Ho Lee Cheung and Another v. Commissioner of Rating and Valuation and Another

LDLA000011/1984

Landlord and tenant - appeal against determination of Commissioner of Rating & & Valuation excepting pre-war business premises looted during war and rendered habitable by extensive repairs after war from Part I - onus of proof on tenant appellants - weight to be given to Commissioner's post-war records - estimates of standard rent and estimated apportionments of reinstatement costs - Held: 1. Both pre-war premises only rendered habitable by post-war extensive repairs; 2. Commissioner's determination that premises excepted from Part I upheld - Sections 3, 32(aa) Landlord and Tenant (Consolidation) Ordinance, Cap. 7; Section 10(6) Lands Tribunal Ordinance, Cap. 17.

IN THE LANDS TRIBUNAL OF HONG KONG

(Appellate Jurisdiction)

Landlord and Tenant Appeals Nos.10 & 11/84

TRIBUNAL: His Honour Judge Cruden, Presiding Officer.

---------------------------

JUDGMENT

---------------------------

1. The appellants, pursuant to Section 32(aa) of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7, have appealed against the determination of the Commissioner of Rating and Valuation under Section 3(2) that their business premises were excepted from the application of Part I of the Ordinance.

2. The 1st appellant is the tenant of business premises situate at No. 7 Kwong Ming Street, Ground Floor, Wanchai, Hong Kong. The 2nd appellant is the tenant of business premises situate at No. 11 Kwong Ming Street, Ground Floor, Wanchai, Hong Kong. The 2nd Respondent is the landlord of both premises. At the beginning of the hearing, by consent, both appeals were consolidated.

3. The background to these proceeding is that in 1983 the 2nd Respondent as landlord commenced proceedings against the appellants under Part II of the Ordinance in the Lands Tribunal sitting at Victoria District Court, being applications Nos. V.C.J. 5011/83 and 5012/83, for recovering of possession of both premises.

4. The appellants, as respondents in those proceedings, pleaded that the respective premises were subject to Part I and not to Part II. The hearing of the Part II proceedings was deferred pending the outcome of the present appeals.

5. It was common ground between the parties that the premises were first constructed before the 2nd World War. In the majority of cases Part I applies to premises which were built on or before the 16th day of August 1945 - Section 3(1)(a). These are generally if not strictly referred to as "pre-war premises". Part II applies to certain domestic premises for which occupation permits under the Buildings Ordinance, Cap. 123 were issued after the 16th day of August 1945. Those premises are generally referred to as "post-war premises" although more recently premises of that vintage are increasingly falling within Part IV and not Part II.

6. The appellants indicated that both premises are business premises and the desirability of them falling within Part I, from the tenants viewpoint, is that they would enjoy the restricted rent and security of tenure provided by that Part. On the other hand, if they are not Part I premises they would enjoy no protection under Part II for that Part is limited to domestic premises. For completeness it might be observed that, even under Part I, the protection given to business premises is limited for pursuant to Section 3(1)(i) all business premises will be excluded from its protection on the 1st day of July 1984.

7. An exception to the general rule that pre-war promises are subject to Part I and pest-war premises to Parts II or IV, occurs where pre-war premises were substantially rebuilt after the 16th day of August 1945. For Part I provides:

8. The Commissioner arrived at his determination principally on the ground that his records indicated that both pre-war premises were rendered uninhabitable due to looting during the 2nd World War and were only rendered habitable after extensive post-war repairs. The Commissioner further pointed out that the application under Section 3(2) and his determination thereon occurred before the enactment of the Landlord and Tenant (Amendment) Ordinance 1983 which came into force on the 10th day of June 1983.

9. That Amendment enacted Section 3(1)(a) in its present form. The predecessor to Section 3(1)(a)(ii) was contained in Section 3(1)(d)which excluded from Part I -

10. The now Section 3(1)(a)(ii) is not only grammatically superior to the former paragraph (d) but also simplifies the basic issue to whether premises are substantially rebuilt. I accept the Commissioner's view that this appeal has to be determined on the basis of the former provisions set out in paragraph (d).

11. Before this hearing Mr. P.W. Yuen, Senior Rating and Valuation Surveyor had filed affidavits on behalf of the Commissioner deposing that in his opinion the premises were excluded from Part I and exhibiting various documents which assisted him in arriving at that opinion. Mr. Yuen is a Fellow of the Royal Institution of Chartered Surveyors and has been employed by the Commissioner since 1959. In addition to his valuation expertise, he is the holder of a Diploma in Building.

12. Mr. Yuen gave evidence and confirmed the contents of his affidavits. Exhibited to the affidavits were relevant documents extracted from the Commissioner's files. I will consider the evidence which he relied on separately in respect of each of the two business premises:-

No. 7 Kwong Ming Street:

13. The Commissioner's records showed that a 4 storey tenement building was erected at this address before the 2nd World War. On the 31st day of December 1945 the then owner signed and completed the Commissioner's Form No. 2 issued under Article 13. Under that Form the owner was required to furnish particulars of the building. The owner stated that the "dwelling house" was "badly damaged".

14. The Commissioner's file also included a report from one of his officers, Mr. To Chi-woon, who stated on the 20th day of March 1946, that "all wood work of these premises being looted. Stairs and floors being pulled down". On the 23rd day of June 1948 another of the Commissioner's officers, Mr. E.R. Clemo, reported that he had inspected this building and noted "Looted only outer walls standing. Work on 7, 9 & 11 just starting".

15. The Commissioner's records further showed that the rating assessment of the whole building was cancelled with effect from the 1st day of October 1945 and reassessed with effect from the 1st day of September 1950 at a rateable value of $7,600. This reassessment followed the return by the owner on the 28th day of March 1951 of Form 1A. In that return the owner reported that the building was fully occupied and that the total cost of reinstatement was $20,000. The Return also indicated that the building was seriously damaged during the War and the outer walls only had been left standing.

No. 11 Kwong Ming Street:

16. The Commissioner's records showed that a 4 storey tenement building was erected at this address before the 2nd World War. On the 29th day of December 1945 the then owner completed and signed the Commissioner's Form No. 2 issued under Article 13. In this form the owner stated that the premises were "demolished during Japanese occupation and are still unrepaired". Later the owner wrote to the Commissioner on the 13th day of February 1946 reporting that the premises "wore thoroughly collapsed daring Japanese occupation".

17. According to an entry on the Commissioner's files, Mr. E.R. Clemo on the 23rd day of June 1946 inspected the buildings and recorded:

"Looted, only outer walls standing. Work on 7, 9 & 11 just starting."

18. The Commissioner's records further revealed that the rating assessment for the building was cancelled with effect from the 1st day of October 1945 and reassessed with effect from the 1st day of April 1949 at a rateable value of $5,900. Appendix E to Mr. Yuen's affidavit comprised a Rating and Valuation Department Form 1 dated the 7th day of January 1949 in which the owner reported that the building was fully occupied. The Form also stated that the total costs of reinstatement was $17,650.

19. Both appellants gave evidence. Mr. Ho Lee Cheung stated that he carried on business at No. 7 Kwong Ming Street manufacturing bottle tops under the firm name of Ho Lee Cheung Bakelite & Metal Company. The business had been carried on at the premises by his father from 1965 and he took over the business in 1978. He personally was unaware of any part of the premises ever having been reinstated. He also stated that the buildings including the floors were made of concrete.

20. Mr. Yeung Tak stated that he carried on business at No. 11 Kwong Ming Street as a furniture manufacturer under the firm name of Tai Hing Tak Kee. He had carried on that same business at the suit premises since 1958. He was unaware of his building being reinstated and he also confirmed that it was made of concrete.

21. I have already found that both premises were originally contructed before the Second World War. The next question is whether the premises after the 16th day of August 1945 remained continuously uninhabitable and after the 23rd day of May 1947 were rendered habitable by extensive repairs effected at the expense of the landlord.

22. I record that the onus of proof in these appeals rests on the appellants. Understandably neither tenant was able to give evidence in respect of the state of the buildings between 1945 and 1947. For that crucial period the only evidence came from the Commissioner. Mr. Yuen was able to compile a very detailed summary of what appears to have occurred from the files of the Commissioner. Apart from any other ground, this evidence was admissible under Section 10(6) of the Lands Tribunal Ordinance, Cap. 17.

23. No objection was made to it admissibility but Counsel for the appellant did question the weight that should be given to the contents of Forms 1 and 1A. It was submitted that these were bare assertions by the owners as to the amount of money expended and were unsupported by receipts or other documentary evidence. In addition, it was submitted that the sums of $20,000 and $17,650 included nonstructural expenses such as architects fees and redecoration costs.

24. In considering the weight to be given to this documentary evidence I note that it includes documents signed both by the owners of the premises and by officers of the Commissioner. The statutory returns signed by the owners included the express notation that any false return rendered the owner liable to summary conviction. What is more significant is that the reports of Mr. To and Mr. Clemo corroborated the owners statements that the premises were damaged during the Japanese occupation. Further, the fact common to both premises, that the Commissioner cancelled the rating assessments for the periods 1945 to 1950 and 1949 respectively, is strong evidence that the premises were uninhabitable during those periods.

25. On the balance of probabilities I am satisfied that No. 7 Kwong Ming Street was uninhabitable from the 16th day of August 1945 until well after the 23rd day of May 1947 namely until some time in 1950. I make a similar finding in relation to No. 11 Kwong Ming Street where it appears that the premises only became habitable late in 1948 or early in 1949.

26. The remaining questions include whether they were continuously untenanted during these periods when I have found they were uninhabitable. With the passing of time this can only be a matter of inference. No doubt this is one reason why Section 3(1)(d) was replaced by the simpler Section 3(1)(a)(ii). However, as the premises were uninhabitable and unrated during those periods the irresistible inference is that they were untenanted and I so find.

27. Next were the repairs "extensive" in terms of the former paragraph (d)? In view of the fact that the looting left only the outer walls standing, the repairs to make the premises again habitable, were clearly major and certainly necessary for rendering the premises reasonably habitable. I find that the work carried out at both premises constituted "extensive repairs".

28. Finally, to be excluded from Part I the expense incurred in making the premises habitable must amount, in terms of paragraph (d):-

"... to not less than the equivalent to the standard rent of the premises for 7 years. "

I accept that the sums of $20,000 and $17,650 were gross amounts and in one case included architects fees and in the other may have included architects fees. However, Mr. Yuen, whose valuation expertise was supported by building qualifications, considered that those sums were equivalent to the reasonable cost of reinstating these premises between 1945 and 1950.  Before coming to that conclusion he had the benefit of perusing other files of the Commissioner, relating to similar reinstatement costs, during that same period. I accept his evidence and find that the costs of reinstatement, inclusive of architects fees, were the sums of $20,000 and $17,650 returned on Forms 1A and 1 respectively. I further find that those sums were wholly expended by the owners and not by any tenants.

29. Neither landlords nor tenants had at any stage applied to the Commissioner for the standard rent of the premises to be fixed. The Commissioner for the purposes of Section 3, therefore estimated the standard rent. For No. 7 Kwong Ming Street his estimate was $32 per month or $2,688 for 7 years. He also apportioned the gross costs of $20,000 by allocating $5,000 as the cost of reinstating the ground floor. For No. 11 Kwong Ming Street he made the same estimate of $32 per month or $2,688 for 7 years as the standard rent of the premises. He apportioned $4,500 of the gross reinstatement costs of $17,650 to the ground floor.

30. Both these estimates included a substantial margin in favour of the Commissioner's calculations, both in respect of his estimate of the standard rent and his apportionment of the gross reinstatement costs of the two ground floor suit premises. When cross-examined on the estimate of the standard rent, Mr. Yuen informed the Tribunal that he has based his estimate on the actual standard rent of the similar ground floor premises at No. 5 Kwong Ming Street. On the evidence I am satisfied that both his estimate of the standard rent and his apportionment of the costs of reinstatement for the two premises were reasonable.

31. From those findings it follows that both suit premises are excluded from Part I pursuant to Section 3(1)(d). I confirm that this was the provision which applied at the time the Commissioner issued his determinations under Section 3(2) that Part I did not apply to the two premises.

32. The Commissioner's determinations being upheld both appeals must fail. Liberty to apply in respect of any consequential matters is reserved.

DATED this 9th day of April, 1984.

Representation:

Mr. T.A. Evans of Chung, Kwan, Chan & Evans for the appellants.

Mr. P.K. Yuen, by leave, for the 1st respondent.

Mr. Raymond Leung of Yung, Yu, Yuen & Co. for the 2nd respondent.