Wan Yung Sang v. Hong Kong Housing Authority and Another

HCAL 135 / 2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 135 OF 2009

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BETWEEN

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Before: Hon Au J in Court

Dates of Hearing: 4 January 2011, 25 February 2011

Further Written Submissions: 11 & 25 March 2011[1]

Date of Judgment: 6 July 2011

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J U D G M E N T

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A. Introduction

1.Mr Wan (the Applicant) is a tenant at Flat 3713 (“the Flat”), Chung Kwai House, Kwai Chung Estate, New Territories.  Kwai Chung Estate is a public housing estate managed by the Hong Kong Housing Authority (“HA”).  HA is also the landlord of the Flat.

2.In this judicial review application, Mr Wang seeks to quash (a) the decision (“the HA’s Decision”) of the HA^[2] made on 31 July 2009 to serve on him a notice to quit (“the NTQ”), and (b) the decision (“the Appeal Decision”) of the Appeal Tribunal (Housing)^[3] (“the Appeal Tribunal”) made on 18 September 2009 confirming the NTQ.

B. The facts

3.Mr Wan is married with Madam Tong Cheung Mei (“the Wife”).  They have two daughters and one son, who are respectively 22, 15 and 13 years old.  They have been living at the Flat since 1998.  The eldest daughter has been studying in Australia since 2008.

4.In 1987, Mr Wan was granted public renting housing to live in a flat at Kwai Chung estate.   The family moved to the Flat in 1998.

5.When Mr Wan moved into the Flat in 1998, the HA as landlord entered into a fresh tenancy agreement (“the Tenancy Agreement”) dated 20 March 1998 with him as the tenant.   

6.The Tenancy Agreement was for a period of 54 days from 8 April 1998 and thereafter on a calendar tenancy until termination^[4]. The rent was HK$2,650 per month payable in advance on the first day of every calendar month.

7.Clause II(10) of the Tenancy Agreement (“the User Clause”) provides that Mr Wan can only use the Flat for residence purposes for himself and his family members but not for, inter alia¸ business purpose^[5]. The Wife and his three children are listed in the Tenancy Agreement as Mr Wan’s family members residing in the Flat with him.

8.Clause IV(7) of the Tenancy Agreement (“the Deeming Clause”) further provides that for the purposes of the agreement, “any neglect or default of any member of the Tenant’s family or any servant of his shall be deemed to be the act, neglect or default of the tenant”.

9.Clause IV(2) of the Tenancy Agreement provides that it shall be lawful for the HA (as landlord) to re-enter the Flat if the tenant, inter alia, fails to observe or perform any of the terms of the agreement.

10.In about May 2009, the District Management Offices (“the DTMO”) of the Housing Department inquired into a complaint that the Wife had been using the Flat to operate a business of fortune telling.

11.On 27 May 2009, a staff of the DTMO went to the Flat for investigation.  The Wife was in the Flat.  The staff found that there was a table and two chairs in a small room with a white screen separating the room from the living room of the Flat.  The staff also saw a woman sitting behind the screen.  Upon enquiry, the Wife told the staff that the woman was her friend.

12.The DTMO staff referred the case to Public Housing Resources Management Sub-section (“the PHRMS”) for further investigation.  The PHRMS staff between 15 June and 9 July 2009 further carried out six daytime surveillance visits to the Flat. 

13.The Applicant was not at the Flat on all these surveillance visits and therefore did not meet the investigator.

14.By a report dated 14 July 2009 prepared by a Housing Affairs Manager (Public Housing Resources Management), it was concluded that the Flat had been used for business purpose in providing fortune telling services.   The Manager came to that conclusion based on in summary the following grounds:

(1) The reading of the hydrometer and electrometer had substantially increased during the six surveillance visits, indicating that there were always people staying inside the Flat.

(2) There were strangers frequently visiting the Flat, who left with something appeared to have been taken from the Flat.  On one occasion, the investigator overheard a female who left with a friend from the Flat asking “whether the master could help”.

(3) The investigator found a person identified as “Auntie Mei”^[6] from a message posted on some discussion forums on the internet.  The contact number provided in the discussion forums was the same registered phone number of the Flat.  The investigator contacted “Auntie Mei” by phone where “Auntie Mei” offered the service of fortune telling at a charge of HK$300.

(4) On 9 July 2009, two investigators from the PHRMS team visited the Flat and located a woman who identified herself as “Auntie Mei” and offered the service of fortune telling at HK$300. 

15.After the report, on 31 July 2008, the HA issued a letter to Mr Wan informing him that the HA had found that the Wife had used the Flat for business purposes and that was in breach of the User Clause.  It further stated that, pursuant to s. 19(1)(b) of the Housing Ordinance (Cap 283) (“the HO”), the HA thereby sent him also the NTQ to terminate the Tenancy Agreement.   He was required to move out of the Flat by 31 August 2009.  The formal NTQ was enclosed in the letter, which stated that the notice was given pursuant to s 19(1)(b) of the HO.

16.In the letter, the HA reminded Mr Wan that he had a right to appeal under s 20(1) of the HO and advised him the relevant appeal procedures.

17.On 4 August 2009, Mr Wan lodged an appeal under s. 20(1) of the HO against the decision of the HA’s Decision.

18.In the Memorandum  for the Appeal Tribunal dated 31 August 2009 (“the Memorandum”), after setting out the background, the HA’s case in support of the issue of the NTQ was summarised as follows:

(1) The Wife provided fortune telling service for remuneration, which was in breach of the User Clause of the Tenancy Agreement prohibiting the Flat to be used for business purposes.   The termination of the tenancy was reasonable.

(2) The Housing Department must uphold the principle of fair distribution of public housing resources.  Public housing flats being misused should be re-entered and redistributed to families with greater need for housing. 

(3) The Housing Department could arrange Mr Wan and his family to live in a transit centre if they did not have a place to live as a result of the re-entry of the Flat.

19.The hearing of the Appeal was held before the Appeal Tribunal on 15 September 2009.  On the day before the hearing, Mr Wan wrote a letter to the Appeal Tribunal asking it to allow the Wife to speak at the hearing, as he only knew that many of the Wife’s Buddha worshipping friends had been visiting the Flat, but nothing else.  It would thus be more appropriate for the Wife to answer any questions from the Appeal Tribunal.

20.Both Mr Wan and the Wife eventually attended the hearing, and answered questions raised by the Appeal Tribunal.  

21.In gist, Mr Wan and the Wife’s case was that:

(1) The Wife had been helping people, neighbours and friends through fortune telling at the Flat, but she did not in fact charge for these services.  She had only asked them to donate HK$300 to charities.  The Wife provided to the Appeal Tribunal certain copies of the receipts of charitable donations said to be have been made by these friends and people who had sought her fortune telling services.

(2) However, it was only until recently that she would answer any such inquiries for services by saying that a charge of HK$300 would be made.  This was only done “on the face of it” as she wanted to reduce the number of people coming to seek her help.

(3) She knew nothing about the internet “advertisement” as she did not even know how to use computer.

(4) Mr Wan had been going to work as a construction site worker in the past three years. He said he only knew that the Wife had been helping people to solve problems.

22.As mentioned above, by a letter dated 18 September 2009, the Appeal Tribunal informed Mr Wan that, after careful consideration of his appeal, it had decided to confirm the NTQ.

23.In the notes of proceeding of the appeal (“the Notes of Proceeding”) dated 8 October 2009, the Appeal Tribunal is recorded to have found and concluded that (a) the Wife had been carrying on the fortune telling business at the Flat, and (b) Mr Wan knew and permitted the Wife to use the Flat for the fortune telling services business.

24.On 10 December 2009, Mr Wan applied for leave to apply for judicial review.   Leave was granted on 24 December 2009.

C.      This judicial review application

C1.    Amenability to judicial review

25.Before dealing with the substantive grounds in support of the judicial review, Mr Abraham Chan, counsel for the HA, raises the preliminary objection that the HA’s Decision is not amenable to judicial review. 

26.Mr Chan’s submissions are as follows.

27.In essence, the Court must decide whether the decision-making process involves not just some but sufficient public elements to render the decision essentially public in nature.  While the question of sufficiency is one of substance and ultimately a matter of fact and degree having regard to all the circumstances, important factors pointing against amenability include the fact that the authority's direct source of power is non-statutory or non- public, and the fact that the function exercised by the authority in reaching the impugned decision was of a commercial or managerial nature^[7].

28.In this case, it is (Mr Chan contends) plain that the HA's Decision was essentially a private law decision:

(1) While s. 19(1)(b) of the HO is mentioned in the NTQ, it is clear from  the accompanying letter of the HA dated 31 July 2009 that the decision was substantively based on the Tenancy Agreement.

(2) This is consistent with the proper interpretation of s. 19(1) of the HO.  The provision does not confer a general power to the HA to terminate its leases.  Rather, its clear purpose is to empower the HA to terminate such leases where it cannot otherwise do so contractually.  This is manifest from the word "[n]otwithstanding" at the beginning of s. 19(1), the provisions for termination without notice in certain specified situations (s19(1)(a) and (aa)), and the provision for termination at the general discretion of the HA by notice to quit as may be provided for in the lease or 1 month's notice to quit "whichever is greater" (s19(1)(b)).

(3) A contrary reading would render s. 19(1) redundant, since it would amount then to a statutory power to achieve what can already be effected contractually.

(4) Here, the HA had a clear contractual right to terminate the Tenancy Agreement. The Wife was found to have operated a business in the Flat, and, by virtue of the Deeming Clause, her acts were deemed to be the Applicant's own acts. Accordingly, there was a breach of the User Clause and the HA was entitled to terminate the lease.

(5) It follows that the HA in requiring the Applicant to quit the Flat was acting entirely within its private law contractual rights under the Tenancy Agreement and accordingly the statutory power under s19(1)(b) of the HO was not substantively engaged.

29.The HA was therefore (Mr Chan further says) in substance acting pursuant to its private law contractual powers qua landlord under the Tenancy Agreement, rather than by virtue of any special statutory powers accorded to it as a public body established under the HO.  The essential underpinning of the HA's decision was thus contractual and not statutory.

30.That the HA is itself a statutory body charged with certain public duties under the HO is wholly insufficient to render its decision in this case amenable to judicial review.

31.I am not convinced by Mr Chan’s submissions.

32.Similar arguments advanced by the HA have recently been considered in the case of Chan Chiu Wah v A Tribuanl of the Panel Appointed under section 7A(6), Housing Ordinance (Cap 283) and The Hong Kong Housing Authority^[8].  In that case, the HA’s decision to issue a notice to quit against the tenant for breach of the tenancy agreement and the appeal tribunal’s decision confirming the same were challenged by way of judicial review. 

33.In addressing and rejecting these arguments,  Poon J said at paras 13 to 20 of his Judgment as follows:

“13. Ms Tong, for the Authority, submitted that when the Authority issued the Notice to the applicant’s father, it was just exercising its contractual right qua landlord under Clause IV(2) of the Tenancy Agreement. It did not involve any public law element. The Authority’s decision is therefore not amenable to judicial review. Ms Tong’s submission is contrary to the weight of the authorities.

14. In Chan Yik Tung v Hong Kong Housing Authority [1989] 2 HKC 394, the Authority issued a notice to quit to a tenant who had acted in breach of the user clause of the tenancy agreement. The Tenancy Appeals Committee, who was then the body dealing with appeals arising from notices to quit, confirmed the notice. The tenant applied for judicial review against both decisions of the Authority and the Committee on the ground that they had taken into account an irrelevant consideration. A preliminary point arose as to whether section 19(3) and section 20(4) of the Ordinance had ousted the court’s supervisory jurisdiction. Liu J (as he then was) held that as the Authority and the Committee were exercising statutory powers and not merely a contractual right, the allegation would, if substantiated, constitute a jurisdictional error susceptible to judicial review. He said at p. 396F-I :

‘ This case is not simply concerned with an exercise of a contractual right by a statutory body. The notice to quit was served expressly under a section of the Housing Ordinance (Cap 283) with reference to cl 4(b) of the tenancy agreement. The section resorted to is s 19(1)(b) which reads as follows:

(1) Notwithstanding the terms thereof, the authority may terminate any lease—

(b) otherwise, by giving such notice to quit as may be provided for in the lease or 1 month’s notice to quit, whichever is the greater.

What is being sought to be reviewed is, therefore, an exercise of a statutory power by the Hong Kong Housing Authority and a further exercise of a statutory power by its appointed committee sitting in a tenancy appeal.’

15. Similarly in Lam Hei Ying v Hong Kong Housing Authority and Appeal Tribunal, HCAL2299/2000, unreported, 23 January 2001, Yeung J (as he then was) said :

‘There could be no doubt that the said flat had been used for illegal purpose and by the operation of the deeming provision under Clause IV(7), the applicant was clearly in breach of the Tenancy Agreement.

But the Notice to Quit was not served by HKHA in the exercise of its contractual right. The Notice to Quit was served under section 19(1)(b) of the Housing Ordinance by giving 1 month’s Notice to Quit.

Section 19(1) of the Housing Ordinance gives HKHA the discretion, notwithstanding the terms of the lease, to terminate the lease in appropriate circumstances. ...’

16. Similar views can be gathered from three other decisions of Yeung J. In Chan Ming Yan v Hong Kong Housing Authority and Appeal Tribunal, HCAL100/2000, unreported, 13 July 2000, the learned judge held that for the proper exercise of the discretion under section 19(1), each case must be considered on its own merits and decided as the public interest required at the time. His Lordship must have regarded the discretion under section 19(1) as a public law function. In Thai Muoi v The Hong Kong Housing Authority and Appeal Tribunal, HCAL155/1999, unreported, 30 May 2000, he rejected the Authority’s submission that its decision to issue a notice to quit was not open to judicial review because section 19(3) ousted the court’s jurisdiction. Then in Kwan Shung King v Housing Appeal Tribunal [2000] 2 HKLRD 764, he held that section 20(4) did not oust the court’s supervisory jurisdiction over the Tribunal’s decision. His Lordship must have been satisfied that both the Authority’s and the Tribunal’s decision fell within the public law domain when he considered the effect of the ouster provisions.

17. Indeed, that was previously the understanding of the Authority and the Tribunal as well. For in Lo Yuet Hing v Hong Kong Housing Authority and Appeal Tribunal, HCAL95/2002, unreported, 25 September 2002, they did not dispute that the Authority’s decision to issue a notice to quit and the Tribunal’s decision made in the consequential appeal were liable to be judicially reviewed.

18. Ms Tong said that the Authority now adopts a different stance because in none of the cases cited had the courts examined the nature of the decision to issue a notice to quit by the Authority, which she maintained, is entirely contractual in nature. I disagree. I think the courts had considered the nature of the Authority’s decision to issue a notice to quit under section 19(1) of the Ordinance and found that it was a public law function. In any event, Ms Tong’s submission is premised on the wrong footing that when the Authority issues a notice to quit, it is only exercising its contractual right under the tenancy agreement, when in fact it is invoking section 19(1)(b) of the Ordinance. The statutory discretion conferred upon the Authority by section 19(1) is properly engaged.

19. The Tribunal is specifically created by the Ordinance to deal with appeals arising from termination of tenancy by a notice to quit issued under section 19(1). Section 20 of the Ordinance confers a wide and unfettered discretion in determining the appeal: Kwok Koon Wor v Appeal Panel and Hong Kong Housing Authority, HCAL71/2000, unreported, 20 September 2000, per Yeung J at p. 7 of the judgment; Kwan Shung King, at p. 772I. It may confirm, amend, suspend or even cancel the notice : section 20(3). Plainly, the Tribunal is exercising a public law function under section 20.

20. I accordingly find that both decisions being impugned in the present case are liable to be judicially reviewed by the court.”

34.I respectfully fully adopt herein Poon J’s reasons in rejecting the HA’s submissions that the HA’s Decision to issue the NTQ is not amenable to judicial review.  

35.In addition, as accepted and acknowledged by Mr Chan in his written submissions^[9], the HA in managing the public housing estates via the tenancy agreements is discharging a public function to provide low cost housing to the needy sector of the public in Hong Kong.  In discharging its duties in managing these public housing estates, it is thus also concerned with, and conscious of, the fair and proper distribution and use of public resources.  As mentioned above, this is one of the considerations it had taken into account when considering whether or not to issue the NTQ.  It is therefore not, as submitted by Mr Chan, acting purely or predominantly as a private landlord.   There are clearly sufficient public elements underpinning the HA’s exercise of rights or discretion in enforcing the tenancy agreement whether under individual provisions or as a whole.

36.In my view, the HA’s Decision and the Appeal Decision are susceptible to judicial review.

37.I would now turn to consider the merits of the individual grounds relied on by Mr Wan in support of this judicial review.

C2.    The Grounds of Judicial Review

C2.1  Procedural impropriety

38.Mr Wan says the Decisions were procedurally irregular as the HA had failed to provide a certificate as required under s. 20(2A)(a) of the HO.

39.S. 20(2A)(a) of the HO states as follows:

“(2A) (a) Paragraph (b) shall apply in relation to any policy of the Authority which is stated and specified as being such in a certificate in writing issued for the purposes of this subsection by the Authority's secretary and as regards which the certificate also certifies that the policy was both considered and applied by the Authority when deciding to terminate the lease or, where appropriate, to issue the notice to quit to which the appeal relates.

(b) In considering an appeal under subsection (1)-

(i) if the tribunal concerned is satisfied that at the time of making the decision to which a certificate mentioned in paragraph (a) relates, the appellant was aware of the policy or could reasonably be expected to have been so aware, the tribunal shall have regard to such policy; and

(ii) if such tribunal is not so satisfied, it may, where it considers it appropriate so to do, have regard to such policy. (Added 24 of 1995 s. 7)”

40.Ms Leung for Mr Wan says:

(1) S. 20(2A)(a) of the HO requires the HA (a) to state and specify in a certificate in writing by the HA’s secretary of its policy, and (b) to certify in the said certificate that the policy was both considered and applied by the HA when deciding to terminate the lease or, where appropriate, to issue the NTQ to which the appeal relates.

(2) S. 20(2A)(b) of the HO stipulates that in considering an appeal, the Appeal Tribunal shall have regard to such policy if it is satisfied that the appellant was aware of the policy or could reasonably be expected to have been so aware.  If the Appeal Tribunal is not so satisfied, it may have regard to such policy where it considers it appropriate to do so.

(3) Since the HA has never issued any such certificate of stated policy in issuing the NTQ, both Decisions fall foul of s. 20(2A) of the HO.  The Decisions are therefore procedurally improper.

41.There is no merit in this ground.

42.I accept the HA’s submissions that:

(1) S. 20(2A) presupposes (and s.20(2A)(b) applies only where) there is some policy of the HA “which is stated and specified as being such in a certificate in writing…”   In other words, it only applies where and if the HA issues a notice to quit (and to terminate a lease) by reference to and by reason of applying a particular stated policy.  It does not itself mandate or require the HA to issue every notice to quit or terminate every lease (a) only by reference to and by applying a particular policy and (b) with the issue of a certificate of policy.  A fortiori, it does not mandate or require the HA to issue such a certificate if in issuing a notice to quit, the HA is not seeking to apply a particular policy of its.

(2) In the present case, the HA did not issue the NTQ by reference to or by applying any policy.   There is thus no question of there being the requirement for the HA to issue such a certificate.

(3) S. 20(2A) of the HO has no application to the Decisions, and there is no procedural impropriety in the making of them.

C2.2  The Decisions are tainted by errors of fact and law

43.It is well established in public law that where there is no evidence to support the material finding of facts relevant to the decision under challenge, it amounts to an error of fact and law, or that it renders the decision “irrational” or “perverse”.  The Court is entitled to intervene and quash such a decision.  See: Wade on Administrative Law (10^th ed), pp 229-232; de Smith’s Judicial Review (6^th ed), para 11-02. 

44.In the Memorandum submitted to the Appeal Tribunal, the HA stated that according to the PHRM Subsection’s report, Mr Wan “permitted” the Wife to use the Flat for business purpose in breach of the User Clause.

45.In dismissing Mr Wan’s appeal against the NTQ, the Appeal Tribunal stated part of its reasons at paragraph 12(e) of the Notes of Proceedings as follows:

“(e) The appellant's allegation [of no knowledge of the Wife’s acts] was also unbelievable, especially as he provided false information to the Housing Department regarding his income. Although this is not the issue of this hearing, it reflected that his honesty was in doubt. Due to his intimate marital relationship with Madam Tong, the interior settings of the Flat and the untrustworthiness of his allegation, the Tribunal opined that he knew and permitted his wife to use the Flat for fortune telling services business.”

46.Ms Leung for Mr Wan submits that material to both the HA’s Decision and the Appeal Decision is the finding that Mr Wan “did know and permit his wife to operate the business of fortune telling in the Flat”.

47.However, Ms Leung contends that there is no evidence to support this finding.  Her arguments run as follows:

(1) There is undisputed evidence that Mr Wan was not present in the Flat at any of the investigations conducted by the HA’s staff. They had also not made any inquiries with Mr Wan on the Wife’s operation of the fortune telling business. 

(2) At the same time, Mr Wan had by various written statements stated that he had no knowledge of the Wife’s operation of the fortune telling business. These statements had not been directly challenged or refuted by the HA and the Appeal Tribunal.  They had also not cross-examined Mr Wan directly on this issue.  They must therefore be bound by Mr Wan’s evidence of ignorance^[10].

(3) Further and in any event, the inference drawn by the Appeal Tribunal from the “intimate marital relationship” and “the setting of the Flat” was not reasonably capable of supporting the finding of Mr Wan’s knowledge and permission of the Wife’s operation of the fortune telling business at the Flat.   

48.I also reject this ground.

49.I do not find there is substance in the contention that the HA and the Appeal Tribunal are bound by Mr Wan’s assertion of lack of knowledge as he was not directly cross-examined on this issue.  The question I have to ask is whether the parties, including the Appeal Tribunal, were conscious and aware of the existence of a contended issue in the appeal as to Mr Wan’s knowledge of the Wife’s acts of operating a fortune telling business at the Flat. 

50.Looking the evidence before me in the entirety, I have no doubt that this constituted one of the two core issues before the Appeal Tribunal (the other one being whether the Wife had been in fact carrying on the business[11]) given:

(1) The stated HA’s position and conclusion in the Memorandum  (as quoted above) about Mr Wan’s permission of the Wife’s acts;

(2) Mr Wan’s repeated statements claiming on the other hand ignorance; and

(3) The Appeal Tribunal’s questioning of Mr Wan on matters relating to his claimed work schedules and general credibility^[12].

51.In these circumstances, it cannot be seriously suggested that Mr Wan’s claimed ignorance had not been or not been properly put under challenge and that the HA and the Appeal Tribunal were bound by Mr Wan’s evidence on this.

52.Once this constituted a live issue, in my view, the Appeal Tribunal was fully entitled to look at all the evidence of the case, including the intimate marital relationship between Mr Wan and the Wife and the physical setting of the Flat, to come to the finding that Mr Wan had knowledge of, and thus permitted, the Wife to operate the fortune telling business at the Flat.   Nor do I find this conclusion to be “irrational” or “perverse” in light of this evidence^[13].   This is fully within the Appeal Tribunal’s power and authority to weigh and assess the evidence before it, and something which the Court in its supervisory role under judicial review would not interfere. 

C2.3  Illegality and further procedural irregularity of the Decisions

53.Ms Leung says the HA’s Decision and the Appeal Decision are  also unlawful and procedurally irregular for the following reasons.

54.She submits that the Decisions are clearly premised upon the Deeming Clause, because it was the Wife, not Mr Wan, who had committed a breach of the User Clause.   In such a case, as a matter of law, before deciding to issue and confirm the NTQ:

(1) The HA and the Appeal Tribunal must inform Mr Wan their reliance on the Deeming Clause.

(2) The HA and the Appeal Tribunal should put the allegation of knowledge to Mr Wan and invite response from him with a view to ascertain if he had the knowledge of the Wife’s offending acts or if he could reasonably foresee the offending acts;

(3) The HA and the Appeal Tribunal should ask Mr Wan to provide particulars of the steps taken by him to prevent the offending acts.

55.However, the HA and the Appeal Tribunal have not stated or informed Mr Wan of their reliance on the Deeming Clause in considering his alleged breach of the User Clause and to respectively issue and confirm the NTQ.  In the circumstances, the HA and the Appeal Tribunal have also failed to do any of the above and the Decisions are (says Ms Leung) thus unlawful and irregular.  They should be quashed.

56.In support of her contentions for the legal propositions set out above, Ms Leung relies on the authorities of Chan Ming Yan v The Hong Kong Housing Authority (unrep., HCAL 100/2000, 13 July 2000, Yeung J) and Thai Muoi, supra.

57.To test whether Ms Leung’s above propositions do apply to the present case, one has to read these two cases in their proper context. 

58.In each of these cases, the tenant sought to review the HA’s decision to terminate the tenancy by reason of the act of a family member who had used the flat for an immoral or illegal purpose. In the subject tenancies, they respectively contained a clause (“the user and permitting clause”) whereby the tenant agreed “not to use or cause or permit the said flat to be used for any illegal or immoral purpose”.  They also contained a separate deeming clause which deemed the acts of family members to be that of the tenant.

59.In Thai Muoi, it was the express conclusion of the Court^[14]that the HA and the appeal tribunal respectively issued and confirmed the notice to quit on the basis of the user and permitting clause but not the deeming clause.   Yeung J then went on to say obiter[15] that, as the deeming clause related to the vicarious liability of the tenant for the wrongdoing of someone else, matters such as whether the tenant could have made any responses to the reliance on the deeming clause had it been relied upon and referred to “must have certain bearing on the way in which the HA and the appeal tribunal choose to exercise the discretion in deciding whether or not to issue or to conform the notice to quit.”  His Lordship then went to observe at page 21 as follows:

“ I wish to point out that if HKHA alleges that a tenant is in breach of clause 2(j) [the user and permission clause] of the tenancy agreement on the basis that the tenant has permitted the flat to be used for an illegal or immoral purpose, before issuing a Notice to Quit, HKHA should put the allegation to the tenant and invite response from the tenant with a view to ascertain if the tenant has knowledge of the offending act or if he could reasonably foresee the offending act.

The tenant should also be asked to provide particulars of the steps taken by him to prevent the offending act.

HKHA must be satisfied either the tenant has knowledge of the offending act or can at least foresee it and has taken no reasonable steps to prevent it before a Notice to Quit can be issued for breach of the tenancy agreement.

If clause 4(g) [the deeming clause] is relied on, it must also be clearly stated.”

60.In Chan Ming Yan, the HA did not state in the notice to quit that it was relying on the deeming clause.  The appeal tribunal in its decision found that the tenant knew and had permitted his son to traffic drugs in the flat and thus was in breach of the user and permitting clause.  It however went on to hold that even if the tenant did not know about the son’s offending acts, he would still have been in breach of user and permitting clause by reason of the deeming clause as the son’s acts would have been deemed to be his own defaulting acts.

61.In the judicial review before Yeung J, the tenant challenged that it was not open to the appeal tribunal to rely on the deeming clause as it was never stated to the tenant that the clause would be relied upon.  Counsel for the respondents in reply submitted that once the HA found out that a flat had been used for an unlawful purpose, it would as a matter of policy issue the notice to quit and it was for the appeal tribunal to find out if it was the tenant who used, caused or permitted the flat to be so used and thus in breach of the user and permitting clause, or whether the tenant was liable because of the deeming clause.

62.In dealing with the respondents’ said submissions, Yeung J said at pp 8 to 10 as follows:

“ In the NTQ, it was not stated that the Applicant was in breach of clause 2(j) [the user and permitting clause] because of clause 4(g) [the deeming clause]. In fact, Mr Chan on behalf of HKHA quite frankly admits that HKHA is not concerned with whether clause 2(j) was breached due to act, neglect or default of the tenant himself or whether the tenant was liable under clause 4(g) due to the act, neglect or default of his family members.

Mr Chan says once it is found that the flat has been used for an unlawful purpose, HKHA will issue NTQ and it is for the Tribunal to find out if it is the tenant who uses, causes or permits the flat to be used for an illegal purpose or whether the tenant is liable because of the deeming provision under clause 4(g). The suggestion is that HKHA lacks the means to investigate to find out the true picture.

Mr Chan further suggests that as in any landlord and tenant cases, the form of a notice to quit is immaterial provide that it indicates, in substance and with reasonable clearness and certainty the intention of the person giving it to determine the existing tenancy at a certain time.

In any event, the failure on the part of the HKHA to specify the exact reason for serving the NTQ on the Applicant had resulted in no injustice or unfairness as the Applicant could not have said more than what he had already said in seeking to persuade HKHA to withdraw the NTQ.

In this judicial review proceeding, my duty is not just to decide the validity or otherwise of the NTQ. I also have to decide if there is any procedural irregularity and whether the decisions to issue and confirm the NTQ are reasonable ones.

As I have observed in Thai Muoi’s case (supra), if clause 2(j) per se is relied on, we are concerned with the wrongdoings committed by the tenant himself whereas clause 4(g) relates to the vicarious liability of the tenant for the wrongdoings of someone else. There is a legitimate expectation that HKHA will deal with the different situation in a different manner.

It is therefore important for the HKHA to decide and to indicate if the NTQ was issued because it was alleged that the tenant was himself in breach of clause 2(j) or whether he was liable by reason of clause 4(g).

It is not open, in my view for the HKHA to take the position that as a matter of policy, once the flat has been used for an illegal purpose, a NTQ will be issued whether the tenant is himself in breach of the tenancy agreement or whether he is liable only by reason of clause 4(g).

The NTQ was issued under section 19(1) of the Housing Ordinance which gives the HKHA discretion to terminate a lease. It is a fundamental rule for the proper exercise of discretion that each case must be considered on its own merits and decided as the public interest requires at the time.

If an authority blindly adheres to a policy laid down in advance without applying its mind to the special circumstances of an individual case, it is not exercising its discretion lawfully. (Bromley L.B.C. v. Greater London Council [1983] 768, per Lords Diplock and Brandon).

It is not open for the HKHA to take the stance as it did that an unlawful use of the flat would invariably lead to the issue of a NTQ even when the tenant himself had done no wrong. Such a decision could well be Wednesbury unreasonable.

In my view, a decision to issue a NTQ on the basis that the tenant is in breach of clause 2(j) by reason of clause 4(g) is more susceptible to a judicial review on the basis that the decision is Wednesbury unreasonable. It is therefore imperative for the HKHA to state in the NTQ if clause 4(g) is being relied on.

I am not persuaded that I was wrong when I ruled in Thai Muoi (supra) that ‘if clause 4(g) is relied on, it must also be clearly stated’ in the NTQ.”

63.His Lordship then went to rule that (a) the appeal tribunal’s conclusion that the tenant must be aware of the son’s illegal acts was “highly questionable”, and (b) even if the tribunal was entitled to reach that conclusion, there was procedural irregularity as the tribunal was not provided with a section 20(2A) certificate of the above-mentioned policy by the Secretary for Housing and, in breach of s. 20(2A)(b)(i) of the HO, there was no evidence to show that the tenant was aware of the policy or could reasonably be expected to have been so aware.   It was therefore wrong for the tribunal to have had regard to this policy.

64.These two cases were therefore decided in the following material context:

(1) There existed in the tenancy agreements the user and permitting clause, where the tenant would himself still be held liable for breach in “causing or permitting” other family members to use the flat unlawfully.

(2) The HA and the tribunal found primarily that the tenants were in breach of the user and permitting clause without reference to or reliance on the deeming clause.

(3) It is only in Chan Ming Yan, where the tribunal further held alternatively that by reason of the deeming clause, the tenant would have also been held liable.

65.In my view, it was under these contexts and the circumstances of these cases that Yeung J held that it would have been incorrect procedurally, and injustice would have been caused to the tenant, if the HA or the appeal tribunal was to rely on the deeming clause, which imposed a vicarious liability as contrast to direct liability on the tenant, without stating it clearly to the tenant. Because by referring in the communication and the notice to quit only to the user and permitting clause, without reference to the deeming clause, the tenant would only be focusing on meeting the case under the permitting clause, and could not have prepared himself to answer a case under the deeming clause (which may require a different test).

66.This, in my view, is quite different from the present case:

(1) In the present Tenancy Agreement, there is no permitting clause within the User Clause.  Under the User Clause, Mr Wan is only in breach and liable if he is himself using the Flat for purposes other than as a residence for him and his family members. 

(2) It is also clear in the present case that Mr Wan was fully aware of the fact that the HA was not alleging that it was he himself who had been using the Flat for business purpose.  He knew full well that the HA was saying that it was the Wife who had been using it for her fortune telling business.

(3) In the circumstances, it must be clear to Mr Wan that the HA and the Appeal Tribunal must have been relying on the Deeming Clause to say that he was in breach of the User Clause.  His understanding of this is underlined by:

(a) His own repeated insistence that he knew nothing about the Wife’s said offending acts.

(b) His own case in the present application that the reliance on the Deeming Clause was obvious and plain^[16].

67.As such, I do not find there is any material procedural irregularity by reason of the HA and the Appeal Tribunal’s failure to state and refer to the Deeming Clause, since it must have been objectively plain and clear to Mr Wan that the clause was relied upon to consider whether he himself was in breach of the User Clause and to issue the NTQ. 

68.Given this conclusion, I also do not find any merits in the complaint that the Decisions are irregular or unlawful as Mr Wan was not put to the questions of (a) whether he had any knowledge of the Wife’s offending acts, and (b) whether he had taken any steps to prevent the offending acts:

(1) It had all along been Mr Wan’s case that he had no knowledge of the Wife’s offending acts.  There is thus no question for the HA or Appeal Tribunal to have to expressly or directly ask Mr Wan whether he had any knowledge of the Wife’s acts.

(2) As I concluded in the above section, it was open to and not irrational for the Appeal Tribunal to reject Mr Wan’s evidence and find that Mr Wan had knowledge about the Wife’s operation of the fortune telling business in the Flat. 

(3) In the circumstances, there is also no question of requiring the HA and the Appeal Tribunal to have to ask Mr Wan whether he had taken any reasonable steps to prevent the Wife from carrying on the fortune telling business in the Flat.   In my view, once it was Mr Wan’s own case that he had no knowledge of the Wife’s offending acts, the burden was on him to say that he had taken reasonable steps to prevent the Wife from doing any offending acts if this was also his case.  It is not for the HA or the Appeal Tribunal to formulate a case for him, and to discharge any initial burden to ask Mr Wan whether, although claiming no knowledge of the Wife’s acts, he had in any event taken any steps to prevent that from happening.  If Mr Wan had already had knowledge of the Wife’s offending acts (as found by the Appeal Tribunal), it was really up to him to satisfy the Appeal Tribunal what possible reasonable and effective steps he had since then taken to stop her from carrying on these acts (which steps had somehow failed).  It must be borne in mind that these acts had continued until discovered by the HA.

69.In the course of arguments, Mr Chan for the HA contends that the Deeming Clause by proper construction is an irrebutable one, and thus Mr Wan’s knowledge of the Wife’s acts is simply irrelevant.   Ms Leung for Mr Wan understandably submits otherwise.

70.For the present purpose, I do not find it necessary for me to decide on these contended constructions of the Deeming Clause because:

(1) Even if the Deeming Clause is an irrebutable one (which I express no views at this stage), it is still within the discretion of the HA (and to that extent the Appeal Tribunal) to decide whether or not the circumstances of a particular case justify the issue of the notice to quit.

(2) It is common ground that in the present case, the HA and the Appeal Tribunal had taken into account of the knowledge of Mr Wan as a factor to decide whether or not to terminate the Tenancy Agreement.  This is a relevant factor that they were entitled to look at.

(3) Thus, whether or not the Deeming Clause is an irrebuttable one has no bearing on the said exercise of discretion by the HA and the Appeal Tribunal. 

71.Insofar as this factor of knowledge is concerned, I have already concluded above that it is open to the HA and the Appeal Tribunal to have found that Mr Wan had knowledge of the Wife’s acts, and that their Decisions are not irrational or unreasonable in the public law sense.

72.For all these reasons, I reject the 3^rd ground of judicial review.

C2.4  The Appeal Decision is illegal as the Appeal Tribunal took into account of anirrelevant consideration

73.Paragraphs 9 to 11 of the Notes of Proceedings state as follows:

“9. The Appellant Mr. Wan Yung Sang told the Tribunal that he works in the construction industry with an average monthly income of ten to twenty thousand dollars. He was once unemployed four or five years ago but was working in the past three years, though sometimes he was underemployed. He said that his wife Madam Tong Cheung Mei was a housewife and had to take care of his 90-year-old mother who held a two-way permit; their eldest daughter was studying in Australia with her godmother paying for the expenses. He said he knew his wife had been helping people solve problems.

10. The representatives of the Housing Department stated that according to the information submitted by the Appellant to the Housing Department in 2008, the appellant claimed that he received no income from 1st April 2007 to 31st April 2008. Daily expenses were paid out of savings.

11. The Chairman asked the appellant why he gave false information to the Housing Department and reminded him that he needed to file a tax return for his work in the construction industry and it is unlawful not to do so.  The appellant replied that he was really unemployed for a period of time but he may have mistaken the years.  He also said he did not know how to file a tax return.”

74.In reaching its conclusions for the Appeal, the Appeal Tribunal stated at paragraph 12(e) of the Notes of Proceedings that:

“(e) The appellant's allegation was also unbelievable, especially as he provided false information to the Housing Department regarding his income. Although this is not the issue of this hearing, it reflected that his honesty was in doubt. Due to his intimate marital relationship with Madam Tong, the interior settings of the Flat and the untrustworthiness of his allegation, the Tribunal opined that he knew and permitted his wife to use the Flat for fortune telling services business. Thus, when the Appeal Tribunal decided whether to accept Mr Wan’s evidence of lack of knowledge of the Wife’s offending acts, it took into account of what it described as Mr Wan’s provision of false information to the Housing Department concerning his income in assessing his general credibility.”

75.Thus, when the Appeal Tribunal decided whether to accept Mr Wan’s evidence of lack of knowledge of the Wife’s offending acts, it looked into the general credibility of Mr Wan, and for that purpose, it took into account of what it described as Mr Wan’s provision of false income information to the Housing Department.

76.Ms Leung for Mr Wan now says there was no connection or relevance between the alleged false declaration of income in 2007-2008 and the specific issue of Mr Wan’s credibility on his knowledge as to the Wife’s offending acts.  This was therefore an irrelevant factor, which the Appeal Tribunal should and could not have taken into account.  In taking this irrelevant factor (i.e, Mr Wan’s provision of false information of his income) into account, the Appeal Tribunal had erred in law and the Appeal Decision is thus unlawful[17].

77.I do not agree.

78.It is correct there is no direct connection[18] between the question of Mr Wan’s lack of knowledge of the Wife’s offending activities and his provision of false information to the Housing Department.  However, I do not accept that the Appeal Tribunal was not entitled to assess Mr Wan’s general reliability (thus “honesty” as stated in the conclusion of the Notes of Proceeding) in assessing the credibility of his allegation of lack of knowledge.  And in so assessing the general reliability of Mr Wan, it was open to the Appeal Tribunal to look at all aspects of Mr Wan’s evidence.

79.I therefore do not accept that this was an irrelevant factor which the Appeal Tribunal should not have taken into account in reaching the Appeal Decision.

80.I would similarly dismiss this ground of the judicial review.

D. Conclusion

81.I do not accept any of the grounds advanced to support the judicial review against the HA’s Decision and the Appeal Decision.  I would dismiss this application.

82.There are no reasons why costs should not follow the event.  I will further make an order nisi that costs of this application be to the 1^st and 2^nd Respondents to be taxed if not agreed.  This order shall become absolute 14 days from today unless any of the parties applies by Summons to vary it.

Ms. Jocelyn S.L. LEUNG, instructed by Messrs Tang, Wong & Chow, for the Applicant.

Mr. Abraham CHAN, instructed by Messrs Li, Kwok & Law,   for the 1^st Respondent.

The 2^nd Respondent, represented by Messrs Lo & Lo, excused from attendance.

Please refer to CACV145/2011 for the relevant appeal(s) to the Court of Appeal.