TOHO LTD v. NG SIK YU

DCCJ 3463/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3463 of 2003

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Reasons for Decision

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Background

1. This was a dispute between a landlord and a tenant.

2. The Plaintiff has been the registered owner of Shop Nos. 5 and 6 on Ground Floor of Princess Mansion, 165A, 167, 167A, 169, 169A, 171, 171A and 175 King's Road and 8-14 Fuk Yuen Street, Hong Kong situated on Inland Lot No. 2361 since 31 May 1995 ("the Shop"). The Shop was at the corner of King's Road and Fuk Yuen Street. The front of the Shop is on King's Road and one side of the Shop is a wall facing the pavement on Fuk Yuen Street. There is no opening in this wall. Against the external side of the wall, the Defendant has operated his hawker business selling ivory and mahjong tiles in an enclosed structure of a size of about 3 ft x 12 ft since 1968 (the original wall stall).

3. Since 1968, the Defendant had been a tenant of the owner of the Shop. From 1989 to 31 May 1995, Mr. Luong Tru ("Luong") was the registered owner of the Shop and the tenancy between Luong and the Defendant had been renewed every two years. Finally Luong entered into a tenancy agreement with the Defendant dated 13 March 1995 in respect of "Side Shop No. 1 of Shop No. 5" (the Premises) for a term of 2 years from 20 March 1995 to 19 March 1997 at a monthly rent of HK$5,500.00 ("the 1st Tenancy Agreement")[C118-136]. The Plaintiff bought the Shop from and replaced Luong to become the landlord on 31 May 1995.

4 The Plaintiff entered into a second tenancy agreement with the Defendant dated 18 March 1997 in respect of the Premises described as "Side Shop No. 1 of Shop Nos. 5 and 6" for a term of 2 years from 20 March 1997 to 19 March 1999 at a monthly rent of HK$6,200.00 ("the 2nd Tenancy Agreement")[C138-140]

5. Following the expiration of the 2nd Tenancy Agreement, the Plaintiff entered into a third tenancy agreement with the Defendant dated 25 March 1999 in respect of the Premises as referred to in the 2nd Tenancy Agreement for a term of 2 years from 20 March 1999 to 19 March 2001 at a monthly rent of HK$5,800.00 ("the 3rd Tenancy Agreement")[C152-154].

6. Following the expiration of the 3rd Tenancy Agreement, no further written tenancy agreement was signed. The Defendant became a monthly tenant subject to the same terms and conditions as stated in the 3rd Tenancy Agreement ("the Monthly Tenancy").

7. The exact location and area of the subject matter of the tenancy agreements between the Plaintiff and the Defendant is in dispute. The Plaintiff says the Premises included the external wall of the two columns of the Shop facing Fuk Yuen Street of a length of about 12 ft 6 in and the space in between the two columns. The original wall stall was part of the Premises.

8. The Defendant on the other hand contends that the subject matter of the tenancy was only the space between the 2 columns of the external wall of a size of 1.5 ft x 6 ft. The Defendant built the original wall stall abut onto the external wall and operated his hawker business there since 1968. The original wall stall was on the pavement which was and is the Government land. He had held a hawker licence from the Government allowing him to occupy the site of the original wall stall for his business.

9. In or about November 2001, the Defendant asked for a reduction of rent but the Plaintiff refused. The Defendant did not pay the rent from 20 January 2002. It is in dispute whether the Defendant gave an oral notice of termination of the tenancy and whether the rental deposit was agreed to be used to set off the rent in arrears.

10. On 15 March 2002, the Defendant demolished the original wall stall. He then erected a similar stall (the new wall stall) of a size smaller than the original wall stall, i.e. 81.3 cm x 135 cm (about 4 ft 5 in x 2 ft 7 in) at a location of about 50 mm (about 2.5 in) away from the external wall of the Shop. The new wall stall occupies about half of the original site of the original wall stall. It is in dispute whether the Defendant gave prior notice of destruction of the original wall stall and the construction of the new wall stall.

11. On 19 April 2002, the Plaintiff, through its solicitor, wrote to the Defendant demanding payment of the arrears of rent and forfeiting the tenancy agreement.

12. It is not disputed that the Defendant had all along carried on his business at the original wall stall. From August 1977 onward, the Defendant had obtained a wall stall license from the Urban Council to operate his business as a hawker at the original wall stall. One of the Fixed Pitch Hawker Licences (Wall Stall) issued on 29 July 1996 showed that the size of the authorized pitch was 862 mm x 3340 mm. After the demolition of the original wall stall and the construction of the new wall stall, the Defendant obtained a new licence from the Food And Environmental Hygiene Department (the Department) issued on 20 January 2003 valid until 19 January 2004, which authorized him to hawk at a pitch at side of No. 175 King's Road of a size of 862 mm x 1350 mm. The licence was issued despite the objection of the Plaintiff through its solicitor to the Department (C201-202; 218-219). After the destruction of the original wall stall and the construction of the new wall stall, the Defendant has continued the same business at the new wall stall until now.

13. The Defendant is still occupying the new wall stall and operating his business there. He has refused to remove the new wall stall. For these reasons, the Plaintiff claims against the Defendant for vacant possession of the Premises, rent in arrears or mesne profits, damages for demolition of the Premises and an injunction order prohibiting the Defendant from carrying on business at the new wall stall.

The Plaintiff's case

14. The Plaintiff's case is that the subject matter of the tenancy is the external wall of the Shop facing Fuk Yuen Street together with the original wall stall. The size of the Premises was about 12 ft 6 in x 2 ft 7 in. The original wall stall is part of the subject matter of the tenancy.

15. In November 2001, the Defendant asked for a reduction of rent but the Plaintiff refused. The Defendant then ceased to pay his rent since 20 January 2002. Miss Poon, the leasing clerk of the Plaintiff responsible for the tenancy, never received notice of termination of the tenancy. She did not agree to use the Defendant's rental deposit to set off the rent in arrears. Without any prior notice to the Plaintiff, the Defendant suddenly demolished and removed the original wall stall and constructed the new wall stall in March 2002. It is the complaint of the Plaintiff that the Defendant has no right to demolish and remove the original wall stall. Moreover by constructing and operating his hawker business at the new wall stall which is occupying about half of the site of the original wall stall, the Defendant had failed to surrender vacant possession of the Premises of the tenancy. Further the operation of business by the Defendant in the new wall stall has caused nuisance and annoyance to the Plaintiff and interfered with its private rights.

16. I was asked by the Plaintiff to pay a visit to the location of the Premises. I noticed that the new wall stall was about 2 in away from the column near the cornor of Kings Road and Fuk Yuen Street. The stall does not block any part of the space between the two columns. There is now a space between the new wall stall and another stall. This space is apparently located at part of the site of the original wall stall. The space is fenced off by wire by the Plaintiff.

17. The Plaintiff called Miss Ng of the Department to give evidence. Her evidence is that a wall stall licence is issued by her department if it is satisfied that there is a wall which the stall is to be affixed to or placed against. The Department is aware that the Defendant has demolished the original wall stall and erected a smaller new wall stall which is detached from the wall. Her department has taken legal advice and is satisfied that the Defendant still satisfies the requirement for a wall stall licence.

18. The Plaintiff also called a surveyor to give evidence. He has prepared a surveyor's report with floor plan showing measurement and dimension of the Shop and the new wall stall.

The Defendant's case

19. The Defendant contends that the subject matter of the tenancy agreements signed by him with the Plaintiff was only the space in between 2 columns of the external wall of the Shop, consisting of a size of about 1.5 ft x 6 ft. The external wall of the 2 columns was not included. He first rented the space from Mr Wong Yuk Tong in 1968. No written agreement was signed. There were no fittings or decorations in the space rented by him. After he rented the space, he built the original wall stall of a size of 3 ft x 12 ft which abutted on to the wall. The original wall stall was not part of the rented premises.

20. In 1977, the Defendant obtained his Wall Stall Licence to occupy and hawk at the original wall stall from the Urban Council. The licence had been renewed subsequently until he demolished the original wall stall. When he erected the new wall stall, he applied to the Department for a new licence to occupy a smaller area and the Department issued a new Wall Stall Licence accordingly on 20 January 2003.

21. In 1989, the Shop was sold to Luong. The Defendant signed a two year tenancy with Luong who acknowledged that the original wall stall was not part of the subject matter of the tenancy. The Defendant and Luong subsequently renewed the tenancy several times until the Plaintiff became the new owner of the Shop.

22. He said that the monthly tenancy with the Plaintiff was terminated on 19 March 2002 by oral notice given by him to Miss Poon of the Plaintiff on 20 February 2002. He had told Miss Poon that he would demolish and remove the original wall stall and its fittings and decoration. Miss Poon agreed that his rental deposit equivalent to two months' rent could be used to set off the outstanding rent from 20 January to 19 March 2002. On 15 March 2002, he demolished and removed the original wall stall thereby surrendering the possession of the Premises of the tenancy.

23. The main argument of the Defendant is that he is entitled to build and occupy the new wall stall which is only occupying Government land pursuant to his Fixed Pitch Hawker Licences issued by previously the Urban Council and currently the Department. The licences required him to demolish the stall when he moved out. He was therefore bound to demolish the original wall stall when he left it.

Facts in Dispute

24. The following facts are therefore in dispute:

(1)	What is the subject matter of the tenancy?
(2)	Whether the Defendant did inform the Plaintiff of and the Plaintiff agreed to the demolition of the original wall stall?
(3)	Whether the Plaintiff did receive notice of termination of the tenancy and agree that the rent for the period of 20 January 2002 to 19 March 2002 was to be deducted from the 2 months' deposit kept by the Plaintiff?

Subject matter of the tenancy

25. In my view, the crux of the matter is what constitutes the subject matter of the tenancy. This is a question of fact. There is no suggestion from either party that they had ever verbally discussed as to the area and location of the Premises of the tenancy when the Plaintiff became the new landlord and when the tenancy agreements were renewed. There is no suggestion from either party that the subject matter of the tenancy agreements has changed when the Plaintiff replaced Luong as the landlord.

26. The Defendant has been carrying on business outside the external wall of the Shop since 1968. The rental receipts dated 23 November 1971 and 19 November 1986 issued to the Defendant acknowledged receipt of the rent he paid for the area rented in the size of 1.6 ft x 11 ft. Insofar as the size of the premises is concerned, these receipts produced by the Defendant himself are against his version that he only rented the space between two columns in the size of 1.5 ft x 6 ft. Moreover the length of the original wall stall was also about 12 ft. On these evidence, I find as a fact that the Premises of the tenancy consisted of the external wall of the two columns and the space in between for a length of about 12 feet.

27. The second part of this question is whether the Premises included the original wall stall. The Defendant testifies that it was agreed by Luong that the original wall stall did not form part of the subject matter of the tenancy. His evidence is supported by the tenancy agreement dated 13 March 1995 (C101-111) entered between Luong and the Defendant. In Part III of the tenancy agreement (C112), the Premises was descried as:

"All that portion (Side Shop No. 1) of Shop No. 5 on the Ground Floor of the building known as Princess Mansion at Nos. 165-175 King's Road and Nos. 8-14 Fuk Yuen Street, Hong Kong erected on all that piece or parcel of ground registered in the Land Registry as Inland Lot No. 2361 which said Side Shop No. 1 is shown and coloured Pink on the Ground Floor Plan annexed hereto for identification purpose only" (my emphasis).

Paragraph 2 of Part VIII says:

"The Tenant hereby acknowledges that the space immediately in front of the said premises coloured blue hatched black on the Ground Floor Plan annexed hereto is Crown Land (hereinafter referred to as 'the Crown Land Area") and in the event the Tenant shall use or occupy the said Crown Land Area or any part thereof during the term the Tenant must obtain all necessary Licence or permit from the Urban Council or any Government Department for such use. In the event the Tenant's use or occupation of the said Crown Land Area or any part thereof shall be considered an encroachment by the Government, the Tenant agrees and undertakes the following:-......." (my emphasis).

28. Reading these two paragraphs together with the floor plan annexed to the tenancy agreement, one would easily find that the original wall stall must be located in the space coloured blue hatched black on the floor plan. Luong and the Defendant clearly acknowledged that this space was Government land and the use of this area of land was subject to the licence from the Urban Council or any government department for such use.

29. Then was the original wall stall, which was situated on Government land, part of the subject matter of the tenancy? The original wall stall was built on Government land. Indeed it would be a futile argument to contend that it was built on the external wall. It is inconceivable that Luong, while he acknowledged the original wall stall was on Government land and required the Defendant to obtain necessary license for its use, would regard the original wall stall as part of the subject matter of the tenancy. In any case, the Premises was identified unequivocally as the part coloured pink on the floor plan. Clearly, the Premises did not include the original wall stall.

30. Miss Wu, Counsel for the Plaintiff, did not take any issue on encroachment by tenant, but I think this issue is worth mentioning. It is trite law that where, during the currency of his tenancy, a tenant encroaches upon, or without title to do so become annexed to the demised premises, whether or not it is immediately adjacent to the demised premises, and whether or not it belongs to the landlord or to a third person, on the determination of the tenancy the land must be given up to the landlord together with the demised premises (see Halsbury's Laws of England, Fourth Edition, Vol 27(1) Landlord and Tenant).

31. If the Defendant had encroached on the pavement by constructing and occupying the original wall stall as a trespasser, he should also surrender the original wall stall when he terminated the tenancy. However here the Defendant has all along obtained licences from the Government to occupy the land on the pavement where the original wall stall was located. There was therefore no encroachment by the Defendant. One may still argue that the Defendant had encroached on Government land from 1968 to 1977. However this argument cannot help the Plaintiff as I accept the Defendant's evidence that Luong acknowledged that the subject matter of the tenancy did not include the Government land and the original wall stall . The issue of encroachment does not arise during the period when Luong was the landlord and the Plaintiff therefore cannot rely on it to say that the original wall stall was part of the Premises by encroachment.

32. On the evidence, I find that the original wall stall was not part of the subject matter of the tenancy agreement between the Plaintiff and Luong. After the Plaintiff became the landlord, the subject matter of the tenancy had remained the same. The subject matter of the last tenancy between the Plaintiff and the Defendant was the same and therefore did not included the original wall stall.

Other facts in dispute

33. Having made the above findings, the other disputed facts become unimportant. But I make findings for the sake of completeness. The question turns on the credibility of the evidence of PW2, Miss Poon, and that of the Defendant. The Defendant says that he had already on 20 February 2002 told Miss Poon that he would terminate the tenancy on 19 March 2002 and he would demolish the original wall stall. Miss Poon also agreed that the Defendant's two months' rental deposit could be used to set off the rent from 20 January 2002 to 19 March 2002. All these suggestions were denied by Miss Poon, the leasing clerk of the Plaintiff. I noticed that when the Defendant gave evidence in court, he said that on 15 March 2002 the process of demolition of the original wall stall might have been seen and Miss Poon called him by telephone. She also blamed the Defendant for not informing her of the demolition of the wall stall. I find that had Miss Poon been informed of this beforehand, she would not have reacted in this way. I find as a fact that the Defendant had not informed the Plaintiff of his intention to demolish the original wall stall and the Plaintiff had not consented to the demolition. However in my view, the Plaintiff is not required to give such notice.

34. As regards the alleged verbal notice of termination of the tenancy agreement and the agreement by the Plaintiff to deduct the two months' rental deposit to set-off the outstanding rent, I find the Defendant's version more likely to be true. The rental was to be paid in advance on the 20th day of each month. The rent for February and March were not paid. Yet there was no evidence from the Plaintiff that reminders for payment had ever been given to the Defendant. I find that it is consistent with the suggestion of the Defendant in this regard. I therefore find as a fact that the Defendant did give verbal notice of termination of tenancy and the Plaintiff did agree that the rental deposit should be used to set off the outstanding rent.

35. I notice that the last written tenancy provided that the Defendant was required to give one month notice in writing to terminate the lease. The requirement of notice in writing is therefore a term of the present monthly tenancy agreement. The Defendant did not give the notice of termination in writing. However I find that the Plaintiff had obviously agreed to the termination by its agreement to set off the outstanding rent.

Has the Defendant surrendered vacant possession?

36. Having resolved the facts in dispute, I come now to the most important issue in the case. Has the Defendant surrendered vacant possession?

37. The Defendant demolished the original wall stall and built a smaller stall occupying the site of the original wall stall but away from the external wall of the Shop about 2 inches. It was the contention of the Plaintiff that the Defendant had not delivered vacant possession as he maintained the new wall stall only at a distance of 50 mm from the external wall. And even if there was delivery it was not vacant. Miss Wu, relying on Cumberland Consolidated Holdings Limited v. Ireland [1946]1 KB 264, submitted that the new wall stall was virtually against the external wall. By doing so, the Defendant interfered with the Plaintiff's private rights. For instance, the Plaintiff would not be able to open an entrance facing Fuk Yuen Street or no advertisement could possibly be hung on the external wall etc. On the other hand, Miss Wu, has fairly drawn to my attention the case of Yu Shu Tung v Buk Cheong Loong & others, unreported, HCA No 6531 of 1989.

38. Yu case was of a background very similar to the present case. In that case the Plaintiff owned a premises at the corner of Nathan Road and Nanking Street. The premises had its front on Nathan Road and the access of the premises was from Nathan Road. The Nanking Street side wall was a blank wall. There was no opening in it. The Defendants in that case were stall holders on Nanking Street. They had been there for over 20 years. They also held licences from the Urban Council to locate their stalls on pitches on the pavement on which the wall abutted. The licence was also described as a "fixed pitch hawker licence (wall stall). The defendants used to have the Plaintiff's permission to attach their stalls to the wall but the permission was withdrawn, and the Defendants detached their stalls from the wall, re-erecting them however only some inches away from it, virtually against the wall. They still retained their Urban Council licences. The Plaintiff, relying on the case of Conn v Saxby, [1914] 3 KB 822, contended that he had a right of access to Nanking Street and the right to have advertisement, show cases and the like on the wall. Godfrey J held that the Defendants were entitled to maintain their stalls on Nanking Street by proper authority lawfully conferred on them by the Urban Council. The licence expressly authorized the maintenance of the Defendants' stalls and there was no way the stalls can be maintained where they were without interfering with the Plaintiff's private rights. The Defendants were therefore acting under lawful authority to obstruct the use of the wall by the Plaintiff. Godfrey J said at page 7 of the Judgment: "But in the absence of negligence you cannot complain of any injury to your premises caused as the necessary and inevitable result of the actions of those acting under statutory authority : see Allen v Gulf Oil Refining Company Limited [1983] AC 509. " For this reason Godfrey J held that the Defendants made out a good defence to the claim.

39. Miss Wu argued that Godfrey J's reasoning is inconsistent with Articles 6 and 105 of the Basic Law on the ground that the Plaintiff's private rights have been interfered with.

40. Article 6 of the Basic Law provides: "The Hong Kong Special Administrative Region shall protect the right of private ownership of property in accordance with law."

41. Article 105 of the Basic Law provides: "The Hong Kong Special Administrative Region shall, in accordance with law, protect the right of individuals and legal persons to the acquisition, use, disposal and inheritance of property and their right to compensation for lawful deprivation of their property."

42. Moreover, Miss Wu submitted that Allen case can be distinguished as the kind of qualification provided by Condition 13 of the Defendant's licence was absent. Condition 13 reads : "The licence does not vest any proprietary rights or interests in land in the licensee. Any dispute over the use of any part of the stall (or pitch) between the licensee and a private land owner has to be resolved between the parties and the Director disclaims any responsibility or liability in such a dispute." I should make an observation that a condition of similar wording was included in Condition 10 of the wall stall licence in Yu case and the condition had been considered by Godfrey J.

43. It is of course very fair of Miss Wu to draw Yu case to my attention. However, for my part, I do not think that the present case has to be resolved by reference to statutory authority.

Any interference of the Plaintiff's private rights?

44. I have found as a fact that the subject matter of the tenancy between the Plaintiff and the Defendant was the external wall of the two columns and the space in between. The space outside the wall and the original wall stall was not part of the Premises. The Defendant's new wall stall is 50 mm away from the external wall. He was and is authorized by previously the Urban Council and currently the Department to set up the pitch at the location of the new wall stall as a fixed pitch hawker. There is no suggestion from the Plaintiff that the licences are outside the Department's power or that the acts of the Defendant are outside the terms of the licences. I think I must assume that the licences were and are granted in the proper exercise of power of the Department and its predecessor. Indeed the Department is not unaware of the dispute between the Plaintiff and the Defendant over the new wall stall. The Plaintiff had written letters to the Department raising its objection to the issue of the Fixed Pitch Hawker Licence to the Defendant. The Department had visited the new wall stall. Despite the Plaintiff's objection, the Department still issued the licence on 20 January 2003 valid until 19 January 2004, which authorizes the Defendant to hawk at a pitch at side of the external wall of the Shop of a size of 862 mm x 1359 mm.

45. As I said earlier, I do not think I need to consider whether the Defendant is entitled to occupy the new wall stall by exercising a statutory power. I only look at the matter considering that the Government is simply an ordinary owner of private land. The Government is the owner of the pavement where the new wall stall is located and the Defendant is authorized by the owner of the land to build and occupy the new wall stall on it. Does he interfere with the private rights of the Plaintiff who owns the land adjacent to the land of the Government? I think not. In my view, the Government has the same right to build on its land as a private person. It may build a structure as what the Defendant has done in this case - a wall stall at a distance of 50 mm away from the external wall owned by the Plaintiff. While the Plaintiff has its rights to use its land, the use is subject to the legitimate use by owner of adjacent land. On this basis, the Defendant, being authorized by the Government to do so, cannot be said to have interfered with the private rights of the Plaintiff.

46. The Defendant's new stall is an independent structure standing away from the external wall of the Shop. He is no longer occupying the Premises of the tenancy with the Plaintiff. He has not interfered with the Plaintiff's rights to use its land. On such basis, I find that the Defendant has surrendered vacant possession of the Premises to the Plaintiff. And on the same basis, while I do not need to decide on the issue of statutory authority, I find that Godfrey J's decision in Yu case is not inconsistent with the Basic Law.

Was the demolition of the original wall stall a breach?

47. The Plaintiff complained that the Defendant was in breach of Clause 7 of the third tenancy agreement when he demolished and removed the walls enclosing, the door leading to and all the fixtures inside the premises.

48. The Plaintiff does not dispute that the original wall stall was built by the Defendant. Indeed, if it was disputed, I would have found in favour of the Defendant whose version is amply supported by the receipts for payment of the construction and refurbishment of the original wall stall in 1968 and 1985.

49. The original wall stall, as I find as a fact, was not part of the Premises of the tenancy, clause 7 of the third tenancy agreement between the Plaintiff and the Defendant in my judgment is ambiguous. The third tenancy agreement is a type of standard form Chinese tenancy agreement obtainable from stationary stores. It was not specifically designed for the Plaintiff and the Defendant. Clause 7 in Chinese provides that no demolition should be made by the Defendant of those installation and fittings available as at the time of his entry of side shop No 1, unless with the Plaintiff's consent ( "乙方進屋時裝修入牆間格窗花電器等乙方遷出時不得拆回..............."). I accept the Defendant's evidence that there were no decoration or fittings when the Premises was first let to him in 1968. If Clause 7 refers to the time when the Premises was first let in 1968, there is no breach of the clause. If Clause 7 refers to the time when the Defendant first became the tenant of the Plaintiff, then it is too ambiguous or at least unidentifiable as to what were the decoration and fittings of the Premises referred to in Clause 7. I do not think that the original stall, not being part of the Premises, can be said to be partition, fittings and decoration of the Premises. I therefore find that the Defendant is entitled to demolish the entirety of the original wall stall. He is not in breach of Clause 7 the tenancy agreement.

Injunction

50. One of the remedies asked for by the Plaintiff is an order of injunction restraining the Defendant from committing waste on the Premises and carrying on the business of a wall stall hawker at the new wall stall which caused a nuisance to the Plaintiff and its tenants. I find these allegations of the Plaintiff unsubstantiated by any evidence. In any event, the Plaintiff is not an occupier of the shop.

Order

51. For the above reasons, the Plaintiff's claim is dismissed with an order nisi that the Plaintiff pay the costs of the action to the Defendant, to be assessed if not agreed. The costs order nisi shall be made absolute 14 days after handing down of this judgment.