Chan Kwok Kwan v. Chan Cheong Wai t/a Chan Cheong Kee Store

CACV000091/1979

Coram: Li, J.A., O'Connor & Power, JJ.

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JUDGMENT

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Li, J.A.:

1. This is an appeal against a judgment dismissing an action by the plaintiff (appellant) for possession of the premises known as Shop B, 65 Blue Pool Road, Ground Floor, (suit premises) on the ground that the primary user of the suit premises is non-domestic. By an agreement dated the 1st December, 1972 (agreement) the appellant let to the defendant (respondent) the suit premises for three years. The agreement was extended for another three years to the 30th November, 1978 at an increased rental of $1,200 per month. The respondent agreed to surrender vacant possession on expiration of the latter term. The respondent, however, held over after the 30th November, 1978. A writ was issued a few days later by the appellant for possession. The appellant's action was resisted by the respondent on the ground that the suit premises were used for domestic purposes and was protected by Part II of the Landlord and Tenant (Consolidation) Ordinance, Cap.7. The learned trial judge held, for reasons I shall refer to later, that the primary user of the suit premises was domestic and refused an order for possession. Hence this appeal. The evidence in the court below may be summarised as follows:-

2. The agreement was signed between the appellant and one Chan Cheong Kee which is the name of a grocery store, the sole proprietor of which is Chan Cheong-wai. The suit premises was originally let as a garage. There was no expressed provisions in the agreement permitting them to be used for domestic purposes. The head lease from the Crown to the appellant designated the suit premises as carports and the occupation permit referred to the suit premises as carports indicating that the uses for the premises was for non-domestic purposes only. The appellant let the suit premises to be used as a provision store. Upon entering into possession the respondent fitted out the premises as a provision store and had the sign board 'Chan Cheong Kee Store' installed on the frontage. The respondent also fitted out the premises with a kitchen and a toilet exclusive to his use at the end of a passageway. The respondent further registered the premises - 'Chan Cheong Kee Grocery Store' carrying on business as a grocery dealer in the suit premises. The Registrar General in his capacity as the Land Officer claimed from the appellant a waiver fee at $26,000 per annum by reason of the suit premises having been used for non-domestic purposes. On the other hand the appellant knew the respondent used the suit premises both as a grocery shop as well as for domestic purposes. The sketch plan of the suit premises produced by the respondent indicated that 434.4 sq.ft. were used exclusively for domestic purposes, 478.2 sq.ft. were used for business purposes and 113.9 sq.ft. representing a passageway, for storage of goods. However, the shop space of 478.2 sq.ft. was used by respondent's two sons as a sleeping place and for recreational purposes for the family after the shop closed. The said sketch plan also showed that the passageway of 113.9 sq.ft. was the only means of access to a cockloft and toilet which was built by the respondent for domestic use although a little portion of it was used for storage of some of the stock in trade for business purpose. The officer from the Commissioner of Rating & Valuation who was called to produce a certificate showing that the suit premises comprised of only 834 sq.ft. of which 71% was used for non-domestic and 29% was used for domestic purposes. However the said officer of the Rating & Valuation Department was not the one who compiled the data which formed the basis of that certificate.

3. On the aforesaid evidence the learned trial judge said that he should not be mesmerized by arithmetic and that little weight could be given to the Certificate from the Commissioner of Rating & Valuation. He found that there was clearly a joint usage of domestic as well as non-domestic purposes. He concluded that the non domestic user of the suit premises was financially more important to the respondent.

In this regard he considered as relevant the respondent's letter to the Registrar General stating that he (respondent) first rented the premises for a shop emphasizing his financial suffering if he (respondent) had to move the shop from the suit premises. He found that the front of the shop was decorated as a shop but that the respondent had a wife and five children ageing between 4 to 20 years old who live in the premises. He said in his judgment as follows:-

"Against the background of all the evidence adduced, including the presumption in favour of the plaintiff under Section 51(6), I am of the opinion that the competing uses are each sufficiently powerful and proven, then it would be impractical and unrealistic to make any distinction between them. I am satisfied that on the balance of probabilities they are more or less equal. In coming to this conclusion I remind myself that while the initial onus was on the plaintiff, the effect of Section 51(6), a certificate in favour of the plaintiff having been adduced, is to transfer to the defendant the obligation to rebut the presumption of non-domestic user. The other evidence just rebuts that presumption."

In short he made no definite finding as to the primary user of the suit premises. He relied on the case of Chan Yuk-tong & others v. Chu Sun-biu 1960 D.C.L.R. 43 as laying down the law that, where premises were used in their entirety for both business and domestic purposes so that the two users were equally balanced, domestic user should be regarded as the primary user and that the business user was in the nature of a 'cottage industry'. On such conclusion, he decided that the primary user of the suit premises was for domestic purposes and refused the order for possession.

4. The grounds of appeal have been set out with the Notice of Appeal I shall not repeat them. Broadly speaking learned counsel for the appellant advanced the following grounds:-

The point of the appeal that the respondent should indemnify the appellant as to the waiver fees demanded by the Registrar General has not been argued before us. It need not be considered.

5. Learned counsel for the respondent addressed us only on the point that a finding of fact in the court below should not be interfered with by the Court of Appeal unless it is wrong in law or that there is no evidence in the court below to support the findings. I shall deal first with the last point of the grounds of appeal namely that the suit premises were let to the respondent as a firm rather than to the sole proprietor of that firm personally.

6. Section 50(6)(k) of the Landlord and Tenant (Consolidation) Ordinance provides that:-

On the face of it the tenancy agreement was granted to the Chan Cheong Kee Store. There appears to be no answer to the appellant's action. Under cross-examination, however, the appellant gave evidence that he knew the respondent was the sole proprietor of the firm before the respondent moved in, and that he knew him as Chan Cheong Kee. On this point the learned judge said:-

"The defendant's full name is Chan Cheong-wai his firm name is Chan Cheong Kee Shop. He also used the shop name for trading purposes for many years prior to his occupancy of the suit premises when he had traded elsewhere. Because of these factors I am satisfied on the balance of probabilities that in his personal capacity the defendant was colloquially known as Chan Cheong Kee and was so named in the tenancy agreement. I am satisfied that the tenancy was to the defendant personally and not to his firm. I therefore reject the plaintiff's submission that the tenancy was to the defendant's business namely, Chan Cheong Kee's store."

7. This is a finding of fact. Having regard to the appellant's own admission we are not inclined to disturb the judge's finding. There is no merit in this ground of appeal.

8. We now come to the first ground of appeal that the learned trial judge erred in placing the legal burden of proof on the appellant. Section 50(1) of the Ordinance provides that:-

"Subject to subsection (6), this Part (Part II) applies to every domestic tenancy and domestic sub-tenancy in a post-war building, whether the same was effected orally or in writing and notwithstanding any provision in such tenancy or sub-tenancy, including any provision purporting generally or specifically to exclude this Part."

The writ was issued on the basis that the suit premises was let as a garage. The appellant knew that it was going to be used as a provision store. The allegation was that the suit premises was let for non-domestic purposes. This was admitted by the respondent although the respondent also alleged that it was, to the knowledge of the appellant, used also for domestic purposes and that he lived in the suit premises with his family. On the basis that he who alleges must prove it is for the respondent to show that he used the suit premises as domestic premises. The judge placed the legal burden on the wrong party. The protection of the Ordinance applies to domestic premises. It was for the respondent to show that they were domestic premises and therefore protected. The legal burden therefore rests on the respondent and not the appellant. However the legal burden of proof is of no significance except in the rare case where, when all the evidence is in, the case is in equilibrium. (Robins v. National Trust Co. A.C. (1927) 515 at 520) and Huyton-With-Roby Urban District Council v. Hunter (1955) All E.R. 398 at 401). It cannot be used to bring the case into equilibrium. There is evidence that the appellant lives in the same block above the respondent's shop and that the appellant, knowing that the respondent intended to reside there, let him keep it. He know that the respondent installed a kitchen in the suit premises. In answer to the question: "From the commencement of the tenancy he (the respondent) used the premises for his family to live", the appellant's answer was "may be so". The caretaker told the appellant he knew the whole family of the respondent residing there. When asked whether he knew the family was there his answer was: "Yes, of course, his family there." The judge put the legal burden of proof and the prima facie presumption arising from the certificate in the scales and having done so found the scales equally balanced. Then he allowed himself to be guided as a matter of law by the case of Chan Yuk-tong & ors. v. Chu Sun-biu. This is the second ground of appeal. The headnote in that case is somewhat misleading if it purports to say that the judgment shows that, where the premises are used in their entirety for both business and domestic purposes so that the two users are equally balanced, the domestic user should be regarded as the primary user and the business as in the nature of a 'cottage industry'. In that case, Judge Huggins (as he then was) said at 47:-

"The premises in question were not used wholly for human habitation and I must ask myself, What was the "primary" user? If I had found that Mr. Chu Fuk's family lived in the 2nd floor and that he slept in the staircase space merely in the role of caretaker I might have said that the space was used primarily for business purposes. But having found that his daughter was living with him I think it follows that there was a user for human habitation which was not subordinate to the user for business purposes. Even if it can be urged that the business and domestic users are equally balanced I think the proper view is that the domestic user is the primary user and that the business is in the nature of a "cottage industry"."

9. Reading his judgment as a whole we find this passage follows immediately his analysis as to the user of the premises in question. The aforesaid observation was made as a finding of fact and in our view, does not lay down a rule of law. Judge Huggins was merely explaining his analysis. Accepting it as a matter of law the learned trial judge, in the present case, has misconstrued the judgment. Misconstruction is apparent in his own words in which he said:-

"The definition of domestic premises there considered was differently worded to the definition in Part II of the present Ordinance. Huggins, D.J. was also concerned with a factual situation where the non-domestic user was, at most, equal to the domestic user. Here the non-domestic user is, at least, equal to the domestic user. The crucial and difficult question was whether on the facts it could he held that the domestic user was equal to the non-domestic user. Huggins D.J., was faced with the reverse factual situation. Looking at that question broadly I have found that the domestic and non-domestic users are equal. In view of this finding I propose, as a matter of law, to adopt the principle enunciated by Huggins D.J. and rule that in such event the domestic user is to be regarded as the primary user."

10. The Certificate of the Commissioner of Rating & Valuation is primary evidence of user but, in the circumstances of the case there being evidence to the contrary effect and the certificate being demonstrably wrong as to area and the compiler having been unaware of the after hours domestic use of the shop, the judge was wrong, after all the evidence was in, to give any independent weight to the certificate. After all the evidence was in the judge put the legal burden on the wrong side of the scale and put the prima facie evidence of the certificate on the scale. Having done so he found the case in equilibrium. These two matters should only have been put on the scale had the evidence, when considered by itself, indicated that the matter was in equilibrium. Indeed we have considerable doubt whether the certificate, once there is evidence to the contrary fit to be left to the trial of fact, has any evidential weight at all. (Regina v. National Insurance Commissioners exparte Richardson (1958) 2 All E.R. 689).

11. It is apparent the learned trial judge in the present case had applied the wrong principles and failed to make a finding of facts. In the circumstances, it falls upon this court when evidence is available to look at the evidence and draw its own conclusions on the facts.

12. The learned judge stated that the defendant had produced a sketch plan of the premises "which indicated that the premises were divided into various areas which fell under one of two descriptions". These areas were, firstly, an area of accommodation totalling 434.4 sq.ft., which was alleged to be used exclusively for domestic purposes; secondly, an area of 478.2 sq.ft., which was the shop portion of the premises which was said to be also used at night as a sleeping area for the two sons of the defendant, as a family dining room during the day and as a recreation area for the children after the shop had closed; thirdly, an area of 113.9 sq.ft. which was said to be a passageway and business store. The learned judge pointed out that the defendant stated that the two latter areas were used partly for business and partly for domestic purposes. He did not make any specific finding as to the defendant's evidence in this regard, however, he does seem to have accepted this evidence as he said, later in his judgment, that he took into account that as well as operating the grocery shop from the front of the premises, the defendant, his wife and children "all reside at the same premises which constitute the family home". The Certificate of Primary User (Exhibit 11) indicated that the total area of the premises was 834 sq.ft., some 192.5 sq.ft. less than the area shown on the defendant's sketch. The learned judge noted the existence of this difference but did not make any express finding as to the total area of the premises. He did, however, appear to be acting upon the basis that the premises occupied an area of 1,026.5 sq.ft.

13. Having adverted to the matters set out above the learned judge stated that, "In deciding the primary user of the premises there are many factors to be taken into account. While square footages are relevant they are not decisive. This is an issue where a court should not be mesmerized by the arithmetic". We are satisfied that this is a correct approach to the problem, however, while we consider that it would be wrong to allow oneself to be mesmerized by the arithmetic we take the view that the use to which particular areas are put and the square footages of those areas are of importance and that a court can often obtain considerable assistance from an arithmetical analysis. This is not, of course, to say that the final decision must of necessity be governed by the results of that analysis; however, where the evidence is finely balanced, it may well be that the results of the arithmetical analysis will be sufficient to tip the scale one way or the other.

14. It seems clear that the area of 434.4 sq.ft., which was referred to as an area for accommodation, was regarded by the learned judge as being exclusively domestic. The learned judge made no express finding as to the 113.9 sq.ft. of passageway. We are satisfied that it should be regarded as having partly domestic and partly business use and having examined the photograph of that passageway (Exhibit DIH) we are satisfied that the use should be regarded as being evenly divided between domestic and business. Indeed, in making this decision we consider that we are, if anything, over emphasizing the business aspect of its use. If the shop portion of 478.2 sq.ft. is taken to have a 90% business use, which, if anything, is a view overly favourable to the landlord, and a 10% domestic use then an analysis reveals as follows:-

This analysis shows a fairly substantial balance of domestic use. As we have indicated an analysis such as this is by no means conclusive when one is considering the question that had to be answered by the learned judge. However, the results of such an analysis are worthy of consideration along with other relevant factors.

15. From the sketch plan it is apparent that the passageway is the sole link between the shop premises to the toilet as well as the cockloft in which the daughters of the respondent lived.

16. Section 51(3) of the Landlord and Tenant (Consolidation) Ordinance provides:-

"In determining whether premises were let, or are being used, as a dwelling, the following may be taken into account-

17. Taking into consideration sub.para.(iv) aforesaid it appears clear that domestic user of the suit premises is more important to the respondent. The net profit of the shop comes to about $1,200 - $1,300 per month. The rent is $1,200. To say that the non-domestic use is more important financially to the defendant is not logically tenable. The respondent, his wife and five children live in the suit premises. Only the respondent and his wife run the business. If the respondent has to spend $1,200 per month in rent alone (not to mention his working capital in business) in order to produce an income of $1,200 a month the business cannot be very profitable. Obviously the respondent has taken into account the domestic user of the premises as a very essential part of his returns and renumerations. It is not correct to say that the non-domestic user of the suit premises is more important to the respondent than the domestic user. We agree that in deciding the question of primary user there are many factors taken into account. One must look at the totality of the evidence and analyse it bit by bit and putthemback into a general pattern as a whole. If the learned trial judge were to give some credit to the domestic user of the business portion of the suit premises and appreciate that the domestic user of the suit premises is financially more important or at least as equally important as the non-domestic user, we are certain that he would find no difficulty in coming to the conclusion as a matter of fact that the primary user of the suit premises is domestic. For this reason we are of the opinion that the learned trial judge has arrived at the right conclusion but through the wrong approach. Accordingly, the appeal should be dismissed.

Representation:

Denis Chang (C.P. Lin & Co.) for appellant

Y.C. Mok (W.K. Lore & Co.) for respondent