Mody Holdings Ltd v. Sylvia Seto
Read the full judgment text of CACV 14/1978 on BabelCite. This Court of Appeal judgment was delivered on 12 March 1979.
1. This is an appeal from a decision of the High Court granting the plaintiff possession of certain premises at 140-142 Austin Road, Kowloon, and dismissing the counterclaim of the defendants.
Cited by 1 case
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CACV000014/1978
Coram: Briggs, C.J., Huggins & Pickering, JJ.A. Date of Judgment: 12 March 1979 ----------------- JUDGMENT ----------------- 1. This is an appeal from a decision of the High Court granting the plaintiff possession of certain premises at 140-142 Austin Road, Kowloon, and dismissing the counterclaim of the defendants. 2. The plaintiff is the registered owner of the premises in question, and by an indenture dated May 19th, 1969, agreed to sub-lease the premises to the defendants for a period of seven years commencing on September 15th, 1969. That lease expired on September 14th, 1976. 3. On May 20th, 1969, the parties entered into a deed of covenant which, inter alia, expressed "the wish of the parties" to the deed that the premises should be let by the plaintiff to the defendants for a total period of fifteen years, commencing on the same date as the lease for seven years. 4. The plaintiff's case is that the lease was for seven years and seven years only. The defendants' case is that it is a lease for fifteen years, that the covenant, when considered in the light of the circumstances existing at the time had the effect of a grant of a further period of eight years from the date of the termination of the seven years' lease. 5. This is the central issue in this appeal. And I have no hesitation in saying that I think that the judge was right when he held that the covenant did not create a lease nor give the defendants an option for a new lease. 6. It is common ground that the plaintiff leased the premises from the Crown, a lease described as a "regrant from the Crown". The term of the regrant was the residue of the term of 150 years from December 25th, 1893, commencing on November 14th, 1962 and the agreement provides for the payment by the plaintiff of a premium of $707,952 payable by 21 annual instalments of $74,308 to the Government. 7. A special condition contained in the regrant prohibits the plaintiff from subletting the premises for more than a term of seven years unless the whole premium is paid to the Crown. In the event of the plaintiff subletting for a period of more than seven years the whole of the balance of the premium then unpaid with interest becomes payable to the Crown. 8. The relevant part of this special condition reads as follows - the 'grantee' being, of course, the plaintiff:-
9. The deed of covenant recites the fact that "the covenantor" i.e. the plaintiff, holds the premises "under certain conditions of Regrant No. 7681" which is the number of the regrant of the premises to the plaintiff, part of which is quoted above. It also recites that those conditions prohibit the plaintiff from sub-letting the premises for a period of more than seven years unless the premium has been paid to the Government. It also recites the granting of the lease for seven years by the plaintiff to the defendants. The deed of covenant then states:-
10. It is suggested that the words of this deed and the surrounding circumstances can be treated as an intention to grant a lease for a term of 15 years. 11. This deed must be construed according to the ordinary meaning of the terms in which it is expressed. It is obvious that the parties wished or wanted to have a lease of fifteen years and not a mere seven years. But the provisions of the regrant as to the payment of the premium to the Government stood in their way. And it is common ground that the plaintiff either could not or did not wish to pay the balance of the premium remaining unpaid to the Government. 12. The parties, in my view, did not intend to create a fifteen year lease nor an option for a lease of eight years after the expiry of the seven years' lease already granted. This could have brought into operation the terms of the regrant and that was a situation the parties did not have in contemplation for it would have entitled the Crown to re-enter the premises. 13. I agree with the trial judge that the true interpretation of the deed of covenant is that the plaintiff covenanted that if she decides to grant a lease she must give the defendants the first option. Of course, as the judge remarked, if the defendants accept such an offer the whole of the outstanding amount of the premium became payable to the Government. But the plaintiff is not obliged to make an offer and certainly there is nothing in the deed to compel her to do so. It expresses the 'wish' of the parties, but it carefully refrains from referring to their intentions: and for obvious reasons, reasons apparent from the wording of the deed itself, and which are referred to above. 14. I will now deal with the other half of this appeal. The plaintiff issued the writ in the action on September 1st, 1976. She claimed possession of the premises on the ground that the defendants were in breach of the covenant to maintain the premises in good repair, and that the rent was in arrears under the terms of the lease. 15. I only intend to deal with the first point. The judge found that the defendants were in arrears with the rent and gave that as one reason why he found for the plaintiff. We heard argument on the point but as I have reached the conclusion that the plaintiff must succeed on the first point, namely, that the defendants were in breach of the covenant to keep in "repair", it is unnecessary to decide the second point. 16. By 1971, shortly after the grant of the seven years' lease, the defendants converted the premises from a school to an hotel. This entailed considerable alterations to the interior of the buildings. There were also alterations to the exterior. Some of the alterations were effected without the prior permission of the Building Authority and in that sense were illegally done, though it was in evidence that by 1977 the Building Authority did not intend to take any action under the powers conferred upon them by the Building Ordinance. 17. The judge held that these alterations were in breach of the covenant to repair contained in the lease. This reads as follows:-
18. A further covenant was also relied upon which reads thus:-
19. Counsel for the plaintiff relied upon rule 72 as stated at p.229 of Hill and Redman's Law of Landlord and Tenant (16th Ed.) which reads as follows:-
There is no question here of an express authorisation. There was evidence that the original lessee acquired the premises in order to sub-let them. It was only later that a decision was made to convert the premises into an hotel. There was no finding by the judge that the parties agreed before the lease was signed or at the signing thereof that there would be such a conversion. 20. Mr. Rattee for the defendants stressed the point that the alterations, if not illegal, were not made in conformity with the Buildings Ordinance. It cannot therefore be said that the plaintiff impliedly agreed to their being done. It is not competent for a private person to allow another to ignore the provisions of an Ordinance passed for the benefit of the public. In short, the landlord cannot consent to a tenant carrying out an infringement of the law. 21. The principle was stated by Goddard, L.J. succinctly in the case of Bowmaker Limited v. Tabor(1) thus:-
22. It was objected by Mr. Bernacchi, who appeared for the defendants that it was not proved that the alterations were unauthorised or illegal. There was put in evidence as an agreed document a notice under section 24(1) of the Buildings Ordinance, signed on behalf of the Building Authority which clearly indicates that certain alterations had been made to the premises which were unauthorised and requiring certain remedial work to be done, including some demolition and some "reinstatement". This is prima facie evidence that the alterations were unauthorised. 23. No evidence was called to rebut it and the notice itself was not challenged. There was also further evidence concerning alterations other than those mentioned in the notice which was not challenged either. In effect, there was evidence before the judge from which he could rightly conclude that the alterations were unauthorised as contrary to the provisions of the Buildings Ordinance. But, it was argued, the plaintiff cannot rely upon the breach of covenant to repair because she has waived her right by the acceptance of rent and that for a very long period of time, some five years. 24. The evidence of the plaintiff is that the Building Authority sent the notice under the Ordinance to the plaintiff, the landlord, in 1971. She thought this was none of her business and sent it to the defendants who were then in possession. Thereafter, she presumed that they had complied with the notice. And she accepted the rent as and when it was paid. In 1977, she received a letter from the defendant claiming a new lease under the provisions of the deed of covenant. So she went and inspected the premises and found that the alterations had not been dealt with according to the notice of 1971. 25. The breach of the covenant to repair is a continuing breach (see Doe on the demise of Vickery v. Jackson(2)) and the receipt of the rent will only act as a waiver of the breach up to and until the rent is accepted. 26. The authority for this proposition will be found in the judgment of Rowlatt, J. in the case of New River Company v. Crumpton(3), which reads as follows:-
27. The last date on which the plaintiff in the present appeal accepted rent was March 14th, 1976. The breach of the covenant to repair was waived until that date but not thereafter. And the notice of the Building Authority has not been complied with. I think the judge was right therefore when he found as a fact that the defendants were in breach of the covenant to repair. 28. In his judgment, the judge uses phrases which clearly indicate that though he found that the defendant was in breach not only of the covenant to keep in repair but also that he was in arrears of rent, it was a case when relief against forfeiture should be given. Indeed, the judgment clearly states that "the defendant was entitled to be relieved from forfeiture" and, later, it reads "I granted the defendant relief against the forfeiture." 29. The date of the writ was September 1st, 1976, when the lease for seven years had some fourteen days to run. By the time judgment was delivered the lease had expired. The judge therefore made no order for relief against forfeiture for obvious reasons. The lease had terminated by the effluxion of time. Further, the judge had held that the deed of covenant did not grant a new lease or an option for a new lease. The plaintiff was therefore entitled to possession. It is common-sense that there could be no order for relief against forfeiture. The judge must have realised that when drawing up the order which, as I have said, contains no reference to such relief. 30. Having found that the plaintiff was entitled to possession, the judge dismissed the counterclaim which prayed for a declaration that the defendant was entitled to remain in possession of the premises and for specific performance of the deed of covenant. 31. In view of the judge's findings that the lease had expired and that there was no right to a new lease under the deed of covenant this was inevitable. 32. The appeal must be dismissed with costs.
Representation: Bernacchi, Q.C. & P. Woo (H.H. Lau & Co.) for appellant. Rattee, Q.C. & R. Wei (Philip K.H. Wong & Co.) for respondent. (1) (1941) 2 K.B. 6. (2) 2 STARK 294. (3) (1917) 1 K.B. 762 at p.765.
----------------- Coram: Briggs, C.J., Huggins and Pickering, JJ.A. Date of Judgment: 12th March 1979. ----------------- JUDGMENT ----------------- Huggins, J.A.: 33. The reasons given by the trial judge, when read in isolation from the formal judgment, were open to misunderstanding. In relation to the covenant to pay rent he found that there had been a breach and said "I granted the defendant relief against the forfeiture". He further found that the appellant tenant was in breach of the covenant to keep the building in repair and held "that the defendant was entitled to be relieved from forfeiture if it obtained the consent of the Building Authority for what had been done, or made such alterations as the Building Authority might demand". However, at the end of his reasons the judge said: "The plaintiff therefore succeeds on the claim and counterclaim". Thus there was an apparent discrepancy, a grant of relief being inconsistent with the dismissal of the counterclaim. When one turns to the formal judgment, one finds confirmation of an intention to give the Plaintiff possession and to dismiss the counterclaim. No application has been made for amendment of this formal judgment. How, then, are the judge's reasons to be construed? He did not set out in full the steps by which he reached his conclusion, but I have no doubt as to what he meant: he found that there were breaches of covenant, that there were grounds upon which relief could be granted but that, in the circumstances of this case, he exercised his discretion against granting equitable relief. He so exercised his discretion because the lease had expired and to grant relief would be an exercise in futility. 34. The Defendant contended that the Deed of Covenant dated 20th May 1969 should be construed as a representation that the tenancy granted to it was for a term of fifteen years and not merely one of seven years, or that a further term of eight years would be granted upon the expiry of a seven-year term. The argument was based upon the obvious intention of the parties to avoid the forfeiture of the Head Lease which might result if there were a sub-lease, or an agreement for a sub-lease, for a term in excess of seven years unless the outstanding balance of a premium were first paid. I am not persuaded that this was to be achieved by misleading the head lessor (the Crown) as to the length of the term granted or agreed to be granted. The recital of the parties' "wish" to have a tenancy for a total period of fifteen years suggests the contrary: it was a recognition that they could not safely contract for that period. The deposit of the Deed of Head Lease for a period of nine years was a device to encourage the Plaintiff to negotiate a new tenancy at the expiration of the first term. Such new tenancy would itself have to be restricted to a term of seven years and if it were negotiated immediately it would still have expired less than fifteen years from the commencement of the first. However, the deposit of the Head Lease gave the Defendant protection against the Plaintiff's assigning the head tenancy in addition to the protection afforded by the covenant not to let the property to any other person for fifteen years from the commencement of the first tenancy. It was clearly expected that a second seven-year term would have been granted to the Defendant before the deposit ended. However, it was agreed that if the Defendant decided it did not want to "renew" the tenancy agreement - which clearly implies (i) that the first agreement was limited to the seven years and (ii) that there was no binding agreement to renew the tenancy - the Deed of Covenant was to be null and void. Thereupon the deposit of the Deed of Head Lease would automatically come to an end. I see no ambiguity in either the Lease or the Deed of Covenant which requires to be resolved in favour of the tenant, nor can the rule against derogating from a grant have any bearing upon the construction of the grant itself. 35. If, as I would hold, there was neither a lease for fifteen years nor a binding agreement to grant a further tenancy upon the expiry of the term of seven years, I do not see how there could be a representation or warranty that the Defendant would in fact be entitled to the remainder of the term of fifteen years". There was no term of fifteen years and the judge rejected the suggestion that the Plaintiff was bound to recognize the Defendant as a tenant after 14th September 1976. I think he was right. 36. Next it was submitted that the judge was wrong in holding that there had been breaches of covenant. In relation to the rent reliance is placed upon the tender made on 25th August 1976 of the rent due for the period from 15th March 1976 to 14th September 1976, i.e. up to the end of the seven-year term. Mr. Bernacchi argues that on the date of the alleged forfeiture (1st September 1976) there was no rent in arrear and, of course, that is true: Bird v Hildage 1947 2 All E.R. 7 and Churn v To Sau Girls' School (1948) 32 H.K.L.R. 70. In those cases the right to possession depended upon the rent's being in arrear at the date of action brought. The question we have to decide is whether the terms of the agreement between the present parties similarly required that the rent should still be in arrear at the date of the forfeiture or whether the right to forfeiture arose once and for all at the expiration of the fifteen days. The proviso reads:
As I understand it, there are two arguments in favour of the contention that the right of re-entry did not depend upon the existence of arrears at the date of the re-entry. First, reliance is placed upon the words "if and whenever". Those words merely indicate that the right of re-entry existed at any moment of time when the condition was fulfilled (see Shepherd v Berger 1891 1 Q.B. 597) and the question is whether this condition was fulfilled on the date when the writ was issued. Then it is argued that, as the condition was "the happening of ... such event" and as the "event" intended must have been that the rent was in arrear at the moment when the fifteen days expired, a subsequent tender could not destroy the right, although an acceptance of the tender would, of course, constitute a waiver. The learned judge does not mention the alleged tender, but it is not in dispute that a tender was made of all the outstanding rent by a letter dated 24th August 1976. If the verb in the condition had been "shall have been", that argument might have had greater force. As it is, the verb was "shall be". It is submitted by Mr. Rattee that the tense of the verb is not sufficient to counteract the reference to an "event", but I think that it at least introduces a measure of ambiguity, and that is sufficient to require us to construe the agreement in favour of the tenant. Accordingly, although at one time I inclined to the opposite view, I would hold that there was no right to forfeiture for non-payment of the rent. 37. There can, I think, be no doubt there was a breach of the covenant to keep the building in repair. That alterations were made to the building was not disputed and in the absence of consent (express or implied) to their being made it must follow that the Defendant was in breach of the covenant: Doe d. Vickery v Jackson (1817) 2 Stark. 294. The Defendant does not allege an express consent but contends that there was an implied consent. The Plaintiff would concede that there was implied consent to make such alterations as were necessary to convert the premises from a school to a hotel provided that the making of those alterations did not involve any illegality, but she persuaded the judge that what was done was not lawfully done because it was without the approval of the Building Authority, as required by s. 14 of the Buildings Ordinance. As I understand it, the Plaintiff never admitted that the alterations were necessary for the conversion of the building into a hotel and the illegality of the alterations was not denied in the pleadings. The judge made no finding as to the necessity for these alterations: the basis of his decision was that the alterations had been carried out without consent. It was upon the question of illegality that the case was argued before us and the burden must be on the Defendant to show that a valid consent has been given. Mr. Bernacchi submits that failure to obtain approval, a failure which was not in dispute, did not prevent the implication of consent. Mr. Rattee, on the other hand, points to the fact that, the works having been carried out, the failure to obtain approval led to the service of notice by the Building Authority on the Plaintiff to restore the premises to their former state. It cannot be right, he says, that there should be implied in favour of the Defendant a consent which might lead to that result. In other words, he would argue that any consent which can properly be implied is a consent which is conditional upon the obtaining of any necessary approval. To that Mr. Bernacchi replies that there is no evidence that any approval was necessary, because s. 41(3) excepts works which do not involve the structure and he says there is no evidence that the structure was involved. The very first item in the notice under s. 24(1) related to the reinstatement of "fire resisting doors and walls". Whatever may be the status of the other works, the removal of a fire resisting wall must, I think, clearly be a structural alteration. The fact that the Building Authority has since decided to take no action upon the notice is immaterial. Accordingly the judge was justified in finding that there had been a breach of the covenant to keep in repair. 38. Then it is said that the breach of the covenant to keep in repair was waived by acceptance of rent. In the first place it was submitted that that breach was a non-continuing breach, so that an acceptance of rent with knowledge of it would be a final waiver. In my opinion the breach was a continuing breach, which would be waived only up to the date on which the rent was accepted. Reliance was placed on Guillemard v Silverthorne (1908) 99 L.T. 584 where, notice to repair having been given under s. 14 of the Conveyancing and Law of Property Act 1881, rent was received by the lessors on three successive quarter days and it was held that that constituted a waiver of the forfeiture. It was not disputed that some repairs had been done and on that basis it was held that a fresh notice was required before there could be a forfeiture. As it seems to me the vital facts in that case were that a notice was required and that by reason of the time which had elapsed since the first notice and of the carrying out of some of the works specified in that notice it was no longer permissible to infer that the condition of repair in which the premises were at the two periods was substantially the same. It was on that basis that Penton v Barnett 1898 1 Q.B. 276 was distinguished and it was a source of distinction which was questioned by Rowlatt, J. in New River Co. v Crumpton 1917 1 K.B. 762. In our case no notice was required and it was common ground that none of the works had been done. Although Penton v Barnett was also a case where notice was required, it is good authority for the proposition that the acceptance of rent is not a waiver of a continuing breach beyond the date of payment and, in the absence of other circumstances supporting the inference that the covenant has been waived, I do not see that it matters how many times a breach of a covenant to keep in repair is waived. At one stage I thought it was being argued that the covenant itself had been waived or released and that the Plaintiff was estopped from enforcing it, but Mr. Bernacchi expressly disclaimed any such contention and confined himself to alleging that there had been a final waiver of these particular breaches of covenant. 39. Of course all this is beside the point unless the acceptance of rent was with full knowledge of facts which would give rise to a forfeiture. The Plaintiff's contention as to that is that, although she was aware in October 1970 that the alterations had been done and became aware in March 1971 that they had been done without approval, she assumed that, as she had sent the notice to the Defendant and heard nothing more, the Defendant had taken steps to obtain the necessary approval ex post facto. For my part I think that once she was apprised of the default in obtaining consent the burden was on her to satisfy herself that consent had been given before she accepted rent. Therefore I think there was a waiver on each occasion that the rent was accepted, but that the breach continued thereafter and was available to the Plaintiff on 1st September 1976. The fact that the last month's rent was payable in advance does not alter the situation. 40. The position was, therefore, that at law the Plaintiff was entitled to an order for possession. I agree with the judge that prima facie this was eminently a case for granting relief. It was only the expiry of the lease which led him to dismiss the counterclaim and Mr. Bernacchi has argued that that was not sufficient ground upon which to refuse relief. Mr. Rattee submits that there could be no entitlement to relief, that it was a discretionary remedy and that as the lease had already expired at the date of the counterclaim it was pointless to grant relief. To this Mr. Bernacchi replies that the counterclaim dates back to that of the writ, so that the lawfulness of the Defendant's possession between 1st September and 14th September 1976 was in issue. I agree that relief, if granted, would have taken effect on the date of the writ. It follows that the lawfulness or otherwise of the Defendant's possession would affect the question whether the Defendant should pay rent or mesne profits for its possession during the last fourteen days of the term. I further agree that it is contrary to the universal practice to allow an amendment to raise a cause of action which would not exist at the date of the writ: Eshelby v Federated European Bank Ltd. 1932 1 K.B. 254 and 429. However, counsel were unable to suggest to me any practical advantage which might result to the Defendant if relief were given - other than its enabling it now to remain in possession unlawfully until fresh proceedings were brought. That, as it seems to me, would be to lend the aid of Equity to produce injustice rather than justice. Certainly I am not prepared to hold that the learned judge was wrong to exercise his discretion as he did. 41. I agree that the appeal should be dismissed. 12th March 1979. Representation:
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----------------- Coram: Briggs, C.J., Huggins & Pickering, JJ.A. Date of Judgment: 12th March, 1979. ----------------- JUDGMENT ----------------- Pickering, J.A.: 42. The Respondent, who I shall call the Lessor, is the registered owner of the property No. 140-142 Austin Road, Tsimshatsui, Kowloon holding the property from the Crown under an Agreement for a Lease (called a Regrant) dated 14th November, 1962 for a term of 150 years from 25th December, 1893. The Agreement contains the usual covenant by the Lessee to maintain the premises in good and substantial repair and so to deliver them up to the Crown on the expiration or sooner determination of the term: there are also provisions for re-entry for breach of covenant. 43. On 19th May, 1969 the Lessor sub-let the premises to the Defendant Company (which I shall call the Lessee) for business purposes for a term of seven years from 15th September, 1969. The sub-lease contained the usual covenant to pay rent and to maintain and keep the whole of the interior of the premises in proper tenantable repair and condition and in such condition to deliver up the premises to the Lessor on the expiration or earlier termination of the sub-lease. There was also the usual provision for re-entry if rent should be in arrear for fifteen days (whether demanded or not) and for the breach of any of the other covenants by the Lessee. 44. A Special Condition in the Agreement for a Lease from the Crown to the Lessor reads, so far as it is applicable:
The premium referred to was one of $707,952 payable by twenty-one annual instalments. 45. The sub-lease from the Lessor to the Lessee contains no option to renew nor anything other than a reversion to the Lessor on the termination of the term. In fact, the Lessee in that sub-lease renounces its right to any relief which might be available to it by reason of any then existing or subsequently enacted legislation. However, on the day after the execution of that sub-lease the parties thereto, i.e. the Lessor and Lessee, entered into a Deed of Covenant in which the Lessor is described as "the Covenantor" and the Lessee "the Covenantee" and which, after reciting that the property is held by the Covenantor and the Conditions of the Regrant, reads:
46. On 1st September, 1976 the Lessor issued a writ claiming forfeiture of the premises on the grounds both that the rent was in arrear since 15th March, 1976 and also that there had been a breach of the covenant to maintain the interior of the premises in repair. The learned judge in the Court below found that rent had in fact been in arrear and held the lease to be liable to forfeiture for non-payment thereof and this despite a tender of rent during August 1976 such tender being intended to cover the rent from 15th March, 1976 to 14th September of that year, the last day of the sub-lease. Since however, all the arrears of rent had been paid into court, and, in addition, there had been paid into court monthly a sum equal to the monthly rent, to be attributed to rent or mesne profits, depending on the outcome of the case, the learned judge was disposed to grant relief to the Defendant against forfeiture upon the ground of non-payment of rent. 47. The judge further held that the Lessee had been guilty of waste in that it had made considerable alterations to the premises in the course of transforming them from a school to an hotel. Letters sent by the Building Authority to the Lessor in 1971, which letters she had forwarded to the Lessee, pointed out that a number of the alterations made were in contravention of the Building Ordinance. It was the contention of the Lessor's counsel in the Court below that consent to make alterations which were illegal could not be implied, an argument which found favour with the learned judge who held that there had been such a breach of the covenant to maintain in repair by reason of voluntary waste as to leave the Lease liable to forfeiture. It appearing however that what the learned judge termed "the stern disapproval" of the Building Authority in its letters of 1971 no longer persisted, he held that the Lessee was entitled to be relieved from forfeiture if it obtained the consent of the Building Authority for the alterations which had been made, or made such further alterations as the Building Authority might demand. That view was derived from a letter of 14th April, 1977 from the Building Authority to the solicitors for the Lessee which read in part:
48. However, the term of seven years created by the sub-lease having expired by the date of trial, the learned judge considered that relief from forfeiture would be purely academic were it not for the Deed of Covenant which I have already recited, the Special Condition in the Regrant, also already recited, and the counterclaim of the Lessee which claimed a Declaration that the Lessee was entitled to remain in possession of the premises and also specific performance of the Deed of Covenant. 49. I need say no more as to that last point than that it was our unanimous view that the Deed of Covenant was not specifically enforceable Mr. Rattee, leading counsel for the Respondent, was not called upon to address us on that issue. The sub-lease for seven years having expired at the date of judgment it followed that the Lessor was entitled at that date to possession and the remaining issue was whether or not the Lessee should have been relieved from forfeiture for the period between the issue of the writ on 1st September, 1976 and the expiration of the sub-lease on the 14th of that same month. The learned judge was of the view that having regard to the fact that the sub-lease had expired relief from forfeiture should not be granted and, despite his phraseology, (the judge said "I granted the (Lessee) relief against the forfeiture" (for non-payment of rent) and "I held that the (Lessee) was entitled to be relieved from forfeiture" (of the covenant to repair)) in fact made no order for relief. Was the learned judge right in holding the sub-lease forfeited by reason of the alleged breaches of covenant for payment of rent and for repair and in declining to exercise his discretion as to relief from forfeiture? 50. It was the Lessor's contention that certain alterations to the premises effected by the Lessee were in breach of the covenant to repair and were also illegal and she relied for this latter allegation largely upon a notice received by her from the Building Authority dated 29th March 1971 itemizing seven items of building works which were said to have been carried out in the premises in contravention of the provisions of section 14(1) of the Building Ordinance which prohibits the commencement or carrying out of building works without the prior approval of the Building Authority. Though Mr. Bernacchi, leading counsel for the Lessee, appeared to wish to contend in this Court that the alterations were not in fact illegal that contention was never raised in the Court below and indeed, on being referred to the pleadings, Mr. Bernacchi was constrained to agree that illegality had been conceded in the Defence. That being so the argument for the Lessee that the Lessor had given her implied authority to the alterations cannot succeed for such authority cannot extend to illegal alterations nor to alterations which impinge upon public law they not being pro se solo (see Bowmaker v. Tabor(1)). The case of Hyman v. Rose(2) quoted by Mr. Bernacchi is no authority to the contrary since the alterations effected in that case were not illegal. It must follow that there being no implied authority to effect the alterations there was a right to re-enter unless it could be said that the Lessor had waived the breach by accepting rent after knowledge of it. A breach of a covenant to repair is however a continuing breach and if there be no change in that breach between the last acceptance of rent and the issue of the writ there can be no waiver (see Penton v. Barnett(3)). The only authority to the contrary quoted to us was Guillemard v. Silverthorne(4). Ridley J.'s decision in that 1908 case was departed from in 1917 by Rowlatt J. in New River Company v. Crumpton(5) who preferred to follow the reasoning of the Court of Appeal in Penton v. Barnett(3). The learned judge was therefore correct in finding no waiver on the ground of acceptance of rent. In the present case the last acceptance of rent was in March 1976 whereas the sub-lease expired on 14th September of that year the writ being issued on 1st September and the illegal alterations continuing in existence throughout. 51. In addition to forfeiture for breach of the covenant to keep in repair, the judge found that there had been forfeiture for non-payment of rent, a finding which Mr. Bernacchi contests. The rent had been in arrear from the middle of March 1976 until, on 25th August, 1976, rent for the period 15th March, 1976 to 14th September, 1976 (the last day of the 7-year term) was tendered by the Lessee's solicitors. Thus, on the basis of Bird v. Hildage(6) and Churn v. To Sau Girls' School(7), at the date of the issue of the writ herein (1st September, 1976) no rent was in arrear. The proviso for re-entry for non-payment of rent contained in the sub-lease reads, so far as it is applicable,
52. Mr. Rattee contends that the effect of those words is that once rent is in arrear for fifteen days the right of re-entry arises and the fact that the rent may subsequently be tendered before the issue of the writ does not affect that right unless the Lessor accepts the rent and so waives his right of re-entry. Here there had been no acceptance of rent. Counsel seeks to distinguish the case of Churn v. To Sau Girls' School(7) on the basis that in that case the question for the Court was whether when the claim came before the Tribunal it could be said that rent was in arrear for more than 30 days. There, Gould J. held not because the rent had been tendered. In the present case, the argument goes, the question is not whether rent was in arrear at the date of the proceedings but whether the right to forfeiture had arisen, that is, had a point of time ever arisen at which rent was in arrear for fifteen days. Such a point of time had been reached so that the right of re-entry arose and, urged Mr. Rattee, remained in being despite the tender. 53. Mr. Bernacchi would have it that if the rent was tendered before the Lessee took advantage of her right to re-enter, that was the end of any breach of covenant to pay rent. The sub-lease should be construed contra proferentem and to hold that the right of re-entry subsisted after the rent had been tendered was to infer a change of tense in the proviso for re-entry. I am inclined to agree. The wording is "if and whenever any part of the rent hereby reserved shall be in arrear for fifteen days". It is easy, with the benefit of hindsight, to say that the phrase could and should have been drafted to read "shall be or shall have been in arrear" and that, to make assurance doubly sure, the words "and whether the rent shall have been tendered or not" could well have been added. However these words were not added and there was no future pluperfect. I see no reason why the phrase "shall be", in the context, should be given anything other than its ordinary meaning of "is". If that be the true interpretation of the phrase the right of re-entry does not survive a valid tender of rent since after it no rent is in arrear. I would hold that, construing the proviso as it is and not as it might have been, at the date of the writ there was no right of re-entry for non-payment of rent. Having said that I think it right to add that had it been otherwise I would have held the learned judge eminently right in declining to exercise his discretion to grant relief from forfeiture for non-payment of rent in the light of the fact that the sub-lease had expired. To have done so would have been to achieve no practical result except to wreak injustice upon the Lessor. That same remark applies to the judge's refusal to exercise his discretion as to relief in respect of the breach of the covenant to repair. 54. I would, as already indicated at the conclusion of the hearing, dismiss the appeal. Representation: Bernacchi, Q.C. & Woo (H.H. Lau & Co.) for Appellant. Rattee, Q.C. & R. Wei (Philip K.H. Wong & Co.) for Respondent. (1) 1941 2 K.B. 2. (2) 1912 A.C. 623. (3) 1898 1 Q.B. 276. (4) 99 L.T. 584. (5) 1917 1 K.B. 762. (6) 1947 2 All E.R. 7. (7) 32 H.K.L.R. 70. |
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