.”

32. On the basis of that paragraph, the mother not only knew of the daughter’s conduct, but may even have been a party, with the daughter merely rendering assistance.  In those circumstances the likelihood of the father having knowledge would tend to increase.

33. The only witness who gave evidence on the issue of knowledge was the respondent himself.  His evidence was that he had no knowledge.  If he worked and resided at the premises more or less continuously which would not be uncommon in Hong Kong - then such an allegation would hardly be credible.  However, the respondent went on to explain the rather unusual circumstances surrounding the conduct of his business.  He stated that he was the only newspaper vendor at Tai O. We can take judicial notice of the fact that Tai O is a small town towards the south-western end of Lantau Island with relatively poor communications with Hong Kong.  The respondent states each day he leaves Tai O at 4 p.m. and travels to Hong Kong Island.  He sleeps overnight at a bed-space he rents, adjacent to a newspaper wholesaler in Central, from whom he purchases his newspapers.  The following morning, at 7 a.m., he leaves Central to return to Tai 0.  He advances this evidence to support his allegation that he was not present at the premises when they were visited by the Police at 8.20 p.m. on 14th September, 1980.

34. He also denied that he was aware of the prosecution of his daughter and her subsequent conviction until he received a letter from the applicants solicitors requiring him to give up possession.  This again is unusual, but given the family and other circumstances in this particular case, not incredible.  However, this latter evidence goes more to the respondent’s credibility as a witness than to the question of whether he knew his daughter used the premises for an illegal purpose.  For if the respondent had no knowledge of the illegal activity at the time it was taking place, then it matters not, if later, he discovered that his daughter had been prosecuted.  Conversely, if he was not told by his wife and daughter of the prosecution and its result that might be evidence which could strengthen his prior claim that he did not know his daughter took bets illegally.

35. The respondent was cross-examined by counsel for the applicant and maintained his ignorance on both issues.  We are unable to find that he was untruthful.  Indeed, we consider that his explanation, given the necessity to visit Hong Kong Island each evening and sleep there overnight, was highly possible.  The onus of proving knowledge rests on the applicant.  We are satisfied, in the light of the unusual factual circumstances of this case, that the applicant has not discharged that burden.

36. Having made this finding it is unnecessary for us to consider the remaining defence submission, namely, that even if the respondent had knowledge of his daughter’s illegal activity, the evidence only amounted to one isolated incident.  Therefore, it was submitted, it fell short, as a matter of law, of establishing that the premises were “used” for an illegal purpose.  We expressly refrain from expressing any opinion on that submission.

37. It follows, as we have not on the balance of probabilities been satisfied that the respondent suffered or permitted the premises to be used for an illegal purpose, that the application to recover possession on that ground must be dismissed.

38. We will hear the parties as to costs and any other consequential matters, if necessary, for which liberty to apply as reserved.

DATED this 9th day of July, 1982.

Representation:

Mr. Thomas Yeung of Raymond Tang & Co solicitors for the applicant.

Mr. A. B. B. wahab instructed by Michael Cheuk & Co. for the respondent.