Tat Hing Firm v. Kwong Sheung Firm

DCMP000019/1947

IN THE SUPREME COURT OF HONG KONG

SUMMARY JURISDICTION

TENANCY TRIBUNAL APPEAL No. 19/47

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Coram: E.H. Williams

Date of Judgment: 7 February 1948

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JUDGMENT

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1. This is an appeal from a decision of a Tenancy Tribunal granting an order for eviction of the appellants from No.27, Wing Lok St., ground floor, on the ground that the tenant (Lung Chuen Firm) had transferred the promises to the appellants without the consent in writing of the landlords - respondents.

2. The decision of the Tribunal is set out below:

and orders:

The grounds of the appeal are 5 in number. They are painly facts rather than law.

3. At the bearing before the Tribunal, both parties were represented solicitors , the chairman of the Tribunal also being a solicitor. The Tribunal did not share any grounds for its decision - it is not required so to do either under the Proclamation or the Ordinance unless the appeal is by way of a case stated. It is, however very regrettable that the appellants did not follow the usual practice in appeals from Tribunals of asking the Chairman through the Court (or directly) for the reasons for its decision in cases where none are set out.

4. The evidence before the Tribunal on behalf of the respondents (applicants) was that Tse Tak Ying was the sole owner of the firm and principal tenant of the house: he left for the country in 1942. In his absence, his parent (since dead) let the ground floor to the Lung Chuen firm and, on his return in 1946, rent continued to be collected on his behalf from some one in the firm which was carrying on the business of Chinese wine merchants. Notice to quit was served on the firm in May 1946 but it was ignored and rent continued to be collected.

5. The servant who collected the rent stated that he obtained payment from the master who was surnamed Lo or, in his absence, the cook. When he visited to collect rent at the end of September, 1946, he found the old employees absent, the premises repainted, the signboard LUNG CHUEN replaced by the sign 'TAT HING, Ship Chandlers'. (photo -graphs shew the name painted prominently over the shop and on the pillars outside). The business now being carried on was a ship Chandlers'. He informed his master and a solicitors' letter was written at the end of October requiring the Tat Hing to vacate immediately. Both TSE TAK YING and his servant stated that about 10 days later they noticed a small signboard LUNG CHUEN in a corner of the shop.

6. The evidence for the appellants (Opponents) was given by Tsang Chau Jor. It was to the effect that he and one, Lo Fong, were partners in the Tat Hing; Lo Fong had been manager of the Lung Chuen: that business had been discontinued owing to the difficulty of securing a wine licence and they changed over to ship chandlers' business under the sign Tat Hing. He denied he had removed all the signboards of Lung Chuen - the one in question had remained throughout.

7. To the Tribunal he stated that he and Lo Fong had invested $4000 equally in the Lung Chuen: in the Tat Hing, he had put $100,000 and Lo Fong $5000 ($3000 paid). Lo was no longer employed in the firm (it would appear he meant the appellant firm). He had continued to display the Lung Chuen signboard because the rent receipt was in that name and also they might later wish to resume the wine business.

8. Lo Fong was present at the hearing but was not called.

9. Counsel for appellants based his case on two grounds. Firstly, he submitted that the evidence was consistent with the Lung Chuen firm retaining possession of the premises and permitting the Tat Hing to use the premises. It was well known that Chinese often carry on business under different signboards with the same partners and in the same premises. He cited Chaplin v. Smith (1925) 1 K.B. 198 and Stenning v. Abraham (1931) 1 Ch. 470 in support. The opening paragraph of the heading to the former case reads:

"A lessee who has covenanted not to part with possession of the demised premises does not commit a breach of the covenant by merely permitting another person to have the use of the premises, so long as the lessee retains the legal possession himself."

10. The observation of Farwell J. in the latter case (p. 473) is important - 'I must entirely disclaim any attempt to define the meaning of parting with possession generally. It must always be a question of fact and the construction of the particular agreement in each case. (i.e. the agreement between the tenant on the one hand and the assignee, licensee or subtenant on the other).

11. His second submission was that assuming Lung Chuen was not apparently in possession, the evidence was that the partners in both firms were the same. A firm, unlike a corporation, has no existence in law as distinct from the partners. Therefore if the Lung Chuen (partners A & B) choose to alter their name and business to Tat Hing (partners A & B), there was no transfer or parting with possession. He relied strongly on the case of Corp. of Bristol v. Westcott XII Ch. (1879) p.461. There a lease was granted to 2 partners B & H as joint tenants with a covenant against assigning, subletting or parting with possession to any person. The partners dissolved partnership, agreed that the partnership property should be made over to B and the lease assigned with consent of the lessor if it could be obtained. H gave up sole possession of the leasehold to B and B so remained in possession. Consent was not obtained and no assignment was executed. It was held that there had been no breach of the covenant. The Court said that the agreement was that the lessees were not to let into possession anyone not previously approved of as tenant by the lessor.

12. Counsel for the appellant referred also to the case of Langton v. Henson 92 L.T. 805. There, the lease of a property had been assigned to two partners in a firm. Later the partnership was dissolved and one assigned his interest in the lease to the other without consent. It was held there was a breach of the covenant against assigning without consent. This case was distinguished from the Corporation of Bristol case in that there one partner had gone out of possession - he had not parted with anything to the other as the other had already got the whole possession. In the Langton case, when one joint tenant assigned to the other (i.e. released to the other) he destroyed the privity of estate between himself and the lessor: something had been parted with.

13. Counsel for respondents submitted that there was evidence on which the Tribunal could find there had been a transfer of the premises: that 'transfer' is one of the widest terms that can be used: if Lung Chuen (partners, A & B) ceased one line of business and began another type of business as Tat Hing (A & B partners) there was a transfer of possession within the meaning of the Proclamation. His reason for this submission was that the object of the Proclamation was to preserve the status quo and that would be altered if premises let for the business of wine dealers were convertied to that of ship chandlers.

14. Secondly he submitted that the evidence given by the respondent shewed that (1) the name of - the firm had been changed (2) the employees changed (3) the nature of the business, and that this was sufficient to shift the burden of proof to the appellants to shew there had not in fact been a transfer. The Tribunal could not have accepted the evidence of Tsang Chau Jor that the partners in both firms were the same, unsupported by any evidence from Lo Fong who was available.

15. It is undoubtedly true that one of the most marked differences between a partnership and an incorporated company is that in law a firm is not recognised as an entity though merchants are apt to look upon it as such.

16. I am certainly not prepared to accept the contention of counsel for the respondent that, if the partners cease to do business under one name and start another business under another name in the same premises, then there is a transfer of or parting with possession within the meaning of the Proclamationor Ordinance. I am not entitled to hold that the object of the Proclamation was to preserve the status quo (a rather vague term) to that extent.

17. In my opinion the whole case depended on the finding as to who, if any, were partners of the Lung Chuen and the appellant firm respectively. There is the possibility that there was a sole proprietor of either firm. Had the Tribunal consisted altogether of lay men, then it might have been that the Tribunal looked at the question purely from the point of view of the merchant in considering a firm as an entity like a corporation. The Chairman, however, was a solicitor. Solicitors appeared for both sides. The Tribunal asked very pertinent questions as to the partners in the respective firms. I would therefore be wrong in supposing that the legal significance of a firm was not considered by the Tribunal in reaching its conclusion.

18. As to the first contention of counsel for the appellants that the evidence was consistent with the Lung Chuen retaining the possession but permitting Tak Hing to carry on, the Tribunal which consisted of three Chinese members is, I feel, better acquainted than I am with the practice of Chinese of carrying on different businesses under different signs with the same partners in the same premises. What opinion the Tribunal formed of the credibility of the witnesses, I cannot say. It was entitled to find, on the evidence, that all the persons who were connected with the Lung Chuen firm had gone out of possession. One statement in the notes is difficult to understand: Tsang Chau Jor, in answer to the Tribunal, said "Mr. Lo, (i.e. the other partner) is no longer employed in the firm'. If he was a partner in both firms then, in point of law, he could not have been employed in them. It may mean that prior to the change he took an active part in the Lung Chuen i.e. was present there selling wine (and therefore in apparent possession) but that when the Tat Hing started selling metal goods, he did not take any part in the management or control of the firm.

19. As to the second submission of counsel for appellants that the Tribunal should have found that the partners in both firms were the same, I have had some difficulty. Tsang Chau Jor's evidence was that the capital of the Lung Chuen was small ($4000) but that the capital invested in Tat Hing was large - $105,000 of which he hald a $100,000 interest and Lo Fong the remainder. After the Tribunal had obtained this information, solicitor for the respondent did not question this evidence of Tsang Chau Jor and counsel for appellants submits that the Tribunal should have found as a fact that this evidence was true. I think the solicitor for respondent ought to have formally challenged it if he did not accept it but I do not agree that the Tribunal ought to have so found. If it had, then I consider that in law there had been no transfer. The Tribunal was entitled to consider the whole of the evidence in deciding whather Tsang Chau Jor was a witness of truth. If the Tribunal accepted the evidence for the respondent that the appellant had put up the Lung Chuen signboards shortly after the solicitor's letter of 30th October, it may well have thought that this was done for the purpose of manufacturing evidence to make it appear that the Lung Chuen had never parted with possession. The Tribunal was also entitled to take into consideration the fact that there were no partnership books of either firm and the fact that no person who assisted in the actual conduct and business of the Lung Chuen now assisted in the Tat Hing firm. Why was there a complete change if each business was owned by the same persons?

20. As I have stated at the beginning of my judgment, I am in difficulty as I do not know what evidence the Tribunal accepted and what it rejected. The appellants have to satisfy me that the decision of the Tribunal is wrong in what is a question of fact namely, whether or not there was a transfer. I am not so satisfied. There was evidence as a whole to support the finding of the Tribunal that there had been a transfer.

21. I therefore hold that the appeal fails on all grounds.

22. This case ones again illustrates the desirability of having some form of registration of firms.

23. Appeal dismissed with costs in the sum of $250.