Chu Nai Lap v. Lai Chuen
|
CACV000019/1973 IN THE SUPREME COURT OF HONG KONG (APPELLATE JURISDICTION) CIVIL APPEAL NO. 19 OF 1973 (On appeal from Kowloon District Court Action No. 5700 of 1972) -----------------
----------------- Coram: Briggs, C.J. and Pickering, J. Date of Judgment: 31st July, 1973. ----------------- JUDGMENT ----------------- Pickering, J.: 1. In the court below the plaintiff, who is the respondent to this appeal, claimed and obtained possession of certain premises together with an order for mesne profits at the rate of $350 per month from the first day of July 1972 until delivery of possession. 2. The premises concerned constitute the ground floor of No. 141 Kiu Kiang Street, Kowloon, and were, on the first day of December 1954, the subject of an oral tenancy agreement between the appellant and the respondent, under which the premises, which are pre-war premises, were rented to the appellant, for business purposes, at $350 per month. 3. The letting, although oral, was evidenced by a document signed by the appellant, the translation of which is as follows:
4. At the commencement of the tenancy, the appellant paid to the respondent a sum of $12,000. The appellant asserts that this payment represented key money, whereas it is the respondent's contention that it was given in payment for certain fittings and machinery left by him in the premises at the commencement of the tenancy. 5. On the 21st December 1971 the respondent served a notice to quit on the appellant, expiring on the 30th June 1972, and claimed that by virtue of that notice the appellant's tenancy was duly terminated on the 30th June 1972, a claim which the appellant denies. 6. The learned District Court Judge held that by virtue of the document set out above, the appellant had contracted generally out of the protection of the Landlord and Tenant Ordinance and gave judgment for possession and mesne profits in favour of the respondent. It is against that judgment that the appellant now appeals. 7. It was the primary contention of Mr. Robert Tang, for the appellant, that the memorandum upon which the respondent relied for the assertion that the appellant had contracted generally out of the protection of the Landlord and Tenant Ordinance, was unenforceable as being illegal in the light of the fact that an excessive rent had been demanded and paid for the premises. In the court below the argument had revolved around the alleged payment of key money rather than the question of the excessive rent, but all the facts were in evidence and that being so the judge had been under a duty to raise the question of the rent himself. If the respondent had accepted excessive rent without the sanction of a tenancy tribunal then, under s.8 of the 1947 Landlord and Tenant Ordinance, he was guilty of an offence and, that being so, the other part of the agreement between the parties, that is the agreement by the appellant to vacate upon notice, could not be enforced by the landlord. 8. There was, Mr. Tang conceded, authority in Hong Kong to the contrary but that authority was wrong and Mr. Tang invited this Court to overrule the case in question, namely Yung Yeung Shook Chun (No.2) v. Lau Pao Wing trading as C.L. Thomas Express(1). In that case a tenant was in possession of protected premises under a lease for twelve months which contained a clause by which she contracted out of the protection provided by the Landlord and Tenant Ordinance. On the grant of the lease, however, a premium had been paid to the landlord. The landlord claimed possession after the expiry of the lease. It was held that a landlord could only rely on a contracting out clause where he had not committed an offence under s.8 of the then Landlord and Tenant Ordinance and that, because of the receipt of an illegal premium, the landlord could not rely on the contracting out clause. With that part of the 1965 decision Mr. Tang had no quarrel but he argued that the learned judge had been wrong to hold (a) that the payment of the premium had rendered the lease void ab initio; (b) that the tenant had entered into possession under an illegal and void lease and had no right to remain; and (c) that the landlord was entitled to avail himself of the common law remedy for recovery of possession against the tenant as a trespasser. Those last three propositions, Mr. Tang argued, were wrong in law and would never have been propounded had the learned judge in the 1965 case had brought to his attention the 1964 case of Hong Chi Mui v. Tong Ching Company(2), a full court case which was binding upon the judge in the 1965 case. In that full court case the plaintiffs had paid $18,000 to the defendants as consideration for taking over the defendants' controlled tenancy, the landlord consenting to the transfer. The defendants failed to vacate and the plaintiffs instituted proceedings claiming an injunction and damages for trespass. At the close of the plaintiff's case the District Court Judge, without calling upon the defendants, dismissed the action on the ground that the plaintiff's claim was unenforceable as it was based on a transaction contrary to s.8 of the then Landlord and Tenant Ordinance which prohibited the payment of a premium. The Full Court held that this was an action brought to assert a right of property already acquired under an agreement, whether the agreement was illegal or not, and not an action to enforce or carry into effect an illegal agreement, and allowed the appeal and ordered a new trial. 9. We think it indisputable that had the learned judge in 1965 had the 1964 case brought to his attention he would not have held that the lease in the case before him was void ab initio or that the tenant had entered into possession under an illegal and void lease and had no right to remain. Nor would he have said that the landlord was entitled to avail himself of the common law remedy for recovery of possession against the tenant as a trespasser. We have no hesitation in overruling the case of Yung Yeung Shook Chun(1) in respect of those three particular points. 10. Mr. Tang submitted that entry into possession by the appellant meant that he had already acquired a right of property and the facts of the present case were indistinguishable from those of the 1964 Full Court case which rested largely upon the decision in Alexander v. Rayson(3). 11. If the agreement was tainted with illegality, counsel continued, the respondent could not evict the appellant under the contracting out clause and the appellant, by virtue of his entry into possession and payment of illegal rent, was the lawful monthly tenant of the premises. 12. On the basis of the Hong Chi Mui case(2) we would be disposed to agree and the real question is whether on the evidence, it can be said with confidence, that an illegal rent had been paid and accepted. Mr. Ming Huang, for the respondent, referred to the 1967 case of Wong Cheong-yee v. Fu Yuen Hing Kee(4) where it had been held that the contractual rent in respect of certain premises was lawfully recoverable because it could not be said to be in excess of the standard rent for the reason that no standard rent for the premises had ever been assessed. Similarly, in the present case, there was no evidence that any standard rent had been assessed and, that being so, the contractual rent could not be said to be in excess of the standard rent, and therefore illegal. Mr. Ming Huang also referred, in the same connection, to the case of Mok Hing Shung v. Foreign Correspondents' Club(5). 13. Essentially, what these cases decide is that where no standard rent has been determined, the contractual rent cannot, as a matter of logic, be said to be in excess of the standard rent, and the contractual rent is accordingly recoverable. The cases do not however, go so far as to lay down that before the issue as to whether the contractual rent exceeds the standard rent can be determined, it is essential that the court should know the precise figure of the standard rent. The issue can, in some cases, be determined on the basis of all the surrounding circumstances without any precise figure being known - and this is one of those cases. 14. That a standard rent does in fact exist is apparent from the fact that in 1954 the respondent obtained possession of the premises from his then tenant, a Mr. Hung, by means of legal action and on account of non-payment of rent. Having regard to the terms of s.18(2) of the Landlord and Tenant Ordinance as it existed in 1954, that could not have happened unless the respondent had been able to satisfy the Tenancy Tribunal that the rent which he had demanded was not in excess of the permitted rent. It follows that in 1954 there was a permitted rent based upon a standard rent. What was the figure of the permitted rent? We do not know precisely but we do know its upper limit for, in evidence, the respondent said:-
15. Thus on the respondent's own evidence, there must have existed a permitted rent and the contractual rent was in excess of that permitted rent and was therefore an illegal rent the charging of which was an offence under s.8 of the then Landlord and Tenant Ordinance. 16. The effect is of course that the respondent cannot succeed in an action based upon his illegal agreement. (See Gas Light & Coke Co. v. Turner(6), Pearce v. Brooks(7), Upfill v. Wright(8), Alexander v. Rayson(3). In the last-named case, referring to the three first-named, Romer L.J. said:-
17. A particularly strong case in point is that of Feret v. Hill(9). In that case A. procured B. to grant him a lease of premises by means of a false representation that he intended to carry on a certain lawful trade therein. Having obtained possession A. converted the premises into a brothel, whereupon B. forcibly expelled him. It was held that A. might maintain ejectment - the fraudulent misrepresentation and the subsequent illegal use of the premises not being sufficient at law to avoid the lease. 18. It follows that the appeal must succeed and the order for possession be set aside. Since the mesne profits claimed are in an amount which is illegal, the court cannot give its support to that claim and the order for payment of mesne profits must also be set aside. It is within the respondent's power to regularise his position by ascertaining from a Tenancy Tribunal, the present-day permitted rent, which will inevitably be less than the monthly amount claimed. 19. Mr. Tang placed no great reliance upon his remaining grounds of appeal and it is unnecessary for us to deal with them. 20. I wish to make it clear that although the Hon. the Chief Justice is out of the Colony at present, he has read and agreed this judgment, which is the judgment of the Court. 21. Costs of the appeal to the appellant. Order for payment out to the appellant of the monies paid into court by him. Representation: Robert Tang (Woo & Woo) for the Appellant Ming Huang (Alexander Tsang & Co.) for the Respondent. (1) 1965 H.K.L.R. 216 (2) 1964 H.K.L.R. 146 (3) 1936 1 K.B. 169 (4) 1967 H.K.L.R. 265 (5) 1960 H.K.L.R. 403 (6) 5 Bing. N.C. 666 (7) L.R. 1 Ex. 213 (8) 1911 1 K.B. 506 (9) 15 C.B. 207 |