Mee Sun Cheong v. Sun Kee
Read the full judgment text of LDLA 8/1984 on BabelCite. This LDLA judgment was delivered on 31 December 1977.
1. This was an appeal pursuant to Section 32(aa) of Part I of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 against the decision of the Commissioner of Rating and Valuation on the application of the respondent under Section 7A to issue a Certificate of User and also against the determination thereunder.
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LDLA000008/1984 Property law - landlord and tenant - relationship of Part I Certificates of User and Part II Certificates of Primary User - jurisdiction to issue Certificates - different Part I and Part II procedure where Certificate disputed - sub-tenants not entitled to apply to Commissioner of Rating and Valuation for Certificate under Part I but are entitled to apply under Part II - relevant considerations in determining whether use domestic or business - consequences of determination - Held: 1. Part I Certificate quashed as issued by Commissioner without jurisdiction; 2. If jurisdiction had existed the Commissioner's Certificate that user domestic would have been upheld - Sections 2, 3, 7, 7A, 32, 51 Landlord and Tenant (Consolidation) Ordinance, Cap.7. IN THE LANDS TRIBUNAL OF HONG KONG (Appellate Jurisdiction) Landlord and Tenant Appeal No. 8 of 1984
TRIBUNAL: His Honour Judge Cruden Presiding Officer and M.W. Phillips, Esq., Member. ------------------------ JUDGMENT ------------------------ 1. This was an appeal pursuant to Section 32(aa) of Part I of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 against the decision of the Commissioner of Rating and Valuation on the application of the respondent under Section 7A to issue a Certificate of User and also against the determination thereunder. 2. The subject premises are situate at No. 3 Tung Man Street, 1st Floor, Central, Hong Kong. The respondent entered into possession in 1940 when the premises were owned by Lu Tong Sen Ltd. which had become the registered Crown lessee in 1932. Lu Tong Son Ltd. had earlier let the whole building to the father of the present Crown lessees, Ng Sun Cheung, Ng Sum Cheong and Ng Kuen Cheong. Their father then carried on business on the Ground Floor under the name of Mee Sun Cheong. Mee Sun Cheong, in turn, had sub-let part of the 1st Floor, comprising the subject premises, to the respondent. 3. When the present Crown lessees purchased the property in 1957 the Ground Floor business continued to be carried on in the name of Mee Sun Cheong. The father's son Ng Sun Cheong, who is one of the present Crown lessees, gave evidence. He stated that after the change of ownership, the tenancy to the business continued together with the sub-tenancy to the respondent. The business of Mee Sun Cheong of which Ng Sun Cheong is a partner, continued in the Ground Floor premises until it closed down on the 31st day of December 1983. 4. On the 8th day of June 1981 the respondent applied to the Commissioner as tenant pursuant to Section 7A, for a Certificate of User in relation to the subject premises. After an inspection of the premises on the 19th day of June 1981 the Commissioner on the 12th day of October 1981 issued a Certificate of User which certified that the premises were occupied as domestic premises on the date of inspection. 5. After the Certificate of User was issued the appellant wrote to the Commissioner on the 16th day of October 1981 disputing the user of the premises and also alleging that the respondent was not the tenant of the premises but a sub-tenant. The latter allegation was significant for Section 7A restricts the right to apply for a Certificate of User to landlords and tenants. Further the wide definition of "tenant" under Section 2, which includes a sub-tenant, is excluded from applying to Section 7A. Section 7A(6) expressly provides that:-
From the 16th day of October 1981 to the 29th day of May 1983 the appellant corresponded with the Commissioner in an attempt to establish that the status of the respondent was a sub-tenant. In that event the Commissioner would have had no jurisdiction to issue a Certificate of User on the respondent's application. Since the Section excludes not only sub-tenants applications but also the premises subject to a sub-tenancy, any lack of jurisdiction would not have been cured by an application being made by the landlord instead of the sub-tenant. 6. The Commissioner finally notified the appellant that the information in his possession left the status of the respondent in doubt and stated that it was open to the appellant to apply to have the issue determined by the Lands Tribunal. This the appellant proceeded to do by filing an appeal to the Lands Tribunal on the 8th day of Feburary 1984, pursuant to Section 32(aa). 7. The parties have now appeared before the Lands Tribunal, each has given evidence while the Tribunal has also inspected the premises. Both parties were unrepresented. In addition, before the hearing the Commissioner caused to be filed an affirmation exhibiting copies of all the relevant correspondence and documents in his possession which we have also considered. 8. This appeal raises a number of procedural questions and also emphasises the differences between the issue of Certificates of User under Part I and the issue of the similar but differently named Certificates of Primary User under Part II. These differences are largely but not entirely historical. 9. Under Part I the Certificates are simply described as Certificates of User and the sole statutory criteria for determining the actual user of the premises is the direction to have regard to the definitions in Section 2 of domestic and business premises. The definition of "domestic premises" fortunately does recognise the common Hong Kong circumstance that premises are often subject to more than one user:-
The definition of "business premises" is simply that they are premises which are not domestic premises. 10. Where in the case of Part I premises there is multiple user, the user to be certified is determined by the primary use as also occurs under Part II. In Part II, Section 51 helpfully sets out various criteria by which in the case of multiple use, the primary user may be ascertained. Those provisions do not apply to Part I. However, as they reflect the approach a Tribunal might properly in any event adopt, in the absence of such provisions, similar considerations will affect the approach of the Tribunal under Part I. 11. Before considering the issue of user, it is necessary to determine whether the respondent was entitled to apply for a Certificate of User. For if the applicant for a Certificate has neither the status of landlord or tenant the Commissioner has no jurisdiction to issue a Certificate. There is no power for the Commissioner to issue a Certificate unilaterally. 12. The Crown Lease Register of Owners for the property was produced, which shows that on the 12th day of January 1957, the property was purchased by the present three owners. The appellant's allegation that the whole property had earlier been let by the former owner to Mee Sun Cheong which in turn let the subject premises to the respondent is confirmed by a sealed copy of an application to apportion rent made to the Tenancy Tribunal on the 23rd day of September 1953. A subsequent statutory notice to the Commissioner dated the 31st day of December 1977 showed that the ground floor was let to Mee Sun Cheong. 13. The respondent did not directly attach the allegation that the appellant continued to sub-let the subject premises to him after the 1957 change in ownership of the whole property. Indeed, his statement that he paid rent to the appellant at its Ground Floor shop until it closed down business in 1983 is consistent with that allegation. 14. The Business Registration Certificate No. 101927-000-12-8 of Mee Sun Cheong for 1981 was also produced. This establishes that at the date of the Certificate of User the appellant was a duly registered business under the Business Registration Ordinance. Mee Sun Cheong was not the business of Ng Sun Cheong as a sole trader for the certificate indicates that the business was carried on in partnership. There was also a letter from the Crown lessees to Mee Sun Cheong dated the 20th day of November 1981 which stated that Mee Sun Cheong were the "chief tenants" of the property and were the only tenants of the Crown lessees. We recognise that the parties to that letter were not at arms length. Indeed, the individuals comprising each party may have been the same in which case the practical effect would be that they have written the letter to themselves. This must reduce the weight we might otherwise give the letter. Yet it is some evidence of intention to preserve the tenancy. 15. The position may be that all three owners are partners of Mee Sun Cheong but the evidence is not sufficiently clear for us to make a finding on that issue. If they were that would not affect the present issue for, as a matter of law, it is open to the three owners as tenants in common in equal shares to lease the whole property to the partnership business of Mee Sun Cheong of which they may also be partners. 16. If that were the position it would not affect the status of Mee Sun Cheong as principal tenant or the respondent as sub-tenant. Before coming to this conclusion we have also considered the definition of "principal tenant" in Section 2:-
On the facts no question of derivative landlord arises. The registered business of Mee Sun Cheong is not the Crown lessee, Further, while Mee Sun Cheong is the tenant of the one holding, namely the whole property, it has not sublet the whole of such holding to the respondent. It has merely sublet the subject premises, which are only part of the holding, to the respondent. Earlier it occupied part of the holding and had sublet another part of the holding to another subtenant. 17. We have also considered but on the evidence are unable to find, in the respondent's favour, whether on the transfer of ownership of the Crown lease in 1957 there was a merger by operation of law or otherwise, of the present interest of the lessees under the Crown lease and the interest of Mee Sun Cheong as tenant, under the tenancy originally granted by the former Crown lessee Lu Tong Son Ltd. 18. After considering the whole of the evidence we are satisfied that Mee Sun Cheomg was the tenant of the property and as a principal tenant sublet the subject premises to the respondent. It follows from that finding that the respondent, as a subtenant, was not entitled to apply for a Certificate of User under Section 7A. The Commissioner did not have the jurisdiction to grant a Certificate on that purported application. The Certificate was therefore issued without jurisdiction and is a nullity. Accordingly it requires to be quashed. 19. If the Certificate of User is quashed does the Lands Tribunal have any residual jurisdiction on this appeal to determine the user of the subject premises? The Commissioner clearly thought the Lands Tribunal did have jurisdiction. In a letter to the appellant dated the 19th day of February 1982 the Commissioner stated that if there was any doubt about the status of the premises, application could be made to the Tribunal for its determination under Section 32. 20. However, the jurisdiction under Section 32 is merely to determine appeals from the Commissioner:-
The reference to tenant in Section 32 is in its wider meaning under Section 2 and would include a subtenant. A landlord or tenant may not under Part I bring an originating application to the Lands Tribunal to determine user. They may only do so by way of appeal. There are no time limitations for an appeal. 21. The restriction on a party to proceed only by way of appeal, is quite different to the position under Part II where a landlord or tenant may bring an originating application to the Lands Tribunal to determine the primary user of premises whether or not either party has earlier elected to obtain a Certificate of Primary User from the Commissioner. Further, since 1982 there has been no right in Part II to appeal against the Commissioner's determination of primary user. Under Part II Section 51(8) now provides:-
22. The Tribunal has no similar original jurisdiction under Part I. This may be unfortunate for the present unrepresented parties are understandably unconcerned with these statutory complications. What does concern them is whether the subject premises are domestic or business premises. 23. At present the sole consequence under Part I of the distinction between domestic and business premises relates to rent. On the other hand, Part II and Part IV apply only to domestic premises. The primary user of premises is crucial under those latter parts to the issue whether the rent or security of tenure provisions of Part II or the security of tenure previsions of Part IV, apply. That issue at present does not arise under Part I for both domestic and business premises enjoy rent and security of tenure protection. However, under Part I the distinction is relevant to rent for the permitted rent of domestic premises is 16 times the standard rent and for business premises 40 times the standard rent. 24. This limited relevance in Part I of the distinction between domestic and business premises will shortly change. In 1979, Section 3(1)(i) was enacted which provides that from the 1st day of July 1984, Part I will only apply to domestic premises. Section 7A, providing for the issue of Certificates of User, was significantly enacted under the same 1979 Amendment. The position therefore is that unless Section 3(1)(i) is amended before the 1st day of July 1984, a major change will be effected to Part I. From that date, Part I will cease to apply to business premises. Only domestic premises will have the rent and security of tenure protection at present afforded to both domestic and business premises. 25. Clearly it is of the utmost importance to both parties to know whether the subject premises will, from the 1st day of July 1984, continue to be subject to the protection of Part I. This is the real issue which has led to the parties considerable efforts since at least 1981, to have the issue of user determined. Until the 1st day of July 1984 arrives, any prior determination would, of course, not be decisive. For the issue as to whether Part I applies on or after the 1st day of July 1984 depends on the actual use at that time and not the use which may have existed in 1981 or even today. 26. However, it is certainly reasonable for the parties to take whatever lawful steps they wish to clarify this very important issue. The appellant in its letter to the Commissioner dated the 29th day of May 1983 expressly raised the now imminent exclusion of business premises from Part I which indicates his concern. The similar concern of the respondent is equally appreciated. 27. If we are right that the Commissioner had no jurisdiction to issue a Certificate, then it would not be open to us to go on and determine the issue of actual user . In the event we have heard evidence and inspected the premises on this issue. True, on an appeal under Section 32(aa) we may at the hearing make any order we think fit. We do not consider, in the exercise of our appellate jurisdiction, that this enables us to make an order as to user when we have already found that there was no jurisdiction for the Commissioner to certify as to user. 28. Nevertheless, it may be helpful to both parties if, without going so far as to make an order, we were to indicate our view of the evidence. In doing so we approach the question of user in terms of Part I. In view of the recognition in Section 2 that primary user is decisive of actual user where there are more uses than one, we consider that the principles as to user are the same under Part I as under Part II. Therefore while the provisions of Section 51 do not apply to Part I, we consider that, by analogy, they provide a fair end sensible basis for an approach to this question under Part I. 29. The considerations which are relevant under Section 51 may be summarised as follows:-
30. We hold that all these factors may properly be taken into account under Part I. We observe also that floor areas, the number of workers not dwelling on the premises and the gross profits of a business use in relation to rent, were factors which the Court of Appeal gave considerable weight to under a Part II appeal in Chan Kwok-kwan v. Chan Cheong-wai trading as Chan Cheong Kee Store (1980) H.K.L.R. 450. We are aware that a different and subsequent Court of Appeal in Kwong Cheung Sun v. Ko Wing On Civil Appeal No. 37/82 was critical of and distinguished that earlier decision but its criticisms were limited to the fact that it considered that a Certificate of Primary User was important evidentially and did shift the onus of proof. The Court of Appeal did not Criticise the earlier Court's factual approach to the determination of use. 31. The evidence of the appellant was that the subject premises were let to the respondent under his trade name of Sun Kee for the purpose of carrying on business as a canvas awning manufacturer. Since the enactment of Part I the respondent had always paid the statutory rent assessed on the higher basis of business premises and there had never been any dispute that that was the proper basis of assessment. The appellant further stated that until recently the respondent advertised his business by signboards on the exterior of the premises. The appellant's witness Ng Sun-Cheong had for many years worked on the Ground Floor of the property and he stated that during the day he was aware that the respondent was using the premises for business purposes. 32. However, Mr. Ng was unable to state what occurred at night; whether the respondent employed any workmen; whether anyone slept overnight. However, he stated in support of his evidence that the premises were business premises that no bathroom or toilet facilities were included in the premises. The appellant also produced a telephone account against the respondent which showed that in 1982 he rented a business telephone at the premises. 33. The respondent stated that he and his family have been living in the premises since 1940. From the commencement of his occupation and for many years thereafter he carried on business at the premises as a canvas awning manufacturer under the name of Sun Kee. The income of the business, according to him, was always small and it was only the earlier relatively small rent which enabled him to pay the rent and support his family from the profits of the business. 34. He stated that he has never employed any workman but was only ever assisted by members of his family. The trade in canvas wares had gradually declined and monthly incomes were only about $150 to $200 per month. He no longer worked but one of his sons did a small amount of canvas awning work at the premises. The rent of the premises in 1940 was $26 while it had now been increased to $608.40. The business signs were removed when he retired about 2 years ago. Now he relies on his children to support him. 35. At present the respondent, his wife and 5 sons live on the premises. Some of the sons are mentally retarded. The respondent stated that this total of 7 persons live and sleep in the premises. The premises include cooking facilities but he agrees that no toilet is provided. For that purpose they use the facilities at nearby Central Market. Finally, he stated that he only paid the higher business rental for the premises under pressure. 36. In addition to the oral evidence we also considered the affirmation of Mr. Lo Tai Fai, a chartered surveyor employed by the Commissioner. This affirmation was filed by the Commissioner before the hearing in accordance with Tribunal appellate practice. The affirmation and its contents were explained to the parties. Among the exhibits was a plan of the premises when they were inspected by the Commissioner on the 19th day of June 1981. 37. The plan shows that the area then occupied for domestic user was 7.8 square metres and the area of mixed user was 6.8 square metres. The Commissioner had also endorsed on the plan that of the mixed user area 50% or 3.4 square metres was used for demestic purposes. This resulted in the Commissioner concluding that 76.7% of the subject premises were used for domestic purposes and 23.3% for non-domestic purposes. 38. Our inspection of the remises confirmed that part of the premises were used for domestic purposes and part for business purposes. The premises were divided into two portions. The first and major portion included bedspaces for 7 persons, chairs, tables and one sewing machine. The other portion was a cooking and washing area. The only apparent business use was that a sewing machine and a small quantity of awning material were situate in the area in which the bedspaces were located. We also confirmed that no signboards remained. 39. We find that there was no written prohibition against domestic user; there appears to have been no oral prohibition; from the beginning of the subtenancy there was and always has been an element of domestic user; by far the greater proportion of the floor area is at present used for domestic purposes; no persons who work or otherwise use the premises dwell elsewhere; the majority of the furnishings, fittings and contents of the premises are domestic; the gross profit from the existing minimal business user is probably far less than the present rent. Our inspection clearly indicated that the premises are substantially used for domestic premises and that any non-domestic user is minimal. If we had any comment on the Commissioner's plan and its endorsements it would be that, if anything, they underestimate the proportion of domestic user. 40. In many cases where the Lands Tribunal has to consider the question of user or primary user, premises are actively being used for both business and domestic purposes. At times real factual difficulties arise as to which use is preponderant. No difficulties arise in this case. The domestic user is not only the primary but the overwhelmingly preponderant use. 41. The facts in this case are certainly very much stronger in favour of domestic use, than those which enabled the Court of Appeal in Chan Kwok-Kwan v. Chan Cheong-wai trading as Chan Cheong Kee Store (supra) to hold that the primary use was domestic. In that case the premises were let under a tenancy agreement for non-domestic use and the tenant, who traded under the name of Chan Cheong Kee, was named as tenant and executed the tenancy agreement under that business title. The tenant carried on active business as a grocer in the front portion of the premises but he and his family also lived in the premises occupying principally the rear of the premises for that purpose. It may be noted that was also a case where the tenant used his trading name for the purposes of the tenancy. That fact was not fatal to the allegation that the premises were used primarily for domestic premises. There, as here, it was necessary for the Court to consider all the facts in their totality. 42. There are also some factual resemblances, favourable to the respondent, between the present case and the decision of the Lands Tribunal in Fook Luen Development v. Commissioner of Rating and Valuation & Anor L. & T. Appeal No. 4/83 in which it was held that the primary user of the premises was domestic. 43. If it were necessary for us to determine the user of the subject premises we would have no difficulty in holding that, as at today, the primary user is domestic and that for the purpose of Part I the premises are domestic premises. However, in view of the fact that the Commissioner had no jurisdiction to issue a Certificate of User to the respondent as sub-tenant it is not necessary for us to make an order on that issue. 44. We are very conscious of the fact that the parties are not represented and that not entirely due to their fault the wrong procedures have for several months unwittingly been pursued. It may therefore be helpful to both parties if we make these final comments. The determination of user for the purposes of Section 3(1)(i) can only decisively be obtained on or after the 1st day of July 1984 in the light of the then existing facts and law. 45. If that issue continues to be disputed, we confirm that it is not even open to the landlord, either before or after the 1st day of July 1984 to apply to the Commissioner for a Certificate of User. For as already indicated, not only is a sub-tenant prohibited by Section 7A from applying for a Certificate but the premise subject to a sub-tenancy are also excluded. This effectively disentitles the landlord from making an application for a Certificate in respect of sub-tenanted premises. 46. The inability of either party to obtain a Certificate of User will not, however, affect any ultimate determination of user. For while Certificates of User are invariably helpful they are not obligatory. If issued they are merely prima facie evidence of user. In substantive proceedings for possession they may be rebutted by other evidence. So in any substantive proceedings where the user of premises is material, it is neither necessary for a Certificate of User to be obtained or produced. Even where a party is entitled to apply for a Certificate of User he may elect not to apply and leave the issue of user to be determined by the Tribunal at the substantive hearing on the other evidence adduced. However, Certificates are commonly produced. No doubt one practical advantage of producing Certificates, in addition to their prima facie evidential value, is that they enable a party expeditiously and economically to produce to the Lands Tribunal the Commissioner's plans and report which he compiled for the purpose of making his Certificate. 47. The law is therefore clear that even where there is jurisdiction for the Commissioner to issue a Certificate, it is entirely at the option of the parties whether to elect to apply for a Certificate. Where a Certificate is issued it is equally at the option of the parties whether to produce it in substantive proceedings or alternatively leave it to the Lands Tribunal to determine the issue of user on other evidence. In many cases he Certificate is produced. An example of proceedings where primary user had to be determined and the parties elected not to obtain a Certificate but leave the matter to be determined in the substantive proceedings on other evidence was Orleans Estates Ltd. v. Robert Jordan Inc. (1981) H.K.L.R. 331. 48. In the result in this appeal we confirm that the Certificate of User, because of the technical lack of jurisdiction, is quashed. We make no order as to user. There will be no order as to costs. DATED this 22nd day of March 1984.
Representation: Mr. Ng Sun-cheong, by leave, for the appellant. The respondent in person. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||