Fu Hop Investment Co Ltd v. Chen Hong Man

HCA000680/1969

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO.680 OF 1969

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Coram: Williams, J.

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ORDER

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1. The plaintiff owns industrial premises at 6th floor, Fu Hop Factory Building. The defendant was his tenant under a three-year lease expiring on 31st May 1969, and has held over.

2. Following a writ for possession judgment was entered for the plaintiff on 25th June in default of an appearance by the defendant.

3. On 8th July the defendant's application for a stay of execution was dismissed.

4. When the landlord issued a writ of execution on 11th July, the defendant instructed Messrs. Woo & Woo who now apply for the judgment to be set aside on the ground that the tenant had not received the necessary six months' notice of termination required under the Tenanoy (Notice of Termination) Ordinance. Mr. Woo referred to Clause 4(a) of the lease which states, (inter alia), that if a petition in bankruptcy be filed against the tenant the landlord may enter and determine the lease. He argues that the tenant had no control over the acts of third parties who may have been disposed to file bankruptcy petitions against him, and that once a petition was filed the landlord would be entitled to forfeit the lease. He pointed to s.2(2)(a) of the Tenancy (Notice of Termination) Ordinance which excludes a lease for at least three years from the control of the Ordinance provided the lease has no provision enabling its earlier determination. He submits that during the three-year lease, anyone may have filed a bankruptcy patition against the defendant (tenant) thereby enabling the landlord to determine the lease; therefore the lease falls within the Tenanoy (Notice of Termination) Ordinance.

5. No doubt such a petition in bankruptcy could have been filed; in fact the landlord to suit his own purposes could have connived at the filing of a bankruptcy petition against the defendant. However, I feel that the filing of a petition would not necessarily have entitled the landlord to re-enter immediately. I feel that one has to look at the whole of Clause 4(a) and ascertain the intention of the parties before ascribing the very wide effect to the filing of a petition which Mr. Woo claims would result. Clause 4(a) has general reference to the solvency of the tenant during the period of the lease, with the obvious intention of ensuring that the landlord would receive his rent when due and not suffer any loss by reason of the lease being assigned to the tenant's creditors, or to a trustee in bankruptcy. Thus it refers to the landlord's right to re-enter on the bankruptcy of the tenant or upon his arranging a composition with his creditors. Since the clause has been inserted for the benefit of the plaintiff, lessor, it will be construed against him, as stated in Hill and Redman's Law of Landlord and Tenant 11th Edn. p.434, section 351. Before a court would permit a re-enter under Clause 4(a) the landlord would have to show that the petition in bankruptcy had not been filed frivolously or irresponsibly. He would, in my view, have to show that the petition was supported by genuine and proveable acts of bankruptcy on the tenant's part which could be pursued to the issue of his being adjudicated bankrupt. I feel that the tenant would be in control of the situation in that he was only obliged to remain solvent and/or to meet his lawful obligations and if his failure to do so resulted in the justifiable filing of a bankruptcy petition to which he could provide no adequate reply, then he would be in breach of that provision. If my above interpretation of Clause 4(a) is correct then I think it is not one which enabled the lease to be determined within the three years' period except by the tenant's own default.

6. The tenant further submits that Clause 4(g) could enable the landlord to determine the tenancy within three years. It states that if the premises or "any part" are destroyed by fire, typhoon, etc. the landlord may determine the lease. Mr. Woo argues that the expression "any part" gives the landlord such a wide margin that he would not have found it difficult to forfeit the lease. Once again one has to examine Clause 4(g) and construe it against the lessor in so far as it may be a provision for his benefit. Clause 4(g) states that the rent shall be reduced in proportion to the amount of the premises destroyed or made uninhabitable; but the landlord instead of being obliged to repair may determine the lease. No court would construe the reference to "any part" of the premises in an absolutely literal fashion; it must be construed by reference to the purpose of the lease. The destruction of a bathroom, toilet, kitchen, or of one room could scarcely render the entire premises uninhabitable to the extent of entitling the landlord to re-enter. Clause 4(g) contemplates a situation where the premises have been so damaged that it would require considerable expenditure of money and of time to render them satisfactory for occupation and use. Properly construed Clause 4(g) is one which releases both parties from their obligations under the lease in the event of the subject matter being rendered substantially useless as the result of an occurrence e.g. typhoon beyond their control. It can scarcely be regarded as a provision to the landlord's advantage enabling determination of the lease of a building, if that building has been virtually destroyed by fire, typhoon, etc.

7. In my view, Clause 4(g) does not bring the lease within the Tenancy (Notice of Termination) Ordinance.

8. For the foregoing reasons the application to set aside the judgment and for leave to defend is dismissed.

9. The defendant will pay the plaintiff's costs of this application. The order staying execution is rescinded.