Attorney General v. The Dor Fook Co Ltd
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HeadNote RATES - tenement owned by defendant Landlord but occupied by its tenant under a lease for 10 years - tenant ordered to be wound up in quarter when rates were demanded and became due - liquidator delivers up vacant possession to Landlord during same period - rates not paid by tenant - whether owner/landlord liable to Collector for proportion of rates attributable to occupation by tenant - surcharges for late payment of rates - whether interest thereon can be awarded under Section 49 of District Court Ordinance - Rating Ordinance (Cap. 116) ss. 21, 22. Held: (1) Both owner and occupier are liable to Collector of Rates for payment of rates, irrespective of any agreement between owner and occupier. (2) The imposition of surcharges in the event of non-payment of rates does not preclude an award of interest. IN THE DISTRICT COURT OF HONG KONG HOLDEN AT VICTORIA CIVIL JURISDICTION ACTION NO. 12162 OF 1985 __________________ BETWEEN
__________________ Coram: His Honour Judge Downey. Date: 23rd May, 1986. __________________ JUDGMENT __________________ 1. In this action the Attorney General, for the Collector of Rates, seeks to recover $11,338.86, being the balance of arrears of rates and surcharges in respect of premises located on the Lower Ground to the fourth floor of 107-111 Des Voeux Road, Central, Hong Kong. These premises are owned by the defendant, which let them to the Hei Ming Chu Restaurant Limited ("the tenant ") under a tenancy agreement dated the 8th February 1977, for a term of 10 years commencing on the 1st December 1976, at a monthly rental of $46,287.50 exclusive of rates. By clause 2(b) of the tenancy agreement, the tenant covenanted to pay all rates, etc. 2. The rates in question are for the period from the 1st January to 31st March 1985, and were originally due on the 31st January 1985. Those rates were not paid because the tenant got into financial difficulties. At some date a receiver was appointed, and on the 14th January 1985 an order was made that it be wound up. The Official Receiver was appointed as liquidator, and on the 6th February 1985 he delivered up the premises to the defendant. Although it has paid part of the rates proportionate to the date when it recovered possession of the premises, the defendant disputes its liability for the rates in question on the ground that it was not the occupier at the material time. The issue turns upon the true construction of Section 21(1) of the Rating Ordinance (Cap. 116). I am told that this is the first time that the question has been brought before a court in Hong Kong, and that this is something in the nature of a test case. Accordingly, these are my reasons in writing for my brief oral Judgment this morning, in accordance with the undertaking given to the parties. 3. Subsections (2) and (3) also have some bearing on the question before me. The relevant provisions of Section 21 are expressed in the following terms:-
4. On behalf of the plaintiff, Mr. Ho submitted that Section 21(1)was unambiguous, and clearly imposed liability for the payment of rates on the owner and the occupier, although the primary responsibility is placed upon the occupier. He emphasised the use of the word "both", and contended that the whole purpose of the section was to protect the public revenue and to ensure that rates were recovered speedily and without imposing additional duties on the Collector of Rates. In particular, he contended that, if the Collector could only recover from the person ultimately liable for rates, there would be imposed on the Collector an extra duty to ascertain the identity of such person, possibly by construing the terms of "documents to which the Collector is a stranger. With respect, this latter submission confuses the functions of the Collector of Rates, and those of the Commissioner of Rating and Valuation. It overlooks the latter's wide powers under Section 5 of the Ordinance; and it appears to suggest that a statute should be construed so as as to avoid any inconvenience to some administrative arm of Government. The last factor must never be overlooked, but, when construing a statue, I venture to suggest that it carries very little weight. 5. Mr. Scott sought to demonstrate that there is an ambiguity in Section 21(1) of Cap. 116 as to the persons responsible for paying rates. He further contended that the legislature had resolved to remove that ambiguity by expressly deeming that the rates assessed on a tenement should be "an occupier's rate" and should be paid by the occupier. He also pointed out that the Crown is in a better position to recover rates from an occupier which is in liquidation, because it is a preferred creditor by virtue of Section 265(1)(d) of the Companies Ordinance (Cap. 32). He also drew my attention to passages in a leaflet, published by the Rating and Valuation Department and intituled "Your Rates in 1984-85", as well as a memo from the liquidator of the tenant to the Collector, dated the 4th March 1985, both of which appear to afford some support for his contention that only the occupier is responsible for rates. 6. I have some sympathy for the defendant in the sense that I think that the liquidator's memo may have encouraged it to contest the present claim. But, the issue before me involves the proper construction of an ordinance and that cannot be determined or affected by some departmental publication or the opinion of some public officer. In fairness to Mr. Scott, he freely acknowledged the limited value or effect of these pronouncements from different branches of the executive arm of Government. 7. Various reasons were canvassed before me to explain why this question was not previously been brought before any court in Hong Kong. Many of these depend upon pragmatic considerations, which, in no way, diminish the force of the defendant's contentions. However, I would respectfully suggest that the real reason why this question has not previously been brought before any court is that Section 21(1) makes it abundantly clear that what is referred to as an "occupier’s rate" is a debt or liability which is owed to the Crown by both the owner and the occupier. They can determine, by agreement between themselves, which one is to pay the rates; and, in the absence of an agreement imposing on the owner the obligation to pay, the occupier must pay them. The primary obligation to pay the Collector is placed upon the occupier. Sub-sections (3) and (4) merely provide specific remedies as between the occupier and owner when the rates are paid by someone other than the party on whom the primary obligation rests. 8. To some extent, it can be said that subsections (3) and (4) add nothing to the enactment, unless it was intended that only the occupier was to be liable to the Collector. The remedies provided by these sub-sections would only be necessary if the person paying the rates was under no legal obligation to do so, and this payment might otherwise be regarded as a voluntary gift. Alternatively, the sub-sections merely restate what would be implied from the terms of the agreement between the owner and the occupier. I think that they were probably inserted in the section ex abundante cantela, or to avoid disputes between owners and occupiers over the express or implied terms of their separate agreements. Subsection (2) does, however, give rise to new remedies. It gives the owner a right to distrain for the rates paid by him in circumstances which would not normally entitle him to this exceptional remedy. It also gives him a clear remedy against occupiers with whom he has no agreement, e.g. guests, or a mere licence to occupy. Whether or not sub-sections (3) and (4) are necessary or add anything to the statute, they cannot, in my view, be used so as to construe subsection (1) as confining the obligation to pay the Collector to one of the two persons mentioned at the beginning. So to construe the mandatory form of the last six words, would involve a total disregard of the clear enactment of the first twelve words. 9. In my view, section 21 is intended to achieve two things. Firstly, it imposes a liability to the Collector on all persons having some close interest in or connexion with the tenement, e.g. owners, mortgagees, occupiers. Though expressed in different language, this is a device commonly found in revenue statutes cf. Inland Revenue Ordinance (Cap. 112) ss. 29-30; Estate Duty Ordinance (Cap. 111) ss. 12(2) &: (4); 14(7) & (7A); and Stamp Duty Ordinance (Cap. 117), First Schedule. The "liability" net is cast wide in order to ensure that the particular revenue is collected. Secondly the section seeks to regulate or clarify the relationship between the persons who are all liable to the Collector, when the rates are paid by one of their number, contrary to the agreement between them or because two or more tenements have been valued as a single tenement. 10. Apart from being of the opinion that Section 265 of the Companies Ordinance (Cap. 32) cannot properly be resorted to as an aid to the construction of the Rating Ordinance, I am not persuaded that it places the Collector in a better position than the defendant. Firstly, it is not clear that the rates in question rank as preferential debts. They appear to have become due and payable after the relevant date. But, assuming that they do rank as preferential debts, the Collector's decision to sue the defendant rather than prove in the liquidation of the tenant is an exercise of an option or discretion, conferred on him by section 21 of the Rating Ordinance, which cannot be questioned in this Court. It seems to me that the only way in which the exercise of a statutory option or discretion by a public officer can be questioned is by means of an application for judicial review. But, although I did not have the benefit of full argument on the point, I do not think that Section 265 of the Companies Ordinance gives to the Collector an advantage which is not available to the defendant. It is, in my view, arguable that, upon payment of the rates, the defendant would acquire the same rights against the tenant as the Collector had, by reason of the doctrine of subrogation. See Section 15 of the Law Amendment and Reform (Consolidation) Ordinance (Cap. 23) and In re Lamplugh Iron Ore Co. Ltd. [1927] 1 Ch. 308. 11. For the above reasons, I consider that there is no defence to the claim. Mr. Scott contended that interest should only be awarded in respect of the original amount of the rates, and not upon that part of the claim which consisted of 5% and 10% surcharges, imposed by virtue of Section 22(2) and (2A) of the Rating Ordinance. In this context I was referred to an unreported ruling of the late Judge Li in Attorney General v. Cheung Wah Ching and First Metre International Investment Co. Ltd. (V.C.J. Actions 14873 and 14875 of 1984; 15th March 1985), where it was held that such surcharges formed part of the debt due to the Crown, by virtue of Section 22(3) of Cap. 116, and did not fall to be treated as interest, thus precluding the award of further interest under Section 49 of the District Court Ordinance (Cap. 336). With respect, I would adopt and follow that ruling in the present case. If interest had been claimed from the date when the rates first became due and payable, i.e. well before the expiry of the 6 months' period which gives rise to the 10% surcharge, I consider that the latter might have to be taken into account when determining how the discretion to award interest should be exercised. But, in the present case, interest is sought from the date of the writ. I am satisfied that the amount claimed, including the two surcharges, was due to the Crown on that date. It should have been paid by the defendant on or before that date. There is, accordingly, no reason why the defendant should not pay interest to the plaintiff for the period from the date of writ to date of judgment. I order that interest at the rate of 8% per annum be added to the judgment of $11,338.86 for that period.
Mr. Dennis Ho, Crown Counsel for Plaintiff. Mr. John Scott, Counsel instructed by Messrs. Hampton, Winter Glynn for Defendant. |