Chen Tse Hao v. Yeung Luen Ching

HCA001523/1974

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 1523 OF 1974

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Coram: Li, J.

Date of Judgment: 27th November, 1974.

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JUDGMENT

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1. This is an action by CHEN Tse-hao (hereinafter referred to as "the plaintiff") against YEUNG Luen-ching (hereinafter referred to as "the defendant") for possession of Shop East on the ground floor of No.62 Granville Road, Kowloon (hereinafter referred to as "the said premises").

2. The whole of the ground floor of 62 Granville Road, of which the said premises form part, originally belonged to the South Asia Investment Company Limited. On the 19th of April, 1969, the plaintiff acquired the whole of the ground floor from the South Asia Investment Company Limited subject to the existing tenancy of one WONG Koke-tung of the Shop East of the said premises. Perhaps at this stage I should observe that the term "Shop East" is the correct description of the said premises although in the agreement, exhibit 1, it was misdescribed as "Shop West".

3. The said Lease with WONG Koke-tung was for a term of 5 years from the 16th of June, 1969, to the 15th of June, 1974. After the plaintiff acquired the said premises, the tenant, WONG Koke-tung, in early 1971 assigned, with the consent of the plaintiff, the lease of the said premises to the defendant for the balance of the term. This is evidenced in one Chinese Agreement in writing dated the 16th of January, 1971, exhibit 5. The Agreement was finally incorporated into a Deed of Assignment - exhibit 4, dated the 8th February, 1971. Thus, at the time of the assignment the balance of the term had more than 3 years to run.

4. At that time the defendant paid over $30,650 to the Assignor, WONG Koke-tung, the then sitting tenant, in consideration of fixtures and furnitures and in consideration of the assignment. This was paid with the knowledge and consent of the plaintiff. This sum of $30,650 included $4,650 as a repayment of deposit paid by Wong to the plaintiff. In addition, the defendant paid over to the plaintiff the sum of $1,500. The term of agreement of the Lease expired by the 15th of June, 1974. On the 14th of March, 1974, the plaintiff, through his Solicitors, wrote to the defendant in terms that the tenancy would expire by the 15th of June, 1974, and asked the defendant to vacate the said premises. That the defendant refused to do. Hence this action.

5. The plaintiff claims that he is entitled to possession of the said premises as from the 15th of June, 1974. He intended that, if the defendant should vacate on that date, to lease the said premises together with Shop West of the ground floor of 62 Granville Road as an entire unit at a rental of some $7,000 exclusive of rates. Further, there is evidence that currently, on the Government assessment through the Rating and Valuation Department, the rate payable for the said premises amounts to $787.50 per quarter. The Defence is that (i) at the time of the assignment the defendant had paid key money to the plaintiff in the sum of $1,500 and, (ii) that the said premises were, in fact, used for domestic purposes and premises and that whatever business done therein was purely incidental. The issue between the parties is, therefore, that whether the $1,500 paid by the defendant is, in fact, key money and (iii) whether the said premises are used primarily for domestic purposes.

6. The plaintiff's evidence was that he accepted a cheque from the defendant for $1,500 to compensate him for the trouble to act as witnesses, to prepare the Agreement, exhibit 5, for the parties and to share that with one Mr. LEUNG Man-chuen who was the broken who introduced the defendant to the Assignor or the Assignor to the defendant for the assignment of the lease of the said premises. It was by no means key money. The plaintiff also produced evidence from the Rating & Valuation Department a certificate which was obtained and dated the 12th of September, 1974, to the effect that the primary user of the premises was non-domestic. He produced rate receipts which show that at the material time the rate for the said premises was $787.50 per quarter. He also called in evidence one Albert Claude Doran, who is a Chartered Surveyor, who had been to the said premises to investigate as to the rental value of the premises, and Mr. Doran gave the opinion that the said premises, together with Shop West combined, would fetch a rent of $5,500 per month, exclusive of rates.

7. The defendant's evidence is rather more of an argument than evidence of facts. First, she charges the plaintiff of not producing all the documents that were relevant. When she was queried as to what other documents that have not been produced, all she is able to produce are the documents which have already been filed in the Court or have been produced by the plaintiff. I hesitate to say that she has told a deliberate lie. However, I am certain what she has told me is not the truth. This is probably due to ignorance and a bias of not appreciating or deliberately refusing to accept what has been blatantly true, namely, that the plaintiff had already produced all the documents that are relevant. The defendant's version is that the $1,500 was paid to the plaintiff as key money. She had, indeed, separately paid the other witness to the Agreement and Assignment, LEUNG Man-chuen. However, she fails to call LEUNG Man-chuen to substantiate her allegations.

8. I think I am correct in saying that where a landlord has failed to account for the reason of disbursements, or any money received from a tenant, the sum so received is normally interpreted as being key money. However, in the present case, the plaintiff, as landlord, has explained that this is really a compensation for the trouble he has gone through to witness various agreements between the defendant and the Assignor of the lease of the said premises. Apart from that, judging from the huge sum of $2,600 which has been paid to WONG Koke-tung, the Assignor, the meagre sum of $1,500 paid to the landlord, is highly unlikely to be key money. I am inclined to believe the plaintiff that it was a compensation to the plaintiff for his trouble in witnessing and procuring a contract between the Assignor and the defendant. If I happen to be wrong in this in law or in fact in this respect there is the provision of sub-section (2) of 116 of the Landlord and Tenant (Consolidation) Ordinance, Chapter 7, which provides that:

"This Part shall not apply -

Thus, if the term of the tenancy is more than one month, as this case is, then, despite the payment of key money, the tenant cannot invoke the operation and the protection of this part of the Ordinance. Thus the first leg of the Defence must fail.

9. I now turn to the other part of the Defence, namely, that the premises are domestic premises. The Assignment and the Lease, namely, Exhibit 1, Exhibit 4, all turn to the fact that the premises are to be used as non-domestic premises. That, of course, is inconclusive. However, there is additional evidence of the certificate from the Rating & Valuation Department which shows that the said premises were used for non-domestic purposes. There is also evidence from Mr. Doran, a witness for the plaintiff, that it appeared to him that the premises were used as a haberdashers' shop. Despite the defendant's denial and saying that part of the premises was used for domestic purposes, I come to the conclusion that the major portion of the premises and, indeed, the primary user of the said premises, was non-domestic. For these reasons I am of the opinion that this defence must fail. On the evidence and on the balance of the probability, I rule that the plaintiff is entitled to possession.

10. I shall now come to the question of mesne profits. The plaintiff maintained that if he let the said premises together with Shop West as an entire unit then his intention was to let it for $7,000 per month exlusive of rate. Mr. Doran's opinion is that, having viewed the premises and drawing on his experience in rental values in Kowloon and Hong Kong, the combined unit will fetch about $5,500 per month exclusive of rates. There is additional evidence on the part of the plaintiff himself that if the units were let for separate units, then each separate unit will fetch a bit more. Taking all into consideration. I find that the assessment of Mr. Doran of $5,500 is acceptable and that if the said premises is let as a separate unit the rent may be a bit more than half of the $5,500. The defendant only occupied one half of the separate unit, namely, Shop East. The assessment is counter-balanced by the fact that when letting as separate units there must be some common passage which is not - in the terms of Mr. Doran - a lettable area.

11. Taking all these into consideration the just assessment for the said premises should be $2,250 per month ex rate. Using the rate receipts as a guide the rates should be $8.70 per day. The defendant has held over the said premises up to date. For these reasons I give the plaintiff possession. There will be judgment to the plaintiff for possession; mesne profit at the rate of $2,250 per month as from the 16th of June, 1974, plus rates at $8.70 per day until vacant possession is rendered with costs to the plaintiff.

Representation: