Li Yit Kwei v. Yuen Koon Man and Another

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT KOWLOON

CIVIL JURISDICTION

RENT INCREASES ACTION NO.306 of 1971

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Coram: Judge Addison.

Date of Judgment: 22.11.1971

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RULING

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1. This application for possession brought by the landlord under section 7(7) of the Rent Increases (Domestic Premises) Control Ordinance, Cap.338 raises the vexed problem of the rights of sub-tenants under that Ordinance where the claim by the landlord is made under section 7(2)(a) thereof.

2. The sub-tenant in this case served a counter notice and in the application he has been joined as a party in the form of 2nd respondent. Notwithstanding his joinder it is nonetheless submitted by Mr. CHENG, who appears on behalf of the landlord, that the sub-tenant has no locus standi and his argument in support of this contention, is as follows.

3. Firstly he says that at Common Law the landlord is not concerned with sub-tenants as there is no privity of contract or estate between a superior landlord and a sub-tenant. His only concern is with his immediate tenant. Thus the sub-tenant cannot have a greater security of tenure than that enjoyed by the principal tenant and the destruction of the interest of the principal tenant involves automatic destruction of the interest of the sub-tenant.

4. This resultant effect is in fact enacted in the Ordinance in section 7(1)(d) which provides:-

"A tenancy or sub-tenancy shall terminate where -

Provided that upon such termination this Ordinance shall apply to any tenancy thereupon arising by operation of law."

Next it is submitted that by reason of the presence in various sections in the Ordinance of the words "landlord", "tenant", "principal tenant" and "sub-tenant" in the juxtaposition as they appear a sub-tenant has no locus standi against a landlord.

5. I do not think it necessary to set out these sections seriatim but a reference to subsections (2), (6) and (7) of section 7 illustrates the argument.

6. Mr. CHENG also maintains that it is not competent for a sub-tenant to serve a counter notice on a landlord and it was also in this context that he referred me to section 7(6) and 7(7) of the Ordinance.

7. Section 7(6) enacts -

"Within fourteen days of service of a notice to quit under subsection (2) or (4) any tenant or sub-tenant of the premises affected by the notice to quit may serve a counter notice in the specified form on the landlord or principal tenant as the case may be, disputing the right of the landlord or principal tenant to serve notice to quit."

8. Section 7(7) provides, inter alia, that the landlord or principal tenant, "as the case may be", may, upon receipt of a counter notice apply to the court for an order for possession of the premises.

9. It is inherent in his argument that the word "or" in these subsections cannot mean "and" having regard to the additional words, "as the case may be".

10. Again it is envisaged that only one counter notice is served and Mr. CHENG additionally argued that it must emanate from either the tenant in the case of an application being made by the landlord or from a sub-tenant where it is the principal tenant who is seeking possession.

11. Mr. CHENG conceded that the sub-tenant may have a right to be heard, save as to hardship, so far as stay of execution in writ proceedings are concerned, but this did not entitle him in an application for possession brought by the landlord under the Ordinance to pitch his hardship against that of the landlord. He said that if the landlord let the premises as business premises to a principal tenant it would not be open to a sub-tenant to say vis a vis the landlord that his user was domestic and that the Ordinance applies. The rights of a sub-tenant to dispute the tenancy is a domestic one is in fact conferred upon section 5(4) but notwithstanding this Mr. CHENG would argue that his contention is unaffected because its mainspring is based on privity of contract.

12. It is trite law that in order to set the machinery of the Ordinance in motion a landlord seeking possession must serve a notice to quit. The Ordinance clearly has in mind the service of such a notice either by the landlord on his tenant when the landlord seeks possession or by the principal tenant on a sub-tenant in case where the principal tenant seeks possession.

13. Inasmuch as service of a notice by the landlord will not affect a sub-tenant provision is made in the Ordinance for certain steps to be taken by the landlord whereby a sub-tenant will be affected. The provision is section 7(3), which reads as follows -

"Where a notice to quit in English and Chinese, is served under subsection (2) and is displayed for three successive days upon the main door or entrance of the premises affected, such notice to quit shall take effect also on any sub-tenancies created under the tenancy to which it relates."

14. These provisions seem to be part of the machinery of the Ordinance and it is a far cry from this to determine what rights, if any, are conferred on the sub-tenant in the landlord's application for possession against his tenant.

15. Turning to the first argument, viz. locus standi: does the sub-tenant have any right to be made a party to the application or is he a mere pawn in the game?

16. This matter was previously before the District Court in the case of Lau Kit-man v. Lam Shiu-ling [1963] D.C.L.R. 171. It was held in that case that those sub-tenants who had filed counter notices had, by so doing, exhibited an intention to dispute the landlord's right to serve a notice to quit and should be joined by the landlord as respondents along with the principal tenant.

17. With that decision I would respectfully agree.

18. In this application the sub-tenant has already been joined, accordingly it seems that the applicant blows hot and cold when, having joined the sub-tenant, he now says he has no locus standi.

19. It is not clear from the report in Lau Kit-man v. Lam Shiu-ling whether the sub-tenants' ground of opposition related exclusively to the question of hardship though it would seem such was not the case.

20. At page 176 of the report, the learned District Judge said -

"In coming to this conclusion I make it clear that I do not suggest that the grounds on which a sub-tenant can dispute are the grounds set out in s.(6)(6). Whether the tenant is entitled to raise the hardship that he (the sub-tenant) would suffer, if the tenancy out of which his sub-tenancy is determined, is one which may have to be determined at some other time. But he would be entitled to raise such issues as collusion between a landlord and principal tenant; that the building is not post-war, that the premises are not domestic, and so forth."

21. In the application before me the counter notice of the sub-tenant disputes that the landlord genuinely requires the premises and further alleges greater hardship would be caused by granting the order for possession than by refusing to grant it.

22. Thus the sub-tenant's opposition is not confined to hardship alone.

23. Assuming in the first instance that the only ground raised in a counter notice of a sub-tenant is one other than hardship is it to be said that the tenant stands in the wilderness powerless to do anything save to present a piece of paper?

24. Mr. CHENG argues that he may not even present a counter notice. I see nothing in the Ordinance to debar a sub-tenant from serving a counter notice in the landlord's application.

25. I do not hold the view that a sub-tenant has no locus standi and as I understand the practice it has always been permissible for sub-tenants to appear and challenge the landlord's claim on grounds other than hardship.

26. Another reported case where this occurred was in Mok Wai-bun v. Yu Ying and another [1964] D.C.L.R. 59 where the sub-tenant was not barred from appearing.

27. It is not clear from that report whether the sub-tenant actually served a counter notice but it would seem that he did not. In Mok Wai-bun v. Yu Ying it was discovered at the hearing of the landlord's application that there was a sub-tenant in possession and though the landlord had not posted a copy of the notice to quit at the entrance to the premises nevertheless the learned Judge directed that he should be joined as a respondent.

28. If Mr. CHENG's submission is correct namely, that a sub-tenant has no locus standi, then the service of a notice to quit upon the main door of the premises would be tantamount to no more than his telling the sub-tenant that he might as well start looking for other accommodation as proceedings are afoot for possession over which he has no say. This hardly seems consonant with the object of the Ordinance which is to make provision for security of tenure of domestic premises.

29. It would also lead to the peculiar result that whereas the sub-tenant could not, in his own right, give evidence as to the lack of bona fides on the part of the landlord he would be able to do so only if he were called as a witness by the principal tenant. But supposing there were collusion between the landlord and the principal tenant resulting in the principal tenant deliberately refraining from calling the sub-tenant, could it then be said that such circumvention of the Ordinance is merely an unfortunate circumstance resulting from the doctrine of privity of contract being given pride of place?

30. No doubt the learned District Judge in Lau Kit-man's case had this in mind when he referred to collusion as a ground for allowing the sub-tenant to come in.

31. In Mok Wai-bun v. Yu Ying and another [1964] D.C.L.R. 59 Judge Huggins, as he then was, said at page 62 of the report:

"The position of sub-tenants in Hong Kong, is of course, very different from that in England and I think the learned judge who made the order joining the 2nd respondent was giving effect to the provision which enables a landlord to serve notice on sub-tenants by posting on the premises: there would be no point in giving notice to sub-tenants in this manner unless it were possible for the sub-tenants to be made parties to proceedings."

32. I hold therefore that the sub-tenant has a locus standi.

33. The next question which arises is in relation to the sub-tenant's hardship.

34. Firstly, in the court empowered to consider hardship raised by a sub-tenant in his counter notice? If so how is that hardship to be weighed? Is it to be considered in isolation and treated in the same manner as if the sub-tenant were the immediate tenant of the landlord? If this is so then may it be added in full to the hardship of the principal tenant and jointly put in the scales against the hardship of the landlord? One can visualize circumstances where the hardship of a tenant is virtually nil but the hardship of a sub-tenant substantial and, taken alone, is in excess of that of the landlord. In such cases is the landlord to be deprived of an order?

35. On the other hand does one, having heard the evidence of the sub-tenant's hardship, then consider it insofar as it affects the tenant's hardship. In other words whether by reason of an order for possession being granted the hardship of the tenant is in any way increased by reason of the fact that his sub-tenant will be required to vacate the premises also. In some cases this may amount to no more than the loss by him of a sub-tenant who is prompt in paying his rent. It may go further and constitute a loss of income to the tenant whereby his financial hardship is considerably increased when he comes to seek alternative accommodation.

36. The Ordinance is one "to make provision for the temporary control of increases in rent of domestic premises, and for the security of tenure of such premises and for purposes connected therewith".

37. Section 3 of the Ordinance limits its application to domestic tenancies and sub-tenancies existing at the date of the commencement of the Ordinance. Where a tenant or sub-tenant is dispossessed he will be unable to enjoy the security the Ordinance affords in his new premises.

38. Now there is nothing in the Ordinance which diminishes the common law principles in determining greater hardship. There is no enactment that hardship of the sub-tenant must be excluded from consideration.

39. Megarry, in his 10th Edition of The Rent Acts, 1st Volume at page 293 says, in relation to the greater hardship rule,

"In addition to the landlord and tenant, the court must consider 'hardship' to all who may be affected by the grant or refusal of an order for possession - relatives, dependants, lodgers, guests and the stranger within the gates - but should weigh such hardship with due regard to the status of the persons affected and their 'proximity' to the tenant or landlord, and the extent to which, consequently, hardship to them would be hardship to him. The inability to take in a guest for the weekend would no doubt be assessed by the judge at nil. The extrusion of a loved and trusted relation, whether dependent or not, would weigh heavily in the scales."

40. In the 27th Edition of Woodfall on Landlord & Tenant Vol.2 at page 1545 appears the following extract in relation to greater hardship:-

"Circumstances which may be considered will include the financial means of both parties, the tenant's failure to seek alternative accommodation, and hardship to third parties, such as the landlord's daughter, other members of the family relatives and dependents, and even (to a lesser extent) lodgers, guests and the stranger within the gate, due regard being had to their status and proximity to the landlord or tenant, and to the extent to which hardship to them would be hardship to the landlord or tenant."

41. I think it follows from this that hardship of the tenant is a factor to be taken into account. This then raises the question: in which way is hardship of the sub-tenant to be taken into account?

42. Is the court required to focus its attention on the tenant and assess the hardship of the sub-tenants merely as it affects the tenant himself? Is the security of tenure the sub-tenant enjoys under the Ordinance against his principal tenant a different security of tenure when measured against the landlord? Is the doctrine of privity of contract or estate to take pride of place under the Ordinance where it is known in Hong Kong that people live in cubicles, bedspaces, partitioned rooms and the like?

43. My reading of Mok Wai-bun v. Yu Ying and another leads me to believe that the learned judge in that case considered the hardship of both the tenant and sub-tenant separately.

44. At page 62 of the report appears the following extract -

"So far as the 1st respondent (the tenant) is concerned he would not suffer as a result of an order for possession save that he might lose a small part of the profit to be obtained by sub-letting. The rear cubicle is occupied by the 2nd respondent and his 10 year old son. The 2nd respondent's wife sometimes comes to the premises. The 2nd respondent has taken the attitude that he is not concerned in this matter .......... The 2nd respondent has not disclosed to me that he would suffer any special hardship beyond that of having to find other accommodation."

45. When once it is established that a sub-tenant has the right to be brought into the application is it to be said that he must be restricted in stating his case?

46. The notice to quit must relate to the whole of the premises let to the principal tenant and where there are sub-tenants in occupation they are in my opinion obviously within the purview of the Ordinance and may fully state their case to protect their own security of tenure. Whether greater hardship is established or not is a question of fact but I see no reason why, under the Ordinance, a sub-tenant cannot seek to defeat the landlord's application in his own right.

47. Argument by way of an example is always open to criticism but supposing, all other things being equal, a landlord having 4 members in his family seeks possession against the tenant who has only two members in his family but there are two rooms in the premises each of which is occupied by a sub-tenant having 3 members each in his family. Then is it to be said that on a numerical count the number of members in the tenant's family only is to be considered against the landlord's family and that a court should view the sub-tenants as if they do not exist?

48. The answer must ultimately be found in the Ordinance itself and I do not think it strains the wording of the proviso to section 7 to adopt an interpretation which results in a court giving effect to the sub-tenant's hardship, having regard to the object of the Ordinance itself.

49. That proviso is in the following form:

"Provided that no order shall be made on the ground specified in paragraph (a) of subsection 2 if the court is satisfied that having regard to the circumstances, including the question whether other accommodation is available for the landlord, the tenant, the principal tenant or the sub-tenant, greater hardship would be caused by granting the order than by refusing to grant it."

50. It might be argued that the inclusion of the words "principal tenant" are otiose if the proviso is construed in the way I have done. It might be said that the words "principal tenant" show that, only in relation to the question of alternative accommodation vis a vis the principal tenant, should the sub-tenant's position be considered and that the juxtaposition of "landlord" "tenant" "principal tenant" and "sub-tenant" indicate that the sub-tenant has no rights against the landlord. I do not think the matter is without difficulty but I incline to the view that the Ordinance never intended to put the tenant on the mat and sweep the sub-tenant under the carpet where security of tenure is concerned in Hong Kong. The proviso says in effect that in relation to hardship the court shall have regard to all the circumstances and in relation to hardship the court may enquire whether alternative accommodation is available to the landlord, the tenant, the principal tenant or the sub-tenant. If the legislature intended that the hardship of a sub-tenant should not be considered in an application by the landlord it could, in my opinion, have done so in clear words by specifically stating such. Nor do I consider the result is affected differently by reason of the definitions ascribed to "principal tenant", "tenant or sub-tenant" in section 2 of the Ordinance.

51. Having thus given my ruling showing how I approach the evidence in this application I shall now orally deliver my reasons on the application itself bearing in mind what appears in Megarry's, 10th Edition of The Rent Acts, at page 285 vis,

"It must not be forgotten that at common law the landlord is entitled to possession as of right; it has been observed that it is wrong to regard the tenant as having a prima facie right to remain and the landlord as seeking an indulgence from the court, although this view is not without its difficulties."

52. I consider that the Ordinance seeks to preserve security of tenure for both tenants and sub-tenants but that hardship is a ground for declining possession to the landlord where that of the tenant and/or sub-tenant outweighs the hardship of the landlord.

Representation:

Mr. Cheng instructed by Hastings & Co. for Plaintiff.

Mr. Liang (P. Mo & Co.) for both Respondents